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ADM Reports Second Quarter Earnings per Share of $2.18, $2.15 on an Adjusted Basis

·13 min read
  • Net earnings and adjusted earnings of about $1.2 billion

  • Adjusted ROIC of 11.6%

CHICAGO, July 26, 2022--(BUSINESS WIRE)--ADM (NYSE: ADM) today reported financial results for the quarter ended June 30, 2022.

"Our second quarter adjusted earnings per share of $2.15 reflect our team’s strong execution, delivering nutrition to billions of people around the globe," said Chairman and CEO Juan Luciano. "In addition, our productivity initiatives are improving our capabilities and mitigating the impact of inflation, while our innovation projects are powering profitable growth, as we leverage our unique portfolio and globally integrated network to meet demand driven by the three enduring global trends of food security, health and well-being, and sustainability.

"Looking forward, we expect the combination of our strategic actions and continued good demand for our products to propel very strong earnings in the second half of 2022, with strong cash flows enabling us to accelerate approximately $1 billion in share repurchases into the back half of the year. Beyond that, we will continue to execute the growth plan we laid out at our Global Investor Day, while maintaining our focus on balanced capital allocation and optimizing ROIC."

Second Quarter 2022 Highlights

(Amounts in millions except per share amounts)

2022

2021

Earnings per share (as reported)

$

2.18

$

1.26

Adjusted earnings per share1

$

2.15

$

1.33

Segment operating profit

$

1,840

$

1,145

Adjusted segment operating profit (loss)1

$

1,849

$

1,160

Ag Services and Oilseeds

1,119

570

Carbohydrate Solutions

473

383

Nutrition

239

201

Other Business

18

6

  • Q2 2022 EPS as reported of $2.18 includes a $0.01 per share net charge related to impairments and restructuring and a $0.04 per share gain related to the mark-to-market adjustment on the Wilmar exchangeable bond. Adjusted EPS, which excludes these items, was $2.15.1

1 Non-GAAP financial measures; see pages 3, 5, 10, 11 and 12 for explanations and reconciliations, including after-tax amounts.

Quarterly Results of Operations

Ag Services & Oilseeds delivered substantially higher year-over-year results.

  • Ag Services results more than doubled versus the year-ago quarter. Global Trade had an outstanding quarter: The destination marketing team’s ability to meet customer demand around the globe helped drive strong volumes and margins, and good execution in global freight, as well as net timing gains of about $65 million for the quarter, contributed to significantly higher year-over-year profits. North America had a solid performance as export volumes remained strong in a good global demand environment, though year-over-year results were lower due to the prior-year’s insurance settlement and strong positioning gains. South America results were higher, based on stronger origination volumes and better margins driven by strong global grain demand.

  • Crushing delivered substantially higher results. Strong soy crush margins drove improved performance in all three regions, as meal and oil demand remained robust. Positive net timing effects of approximately $90 million for the quarter, versus the $70 million of negative timing in the year-ago period, helped drive higher year-over-year results.

  • Refined Products and Other results were similar to the prior-year period, as strong demand for biofuels and food oils drove refining premiums and biodiesel margins, offset by approximately $150 million of negative timing effects versus negative $30 million in the prior-year quarter.

  • Equity earnings from Wilmar were significantly higher versus the second quarter of 2021.

Carbohydrate Solutions results were substantially higher versus the prior-year period.

  • The Starches and Sweeteners subsegment, including ethanol production from our wet mills, delivered much better results due to solid demand as food service volumes reached close to pre-pandemic levels. Corn co-products, including strong demand for corn oil, and effective risk management drove higher ethanol and sweetener margins.

  • Vantage Corn Processors results were slightly higher in an environment of good gasoline demand and strong ethanol blending economics. A $50 million recovery from the USDA Biofuel Producer Recovery Program helped offset the prior year’s strong industrial alcohol results from the now-sold Peoria facility as well as valuation losses on ethanol inventory as prices fell late in the quarter.

Nutrition delivered 16% revenue growth — 20%1 on a constant currency basis — and 19% higher year-over-year operating profit.

  • Human Nutrition delivered higher year-over-year results as demand across its diverse product portfolio remained robust. Flavors grew revenue in North America, EMEA and South America, though profits were lower due to negative currency effects in EMEA as well as weaker results in APAC. Healthy demand for alternative proteins resulted in strong soy protein volumes and margins, as contributions from the Sojaprotein acquisition, as well as good demand for texturants, drove higher results in Specialty Ingredients. Strength across probiotics, including in the recently acquired Deerland business, as well as robust demand for fibers, contributed to a stronger quarter in Health and Wellness.

  • Animal Nutrition profits were up substantially year over year, driven by continued strong volumes and margins in amino acids.

Other Business results increased from the prior-year quarter, driven primarily by higher ADM Investor Services earnings due to higher interest rates.

Other Items of Note

As additional information to help clarify underlying business performance, the table on page 10 includes reported earnings and EPS as well as adjusted earnings and EPS.

Segment operating profit of $1.8 billion for the quarter includes net charges related to impairment of $9 million ($0.01 per share).

In Corporate results, interest expense increased year over year on higher rates and higher short-term borrowings to support working capital needs, as well as higher expense for long-term debt. Unallocated corporate costs were higher year over year due primarily to higher IT operating and project-related costs and higher costs in the company’s centers of excellence. Other Corporate was unfavorable to the prior year primarily due to an ADM Ventures investment revaluation gain in the prior-year quarter. Corporate results also included a loss related to the mark-to-market adjustment on the Wilmar exchangeable bond of $19 million ($0.04 per share).

The effective tax rate for the quarter was approximately 18%, compared to approximately 14% in the prior year. The increased rate was driven primarily by changes in the geographic mix of pretax earnings in addition to the impact of discrete tax items.

Note: Additional Facts and Explanations

Additional facts and explanations about results and industry environment can be found at the end of the ADM Q2 Earnings Presentation at www.adm.com/webcast.

1 FX adjusted revenue is ADM's GAAP revenue adjusted for the impact of fluctuations in foreign currency exchange rates. The Company calculates FX adjusted revenue by converting its current period revenue using the prior period exchange rates and comparing the adjusted amount to its prior period reported results. Management believes providing FX adjusted revenue provides valuable supplemental information regarding its revenue and facilitates period-to-period comparison. FX adjusted revenue is a non-GAAP measure and is not intended to replace or be an alternative to GAAP revenues, the most directly comparable GAAP financial measure.

Conference Call Information

ADM will host a webcast on July 26, 2022, at 8 a.m. Central Time to discuss financial results and provide a company update. To listen to the webcast, go to www.adm.com/webcast. A replay of the webcast will also be available for an extended period of time at www.adm.com/webcast.

Forward-Looking Statements

Some of our comments and materials in this presentation constitute forward-looking statements that reflect management’s current views and estimates of future economic circumstances, industry conditions, Company performance and financial results. These statements and materials are based on many assumptions and factors that are subject to risk and uncertainties. ADM has provided additional information in its reports on file with the SEC concerning assumptions and factors that could cause actual results to differ materially from those in this presentation, and you should carefully review the assumptions and factors in our SEC reports. To the extent permitted under applicable law, ADM assumes no obligation to update any forward-looking statements as a result of new information or future events.

About ADM

ADM unlocks the power of nature to enrich the quality of life. We’re a premier global human and animal nutrition company, delivering solutions today with an eye to the future. We’re blazing new trails in health and well-being as our scientists develop groundbreaking products to support healthier living. We’re a cutting-edge innovator leading the way to a new future of plant-based consumer and industrial solutions to replace petroleum-based products. We’re an unmatched agricultural supply chain manager and processor, providing food security by connecting local needs with global capabilities. And we’re a leader in sustainability, scaling across entire value chains to help decarbonize our industry and safeguard our planet. From the seed of the idea to the outcome of the solution, we give customers an edge in solving the nutritional and sustainability challenges of today and tomorrow. Learn more at www.adm.com.

Financial Tables Follow

Source: Corporate Release
Source: ADM

Segment Operating Profit, Adjusted Segment Operating Profit (a non-GAAP financial measure)

and Corporate Results

(unaudited)

Quarter ended

Six months ended

June 30

June 30

(In millions)

2022

2021

Change

2022

2021

Change

Segment Operating Profit

$

1,840

$

1,145

$

695

$

3,379

$

2,250

$

1,129

Specified items:

Gain on sale of assets

(22

)

22

(1

)

(22

)

21

Impairment, restructuring, and settlement charges

9

37

(28

)

27

131

(104

)

Adjusted Segment Operating Profit

$

1,849

$

1,160

$

689

$

3,405

$

2,359

$

1,046

Ag Services and Oilseeds

$

1,119

$

570

$

549

$

2,127

$

1,347

$

780

Ag Services

407

190

217

665

399

266

Crushing

468

150

318

896

532

364

Refined Products and Other

130

130

328

231

97

Wilmar

114

100

14

238

185

53

Carbohydrate Solutions

$

473

$

383

$

90

$

790

$

642

$

148

Starches and Sweeteners

393

306

87

709

528

181

Vantage Corn Processors

80

77

3

81

114

(33

)

Nutrition

$

239

$

201

$

38

$

428

$

355

$

73

Human Nutrition

183

162

21

324

290

34

Animal Nutrition

56

39

17

104

65

39

Other Business

$

18

$

6

$

12

$

60

$

15

$

45

Segment Operating Profit

$

1,840

$

1,145

$

695

$

3,379

$

2,250

$

1,129

Corporate Results

$

(321

)

$

(320

)

$

(1

)

$

(589

)

$

(601

)

$

12

Interest expense - net

(87

)

(70

)

(17

)

(163

)

(134

)

(29

)

Unallocated corporate costs

(267

)

(248

)

(19

)

(476

)

(450

)

(26

)

Other

13

49

(36

)

49

59

(10

)

Specified items:

Expenses related to acquisitions

(2

)

(2

)

Gain on debt conversion option

19

30

(11

)

4

10

(6

)

Loss on sale of assets

(3

)

(3

)

Restructuring and settlement charges

1

(81

)

82

2

(86

)

88

Earnings Before Income Taxes

$

1,519

$

825

$

694

$

2,790

$

1,649

$

1,141

Segment operating profit is ADM’s consolidated income from operations before income tax excluding corporate items. Adjusted segment operating profit, a non-GAAP financial measure, is segment operating profit excluding specified items. Management believes that segment operating profit and adjusted segment operating profit are useful measures of ADM’s performance because they provide investors information about ADM’s business unit performance excluding corporate overhead costs as well as specified items. Segment operating profit and adjusted segment operating profit are not measures of consolidated operating results under U.S. GAAP and should not be considered alternatives to income before income taxes, the most directly comparable GAAP financial measure, or any other measure of consolidated operating results under U.S. GAAP.

Consolidated Statements of Earnings

(unaudited)

Quarter ended

Six months ended

June 30

June 30

2022

2021

2022

2021

(in millions, except per share amounts)

Revenues

$

27,284

$

22,926

$

50,934

$

41,819

Cost of products sold (1)

25,184

21,463

46,937

38,808

Gross profit

2,100

1,463

3,997

3,011

Selling, general, and administrative expenses (2)

814

739

1,643

1,488

Asset impairment, exit, and restructuring costs (3)

1

23

2

82

Equity in (earnings) losses of unconsolidated affiliates

(192

)

(163

)

(396

)

(288

)

Investment income

(32

)

(50

)

(91

)

(63

)

Interest expense (4)

73

40

165

127

Other (income) expense - net (5,6)

(83

)

49

(116

)

16

Earnings before income taxes

1,519

825

2,790

1,649

Income tax expense (benefit) (7)

279

113

486

244

Net earnings including noncontrolling interests

1,240

712

2,304

1,405

Less: Net earnings (losses) attributable to noncontrolling interests

4

14

4

Net earnings attributable to ADM

$

1,236

$

712

$

2,290

$

1,401

Diluted earnings per common share

$

2.18

$

1.26

$

4.03

$

2.48

Average diluted shares outstanding

568

566

568

565

(1) Includes charges related to inventory writedown of $14 million and $25 million in the current quarter and YTD respectively, and $13 million in the prior year quarter and YTD. Current YTD was partially offset by an insurance settlement of $2 million.

(2) Includes a $7 million reversal of a charge related to receivable impairment in the current quarter and a legal settlement of $38 million in the prior YTD.

(3) Includes net charges related to the impairment of certain assets and restructuring of $1 million and $2 million in the current quarter and YTD, respectively, and $23 million and $82 million in the prior year quarter and YTD, respectively.

(4) Includes gains related to the mark-to-market adjustment of the conversion option of the exchangeable bond issued in August 2020 of $19 million and $4 million in the current quarter and YTD, respectively, and gains of $30 million and $10 million in the prior year quarter and YTD, respectively.

(5) Includes net losses related to the sale of certain assets of $2 million in the current YTD and gains of $22 million in the prior year quarter and YTD.

(6) Includes a pension settlement charge of $82 million in the prior year quarter and YTD. Also, includes exit costs of $2 million in the prior YTD.

(7) Includes the tax benefit impact of the above specified items and tax discrete items totaling $3 million and $11 million in the current quarter and YTD, respectively, and $24 million and $49 million in the prior year quarter and YTD, respectively.

Summary of Financial Condition

(unaudited)

June 30,
2022

June 30,
2021

(in millions)

Net Investment In

Cash and cash equivalents (a)

$

906

$

869

Operating working capital (b)

14,537

11,628

Property, plant, and equipment

9,680

9,873

Investments in and advances to affiliates

5,464

5,113

Goodwill and other intangibles

6,547

5,266

Other non-current assets

2,490

2,202

$

39,624

$

34,951

Financed By

Short-term debt (a)

$

2,352

$

1,289

Long-term debt, including current maturities (a)

9,166

8,432

Deferred liabilities

3,419

3,556

Temporary equity

261

71

Shareholders’ equity

24,426

21,603

$

39,624

$

34,951

(a)

Net debt is calculated as short-term debt plus long-term debt (including current maturities) less cash and cash equivalents.

(b)

Current assets (excluding cash and cash equivalents) less current liabilities (excluding short-term debt and current maturities of long-term debt).

Summary of Cash Flows

(unaudited)

Six months ended

June 30

2022

2021

(in millions)

Operating Activities

Net earnings

$

2,304

$

1,405

Depreciation and amortization

514

492

Asset impairment charges

4

54

(Gains) losses on sales/revaluation of assets

(42

)

(79

)

Other - net

438

330

Other changes in operating assets and liabilities

(3,893

)

805

Total Operating Activities

(675

)

3,007

Investing Activities

Purchases of property, plant and equipment

(500

)

...