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ADM foresees 'record' earnings in 2021, backed by 'strong' grains demand

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Archer Daniels Midland forecast “record” earnings this year, fuelled by “strong demand” for grains, as it unveiled better-than-expected results for 2020, backed by a record quarter for its core ag services division.

 

Juan Luciano, chairman and chief executive at the US-based group, said that ADM was for 2021 expecting “strong growth” in its divisional operating profit “and another record year of earnings per share”.

 

The performance would be supported by “improving market conditions as the year progresses”, backed by the lifting of Covid-19 lockdowns and, in the nutrition division, by expansion plans.

 

In the core ag services and oilseeds division, ADM forecast that “with continued strong global demand for grains and oilseeds as well as meal and oils, we are confident in another outstanding performance” this year.

 

Ahead of forecasts

Wall Street currently forecasts ADM to report $3.65 in underlying earnings per share for 2021 - a small increase from the earnings of $3.59 per share which the group on Tuesday reported for last year.

 

The 2020 result included adjusted earnings of $1.21 per share for the October-to-December period, ahead of the $1.10-per-share result expected by investors, according to Refinitiv.

 

Reported earnings for the quarter, at $687m, represented an increase of 36% year on year, although this improvement reflected largely one-time factors, including gains this time from asset disposals, such as a sell down of ADM’s stake in Singapore-based Wilmar International.

 

ADM shares stood 0.5% lower at $52.28 in early trading in New York.

 

‘Higher export volumes’

The group reported a 10.1% increase to $17.98bn in revenues for the October-to-December period, growth down nearly all to the ag services and oilseeds business, which achieved growth of 12.9% to $834m in operating profit and set its fourth-quarter record.

 

The division’s North American ag services unit “capitalised on strong global demand” for agricultural commodities, “particularly from China, to deliver higher export volumes and margins,” ADM said, seeing these dynamics lift the global trade operations too.

 

US corn exports so far in 2020-21, as started in September are, at 18.74m tonnes, running 84% ahead of the year-ago pace, and soybean shipments, at 45.28m tonnes, up 79% year on year, US Department of Agriculture data on Monday showed.

 

In both cases, China has been the top destination.

 

Meanwhile, the division’s crushing operations reported a jump in operating profits to $217m, from $87m, on “significantly higher margins in all regions”, thanks to “strong global demand for both meal and vegetable oils”.

 

Alcohol switch

Profits in ADM’s grain processing division rose by 19.5% to $208m, helped by lower corn costs, and also by narrowing losses in ethanol, as is switched to making consumer-market alcohol, demand for which has been whetted by the need for sanitisers to counter the spread of the Covid-19 virus.

 

The division had reached “quickly and effectively to meet incremental demand for industrial starches, retail flour and high-grade alcohol”.

 

The nutrition division reported a 24% rise to $127m, led by the animal nutrition arm which achieved “strong performances” in Asia and Europe.

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