ADM reports solid profit growth
Food processor Archer Daniels Midland Co. said Monday its second-quarter profit rose 7 percent as higher earnings from oilseed processing and rising demand for feed grains offset declining margins in its ethanol business.
The results, however, were just shy of Wall Street's expectations and shares fell almost 3 percent.
Profit for the quarter ended Dec. 31 rose to $473 million, or 73 cents per share, from $441 million, or 67 cents per share, in the same period a year earlier.
Revenue rose 50 percent to $16.5 billion.
Analysts polled by Thomson Financial had forecast a profit of 74 cents per share excluding one-time items on revenue of $12.75 billion.
Shares of the company fell $1.30 to close at $44.20. The stock has traded between $31.28 and $47.33 in the past 52 weeks.
Decatur-based Archer Daniel Midland's ethanol business had a second consecutive rough quarter, but its soybean processing segment performed well.
Oilseed processing operating profit rose 14 percent to $219 million on strong global demand for protein and oil. By contrast, corn processing operating profit fell 18 percent to $275 million on lower ethanol selling prices and higher corn costs.
Profit in ADM's agricultural service business, which includes grain trading and transportation, more than doubled to $315 million.
"ADM's record earnings for the second quarter and first half of fiscal 2008 demonstrate the … strengths of our broadly diversified (company)," said Chief Executive Officer Patricia Woertz.
One analyst questioned whether ADM could continue to manage the volatility in agricultural markets as well as it has.
"The sustainability of this level of earnings is still the big question given that so much of it came from the inherently volatile agricultural services division," Credit Suisse analyst Robert Moskow wrote in a note to investors. Still, he praised the company's performance and expected strong results the rest of the year.
Another analyst also noted ADM will likely have to keep paying high prices for the corn it uses to make ethanol and sweeteners.
"Higher corn costs should clearly create headwinds … representing a situation that we will grapple with over the course of (2008)," Citigroup's David Driscoll wrote in a note to investors.