By Karl Plume
Feb 4 U.S. agribusiness giant Archer Daniels
Midland Co said Tuesday it remained committed to
expanding its global reach to satisfy Asia's fast-growing demand
for food, despite a failed bid to acquire Australian grain
handler GrainCorp Ltd.
Charges relating to the GrainCorp deal contributed to a
27-percent drop in ADM's fourth-quarter profit, overshadowing
strength in its corn processing and oilseeds businesses as lower
crop prices boosted margins.
The Decatur, Illinois-based company had pursued grain
handler GrainCorp for 13 months before Australia's government
blocked the deal in November. ADM retains a stake of about 20
percent in the company.
"The strategic rationale for ownership in GrainCorp remains
the same today as it did before with its good business location,
strategic region and proximity to Asia. We're pleased with our
current ownership stake and have no plans to sell it at this
time," said ADM Chief Executive Patricia Woertz.
A strong balance sheet will allow ADM to pursue additional
investments in 2014, but the company's focus could be on
"consolidation plays," said Chief Operations Officer Juan
"This is an industry of relatively high capital intensivity
and low margins so you need to make sure you are very prudent in
how you invest so you return the cost of capital," he said.
Shares of ADM slipped 0.4 percent to $38.76 in afternoon
trading on the New York Stock Exchange.
ADM reported strong results in its corn processing and
oilseeds divisions as bumper U.S. crops, following an historic
drought in 2012, replenished supplies and bolstered margins. The
company also highlighted good demand for ethanol and biodiesel.
ADM is one of four large agribusinesses known as the ABCDs
that dominate the global grain trade. The others are Bunge Ltd
, Cargill Inc and Louis Dreyfus Corp.
Cargill Inc last month reported a surge in quarterly profit
as lower crop prices boosted grain processing margins and buoyed
profits in its meat business.
Benchmark corn prices on the Chicago Board of Trade
are down about 40 percent from last summer's highs while
soybeans are down about 20 percent.
ADM's agricultural services segment struggled to capitalize
on the U.S. grain bounty as some farmers resisted selling at
lower prices, striking a blow to its grain trading returns.
Poor international merchandising results further dragged on
the segment, including a small impact from cancellations of U.S.
corn sales to China amid a dispute over an unapproved biotech
ADM viewed the slow farmer sales of corn in the United
States mostly as a delay, similar to limited South American
sales in the first quarter last year. U.S. corn has already
started to flow in 2014 and more will eventually come to market.
"We expect ag services results to improve from what we saw
in Q4 as we go forward and we commercialize the full crop," said
Analyst Morningstar on Tuesday raised its fair value
estimate for ADM stock to $39 a share from $37 previously due to
the big U.S. crop and lower corn prices.
Still, ADM, one of the world's largest ethanol producers,
may face challenges in the coming year as the U.S. Environmental
Protection Agency considers a proposal to reduce biofuel
For the quarter ended Dec. 31, ADM earned a net profit of
$374 million, or 56 cents a share, compared with $510 million,
or 77 cents a share, a year earlier, the company said.
Adjusted earnings, which excluded GrainCorp-related charges
and other items, were 95 cents a share, up from 60 cents a share
a year earlier and 10 cents above the consensus estimate,
according to Thomson Reuters I/B/E/S.
Revenue slipped to $24.1 billion, from $24.9 billion in the
same quarter a year ago, below forecasts for $24.7 billion.
Oilseeds processing profit rose 16 percent to $478 million
in the quarter while corn processing earnings surged to $279
million from just $3 million a year ago.
Agricultural services profit fell to $46 million, down $271
million from the same quarter the prior year.