ADM’s ethanol operations impacted by low margins

By Erin Voegele | January 26, 2023

Archer Daniel Midlands Co. released fourth quarter financial results on Jan. 26, reporting that the company’s ethanol-related business segments were negatively impacted by low ethanol margins and high inventory levels.

ADM’s Carbohydrates Solutions business segment results for the fourth quarter were down substantially when compared to the fourth quarter of 2021. Carbohydrate Solutions includes both the Starches and Sweeteners subsegment, which includes the company’s wet mills, and Vantage Corn Processors, which includes the company’s dry mills.

The Starches and Sweeteners subsegment delivered improved results when compared to the fourth quarter of 2021 despite lower ethanol margins. Vantage Corn Processors results were down substantially, however, as higher ethanol inventory levels pressured margins, especially when compared to the very strong margin environment in the fourth quarter of 2021.

Carbohydrate Solutions reported $261 million in operating profit for the fourth quarter, with $287 million in operating profit for Starches and Sweeteners and a $26 million loss for Vantage Corn Processors. During the same period of 2021, ADM reported $428 million in operating profit for Carbohydrates Solutions, with $207 million in operating profit for Starches and Sweeteners and $211 million in operating profit for Vantage Corn Processors.

For the full year 2022, ADM reported $1.36 billion in operating profit for Carbohydrate Solutions, including $913 million in operating profit for Starches and Sweeteners and $37 million in operating profit for Vantage Corn Processors. For 2021, the company reported $1.283 billion in operating profit for Carbohydrate Solutions, including $913 million in operating profit for Starches and Sweeteners and $370 million in operating profit for Vantage Corn Processors.

During an earnings call, ADM Chief Financial Officer Vikram Luthar said ethanol margins remain pressured by high inventory levels moving into the first quarter of 2023. If stocks come down, he said the results could be similar to the first quarter of 2022. If margins remain pressured, however, results will likely be lower.

Overall, ADM reported $1.611 billion in segment operating profit for 2022, up from $1.388 billion in 2021. Earnings per share reached $1.84 for 2022, up from $1.38 in 2021.