Milling & Baking News - August 18, 2015 - 14

Financial Results X

ADM quarterly earnings decline
28%; strong milling results cited
CHICAGO - Net income at Archer Daniels Midland Co. fell 28% in the second
quarter of fiscal 2015, as operating profit
in the company's Agricultural Services
and Corn Processing segments finished
lower than a year ago. Strong results were
indicated for milling.
Net income in the second quarter ended
June 30 totaled $386 million, equal to 62c
per share on the common stock, down
from $533 million, or 81c per share, in the
same period a year ago. Revenues fell 20%
to $17,186 million from $21,494 million.
Despite the lower year-over-year results,
Juan Luciano, president and chief executive
officer, said second-quarter financials demonstrated the strength and value of ADM's
geographic and business portfolio diversity.
"In corn, domestic and export demand
for ethanol was robust, but record industry production limited margins," he said
during an Aug. 4 conference call with analysts. "This was partially offset by strong
results from our corn sweeteners and
starches business. In oilseeds, good meal
demand supported strong North American crushing results, and South American
origination and export volumes were up,
leading to good throughput at our expanded origination and board network.
This, combined with the flexibility of our
global crush plants, helped the oilseeds
team deliver another strong performance.
"The Wild Flavors and special ingredients team had an excellent quarter and

continues to make great progress toward
achieving their targeted cost and revenue
synergies. Our services earnings were
impacted by lower margins and volumes
of North American exports, as they were
less competitive globally, and by a sharp
upward move in commodity prices at the
end of the quarter. But within our ag services segment, the milling business had
record second-quarter results."
Operating profit in the Oilseeds Processing unit was $301 million, up narrowly
from $297 million in the same period a
year ago. Crushing and origination profit
increased to $198 million from $163 million.
"Oilseeds had another consistent, solid
quarter similar to last year," Mr. Luciano
said. "In crushing and origination, large
global bean supply and a strong U.S. mill
demand drove great global soy crush results. In the first half of 2015, we crushed
record volumes of soybeans globally. As
part of our strategic plan for oilseeds, we've
added switch capacity to more of our North
American crush plants, and we've profited
from our global switch capacity in a weak,
softened margin environment this quarter."
Agricultural Services operating profit
decreased 31% to $127 million from $184
million, as both merchandising and handling and transportation results declined.
Milling and other results improved to $67
million from $42 million during the quarter.
Also lower during the quarter was operating profit within the Corn Processing

Sales slip at Kraft Heinz while
earnings rise sharply
PITTSBURGH - In its first quarterly
report as a combined company, The Kraft
Heinz Co. said sales fell 4.9% at Kraft
Foods Group, Inc. and 4.1% at H.J. Heinz
Holding Corp. prior to the completion
of the merger in July. Lower prices and
weak demand hurt Kraft in the quarter,
while Heinz's results were affected by
unfavorable currency translation.
"The company is focused on the difficult
and challenging process of integrating
our two businesses," said Bernardo Hees,
chief executive officer of Kraft Heinz. "We
have a lot of hard work ahead of us as we
continue to design our new organization,
always putting our consumers first."
For the second quarter ended June 27,
Northfield, Ill.-based Kraft Foods had
net earnings of $551 million, or 93c per
share on the common stock, up from $482
million, or 81c per share, for the year-ago
14 / August 18, 2015 XMilling & Baking News

period. The company recorded expenses
of $56 million in cost savings initiatives
and $37 million of merger-related costs
that were partly offset by $20 million in
unrealized gains on hedging activities

within cost of sales and a gain on sale of
assets of $21 million.
Net revenues were $4,515 million, which
compared with $4,747 million the year
before, reflecting a negative impact from
foreign currency translation, lower sales of
ready-to-drink beverages from decreased
promotional activity and lower net pricing
in the cheese and food service businesses,
which were partially offset by pricing
increases taken in previous quarters.

unit, which fell 30% to $188 million from
$268 million. Sweeteners and starches results improved behind good North American sweetener volumes and margins, good
demand for co-products and solid results
from the Almex and Eaststarch joint ventures, but bioproducts results fell to $43
million from $145 million. Bioproducts results were affected adversely by lower ethanol industry margins, the company said.
Wild Flavors and Specialty Ingredients
operating profit totaled $104 million in
the second quarter. There were no comparable results to a year ago.
"The Wild Flavors and Specialty Ingredients business unit delivered more than
$100 million in earnings and excellent
performance," Mr. Luciano explained.
"The W.F.S.I. business, with products
ranging from protein specialties to ancient
grains to natural flavors, is a key component
in ADM's efforts to serve customers with ontrend products to grow their business."
Providing an update on acquisitions
and investments, Mr. Luciano said ADM
expanded its farmer services offering
with an investment in Agri Port, a leader in on-farm analytical and forecasting
tools, and closed the sale of a 50% stake
in its Barcarena port to Glencore. The
company also closed the sale of its global
chocolate business to Cargill and is on
track to close its acquisition of Eaststarch
in the second half of the year.
For the first half of fiscal 2015, net income
was $879 million, or $1.39 per share, up
10% from $800 million, or $1.21 per share,
a year ago. Revenues were $34,692 million,
down 18% from $42,190 million. MBN
For the second quarter ended June 28,
Heinz sustained a loss of $164 million,
which compared with net income of
$127 million the year before. Adjusted
earnings before tax, interest, depreciation
and amortization increased 6.7% to $739
million, driven by increased sales in North
America and Venezuela and cost savings
initiatives that partially were offset by
unfavorable currency translation and
increased marketing spending in North
America.
Sales slipped 4.1% to $2,616 million
from $2,729 million, as the negative
impact of foreign exchange translation
and a reduction from the divestiture
of a frozen food business in the United
Kingdom more than offset benefits of
higher pricing across all segments and
volume gains in the United States.
Kraft Heinz said it does not expect to
issue earnings guidance going forward, but
the company expressed confidence in its
ability to generate aggressive run-rate cost
savings of $1.5 billion by the end of 2017. MBN
bakingbusiness.com / world-grain.com

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Milling & Baking News - August 18, 2015

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