* Q1 earnings $0.45 per share, top estimates of $0.35/shr
* Net sales $21.81 billion, exceed Wall Street forecasts
Oct 30 Agribusiness giant Archer Daniels Midland
Co reported better-than-expected quarterly earnings on
Tuesday, helped by higher profit at its oilseeds processing
The Decatur, Illinois-based company, one of the world's top
grain traders, said it turned in a "mixed" performance in its
fiscal first quarter as oilseeds were strong, margins shrank in
its ethanol business and the agricultural services business
faced the worst U.S. drought in half a century.
The four "ABCD" companies that dominate the global
agricultural business - ADM, Bunge, Cargill Inc
and Louis Dreyfus Corp - are emerging from a
period of dismal earnings in which new competitors and volatile
markets pressured profits.
But there are signs that the scramble for grains after the
drought may be aiding a recovery, as companies with
geographically diverse resources can acquire and deliver grain
where it is needed.
However, the companies still face hurdles from the drought,
which slashed harvests, leaving fewer bushels of corn to
process, store and transport.
Looking ahead, ADM said it was bringing online a large
soybean-processing plant in Paraguay, as South American farmers
are responding to tight market conditions with record plantings.
"Longer-term, we remain optimistic as we see continued
growth in global demand for protein meal and other agricultural
products," ADM Chief Executive Patricia Woertz said in a
The company reported net earnings of $182 million, or 28
cents per share, in its fiscal first quarter ended on Sept. 30,
down from $460 million, or 68 cents per share, a year earlier.
Excluding charges related to an asset impairment and
Brazilian income tax, earnings were 45 cents per share. On that
basis, analysts on average were expecting 35 cents, according to
Thomson Reuters I/B/E/S.
Profit rose in the oilseeds processing unit, helped by
improvements in the crushing and origination businesses. Profit
fell in the corn processing unit, as negative ethanol margins
more than offset improved results from sweeteners and starches.
Refineries for months have lost money on each gallon of
ethanol they produce after the deepest drought in five decades
sent prices of corn, the main feedstock used in U.S. biofuel
production, to a record this summer.
U.S. ethanol production this month fell to the lowest level
since the government began releasing weekly data more than two
years ago, according to the Energy Information Administration.
Net sales and other operating income slipped 4 percent to
$21.81 billion, but topped analysts' average estimate of $20.04
ADM trades, transports, stores and processes grains,
oilseeds and cocoa into products for food, animal feed,
industrial and energy uses.
It has the attention of the grain industry after speeding up
the global race for grains trading power this month with a $2.8
billion bid for smaller Australian shipper GrainCorp.
ADM's bid comes at a time of consolidation in the global
grains sector amid intense competition to feed fast-developing
countries seeking food security. Australia is a key wheat
producer with good links to Asia.
Yet, analysts have said ADM's bid, even at a 33 percent
premium to GrainCorp's pre-offer price, undervalues the
Australian company based on past deals. They expect either a
sweetened offer from ADM or a rival bid from another suitor,
such as Cargill or Bunge.
Cargill and Bunge have declined to comment on GrainCorp.
GrainCorp has said it is reviewing the offer by ADM, which
has a 14.9 percent stake in the firm now. The bid is subject to
a number of conditions including exclusivity and due diligence.
ADM also has reached a preliminary agreement to sell its
stake in Mexican corn flour processor Gruma, a deal
that analysts say could help fund the acquisition of GrainCorp.