May 6, 2009
Investment losses drag ADM''s Q3 profit by 98 percent
Archer Daniels Midland Co., the world''s largest grain processor, said third-quarter profit declined 98 percent because of investment losses and lower demand for agricultural commodities.
Net income dropped to US$8 million, or 1 cent a share, in the three months through March, from US$517 million, or 80 cents, a year earlier, Decatur, Illinois-based ADM said in a statement. Excluding some items, profit was 34 cents a share. The average estimate of 10 analysts in a Bloomberg survey was 49 cents. Sales fell 21 percent to US$14.8 billion.
Results fell in all of ADM''s operating units as demand for soy products, ethanol and other agricultural commodities declined. ADM had a US$132 million charge related to currency derivatives at tortilla maker Gruma SAB, in which it holds a 23 percent stake, and a US$97 million tax charge from its investment in Wilmar International Ltd.
David Driscoll, an analyst at Citigroup Inc., said ADM''s results have begun to "come in line with the realities of the agriculture market which are pointing towards softening trends."
ADM fell US$1.49, or 5.7 percent, to US$24.68 at 9:56 a.m. in New York Stock Exchange composite trading. The shares dropped 9.2 percent this year through yesterday.
Profit from the agricultural-services unit, which stores and transports grains, fell 67 percent to US$121 million as global demand for agricultural commodities fell, ADM said. The unit accounted for 49 percent of ADM''s sales in the fiscal year ended in June.
Earnings from crushing oilseeds such as soy, rapeseed and canola fell 5.5 percent to US$224 million. The soy-crush margin, which reflects the profit from processing soy into animal feed and vegetable oil based on futures traded in Chicago, averaged at US$61.875 a bushel during the quarter, 7.6 percent lower than a year earlier.
Feed consumption has slowed as US livestock producers cut output amid falling demand for meat and poultry. The number of cattle on feedlots at the start of April dropped 4.6 percent from a year earlier, US Department of Agriculture data show.
ADM had a US$97 million loss from refining corn into ethanol and other products, compared with profit of US$70 million a year earlier, because of higher corn costs, lower selling prices and inventory writedowns. Profit from processing corn into starches and sweeteners rose 43 percent to $146 million.
Ethanol, a form of alcohol used to stretch gasoline, traded at an average US$1.586 a gallon in the quarter, down 28 percent from a year earlier.
Ethanol producers have struggled amid high corn costs last year and lower fuel demand. On April 7, Aventine Renewable Holdings Inc., based in Pekin, Illinois, filed for bankruptcy protection, joining Renew Energy LLC, Cascade Grain Products LLC and VeraSun Energy Corp.
The average ethanol plant in Iowa is losing 1 cent a gallon and an Illinois mill is making a 6-cent profit as of May 4, according to Ag Trader Talk, an online grain information service in Clive, Iowa.