(Adds company comment from conference call, updates shares)
By Arundhati Sarkar and P.J. Huffstutter
BANGALORE/CHICAGO Oct 31 (Reuters) - Grain trader Archer Daniels Midland Co posted higher-than-expected quarterly profit on Thursday, as increased returns in its nutrition business and improved U.S. grain marketing efforts helped cushion the impact of sluggish commodity prices, ethanol industry troubles and trade war woes.
Chicago-based ADM and its rivals have been restructuring their businesses after a years-long crop supply glut thinned margins and sapped profits. Adding to the challenges are the U.S.-China trade war and a deadly pig disease that has dampened demand for soymeal in China.
Lower demand from China, the world's biggest hog producer and soybean importer, has led to a tightening of ADM's oilseed processing margins both in the U.S. and South America, and turned the company’s focus toward other export markets, including Vietnam.
African Swine Fever in China killing millions of pigs also has affected what crops some plants are processing, said ADM Chief Executive Juan Luciano.
While some U.S. customers are planning soymeal production increases, Luciano said, “We've seen some of the plants that are dedicated to export in Brazil taking some of that capacity down. We're seeing some shift in Europe, also, from soybean to rape(seed) just because there is more profitability there.”
Excluding special items, ADM earned 77 cents per share in the third quarter, beating average analyst estimates by 8 cents, according to IBES Refinitiv data. ADM shares rose nearly 3% to $41.67.
Adjusted earnings from its carbohydrate solutions segment fell 36.8% to $182 million due to lower margins at its ethanol business.
The nutrition business was a bright spot for ADM, with a 76% jump in adjusted operating profit, as the company pushes for growth by investing in specialty items such as pea protein and other plant-based, protein-rich ingredients, which supply trendy vegan products.
The company also reported a reduction in its stock-based compensation, which helped bolster quarterly results.
ADM is one of the so-called "ABCD" quartet of grain traders, alongside Louis Dreyfus Co, Bunge Ltd and Cargill Inc.
Smaller rival Bunge also beat estimates for profit on Wednesday. But it warned of a drop in annual profit due to mounting challenges to its grain trading and processing business.
Extreme weather in the United States, which caused historic late plantings in much of the Midwest and led to a delayed and wet harvest this fall, has impacted ADM and other grain merchants' supply chains, company officials said on Thursday.
How much those delays could hurt ADM’s bottom line next quarter is unclear. The company does expect to see “some significant drying revenue” in the coming months, as U.S. farmers deliver wet grain that will need to be dried, ADM Chief Financial Officer Ray Young said on a call with analysts.
The company is still well-positioned for improved results going into the next year, company executives said, pointing to opportunities in both plant-based proteins and improving crush margins.
"We are fundamentally believers in the crush environment for 2020 given 3% growth outside China," Luciano said.
ADM's revenue rose 5.8% to $16.72 billion in the quarter, supported in part by higher sales across segments. (Reporting by Arundhati Sarkar in Bengaluru and P.J. Huffstutter in Chicago; Editing by Arun Koyyur and Bill Berkrot)