Archer Daniels Midland's 3Q profit tumbles
ST. LOUIS -- Archer Daniels Midland Co., a major corn and soybean processor and ethanol maker, said Tuesday its fiscal third-quarter profit tumbled an unexpectedly sharp 98 percent due to a drop in sales along with an unexpected tax payment and a loss on equity investments.
The adjusted results were below Wall Street expectations, and ADM shares fell $2.50, or 9.6 percent, to $23.67 in afternoon trading.
The Decatur, Ill.-based agribusiness company said its profit fell to $8 million, or a penny per share, in the three months ended March 31, down from $517 million, or 80 cents per share, a year ago.
The latest results included losses of $229 million, or 36 cents per share, from equity investments. Excluding that, adjusted earnings would have been 37 cents per share.
That is below the analysts' consensus estimate of 49 cents a share, according to a survey by Thomson Reuters.
While the one-time charges hit earnings, the global economic downturn and stabilizing crop prices pulled down sales and profits across the company's portfolio of agribusiness ventures, which include processing crops, shipping commodities and making biofuels.
Sales fell 21 percent to $14.8 billion from $18.7 billion a year ago and well below the analysts' average estimate of $16.9 billion.
Barclays Capital analyst Christopher Bledsoe said the results show a broad-based drop in demand is dragging down ADM sales and will be difficult to counter. He said investors appeared particularly concerned about increasing losses in the ethanol division.
The company's bioproducts division which includes the ethanol business posted an operating loss of $97 million in the latest quarter in contrast to a profit of $70 million a year earlier as higher corn costs and lower gasoline costs ate into margins. Profits from soybean and corn processing were both down.
During a conference call Tuesday, analysts questioned weather Archer Daniels Midland could continue to reap the high profits it reported last year when a global supply crunch of crops boosted food prices around the world. The company profited in several ways from the market volatility, including financial bets it made on crop prices and higher fees it charged to ship grain overseas.
Chief Executive Patricia Woertz conceded the economic outlook had dimmed for agribusiness firms, but said the company would benefit when global demand for food and domestic demand for ethanol rebound.
"We do feel we performed relatively well given the economic downturn," she said.
Woertz said the ethanol market was also worrisome, with Archer Daniels Mildland expecting an oversupply of the crop-based fuel throughout the next year. The company invested heavily in building ethanol plants through the Midwest, joining a building boom that has oversaturated the market.
The third quarter earnings reflected one-time investment losses, including $132 million on derivative currency investments made by its affiliate, the Mexican food company Gruma SAB de CV. The company said Gruma was trying to renegotiate many of the bad derivative bets it had made, and there might not be a loss associated with Grums during the fourth quarter.
ADM said it also had to pay an additional $97 million in income tax after buying the Asian agribusiness company Wilmar International Ltd. Chief Financial Officer Steven Mills said income tax costs from the deal will continue through the year, costing an estimated $60 million during the fourth quarter, and an estimated $318 million with the next 18 months.