Archer Daniels Midland Co. Q1 Profit Squeezed By High Corn Costs

Tallahassee, FL 11/1/11 (StreetBeat) --Archer Daniels Midland Co. (NYSE: ADM), the world’s largest grain processor, reports fiscal first-quarter profit that missed analysts’ estimates amid “weak” oilseed- processing margins and tight U.S. corn supplies.

Net income gained 33 percent to $460 million, or 68 cents a share, in the three months ended Sept. 30, from $345 million, or 54 cents, a year earlier. Earnings excluding inventory gains and debt-exchange costs were 58 cents a share, trailing the 66- cent average of 13 estimates compiled by Bloomberg. Sales rose 30 percent to $21.9 billion from $16.8 billion a year earlier. “The first quarter presented a difficult and challenging market environment,” Chief Executive Officer Patricia Woertz said in the statement. “Margin conditions in our global oilseeds segment were generally weak, and net corn costs were high.”

Global corn inventories at the end of the 2011-2012 crop year will drop 5 percent to 123.19 million metric tons, the smallest since 2006-2007, the U.S. Department of Agriculture said Oct. 12. Oilseed margins narrowed amid excess processing capacity and lower soybean-meal demand, according to BMO Capital Markets.

‘Tighter’ Supply
While volumes at the corn-processing unit rose 5 percent, costs more than doubled amid “tighter” global supply, ADM said. Its operating profit, or sales minus the costs of goods sold and administrative expenses, fell 48 percent.
Oilseed-processing operating profit fell 28 percent as a “weak margin environment” for global soybean and European rapeseed crushing offset improvements in the Americas.

The corn processing and oilseed units accounted for 12 percent and 33 percent of ADM’s sales in fiscal 2011 respectively.

The agricultural-services unit, which trades and transports grains and other commodities, posted an 85 percent increase in operating profit as rising exports from the Black Sea region countered lower U.S. shipments. The unit is ADM’s biggest by revenue, generating 47 percent of fiscal 2011 revenue.

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