Archer Daniels Comes Up Short

| About: Archer Daniels (ADM)

Archer Daniels Midland Co.’s (ADM) fiscal 2011 first-quarter earnings plunged to $345 million or 54 cents per share from $496 million or 77 cents per share in the year-ago quarter. Quarterly earnings fell short of the Zacks Consensus Estimate of 75 cents per share.

The soft quarterly result was primarily due to lower segment profit and negative discrepancy from changing LIFO inventory valuations.

Archer Daniels’ quarterly net sales increased 12.6% year over year to $16.8 billion, also beating the Zacks Consensus Estimate of $15.5 billion. The growth was mainly attributable to a 13.7% growth in Corn Processing revenues and a 1.6% rise in Oilseeds Processing revenue sto $6.5 billion, partially offset by a 22.8% decline in Agricultural Services revenues to $6.5 billion.

Total segment operating profit for Archer Daniels dropped to $765 million from $774 million in the prior-year quarter. Operating profit for Oilseeds Processing segment grew $24 million to $308 million from $284 million in the year-ago period, reflecting better crushing volumes in South America and Europe, improved margins in soybean and softseed crushing.

Archer Daniels’ Corn Processing segment swung to an operating profit of $341 million from an operating profit of $188 million last year. The increase was primarily attributable to a significant improvement in bioproducts performance stemming from better margins for ethanol and lysine aided by lower net corn costs. However, growth in segment operating income was partially offset by lower average selling prices of sweeteners and starches.

Archer Daniels’ Agricultural Services segment recorded a quarterly operating profit of $132 million compared with an operating profit of $175 million in the year-ago period due to the negative impact from supply shifts early in the quarter. Operating loss from the Other business segment came in at $16 million as opposed to an operating profit of $127 million in the year-ago quarter.

The long-term debt-to-capitalization ratio of 31.8% compared favorably with a long-term debt-to-capitalization ratio of 34.9% in the prior-year quarter.

Archer Danielscurrently has a short-term Zacks #2 Rank (Buy) rating and a long-term Neutral recommendation.

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