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Archer Daniels Expands in China, Opens Sweetener Facility

Zacks Equity Research

Archer Daniels Midland Company (ADM) is steadfastly progressing with its plans to gain foothold in the Asia-pacific region, particularly in China. This was evident from the inauguration of the company’s previously announced sweetener facility in North China at the port of Tianjin, which overlooks the Yellow Sea.

This facility marks the commencement of the first phase of the company’s integrated food manufacturing complex in China, which will include a soluble-fiber manufacturing complex and a sweetener facility. The company expects the complex, which will be Archer Daniels’ first wholly owned food-ingredient production facility in China, to be fully operational by mid 2015.

Apart from the sweetener facility, the company’s Chinese complex will be capable of producing soluble fiber, used to add dietary fiber to a wide range of food and beverage products. This complex will cater to the Chinese demand for superior quality food ingredients.

Archer Daniels, which competes with Bunge Ltd. (BG), sees a host of benefits coming from the Tianjin complex, ranging from efficient transportation to improved customer service. To elaborate on, the Tianjin site provides the advantage of immediate access to railway 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 capture customers in China as well as across the Asia-Pacific region.

Archer Daniels’ venture into the high-growth Chinese market is a part of the strategy to enhance returns and reduce earnings volatility. In another such venture, the company has built a facility in Nanjing, China, to manufacture animal feed premix, which when combined with animal rations are likely to support optimal growth and good health. This facility, which is expected to complement the company’s existing Chinese operations, is slated to commence operations from mid 2015.

Archer Daniels’ 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 grown to become 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.

The company currently carries a Zacks Rank #3 (Hold). Other better-ranked stocks in the same sector include Tyson Foods Inc. (TSN) and Amira Nature Foods Ltd. (ANFI), both carrying a Zacks Rank #2 (Buy).

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