Archer Daniels Slumps, Revs Rise

Leading food processing company Archer Daniels Midland Company’s (ADM - Analyst Report) fourth-quarter 2012 earnings per share of 38 cents was way behind the Zacks Consensus Estimate of 62 cents. Quarterly earnings also slipped was down 44.9% from the year-ago earnings of 69 cents per share mainly driven by a decline in segment operating income, offset by lower corporate expenses.

The company’s fiscal 2012 earnings of $2.25 per share, down 34.8% from the year-ago earnings and missed the Zacks Consensus Estimate of $2.48.

On a reported basis, including a LIFO credit of 5 cents, quarterly earnings were down roughly 25.9% to 43 cents per share from the prior-period earnings of 86 cents per share. For the full year, earnings per share were $1.84 compared with $3.13 in fiscal 2011.

Archer Daniels' quarterly net sales dipped 0.9% year over year to $22,675 million, slightly above the Zacks Consensus Estimate of $22,382 million. The year-over-year growth in net sales was mainly attributable to a 4.8% rise in processed volumes. Volumes in the quarter totaled 15,509 thousand metric tons.

Further, a 4.4% rise in Oilseeds Processing revenues to $9,663 million, offset by a 0.5% decline in Corn Processing revenues to $2,828 million and a 5.5% decline in Agricultural Services to $10,147 million drove the upside.

Net sales for the year jumped 10.4% to $89,038 million compared with $80,676 million in fiscal 2011. Yearly sales also surpassed the Zacks Consensus Estimate of $88,614 million.

Quarterly Details

Archer Daniels reported total segment operating profit of $416 million, down 45.5% from the year-ago quarter, driven by reduced operating income at all the segments.

On a segmental basis, operating profit for Agricultural Services segment declined $222 million to $123 million due to tight U.S. crop supplies which affected both export volumes and U.S. merchandising results.

Archer Daniels' Corn Processing segment's operating profit reflected a fall of $48 million to $74 million in the fourth quarter. The decline was attributed to better sweeteners and starches operating profit more than offset by weak ethanol margins.

Oilseeds Processing segment recorded fourth-quarter operating profit of $331 million compared with an operating profit of $449 million in the year-ago period. The $118 million decline was driven by the lack timing gains that were availed in the year-ago quarter and weaker results in cocoa and other.

Operating profit from the other business segment came in at $16 million, up $11 million from last year. The upside was driven by lower captive insurance loss reserves, and better results at ADM Investor Services.

Financials

Archer Daniels ended the year with $1,291 million in cash and cash equivalents compared with $615 million at the end of fiscal 2011. At year-end, long term debt was $8,212 million. Shareholder’s equity as of June 30, 2012 was $18,169 million.

Outlook

Looking ahead, Archer Daniels expects to compensate for the reduction in the potential size of the U.S. corn crop by developing other crops in North America and Europe.

Archer Daniels, which competes with Bunge Limited (BG - Snapshot Report) and Tyson Foods Inc. (TSN - Analyst Report), currently has a Zacks #5 Rank, implying a short-term ‘Strong Sell’ rating on the stock. However, the company retains a long-term Neutral recommendation.