ADM Earnings Exceed Estimates on Record Soybean Capacity

Archer-Daniels-Midland Co., the world’s largest corn processor, reported fiscal second-quarter profit and revenue that topped analysts’ estimates as its U.S. soybean-crushing operations ran at record capacity.

Earnings excluding inventory gains and other items was 60 cents a share in the three months through December, the Decatur, Illinois-based company said today in a statement. The average of 11 estimates compiled by Bloomberg was for 58 cents. Sales increased 6.9 percent to $24.9 billion, exceeding the $22.7 billion average of seven estimates.

Chairman and Chief Executive Officer Patricia Woertz said in the statement that ADM fully utilized its oilseed-crushing capacity in North America to meet “strong” global demand. The margin, or spread, between prices for soybeans and products such as oil and meal that are derived from the commodity rose 77 percent in Illinois in the year through Jan. 31, the latest data from the U.S. Department of Agriculture show.

“Oilseeds was driven by continued strong demand in the U.S. and better than expected demand out of Asia,” Ann Gurkin, a Richmond, Virginia-based analyst for Davenport & Co. who has a buy rating on ADM, said in a telephone interview today.

ADM rose 3.3 percent to $29.38 in New York.

Net income rose to $510 million, or 77 cents a share, in the quarter from $80 million, or 12 cents, a year earlier. Operating profit for ADM’s oilseeds segment almost doubled to $411 million.

River Levels

The agricultural services business, which trades and distributes agricultural commodities, saw operating profit increase 32 percent to $317 million, including a $62 million gain from ADM’s stake in Australian grain handler GrainCorp Ltd. The unit’s performance exceeded Gurkin’s estimates on “good transportation management,” even as the drought in the U.S. lowered water levels in the Mississippi River, she said.

Earnings at the sweeteners and starches segment increased 29 percent as industry capacity constraints and higher corn costs supported higher selling prices, ADM said. The company produces high-fructose corn syrup, the price of which rose 11.5 percent from a year earlier as processors were able to pass on higher corn costs, Farha Aslam, a New York-based analyst for Stephens Inc., said in a Jan. 30 report.

Corn-processing operating profit was $3 million, compared with a loss of $129 million a year earlier. Lower gasoline demand and ethanol imports from Brazil have created excess U.S. inventory of the fuel additive and contributed to negative margins, ADM said.

GrainCorp Bid

ADM, which generates most of its sales domestically and has the majority of its assets in the U.S., is expanding in other countries by opening a soybean-crushing plant in Paraguay and in October making an unsolicited bid for GrainCorp. ADM raised its stake in the Australian grain handler to 19.9 percent in December and increased its offer to A$2.8 billion ($2.9 billion). The Australian company rejected the bid as too low.

Since the rejection, the two companies have had “no conversations” and there’s no update on the proposed deal, Woertz said on a conference call with analysts today.

ADM has aligned its financial reporting with the calendar year and started its fiscal 2013 on Jan. 1. The second-quarter results reported today comprise part of an abbreviated, transitional financial year of July through December.

The company plans to restart a “modest” share buyback program in the first quarter and allocate $1 billion for capital expenditures in 2013, according to a slide presentation on its website today.

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