ADM: Profits in corn processing decline due to doubled corn costs

By Holly Jessen | November 02, 2011

Net earnings were up overall for Archer Daniels Midland Co.’s first quarter, which ended Sept. 30. Specifically, in the corn processing segment, which includes ethanol production, ADM reported a profit on Nov. 1 but noted it was a $162 million decrease from the same time period last year.

 “The first quarter presented a difficult and challenging market environment,” said ADM Chairman and CEO Patricia Woertz. “Margin conditions in our global oilseeds segment were generally weak, and net corn costs were high. We offset some of these pressures with good management of our commodity positions and by capturing opportunities through our broad and diverse portfolio.”

The news wasn’t all bad, despite lagging profits in those segments. “Looking ahead, we see the landscape improving,” she said.

ADM processed 5 percent more corn in the first quarter than the same time period last year. Operating profit for the corn processing segment, which includes bioproducts, sweeteners and starches, was at $179 million. That’s a big decrease from the about $341 million in profits during the first quarter of the same time period last year. The company pointed out that net corn costs more than doubled from the previous year, as a result of economic hedging benefits recognized in previous quarters.

Bioproducts profit was at $151 million, a decrease of $44 million from last year. The good news in this quarter, however, was that spot ethanol and lysine margins were good, said Juan Luciano, executive vice president and chief operating officer. “We expect good ethanol spot margins to continue in the near term, although some smaller plants may restart,” he added.

The company’s dry mill ethanol plants hit record production levels, exceeding nameplate capacity. The company is continuing to improve throughput at its corn wet mill plants as ADM expects strong demand for its products to continue, he said. The company has also improved its energy efficiency at its plants by nearly 4 percent over the 2011 fiscal year baseline, ahead of its target for that improvement. “We continue to aggressively pursue energy savings,” Luciano said.

The picture was rosier for the agricultural services segment and other businesses, with profits increasing $112 million and $71 million respectively. In all, ADM returned $347 million to shareholders in the first quarter, which includes they buy back of 8.9 million shares for $240 million. Net earnings for the company as a whole were at $460 million, or 68 cents per share. That’s an increase of 33 percent and 26 percent respectively from the same period a year earlier.