ADM Profit, Sales Miss Estimates After Grain Margins Weaken

  • ‘More favorable second half’ to follow challenging first: CEO
  • Equity loss of $50 million tied to Wilmar seen this quarter

Archer-Daniels-Midland Co., the world’s largest corn processor, posted second-quarter earnings that missed analysts’ estimates as U.S. grain margins weakened. 

Net income fell to 48 cents a share from 62 cents a year earlier, Chicago-based ADM said Tuesday in a statement. Excluding one-time items, profit was 41 cents, trailing the average of 45 cents from 10 analyst forecasts compiled by Bloomberg. Sales were $15.6 billion, below the $16.9 billion estimate. A year earlier, revenue was $17.2 billion.

“The first half of the year was very challenging,” Chief Executive Officer Juan Luciano said in the statement. “However, with improved fundamentals, we anticipate a more favorable second half of the year.”

Prices in agricultural markets have posted wide swings, which can affect profit from trading to ethanol processing. After jumping in April and May, corn futures and the margin for crushing soybeans slumped in June. ADM buys and stores agriculture commodities and processes crops such grain and oilseeds into food, livestock feed and fuel.

‘Compressed Margins’

In agricultural services, the largest segment by revenue, crop merchandising and handling profit dropped mainly “due to compressed margins across the U.S. grain-handling network,” the company said. While it has elevators and plants around the world, most assets are domestic, and results often are linked to the U.S.

A $14 million loss excluding certain items in merchandising and handling curbed operating profit from agricultural services.

ADM shares fell 1.5 percent to $43.58 at 9:37 a.m. in New York. Through Monday, they climbed 21 percent this year.

Transportation results decline on weak barge demand and lower freight rates. Ethanol margins continued to weaken amid high industry inventories, spurring ADM to cut production. The company cited “progress in the strategic review” of its ethanol dry mills, a move announced in February.

The milling business had a “strong” quarter on “solid volumes and margins,” the company said. Sweetener and starch results improved partly as volumes and pricing rose.

In the third quarter, the company expects to report about $50 million in equity losses linked to the holding in Wilmar International Ltd. In July, the Singapore company said it expects a net loss of about $230 million in the second quarter. ADM, which records Wilmar results on a one-quarter lag, has a 22 percent stake.

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