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ADM's 1Q Earnings Slip Below Ests

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Archer Daniels Midland Company’s (ADM - Free Report) adjusted earnings of 48 cents per share for the first-quarter ended Mar 31, 2013 fell short of the Zacks Consensus Estimate of 51 cents and dipped 38.5% from the year-ago period’s adjusted earnings of 78 cents. The company’s earnings suffered primarily due to inferior segment operating profits.

On a reported basis, the company reported earnings of 41 cents per share, substantially below 60 cents earned in the prior-year quarter.

Archer Daniels' quarterly net sales increased 2.7% year over year to $21,727 million, but missed the Zacks Consensus Estimate of $22,126 million. The year-over-year growth in sales was mainly attributable to improved performances at Oilseeds and Corn Processing segments, partially offset by slightly weakened results at the company’s Agricultural Services segment.

Segment-wise, the company’s Oilseeds Processing segment revenues increased 5.5% year over year to $8,143 million and Corn Processing revenues grew 7.7% to $3,053 million. However, revenues for the Agricultural Services segment witnessed a marginal decline of 0.7% to $10,500 million.

Operational Discussion

Archer Daniels reported total segment operating profit of $630 million, down 31.4% from the year-ago quarter, primarily due to weak operating performance at the Agricultural Services and Oilseeds Processing segments.

On a segmental basis, Oilseeds Processing segment recorded operating profit of $313 million compared with an operating profit of $542 million in the year-ago period. The $229 million decline was attributed to the continued challenges in Brazil and dismal margins in Cocoa.

Operating profit for Agricultural Services segment declined 42.1% to $151 million driven by poor U.S. origination volumes that resulted from the negative impact of last summer’s U.S drought.

Archer Daniels' Corn Processing segment's operating profit increased 15% to $153 million from $133 million in the year-ago quarter. This was primarily attributable to improved ethanol results, offset by weaker sweeteners and starches performance.

Operating profit from the Other Business segment came in at $13 million, up $31 million from loss of $18 million reported in the prior-year quarter.


Archer Daniels ended the quarter with $1,448 million in cash and cash equivalents compared with $818 million at the end of the prior-year quarter. At quarter-end, long-term debt was $6,505 million. Shareholder’s equity as of Mar 31, 2013 was $18,976 million.

GrainCorp Acquisition Update

Concurrent to the first-quarter earnings announcement, Archer Daniels announced the successful complete of due diligence for its proposed acquisition of GrainCorp Limited. In accordance with the takeover implementation deed entered last week, the company now proposes to pay A$12.20 per share in cash for all outstanding shares of GrainCorp, with the aggregate transaction value amounting to $3.4 billion.

Moreover, GrainCorp will pay its shareholders a dividend of A$1.00 per share before the completion of the takeover. In case the regulatory approvals are delayed beyond Oct 1, 2013, the company will pay its shareholders an additional dividend of A3.5 cents per share from its profits, every month, starting from Oct 1 till the approvals are received or waived off.

Other Stocks Worth Considering

Besides Archer Daniels that currently carries a Zacks Rank # 3 (Hold), stocks performing well in the farm products industry are Flowers Foods Inc. (FLO - Free Report) , Campbell Soup Company (CPB - Free Report) and J&J Snack Foods Corp. (JJSF - Free Report) . Of these, Flowers Foods has a Zacks Rank #1 (Strong Buy), while Campbell and J&J Snack carry a Zacks Rank #2 (Buy).

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