ADM Second-Quarter Profit Misses Analysts’ Estimates After Corn Costs Rise

Archer Daniels Midland Co. (ADM), the world’s largest grain processor, posted a second-quarter profit that missed analysts’ estimates after oilseed earnings fell and corn costs rose.

Net income fell 89 percent to $80 million, or 12 cents a share, in the three months ended Dec. 31, from $732 million, or $1.14, a year earlier, the Decatur, Illinois-based company said today in a statement. Earnings adjusted for inventory and impairment charges were 51 cents, lower than the 76-cent average of 12 estimates compiled by Bloomberg. Sales rose 11 percent to $23.3 billion from $20.9 billion.

“It was a tough quarter,” ADM Chairman and Chief Executive Officer Patricia Woertz said in the statement. “Ongoing weakness in global oilseeds margins, lower results in corn and poor international merchandising results hurt our second-quarter profits.”

ADM is among traders and processors of basic foodstuffs to report declining earnings amid increasing commodity-price volatility. Cargill Inc., the largest closely held U.S. company and a competitor of ADM, said earlier this month its fiscal second-quarter profit fell 88 percent as the European debt crisis and political uncertainty weighed on commodity markets.

Investors have taken a “very pessimistic view” of grain processors, with the group trading as much as 50 percent below its 10-year historical average valuation, David Driscoll, a New York-based analyst for Citigroup Global Markets Inc. who has a “buy” rating on ADM shares, said in a report Jan. 24.

ADM said Jan. 11 it will reduce its workforce by about 1,000, or 3 percent, to cut annual pretax expenses by more than $100 million. The company said the following day it will take a pretax impairment charge of as much as $360 million in the second quarter to end a bio-plastics joint venture with Metabolix Inc.

“ADM’s recent cost-cutting announcement supports the idea that margins are disappointing,” Lindsay Drucker Mann, a New York-based analyst for Goldman Sachs Group who has a “neutral” rating on the shares, said in a report on Jan. 26. ADM dropped 0.4 percent to $29.71 in New York yesterday. The shares have dropped 9.1 percent in the past year.

To contact the reporter on this story: Shruti Date Singh in Chicago at ssingh28@bloomberg.net.

To contact the editor responsible for this story: Simon Casey at scasey4@bloomberg.net.

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