ADM discusses planned changes to ethanol business

By Erin Voegele | October 26, 2021

ADM’s planned sale of its 135 MMgy ethanol dry mill in Peoria, Illinois, and the recent announcement the company is exploring a partnership with Gevo Inc. on alcohol-to-hydrocarbon production will help ADM significantly reduce its exposure to the fuel ethanol market while allowing the company’s expertise and assets to capitalize on new opportunities, according to ADM Chairman and CEO Juan Luciano.

Luciano discussed both announcements during a third quarter earnings call held Oct. 26. ADM on Oct. 21 announced an agreement to sell the Peoria plant to BioUrja Group. The expected sale is related to ADM’s strategic review of its dry mill ethanol assets. The company said it plans to redeploy the resulting capital to other strategic growth investments.

Less than a week later, ADM announced it has signed a memorandum of understanding (MOU) with Gevo to support the production of sustainable aviation fuel (SAF) and other low-carbon fuels from alcohol feedstock. The MOU contemplates the production of both ethanol and isobutanol that would be transformed into SAF and other hydrocarbons using Gevo technology. ADM said approximately 900 million gallons of ethanol produced at its dry mills in Columbus, Nebraska, and Cedar Rapids, Iowa, as well as its Decatur, Illinois, complex is expected to be processed with the alcohol-to-hydrocarbon, resulting in approximately 500 million gallons of SAF and other renewable hydrocarbons.

During the earnings call, Luciano elaborated on the market opportunity presented by SAF. He said the U.S. and European Union have already set goals that will support nearly 4 billion gallons of annual SAF production by 2030, and more than 45 billion by 2050.

ADM is also working to produce other high-value products, including high-purity corn-based lactic acid, which can be used in food, feed and cosmetics, as well as industrial products like biobased plastic. The company in mid-August signed a MOU with LG Chem to explore U.S.-based production of lactic acid to meet those market needs.

ADM’s Carbohydrates Solutions business segment reported lower results for the third quarter. Starches and sweeteners, including ethanol production from the company’s wet mills, managed through dynamic market conditions, the company said, optimizing between sweeteners and ethanol production through the quarter. Results were down when compared to the third quarter of last year due primarily to higher input costs.

The Vantage Corn Processors, which includes ADM’s dry mill ethanol plants, reported improved results when compared to the third quarter of 2020. The company said the improvement was supported by the resumption of production at its two dry mills, and improved fuel ethanol margins, particularly late in the quarter.

The Carbohydrates Solutions business segment reported $213 million in operating profit, down from $146 million during the third quarter of last year. Vantage Corn Processors reported $35 million in segment operating profit, compared to an $11 million loss reported for the same period of 2020.

Overall, ADM reported segment operating profit of $1 billion for the third quarter, up from $904 million reported for the same period of last year. Adjusted operating profit was $1.002 billion, up from $849 million. Earnings per share reached 93 cents, up from 40 cents, while adjusted earnings per share were at 97 cents, up from 89 cents.