ADM tops Wall Street view, shares up 4 percent

CHICAGO Tue Feb 2, 2010 1:44pm EST

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CHICAGO (Reuters) - Archer Daniels Midland Co's (ADM.N) quarterly earnings topped Wall Street expectations and the grain processor and ethanol producer said demand for food and fuel was improving, sending shares up 4 percent.

ADM and others in the agricultural sector were hit hard over the past year as the worst recession in decades hurt global demand for food and fuel. But signs of a global economic recovery and the company's ethanol expansion plans point to a brighter outlook ahead.

"We're seeing demand improving in some of our the key markets we serve and we're also seeing the U.S. ethanol market reasonably balanced," said ADM CEO Patricia Woertz. "We have an optimistic view of the ethanol business or we wouldn't be building the capacity."

Earnings for the fiscal second quarter that ended December 31 totaled 88 cents per share, handily beating the consensus analyst forecast for 72 cents, according to Thomson Reuters

I/B/E/S.

"There was a degree of skepticism going in that they would just merely meet that consensus. And they were very bullish on ethanol looking out," said Christina McGlone, analyst with Deutsche Bank Securities.

ADM, currently the second largest producer of ethanol in the United States, is ramping up production at a newly-build ethanol plant in Columbus, Nebraska, and will start production at another new plant in Cedar Rapids, Iowa, this summer slightly ahead of schedule.

Both new plants were slated to be 275-million-gallon a year facilities, but ADM said they would ultimately produce 300 million gallons annually.

"Even though that's only 50 million gallons, it still shows that they are very positive about the market," Deutsche Bank's McGlone said.

PROFIT SLIPS

ADM reported a net second quarter profit of $567 million, or 88 cents per share, compared with $578 million, or 90 cents a share, a year earlier.

Net sales fell 5 percent to $15.91 billion as increased sales volumes were offset by lower selling prices. Analysts had expected $16.54 billion.

Oilseed processing results rose by 10 percent to $352 million amid improved margins, strong demand in Asia, and the absence of fertilizer inventory writedowns that weighed on year-earlier results.

Corn processing net profit grew ten-fold from the prior year to $290 million on improved margins in sweeteners and starches and bioproducts, which includes ethanol production.

Bioproducts emerged from four consecutive quarters of red ink as lower corn input costs and favorable gasoline blending economics bolstered ethanol margins.

Agricultural services segment earnings fell to $150 million from $462 million. Other operating profit, which includes ADM's wheat and cocoa operations, increased to $178 million from $5 million.

Results included a $54 million charge due to last-in, first-out accounting.

Shares of ADM, based in Decatur, Illinois, were up $1.15, or 3.8 percent, at $31.31 in afternoon trading on the New York Stock Exchange.

(Reporting by Karl Plume; Editing by John Wallace and Derek Caney)

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