ADM Profit Falls on Charges, Slow Corn Selling -- Update

By Jacob Bunge and Tess Stynes 

Archer Daniels Midland Co.'s fourth-quarter earnings fell 27% on charges related to its blocked purchase of GrainCorp Ltd., while farmers' reluctance to sell corn at cheap prices hit ADM's grain-trading revenue.

A record U.S. corn harvest last autumn prompted farmers to store corn rather than to sell it at sharply lower prices, pushing ADM's grain-trading profits down by one-third in the quarter, the company reported Tuesday. Many U.S. farmers have increased grain-storage capacity in recent years, giving them more flexibility around when to sell corn.

"Our ag services business was impacted by the slow U.S. farmer selling of corn and challenges in our international merchandising," ADM Chief Executive Patricia Woertz said on a post-earnings conference call.

On a positive note, last year's bumper corn and soybean crops reduced costs for ADM's corn-processing businesses, improving margins for ethanol production. Earnings for the unit surged in the fourth quarter to $279 million, versus $3 million in the prior-year period.

The ethanol industry faces challenges, however, as the U.S. government considers a reduced requirement this year for blending ethanol into gasoline, which could lead to lower domestic consumption and trigger increased competition to export the corn-based biofuel.

ADM, one of the world's largest grain and oilseed processors, plans "aggressive actions" to improve results in its grain-trading unit, particularly in South America, Chief Operating Officer Juan Luciano told analysts on the conference call. "We fumbled and we will correct that," he said.

The company said earnings from grain merchandising and handling dropped to $84 million in the fourth quarter from $129 million a year earlier.

ADM also is considering its next steps in Asia, where its proposed 3 billion Australian dollar (US$2.7 billion) purchase of Sydney-based grain merchant GrainCorp Ltd. failed after the Australian government blocked it over fears of ceding too much control to a foreign-based entity. The November ruling dealt a blow to ADM's plans to sell more grain and commodities into China and other rapidly expanding Asian economies.

The failed deal with GrainCorp, in which ADM maintains a 19.9% stake, drove $155 million worth of impairment charges in ADM's fourth quarter, the company said.

Overall, ADM reported a profit of $374 million, or 56 cents a share, down from $510 million, or 77 cents a share, a year earlier. Excluding items such as charges related to GrainCorp, adjusted earnings rose to 95 cents from 60 cents.

Revenue decreased 3.1% to $24.14 billion.

Analysts polled by Thomson Reuters expected per-share profit of 85 cents and revenue of $24.7 billion.

ADM in December said it plans to move its headquarters from Decatur, Ill., to Chicago.

Write to Jacob Bunge at [e-mail] and Tess Stynes at [e-mail]

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