Archer Daniels Midland Co., the largest grain processor, topped analysts’ profit estimates for the first time in four quarters after international grain sales and oilseed processing in North America improved.
Excluding an inventory charge and restructuring costs, per-share profit for the three months through March was 78 cents, 31 percent more than the average of 13 estimates compiled by Bloomberg. Net income fell to $399 million, or 60 cents a share, from $578 million, or 86 cents, a year earlier, the Decatur, Illinois-based company said in a statement today. Sales rose 5.4 percent to $21.2 billion from $20.1 billion.
“They beat on the bottom line on better-than-expected oilseed operating profit and solid results in agricultural services,” Ann Gurkin, a Richmond, Virginia-based analyst for Davenport & Co. who has a buy rating on the shares, said in a phone interview today.
ADM is among agricultural trading companies seeing improvements in grain sales. Cargill Inc. said April 10 its unit that buys and processes crops had a “sharp rebound” in the three months through February from the preceding quarter. Agribusiness market conditions are “better” than they were a few months ago, Alberto Weisser, the chief executive officer of U.S. grain processor Bunge Ltd., said April 26.
ADM rose 7.1 percent to $33.03 at the close in New York, the biggest gain since May 8, 2009. The shares have climbed 15 percent this year.
Operating profit at ADM’s agricultural-services unit, its largest by revenue, rose 4.7 percent to $179 million because of improved international volume and margin. The business buys and stores crops including oilseeds, corn and wheat before selling them to food companies and processors.
Oilseeds processing profit declined 23 percent to $395 million in the quarter after “significant” timing benefits last year, ADM said. Oilseed processing, which includes making oils and protein meal from crops such as soybeans, canola and palm, accounted for 33 percent of ADM’s revenue last year.
Tight South American supplies led to more soybean meal exports from North America, ADM said. In South America, “favorable positioning and increased farmer selling” helped its grain buying performance, the company said.
Operating profit at its corn-processing unit decreased 36 percent to $130 million because of an oversupply of ethanol and costs related to the closing of an ADM ethanol facility in North Dakota, the company said.
Processors of corn into ethanol on average lost 6 cents a gallon in the first three months of 2012, compared with a 3-cent gain a year earlier, said Christine Healy, a Toronto-based analyst for Scotia Capital Inc. The deterioration was due to higher corn prices, the expiration of tax incentives and reduced gasoline demand, she said in an April 18 report.
Sweeteners and starches operating profit increased on export demand and higher prices for high-fructose corn syrup, ADM said.
“This quarter, we delivered very good results despite difficult margin environments, particularly in ethanol and European oilseeds,” ADM Chairman and CEO Patricia Woertz said in the statement. “Looking ahead, planting is under way in North America, and we’re encouraged by the projected corn and soybean acreage.”
The company also “substantially completed” its global workforce reduction and expects it to result in annual savings of more than $150 million, up from a prior estimate of a $125 million, Woertz said on a conference call with analysts today. The company said in February that it planned to eliminate more than 1,200 jobs globally.