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Archer Daniels Buys Another Sweetener Facility in China - Analyst Blog

Zacks Equity Research

Archer Daniels Midland Company ADM seems to be progressing well with the expansion of its operations in the Asia-Pacific region, especially China. This is evident from the company’s latest deal to acquire a sweetener facility – Meiweiyuan Biotechnology Co, located in the central Chinese province of Hubei.

This purchase, which is expected to be completed in the forthcoming weeks, is most likely to solidify Archer Daniel’s position in the regions with growing demand. The company has been on the lookout for such opportunities in an attempt to drive profitability.

Apart from this, Archer Daniels inaugurated a sweetener facility in North China at the port of Tianjin, in Nov 2014. This facility marked the commencement of the first phase of the company’s integrated food manufacturing complex in China.

The Tianjin site provides the advantage of immediate access to railways and waterways as well as raw material supplies, which enables it to quickly integrate with the company’s global origination and transportation network. Additionally, the site’s proximity to large urban demand centers allows it to win new customers in China as well as across the Asia-Pacific region.

While the Tianjin facility enables Archer Daniels to cater to Northern China and export to other Asian markets, its latest Hubei sweetener facility will help it meet demand in Central and Western China. Management believes that these regions have major growth potential, which coupled with support from the Chinese government, will likely drive investments and ultimately boost returns.

Archer Daniels’ venture into the high-growth Chinese market is part of its strategy to enhance returns and reduce earnings volatility. The company’s presence in China dates back to 1995 when it acquired an animal feed premix plant in Dalian in the northeast.

Over the years, Archer Daniels has emerged as one of the leading agricultural commodity exporters to the Asia-Pacific region. The company markets a wide assortment of animal feeds, feed premixes and food ingredients via its extensive sales channel in the region.

Zacks Rank

The company currently carries a Zacks Rank #3 (Hold). Better-ranked stocks in the same sector include Adecoagro S.A. AGRO, Tyson Foods Inc. TSN and The WhiteWave Foods Company WWAV, each carrying a Zacks Rank #2 (Buy).

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