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ADM results miss expectations, as grain trading arm takes hit

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Food and commodity giant Archer Daniels Midland Company reported weaker-than-expected profits, thanks to falling returns from its grain trading business.

But ADM chief executive Juan Luciano struck a more upbeat tone for prospects over the next sixth months.

"After a challenging start to the year, general market conditions began to turn at the end of the second quarter, providing us with improved opportunities, said Mr Luciano.

Profits slump

Across the company, net profits slumped 26% in the three months to June 30.

This drop was driven by sharply lower profits in its grain handling and oilseed processing business, which saw earnings drop by 57% and 47% respectively.

Adjust earnings came in at 41 cents a share, below analyst estimates of 45 cents a share.

The fall in profits was driven by lower revenues, which fell 9%, to $15.63bn, below the average analyst estimate of $16.97bn.

Grain handling, oilseed crush takes hit

Earnings in the group's agricultural services segment, which includes grain merchandising and handling were down, thanks to "compressed margins across the US grain handling network," ADM said.

"Weak grain handling margins and merchandising results continued for ag services."

And in the oilseeds processing, ADM reported that "crushing and origination operating profit declined driven primarily by continued weak canola margins as well as lower soy crush margins, which were historically high last year".

But despite the lower profit margins, ADM said it "achieved record soy crush volumes in North America and Europe through increased utilization of new flex capacity".

Switch from ethanol to sweetener

The group's international grain merchandising business achieved improved results, thanks to stronger results in Argentina.

ADM's decision to focus on wet corn milling, which allows facilities to switch between ethanol, and sweetener and starch production, was reflected in results.

Earnings from the sweeteners and starches segment improved, while earnings from ethanol were down, as the company cut production in the face of weaker margins.

ADM shares fell in pre-market trading, after the disappointing result.

Shares were down 2.8%, to $43.00, in premarket deals.


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