Milling & Baking News - February 10, 2009 - 14

Financial Results

Inventory valuation changes lift
ADM earnings in second quarter
DECATUR, ILL. - Net income of Archer Daniels Midland Co. in the second quarter ended Dec. 31 was $585
million, equal to 91c per share on the
common stock, up 24% from $473 million, or 73c per share, in the second
quarter of fiscal 2008. Net sales were
$16,673 million, up 1%.
The company attributed the higher net income "principally to the
positive impact on corporate results
of the changes in LIFO (last in/first
out) inventory valuations." Operating income was
down during the
quarter.
"Our insight
into market dynamics and our
core competencies in risk and
cost
management enabled our
team to deliver
strong results for
the quarter as we
saw a weakening global demand and
margin environment," said Patricia
Woertz, chairman, president and
chief executive officer. "Our balance
sheet is strong, and we are focused
on managing our business in these
challenging markets while continuing to execute our strategy of building long-term shareholder value
through strengthening and growing
our value chain."
Improved oilseed crushing margins
While overall operating income was
lower during the second quarter, the
company's Oilseeds Processing and
Agricultural Services segments enjoyed strong results.
Operating profits of Oilseeds Processing were $319 million in the second quarter, up 46% from $219 million in the same period in fiscal 2008.
The company said profit was up in
all geographic regions except South
America. The gains reflected improved crushing and original margins, offset by lower fertilizer profitability. Refining, packaging and
biodiesel results were up. For the
six months ended Dec. 31, operating
earnings were $829 million, up 94%.
Corn Processing operating earnings
in the second quarter plunged to $29
million, down 89% from $275 million in the second quarter last year.
The decline reflected weaker ethanol
14 / February 10, 2009

Milling & Baking News

business as we experienced declining market prices, declining demand, and we wrote down our ethanol inventories," Ms. Woertz said.
operating conditions. For the six "The ethanol business is still chalmonths, operating profits were $147 lenging. While we did foresee the
million in Corn Processing, down 72%. overbuilding of some supply a while
Agricultural Services operating ago, we did not foresee the depth of
profit was $462 million, up 47% this current economic crisis or the
from $315 million a year earlier. The decline in gasoline demand. Incregain was due to improved merchan- mental blending, which in the past
dising and handling results. Year- above the mandate had been increasto-date operating profit was $890 ing nicely, substantially stopped.
We do have good reason to believe
million, up 64%.
Profitability nearly evaporated in the longer term opportunities for
in the ADM Other segment with $5 ethanol as we work our way through
million in operating earnings, down this oversupply situation."
Steven R. Mills,
chief financial officer and executive
'The ethanol business is still
vice-president,
challenging. While we did foresee the
estimated
that
overbuilding of some supply a while
the LIFO accounting resulted in a
ago, we did not foresee the depth
positive earnings
of this current economic crisis or the
swing of 34c per
decline in gasoline demand.'
share (a positive
- Patricia Woertz, ADM chairman, president and c.e.o.
12c this year versus a negative 22c
last year).
Discussing the Oilseeds Processing
97% from $146 million in the second
quarter last year. Operating prof- business, Mr. Mills said ADM benits were $125 million in the first six efited from having "a good bit of busimonths of the year, down 50% from ness booked forward with good margins." On the other hand he warned
$252 million last year.
that crushing margins narrowed as
the quarter proceeded and demand
Hit from Gruma currency losses
Factoring large in the decline in the diminished.
Turning to Corn Processing, Mr.
Other business was the effect of lower
equity earnings from the company's Mills said that while ethanol margins
investment in Gruma S.A.B. de C.V. "collapsed" during the quarter, stronGruma was hit hard by foreign cur- ger results were achieved in the marrency derivative losses. Shoring up the ket for its edible products.
"We were able to generally maintain
Other segment results were improved
profitable (margins) for sweeteners
wheat and cocoa margins.
and starches as higher selling prices
and results of our international joint
$348 million accounting swing
In detailing the LIFO accounting, ventures compensated for the higher
ADM said a $123 million gain was net corn costs," he said.
booked in the second quarter, versus a $225 million loss in the second Steady wheat flour demand
In wheat flour milling, "we see
quarter last year. For the first half of
fiscal 2008, the LIFO credit was $576 steady demand, and the large North
million, versus a $307 million loss American wheat crop has provided
ample milling quality wheat for the
the year before.
Net income in the first six months industry," Mr. Mills said.
Cocoa demand has "flattened out a
of fiscal 2009 was $1,635 million, or
$2.54 per share, up 79% from $913 bit" and customers are more reticent,
million, or $1.41 per share, during he said.
In New York Stock Exchange tradthe first half last year. Sales were
ing after ADM announced earnings,
$37,833 million, up 29%.
In a Feb. 3 conference call, Ms. Wo- shares surged at the open but then fell
ertz elaborated on quarterly results, back. After initially climbing as high
including the difficulties faced by as $28.75 (up 5%), the shares reversed
course and were trading at about
ADM's Corn Processing segment.
"We saw losses in our ethanol $26.50 (down 3%) an hour later. MBN
bakingbusiness.com / world-grain.com

http://www.bakingbusiness.com http://www.world-grain.com

Milling & Baking News - February 10, 2009

Table of Contents for the Digital Edition of Milling & Baking News - February 10, 2009