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Archer Daniels' (ADM) New Facility in China to Aid Nutrition Unit

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Archer Daniels Midland Company (ADM - Free Report) has opened a new flavor production facility in Pinghu, Zhejiang Province, China, by the name of ADM Food Technology (Pinghu) Co., Ltd. The new facility will serve as its flavor supply hub in the Asia Pacific region.

The state-of-the-art facility is in close proximity to Shanghai, thereby providing a geographical advantage to customers and enabling the company to get direct access to resources. The facility features automated flavor lines with advanced dosing technology for a smooth and efficient process. It also comes with labs for flavor production, taste design and product development. Alongside these, there are separate provisions for specific dietary needs such as Halal and Kosher certified products.

This marks the latest investment in the global nutrition business. Some other notable efforts include the acquisition of pet treat and supplement manufacturers namely PetDine, Pedigree Ovens, The Pound Bakery and NutraDine (P4); European-based non-GMO human nutrition protein solution, namely Sojaprotein; along with Vietnam-based animal nutrition premix provider, Golden Farm.

Being a premier global company in human and animal nutrition, it remains on track with investments in organic growth, strategic acquisitions as well as innovation and technology. It has already emerged as the partner of choice for customers who prefer healthy yet delicious foods and beverages.

Archer Daniels’ nutrition unit has been acting as a major growth driver for a long time now. For second-quarter 2021, revenues at the segment rose 20.6% year over year. The segment’s adjusted operating profit grew 27.2% year over year, owing to significant gains in Human and Animal Nutrition units. The North America and EMEA regions gained from strength in the flavors business on higher volumes and better product mix, particularly in the beverage segment.

Sales growth in specialty proteins aided the Specialty Ingredients unit, while robust sales and margins in probiotics contributed to growth of the Health & Wellness category. The Animal Nutrition unit grew year over year owing to positive demand and margins in amino acids, strength in feed additives and ingredients along with improved performance in the EMEA region, which more than offset the adverse impacts of the COVID-19 pandemic. Management lifted its 2021 operating profit growth guidance for the Nutrition segment to 20%.

We believe that aggressive investments in the nutrition unit are fueling growth and strengthening Archer Daniel’s position in this space. Shares of this Zacks Rank #3 (Hold) company have rallied 26.4% year to date compared with the industry’s 0.5% growth.

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