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ADM sees soybean earnings

02/05/2013 @ 10:50am

Archer Daniels Midland Co.'s (ADM) fiscal second-quarter earnings surged as higher profits from soybean processing and grain trading more than offset declines in its ethanol business.

The grain processor and trader said net income rose more than six-fold despite last summer's severe drought in the U.S. Farm Belt, which withered the nation's corn crop and made it more difficult for grain processors to secure supplies.

The soybean crop, in contrast, benefited from late-season rainfall, and ADM's oilseeds segment, including soybean crushing, nearly doubled earnings from a year earlier. ADM said demand for soybean meal, which is used in livestock feed, was strong both domestically and globally. Its U.S. soy processing plants operated at a record capacity in the quarter, the company said.

ADM shares were up $1.05, or 3.7%, at $29.49 each. The shares have climbed about 8% so far this year.

For the quarter ended Dec. 31, Decatur, Ill.-based ADM reported a profit of $510 million, or 77 cents a share, up from $80 million, or 12 cents a share, a year earlier. Excluding inventory-related gains, a year-earlier asset write-down and other items, adjusted earnings rose to 60 cents from 51 cents.

Revenue rose 6.9% to $24.92 billion.

Analysts polled by Thomson Reuters most recently projected earnings of 58 cents a share on revenue of $21.22 billion.

The company "managed well despite challenges from the U.S. drought and from persistent, negative margins in the ethanol industry," ADM Chief Executive Patricia Woertz said in a prepared statement.

The company lost $94 million in the quarter in its bioproducts segment, which includes ethanol. Chief Operating Officer Juan Luciano said on a conference call with analysts that the company decided to reduce its ethanol production capacity, but did not specify the extent of the reduction.

While the drought has helped keep corn prices near historic highs, Mr. Luciano said sluggish gasoline consumption, rather than corn prices, is behind the ethanol sector's problems. While the industry is built to fit a 150 billion-gallon U.S. gasoline market, actual gasoline demand has been closer to 130 billion gallons, he said.

The company has in the past couple of years shifted its focus to international expansion, but its most recent effort, to acquire GrainCorp Ltd. (GNC.AU) of Australia, has stalled. Ms. Woertz said on the earnings call that the company has had "no further conversation" with GrainCorp since it rejected ADM's second bid, worth $2.8 billion, in December.

Ms. Woertz did not indicate whether talks had ended, or if the company planned to make another bid. The Australian company would give ADM greater access to Asian markets.

ADM recently sold stakes in Gruma SAB (GMK, GRUMA.MX) and several of its units for $450 million, with proceeds earmarked to pay for the GrainCorp deal. While a GrainCorp deal hasn't happened, Chief Financial Officer Ray Young said the company significantly reduced its debt load in the second half of 2012.

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