--ADM earnings jump on strong soybean processing, exports
--Ethanol segment reports big loss
--CEO says no further discussions with GrainCorp on possible
acquisition
(Updates throughout with detail, executive comments.)
By Ian Berry and Tess Stynes
Archer Daniels Midland Co.'s (ADM) fiscal second-quarter
earnings surged as higher profits from soybean processing and grain
trading more than offset declines in its ethanol business.
The grain processor and trader said net income rose more than
six-fold despite last summer's severe drought in the U.S. Farm
Belt, which withered the nation's corn crop and made it more
difficult for grain processors to secure supplies.
The soybean crop, in contrast, benefited from late-season
rainfall, and ADM's oilseeds segment, including soybean crushing,
nearly doubled earnings from a year earlier. ADM said demand for
soybean meal, which is used in livestock feed, was strong both
domestically and globally. Its U.S. soy processing plants operated
at a record capacity in the quarter, the company said.
ADM shares were up $1.05, or 3.7%, at $29.49 each. The shares
have climbed about 8% so far this year.
For the quarter ended Dec. 31, Decatur, Ill.-based ADM reported
a profit of $510 million, or 77 cents a share, up from $80 million,
or 12 cents a share, a year earlier. Excluding inventory-related
gains, a year-earlier asset write-down and other items, adjusted
earnings rose to 60 cents from 51 cents.
Revenue rose 6.9% to $24.92 billion.
Analysts polled by Thomson Reuters most recently projected
earnings of 58 cents a share on revenue of $21.22 billion.
The company "managed well despite challenges from the U.S.
drought and from persistent, negative margins in the ethanol
industry," ADM Chief Executive Patricia Woertz said in a prepared
statement.
The company lost $94 million in the quarter in its bioproducts
segment, which includes ethanol. Chief Operating Officer Juan
Luciano said on a conference call with analysts that the company
decided to reduce its ethanol production capacity, but did not
specify the extent of the reduction.
While the drought has helped keep corn prices near historic
highs, Mr. Luciano said sluggish gasoline consumption, rather than
corn prices, is behind the ethanol sector's problems. While the
industry is built to fit a 150 billion-gallon U.S. gasoline market,
actual gasoline demand has been closer to 130 billion gallons, he
said.
The company has in the past couple of years shifted its focus to
international expansion, but its most recent effort, to acquire
GrainCorp Ltd. (GNC.AU) of Australia, has stalled. Ms. Woertz said
on the earnings call that the company has had "no further
conversation" with GrainCorp since it rejected ADM's second bid,
worth $2.8 billion, in December.
Ms. Woertz did not indicate whether talks had ended, or if the
company planned to make another bid. The Australian company would
give ADM greater access to Asian markets.
ADM recently sold stakes in Gruma SAB (GMK, GRUMA.MX) and
several of its units for $450 million, with proceeds earmarked to
pay for the GrainCorp deal. While a GrainCorp deal hasn't happened,
Chief Financial Officer Ray Young said the company significantly
reduced its debt load in the second half of 2012.
Adjusted earnings in ADM's corn-processing segment returned to
the black absent a year-earlier asset write-down related to a
failed bioplastics venture in the U.S. ADM also noted results
improved at its sweeteners-and-starches business, which benefited
from tight supplies and higher corn costs that supported price
increases.
Operating profit in ADM's agricultural-services segment, which
includes grain storage and exports, rose 32% to $317 million. The
company noted strong U.S. soybean exports, and said global trading
profits improved.
Write to Ian Berry at ian.berry@dowjones.com and Tess Stynes at
tess.stynes@dowjones.com
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