ADM Trading Unit Reports Another Loss Amid Global Crop Gluts

  • Shares fall most since 2009 after quarterly earnings report
  • Agricultural services results seen weaker than expected

Archer-Daniels-Midland Co. is still struggling to make money from trading in global agricultural markets that are awash with excess supply.

Its international merchandising unit, which has seen several senior employees depart recently, had a loss during the first quarter, the Chicago-based company confirmed to Bloomberg News in an email Tuesday. That follows losses for the segment in the first and fourth quarters of last year. ADM’s shares tumbled 8.9 percent in New York, the biggest decline in eight years.

“A substantial global supply of crops continues to limit merchandising opportunities,” Chief Executive Officer Juan Luciano told analysts on ADM’s first-quarter earnings conference call. He added that it also suffered from reduced volumes at Argentine ports, though the unit’s performance is expected to improve later in the year.

ADM’s international trading activities form part of its agricultural services division -- the company’s largest by revenue -- and that part of the business saw higher first-quarter operating earnings overall amid strong global demand for U.S. commodities.

But results for agricultural services in 2017 may be weaker than what the company had expected at the start of this year, Luciano said. Uncertainty over those earnings pushed the shares lower, said Farha Aslam, a New York-based analyst for Stephens Inc. ADM closed at $41.67 in New York, for a year-to-date decline of 8.7 percent.

Luciano is pushing for improvements at the company, including a shake-up of the international trading unit. He said trading costs are being reduced and the segment’s restructuring is mostly complete, with a consolidation of offices in Argentina and the closure of a South African office.

‘Aggressive Actions’

Just last week, ADM said Gary Towne, president of the global trading desk, will step down, and Gary McGuigan will succeed him. The company also told employees last week that it hired Stefano Rettore, formerly at U.S. farm co-operative CHS Inc., to be its chief risk officer, replacing Mark Bemis, who is retiring.

“We are beginning to see the benefits of our aggressive actions to improve that international merchandising performance," Luciano said on the call.

ADM’s net income for the first quarter rose to $339 million, or 59 cents a share, from $230 million, or 39 cents, a year earlier, it said in a statement. Earnings excluding one-time items were 60 cents a share, trailing the 62-cent average of 13 analysts’ estimates compiled by Bloomberg. Revenue increased 4.2 percent to $15 billion.

Corn processing earnings rose on improved performance from sweeteners and starches and “very strong” ethanol exports.

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