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Archer Daniels' EPS Beats

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Archer Daniels Midland Company’s (ADM - Free Report) adjusted earnings of 50 cents per share for the first-quarter ended September 30, 2012, slipped nearly 14% from the year-ago period’s adjusted earnings of 58 cents primarily due to lower sales and increased input and operational costs. However, the quarterly earnings were above the Zacks Consensus Estimate of 44 cents per share.

On a reported basis, including a LIFO charge of 5 cents, asset impairment charge of 16 cents and adverse impact from Brazil income tax re-measurement, quarterly earnings plunged roughly 59% to 28 cents per share from the prior-period earnings of 68 cents. A LIFO credit of 11 cents is included in the prior-year quarters’ earnings.

Archer Daniels' quarterly net sales inched down 0.4% year over year to $21,808 million, significantly below the Zacks Consensus Estimate of $22,410 million. The year-over-year decline in net sales was mainly attributable to weak performances at Corn Processing and Agricultural Services segments, partially offset by improved results at the company’s Oilseeds Processing segment.

Segment-wise, the company’s Oilseeds Processing segment’s revenue increased 6.8% year over year to $9,688 million while revenue at Corn Processing and Agricultural Services declined 5.1% and 5.8% to $3,126 million and $8,956 million, respectively.

Operational Discussion

Archer Daniels reported total segment adjusted operating profit of $644 million, down approximately 11% from the year-ago quarter, primarily due to reduced operating income at the Corn Processing and Agricultural Services segments, partially offset by improved operating result at Oilseeds Processing segment.

On a segmental basis, adjusted operating profit for Agricultural Services segment declined $99 million to $224 million due to tight U.S. crop supplies, which affected both export volumes and the U.S. merchandising results.

Archer Daniels' Corn Processing segment's operating profit reflected a fall of $115 million to $68 million in the first quarter. The decline was primarily attributable to higher corn costs which were partially offset by improved results of sweeteners and starches.

Oilseeds Processing segment recorded third-quarter operating profit of $336 million compared with an operating profit of $220 million in the year-ago period. The $116 million increase was driven by strong performance delivered by every category except Refining, packaging, biodiesel and other category.

Operating profit from the other business segment came in at $16 million, up $21 million from the last year quarter. The upside was driven by improvement in captive insurance and better results at ADM Investor Services.


Archer Daniels ended the quarter with $1,235 million in cash and cash equivalents compared with $1,320 million at the end of prior-year quarter. At quarter-end, long-term debt was $6,815 million. Shareholder’s equity as of September 30, 2012 was $18,441 million.

Archer Daniels, which competes with Bunge Limited (BG - Free Report) and Tyson Foods Inc. (TSN - Free Report) , currently has a Zacks #5 Rank, implying a short-term Strong Sell rating on the stock.

Archer Daniels Midland procures, transports, stores, processes, and merchandises agricultural commodities and products in the United States and internationally. The company has three major business segments: Oilseeds Processing, Corn Processing, and Agricultural Services. Currently, Archer Daniels Midland has 30,000 workers around the world. It runs around 270 processing plants and provides 420 crop procurement facilities.

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