ADM misses Q1 revenue target by 5.5%, profit falls 13% as US floods hit

Agribusiness major Archer Daniels Midland (ADM) has taken a 13% hit in its operating profit for the first quarter of the year as the US floods had a bigger-than-expected impact on the company’s ethanol business.

Reporting results on Friday, ADM – the A in the so-called ABCD quartet of agribusiness companies that dominate global trade in food and feed – posted operating profit of $611 million versus $704 million in the first quarter of 2018.

“The first quarter proved more challenging than initially expected,” said Juan Luciano, ADM chairman and CEO.

“Impacts from severe weather in North America were on the high side of our initial estimates, and the ethanol industry environment limited margins and opportunities".

The company's revenue for the quarter was down marginally at $15.3 billion versus $15.5 billion and a target of $16.2 billion and earnings per share were down 41% to 41 pence per share from 70 pence per share a year ago.

Flood

By segment the biggest hit to profit was in the company’s Carbohydrate Solutions business, where operating profit fell to $96 million from $213 million.

The company said in March that it expected a $50-60 million hit to profits as a result of flooding, but the actual impact was about double that figure.

Large sections of the Midwest suffered from severe flooding in mid-March triggering a big reduction in ethanol production the company’s operations in Nebraska while simultaneously hampering logistics on road and rail.

Other losses occurred in the oilseeds business, which saw operating profit fall to $341 million versus $349 million a year ago, and the company’s nutrition business, where profit fell to $81 million from $96 million.

The losses in the oilseed business were driven by poor performance from its stake Wilmar as well as the cancellation of the US biodiesel tax credit, which helped trigger a $159 million quarterly fall in profit in the refining, packaging and biodiesel business.

Although that was partially offset by a $151 million rise in profit in ADM’s crushing and origination business due to higher crush margins globally.

The company’s origination business posted a $30 million increase in operating profit, compared to Q1 2018, to $76 million, as profits a year earlier were impacted negatively by mark-to-market timings.

The announcement of lower profits comes as the company embarks upon a global cost-cutting measure that is expected to see thousands of redundancies across North America and Canada after years of acquiring companies.