ADM posts record first-quarter earnings

By Bryan Sims | November 03, 2008
Web exclusive posted Nov. 13, 2008 at 11:31 a.m. CST

Archer Daniels Midland Co.'s first-quarter earnings more than doubled on the back of higher grain commodity prices as the Decatur, Ill.-based agri-giant posted net earnings of $1.05 billion for the quarter ending Sept. 30. It was an increase of approximately 138 percent when compared with the $41 million it reported the same period a year ago.

"This record quarter again demonstrates the ability of our people to utilize our integrated global network and financial strength to capitalize on opportunities and further affirms our business model and strategy," said Patricia Woertz, chairman of the board and chief executive officer for ADM. "Our strong balance sheet and credit rating provide us with the flexibility to access the most cost-efficient credit markets. Our market acumen coupled with this financial strength enables us to recognize and promptly act upon opportunities when they arise."

Net sales rose 65 percent to $21.16 billion, mostly due to higher average selling prices for its oilseeds products as well as for its corn-based sweeteners, starches and ethanol. Sales volumes for the company remained flat.

According to ADM, its segment profit for oilseeds more than doubled to $510 million, up from $209 million last year, on wider profit margins and increased earnings at its Asia affiliates. Profits from its agricultural services rose 87 percent to $428 million, also from improved margins in addition to "shifts in sources of grain supplies and the delayed U.S. harvest."

Although sales for its corn-processing segment increased, ADM said higher input costs helped undercut the unit's profit to $118 million, down from $253 million.

Meanwhile, ADM announced plans to enter the Brazilian ethanol market through a $500 million joint venture with Grupo Cabrera. The partnership is intended to bring together ADM's expertise in ethanol production, logistics and marketing with Cabrera's extensive knowledge of sugarcane agriculture and production.

ADM, already one of the largest producers of corn-based ethanol in the United States, has been examining options to enter Brazil's sugarcane-based biofuels sector for some time. The company already produces soy-based biodiesel in Brazil, as well as in the United States and Europe.

"This joint venture will leverage the expertise of both participants to meet growing Brazilian demand for ethanol," said John Rice, executive vice president of ADM. "Importantly, this partnership also advances ADM's goals of diversifying our feedstocks and growing our global bioenergy business."

The joint venture will construct two processing complexes, each consisting of a sugarcane plantation, a sugar mill, an ethanol plant and a biomass-powered cogeneration facility that will provide power and steam. According to Woertz, the joint venture is expected to produce between 70 MMgy and 90 MMgy of ethanol.

The complexes will be located in Limeira Do Oeste in the state of Minas Gerais, and Jatai in Goias, Brazil. Upon completion, each mill will have a crush capacity of 3 million metric tons annually.