ADM reports solid third quarter results, ethanol margin recovery

By Holly Jessen | October 30, 2013

Archer Daniels Midland Co. revealed third quarter adjusted earnings per share of 46 cents, in an Oct. 29 conference call. That’s down from adjusted earnings of 53 cents per share in the same time period last year and net earnings of 72 cents per share, up from 28 percent per share third quarter last year.

“The team delivered solid operating results overall, despite the lingering effects of the 2012 U.S. drought,” said ADM Chairman and CEO Patricia Woertz. “Oilseeds performed well, particularly in North and South America; Corn benefitted from improved ethanol margins; and Ag Services managed effectively through the transition to new crop.”

One of the highlights was corn processing profit increased $91 million, which ADM attributed to ethanol margin recovery. Specifically, bioproducts results increased $97 million to $71 million, when the impact of corn hedge ineffectiveness was excluded. Ethanol margins are remaining profitable through volatile, the company said.

Juan Luciano, executive vice president and chief operating officer, added that the expected record U.S. corn harvest will mean good feedstock supplies for the ethanol industry. “We'll be watching industry production levels relatively to demand, and we will continue to adjust our plants to maximize our own profitability,” he said. “We expect continued ethanol margin volatility. In 2014, between favorable blending economics, expansion of E85 adoption, and growing exports, we remain confident in our ethanol business.”

During the question and answer portion of the call Luciano confirmed the company’s support of the renewable fuel standard (RFS) and overall positive outlook on ethanol margins going into 2014. One question brought up the leaked draft proposal for the 2014 RFS. Luciano said it would be speculative to comment on rumors since the U.S. EPA has confirmed no final decision has been made at this point. Instead, he pointed to market conditions affecting ethanol production, including the record corn crop, lowered corn prices, providing strong economic signals to blend ethanol. He also pointed to the expansion of E85 and E15 blends plus growing ethanol exports. “We are very confident in the industry's ability to meet the [2014] corn-based requirements,” he said, adding that ADM doesn’t see reasons to change the RFS currently and would be highly disappointed if it was changed.

When asked again about the company’s outlook on ethanol margins, Luciano said continued volatility was expected but that, overall, ADM has a positive view on margins. Volatility may affect some in the ethanol industry, especially high-cost producers, he said. That’s why the company has worked to increase its ethanol production cost advantage.