ADM 1Q profit rises 9 pct, sales surge

Food processor Archer Daniels Midland Co. surprised Wall Street on Tuesday by reporting stronger-than-expected profits and surging sales despite a slowing of the ethanol boom, demonstrating its strength in oilseeds processing and agricultural services. Its stock leaped almost 7 percent.

ADM's first-quarter earnings of $441 million were only a modest 9 percent more than in the same period a year ago. But the fact it was able to shatter earnings and sales forecasts despite a drop in prices for ethanol, which had propelled its growth in recent quarters, and higher corn prices impressed industry analysts.

"ADM's performance provides greater evidence that ADM is not simply an ethanol company, or a one-trick pony, but an agriculturally diversified business that should generate sustainable growth," BMO Capital Markets analyst Kenneth Zaslow said in a note to investors.

Executives of the Decatur, Ill.-based company said on a conference call that ethanol prices are expected to fall further in the second quarter, and noted that the current supply glut has caused other companies to put ethanol projects on hold. But they said they are pushing ahead with construction of additional ethanol plants, able to withstand the downturn because of their diversified operations.

"Where excellent first-quarter earnings of a year ago reflected steep growth in the ethanol market, our record first-quarter earnings this year demonstrate our strengths in sweeteners and starches, oilseed processing and our global capabilities in grain merchandising and handling," said Chief Executive Patricia Woertz.

Profit for the three months ended Sept. 30 amounted to 68 cents per share, up from $403.9 million, or 61 cents per share, during the same period a year earlier.

Excluding certain items, including a $23 million charge resulting from an organizational realignment announced in August, operating earnings were 77 cents per share — easily topping the consensus estimate of 59 cents per share by analysts surveyed by Thomson Financial.

Sales rose 36 percent to $12.83 billion from $9.45 billion a year earlier, far above the $10.64 billion expected by analysts.

Its shares rose $2.37, or 6.9 percent, to close at $36.89 Tuesday after reaching a seven-month high of $37.67.

Today's results should remind investors that ADM is more than just an ethanol play and that it is directly benefiting from improving global agricultural trends," said Pablo Zuanic of J.P. Morgan in a research note.

Profit in ADM's oilseeds processing business rose nearly 23 percent to $209 million from $170 million a year ago, due to strong demand worldwide for protein meal and oil.

Corn processing operating profit declined 12 percent to $253 million due to lower ethanol sales prices and volumes and higher net corn costs. Ethanol income declined 52 percent before taxes.

Operating profit from sweeteners and starches jumped 38 percent to $164 million on higher average sweetener and starch selling prices.

Agricultural services results nearly doubled to $229 million. The company said volatile commodity market conditions, large North American crops and global wheat shortages all boosted profits.

Morgan Stanley analyst Vincent Andrews noted that ethanol indirectly helped the company achieve the strong overall results, partly as a key contributor to the volatility in commodity prices.

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