UPDATE: ADM 2nd-Quarter Net Falls 21% on Legal Costs; Sales Weaken

--Archer Daniels Midland second-quarter earnings fall 21%

--Legal costs, currency hedges, last year's drought weigh on results

--Company expects large U.S. grain harvest to boost grain-handling results

(Updates throughout with detail, executive comments, share price.)

 
   By Ian Berry 
 

Archer Daniels Midland Co's (ADM) second-quarter earnings fell 21% amid weaker grain-handling profits stemming from last year's drought, but the company said a large U.S. crop this year should revive the business.

ADM, along with other grain traders and processors, has struggled in the wake of last year's historic drought to secure soybean and corn supplies. While supplies have tightened throughout the year, forecasters are expecting a record corn crop once U.S. farmers begin harvesting in a few weeks.

The new harvest will help boost grain-handling volumes, and ADM executives said it will help the company more fully utilize its network of storage and transportation facilities.

Government forecasters in July projected a U.S. corn harvest this year of 14 billion bushels, up 30% from last year and 13% from 2011.

"This is a recharge that is just essential for ADM," Craig Huss, ADM's chief risk officer, told investors in a conference call. "As the largest storer of grain in the U.S., we will be filling these assets."

The large crop should also bolster margins in business ranging from ethanol to corn sweetener, company officials said.

For the second quarter, the company's agricultural services segment, which includes grain merchandising, saw profit fall 34% to $81 million. The company's earnings were also hit by foreign-currency hedging losses and an increased provision related to a legal matter.

While the company waits for a large U.S. harvest, ADM, based in Decatur, Ill., is already enjoying a revival in its ethanol business, which had struggled for several quarters. Its second-quarter operating profit more than doubled to $223 million due in large part to stronger ethanol earnings, although the company said the industry remains volatile.

ADM, one of the world's largest grain traders, is awaiting full regulatory approval for its planned A$3.4 takeover of GrainCorp Ltd. (GNC.AU), Australia's largest grain company, which accepted the offer in April. The company has received six regulatory approvals but is still awaiting approval from Australia and China.

ADM reported a profit of $223 million, or 34 cents a share, down from $284 million, or 43 cents, a year earlier. Excluding items such as foreign-currency hedging losses and additional provisions related to a Foreign Corrupt Practices Act matter, adjusted earnings rose to 46 cents from 38 cents. Sales declined 0.6% to $22.54 billion.

Analysts polled by Thomson Reuters had most recently forecast per-share earnings of 44 cents on revenue of $22.87 billion.

The company said it increased a provision related to a bribery investigation to $54 million from $25 million. The investigation, which was previously announced, involves the U.S. Department of Justice and the U.S. Securities and Exchange Commission.

ADM shares were recently up 0.3% to 37.98. They are up 39% so far this year.

-Melodie Warner contributed to this article.

Write to Ian Berry at [e-mail]

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