By Jacob Bunge and Tess Stynes
Archer Daniels Midland Co.'s fourth-quarter earnings fell 27% on
charges related to its blocked purchase of GrainCorp Ltd., while
farmers' reluctance to sell corn at cheap prices hit ADM's
grain-trading revenue.
A record U.S. corn harvest last autumn prompted farmers to store
corn rather than to sell it at sharply lower prices, pushing ADM's
grain-trading profits down by one-third in the quarter, the company
reported Tuesday. Many U.S. farmers have increased grain-storage
capacity in recent years, giving them more flexibility around when
to sell corn.
"Our ag services business was impacted by the slow U.S. farmer
selling of corn and challenges in our international merchandising,"
ADM Chief Executive Patricia Woertz said on a post-earnings
conference call.
On a positive note, last year's bumper corn and soybean crops
reduced costs for ADM's corn-processing businesses, improving
margins for ethanol production. Earnings for the unit surged in the
fourth quarter to $279 million, versus $3 million in the prior-year
period.
The ethanol industry faces challenges, however, as the U.S.
government considers a reduced requirement this year for blending
ethanol into gasoline, which could lead to lower domestic
consumption and trigger increased competition to export the
corn-based biofuel.
ADM, one of the world's largest grain and oilseed processors,
plans "aggressive actions" to improve results in its grain-trading
unit, particularly in South America, Chief Operating Officer Juan
Luciano told analysts on the conference call. "We fumbled and we
will correct that," he said.
The company said earnings from grain merchandising and handling
dropped to $84 million in the fourth quarter from $129 million a
year earlier.
ADM also is considering its next steps in Asia, where its
proposed 3 billion Australian dollar (US$2.7 billion) purchase of
Sydney-based grain merchant GrainCorp Ltd. failed after the
Australian government blocked it over fears of ceding too much
control to a foreign-based entity. The November ruling dealt a blow
to ADM's plans to sell more grain and commodities into China and
other rapidly expanding Asian economies.
The failed deal with GrainCorp, in which ADM maintains a 19.9%
stake, drove $155 million worth of impairment charges in ADM's
fourth quarter, the company said.
Overall, ADM reported a profit of $374 million, or 56 cents a
share, down from $510 million, or 77 cents a share, a year earlier.
Excluding items such as charges related to GrainCorp, adjusted
earnings rose to 95 cents from 60 cents.
Revenue decreased 3.1% to $24.14 billion.
Analysts polled by Thomson Reuters expected per-share profit of
85 cents and revenue of $24.7 billion.
ADM in December said it plans to move its headquarters from
Decatur, Ill., to Chicago.
Write to Jacob Bunge at jacob.bunge@wsj.com and Tess Stynes at
tess.stynes@wsj.com
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