Ethanol a bright spot in otherwise disappointing Q3 for ADM

By Erin Voegele | October 31, 2017

Archer Daniels Midland Co. released third quarter financial results on Oct. 31, reporting increased earnings for the Bioproducts segment due, in part, to better ethanol margins. Overall, the company reported adjusted segment operating profit fell 17 percent.

“Our third quarter results were below our expectations, as the operating environment in our Ag Services and Oilseeds businesses was more challenging than anticipated,” said Juan Luciano, chairman and CEO of ADM. “Through the quarter, we took several actions to be even more competitive in the future, including: restructuring our global workforce; reconfiguring the Peoria ethanol complex; working to complete several operational start-ups; driving additional asset monetizations; and further reducing costs through our Project Readiness initiative.

“As we move through the fourth quarter, we are starting to transition from a period of costs and investments in acquisitions, new innovation centers and new facilities, to a period of lower capital spending and increasing benefits from these investments,” Luciano continued.

While the company attributed improved third quarter earnings for the Bioproducts segment to better ethanol margins, Luciano indicated that could change in the fourth quarter. During an earnings call, Luciano noted the company is seeing weaker ethanol margins moving into the final three months of the year.

ADM reported results for its Ag Services were down, compared with a strong prior-year period. In the Merchandizing and Handling segment, results were decreased largely due to the lack of competitiveness of U.S. corn and soybeans in global markets. Transportation results decreased due to low U.S. grain exports and a slower start to the North American harvest. ADM also said Milling and other earnings were down due to decreased volumes, while product margins remained steady. The Corn Processing segment was up year-over-year and delivered another strong quarter, ADM noted. North America Sweeteners and Starches experienced good margins, while Bioproducts result increased due to improved ethanol margins. Oilseeds Processing results were down, with Crush and Origination results impacted by compressed global crush margins and weak South America origination margins. Refining, Packaging, Biodiesel and other segments experienced lower earnings due to weaker biodiesel results caused by lower margins and mark-to-market impacts. Asia was up while WFSI results were down. Wild Flavors delivered double-digit operating profit growth, and Specialty Ingredients was down.

Segment operating project was $485 million for the third quarter, down from $645 million during the same period of last year. Adjusted segment operating profit reached $541 million, down from $650 million. Bioproducts earnings increased to $51 million, up from $38 million during the third quarter of 2016.