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Archer Daniels Reports Strong 2Q

Zacks Equity Research

Archer Daniels Midland Company’s (ADM) adjusted earnings of 60 cents per share for the second-quarter ended Dec 31, 2012 rose 17.6% from the year-ago period’s adjusted earnings of 51 cents, primarily due to improved segment operating profits. Quarterly earnings also beat the Zacks Consensus Estimate by a penny.

On a reported basis, the company reported earnings of 77 cents per share, a substantial increase from 12 cents earned in the prior-year quarter.

Archer Daniels' quarterly net sales increased 6.9% year over year to $24,921 million, significantly above the Zacks Consensus Estimate of $21,957 million. The year-over-year growth in sales was mainly attributable to improved performances at Oilseeds and Agricultural Services segments, partially offset by weak results at the company’s Corn Processing segment.

Segment-wise, the company’s Oilseeds Processing segment revenues increased 1.2% year over year to $8,364 million and Agricultural Services revenues grew 13.8% to $13,485 million. However, revenues for the Corn Processing segment declined 3.7% to $3,041 million.

Operational Discussion

Archer Daniels reported total segment adjusted operating profit of $808 million, up approximately 136.3% from the year-ago quarter, primarily due to improved operating income in all three segments.

On a segmental basis, Oilseeds Processing segment recorded second-quarter operating profit of $411 million compared with an operating profit of $209 million in the year-ago period. The $202 million increase was driven by strong performance delivered by the crushing and origination categories across all regions.

Adjusted operating profit for Agricultural Services segment rose $77 million to $317 million driven by improved soybean exports in the U.S., better international merchandising results and synergies from investment in GrainCorp.

Archer Daniels' Corn Processing segment's operating profit came in at $3 million compared to an operating loss of $129 million in the year-ago quarter. This was primarily attributable to improved results of sweeteners and starches offset by weak ethanol margins.

Operating profit from the other business segment came in at $77 million, up $55 million from the last-year quarter. The upside was driven by improvement in captive insurance loss reserve adjustment and asset sale gains.


Archer Daniels ended the quarter with $1,714 million in cash and cash equivalents compared with $864 million at the end of the prior-year quarter. At quarter-end, long-term debt was $6,724 million. Shareholder’s equity as of Dec 31, 2012 was $19,131 million.

Besides Archer Daniels that currently carries a Zacks Rank # 4 (Sell), stocks performing well in the farm products industry are Ingredion Inc. (INGR), Smithfield Foods Inc. (SFD), both of which hold a Zacks Rank #1 (Strong Buy) and Tyson Foods Inc. (TSN), which has a Zacks Rank #2 (Buy).

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Read the Full Research Report on INGR

Read the Full Research Report on TSN

Read the Full Research Report on SFD

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