ADM reports continued negative margins for ethanol

By Erin Voegele | August 01, 2019

Archer Daniels Midland Co. released second quarter financial results Aug. 1, reporting earnings for its bioproducts segment were down significantly due to continued negative ethanol industry margins caused by ample inventory and lower exports.

During an earnings call, Ray Young, chief financial officer of ADM, said ethanol industry margins remained negative in the quarter as the China trade situation continued to weigh on export demand and industry inventory levels remained elevated. He said manufacturing costs and production volumes were also impacted by weather at the company’s plant in Columbus, Nebraska.

Looking ahead, Young said ADM expects the ethanol margin environment to remain challenging, especially with the recent increase in corn prices. He said challenging margins are expected to persist until the industry sees significantly increased ethanol purchases from China and industry production that is better matched with demand.

Juan Luciano, chairman and CEO of ADM, expressed confidence that more normalized trade will eventually resume between the U.S. and China. He, however, said he wouldn’t speculate on the timing of that improvement.

Luciano also said ADM is continuing to work on the operational and legal separation of its ethanol dry mill assets as a standalone business unit that will facilitate the eventual sale, joint venture or spin of that business.

ADM’s bioproducts segment, which includes ethanol, reported a $26 million loss for the second quarter, compared to a $9 million profit for the same period of last year. Overall, the company reported net earnings of $235 million, down from $566 million during the second quarter of last year. Diluted earnings per common share were 42 cents, down from $1 during the same period of 2018.