ADM discusses impacts of COVID-19 on ethanol, biodiesel

By Erin Voegele | April 30, 2020

ADM held an earnings call to discuss first quarter 2020 results on April 30 and announced a partnership with Sazerac to increase hand sanitizer production. During the call, the company discussed the impact of COVID-19 on its operations, including biofuels production.

Juan Luciano opened the earnings call with a discussion of the COVID-19 pandemic and actions ADM is taking to help protect its employees and the communities in which it operates.

Luciano said ADM has put strict guidelines into place to help protect employees and contractors, including travel restrictions, remote work and social distancing measures at the company’s production facilities. “When colleagues do develop symptoms, we have protocols designed to protect them and others that they may have come in contact with them, as well as support continuity of operations,” he said. Luciano said this includes paid leave for all colleagues during required quarantine periods.

According to Luciano, so far only a relatively small portion of ADM colleagues have tested positive for COVID-19. “Tragically, we did suffer our first COVID-19 related fatality two weeks ago,” he said. “Our thoughts are with everyone who has been personally impacted by this disease. Our ADM colleague emergency fund is available for team members who are facing economic hardship due to the crisis, and through ADM cares we have committed funds and other resources to support others in communities around the world who are serving on the front line in the fight against COVID-19.”

Luciano briefly referenced the announcement made by ADM on April 27 that the company has idled its corn dry mills facilities in Cedar Rapids, Iowa, and Columbus, Nebraska, due to impacts of the COVID-19 pandemic.

“As you know, we made the difficult decision last week to idle two of our dry mills amid continued low gasoline demand,” Luciano said. “We will expect to see some of this demand build back in as economies reopen, although there will be a significant variability depending on when and how those re-openings occur.”

ADM reported that first quarter results for its carbohydrate solutions business segment were down when compared to the first quarter of last year. The starches and sweeteners sub-segment, which includes wet mill ethanol results, was down year over year, largely due to about $50 million in negative mark to market impacts on forward sales of corn oil, much of which could reverse over the balance of the year. Absent those impacts, results were higher due to better operating performance at the Decatur complex, strong results in wheat milling, and improved conditions in Europe, Middle East, Africa and India (EMEAI). The starches and sweeteners sub-segment reported $99 million in operating profit, down from $135 million during the same period of last year. Vantage corn processors results were up slightly when compared to the first quarter of 2019. ADM said effective risk management, combined with the lack of the severe weather impacts seen in the first quarter of last year help offset weak industry ethanol margins caused by significantly decreased demand. Vantage corn processors reported a $31 million loss, compared to a $39 million loss during the first quarter of 2019.

The ag services and oilseeds division, which includes biodiesel, delivered strong results that were in line with the first quarter of last year. ADM said results for the refined products and other sub-segment were higher than the first quarter of 2019. Higher margins in both biodiesel and refined oils in North America were offset by lower biodiesel margins in EMEAI. The sub-segment reported $81 million in operating profit, up from $72 million during the same quarter of last year.

During the earnings call, Luciano and other company officials fielded questions related to the impacts of COVID-19 on the ethanol and biodiesel industries. When asked if the COVID-19 crisis will change the structure of the ethanol industry, Luciano admitted it could. He said it will depend on how quickly margins rebound, but noted if there is a prolonged drop in demand for gasoline and ethanol margins continue to be low, it is possible that some plants will be unable to come back online.

ADM officials were also asked about the impact the pandemic is having on the company’s biodiesel business. A company official noted that there has been a hit to biodiesel demand in Europe due to stay-at-home orders and the fact that many passenger cars are fueled with diesel. However, that hasn’t been the case in the U.S. The company official said there was actually strong demand for diesel and biodiesel due to the increase in demand from trucking operations. A representative of ADM said the U.S. biodiesel market has held up relatively well during the pandemic and said the company feels good about that part of its business right now.

ADM also recently announced a new partnership to produce hand sanitizer in response to the pandemic. ADM on April 29 announced it has partnered with Sazerac Co., the largest producer of distilled spirits in North America, to help increase Sazerac’s production of hand sanitizer. ADM is providing industrial ethyl alcohol to Sazerac, which is producing, packaging and distributing hand sanitizer to some of the world’s largest organizations in healthcare, government, military, retail, distribution, airline, pharmacy and banking industries. ADM also said it is donating nearly 10,000 1.75 liter bottles of Sazerac’s hand sanitizer to healthcare and long-term care facilities in Decatur, Illinois, through the company’s social investment program ADM Cares, to help address local needs.

Overall, ADM reported earnings of 69 cents per share for the first quarter, up from 41 cents per share during the same period of last year. Adjusted earnings per share reached 64 cents, up from 46 cents. Segment operating profit was $599 million, down from $611 million. Adjusted segment operating profit was $643 million, up from $608 million during the same period of last year.