Archer-Daniels-Midland Co. reported sharply lower quarterly earnings, well below analysts’ expectations, and cut its capital spending plans, sending its shares lower.
The U.S. agribusiness giant, struggling with high commodity costs in an extremely competitive environment, made less money in almost all of its major units and took a big charge related to a plastic production facility.
Companies like Archer-Daniels make money by buying, selling, shipping and storing farm products and by processing commodities such as corn and soybeans into products like livestock feed.
Prices for corn and soybeans are high because of concerns about global supplies, but this does not always translate into strong revenues for agribusiness companies. Commodity trading firms and processors have struggled as volatile markets have increased risks and costs.
“Ongoing weakness in global oilseed margins, lower results in corn, and poor international merchandising results hurt our second-quarter profits,” chief executive officer Patricia Woertz said on a conference call with analysts.
“We are prioritizing capital projects, and we have adjusted our combined capital expenditure and M&A projections from $2-billion [U.S.]to $1.7-billion for this fiscal year,” she said.
Earlier this month ADM said it would cut about 1,000 jobs worldwide, or 3 per cent of its work force, in the first broad reduction in company history.
Rival Cargill last month said it would eliminate 1.5 per cent of its staff, or about 2,000 workers.
In the second quarter ended Dec. 31, ADM’s oilseed processing profit fell 22 per cent to $253-million. In corn processing it suffered a loss of $133-million, compared with a profit of $399-million a year earlier.
ADM said the loss in corn processing included $339-million in asset impairment charges related to a renewable plastic production facility in Clinton, Iowa.
The company’s agricultural services segment, which buys, sells, stores and ships farm products and is the largest in terms of revenue, saw profit fall 63 per cent to $158-million on poor international merchandising and lower U.S. export volumes. Results at other businesses plummeted 85 per cent to $31-million.
ADM posted overall second-quarter profit of $80-million or 12 cents a share, down from $732 million or $1.14 a year earlier.
Excluding special items, it earned 51 cents a share. On that basis, analysts, on average, expected 76 cents, according to Thomson Reuters.
Net sales rose to $23.31-billion from $20.9-billion. The average Wall Street forecast was $22.8-billion.
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