01—Abstract
Summary
Summary of the 10-K filed February 16, 2018. Cited figures are marked; the original filing is the authoritative source.
Archer-Daniels-Midland Company (ADM) reported revenues of $60.8 billiona for the fiscal year ended December 31, 2017, a slight decrease from $62.3 billion in 2016.
This decline was primarily driven by lower sales volumes across its segments, particularly in Agricultural Services and Corn Processing, impacted by factors like reduced unprocessed commodity volumes and lower ethanol margins. Net earnings attributable to controlling interests increased to $1.6 billionb from $1.3 billion in the prior year, bolstered by a significant tax benefit from the Tax Cuts and Jobs Act, which reduced the effective tax rate to 0.4% from 29.3%. Despite revenue pressures, ADM demonstrated operational resilience, with segment operating profit showing strength in Corn Processing and Wild Flavors and Specialty Ingredients, though Oilseeds Processing faced margin compression.
The company continued its strategic growth initiatives, including acquisitions in the pet treat and microbial technology sectors, and portfolio optimization, such as the sale of its crop risk services business. ADM maintained a solid balance sheet with a strong liquidity position and a manageable debt-to-capital ratio, supporting its ongoing capital expenditures and dividend payments.
02—Key points
Key Highlights
- Total revenues for the fiscal year ended December 31, 2017, were $60.8 billion, a decrease from $62.3 billion in 2016, mainly due to lower sales volumes across segments.
- Net earnings attributable to controlling interests rose to $1.6 billion in 2017 from $1.3 billion in 2016, significantly benefiting from a substantial tax reduction due to the Tax Cuts and Jobs Act.
- The company's effective tax rate decreased dramatically to 0.4% in 2017 from 29.3% in 2016, largely attributed to the new U.S. tax legislation.
- Segment operating profit decreased by $168 million to $2.5 billion, with Corn Processing showing strong growth, while Oilseeds Processing experienced a decline due to lower crush margins.
- ADM made strategic acquisitions in 2017, including Crosswind Industries and Biopolis SL, to expand its specialty ingredients and nutrition portfolio.
- The company maintained a stable liquidity position, with $0.8 billion in cash and cash equivalents and $5.5 billion in unused lines of credit at the end of 2017.
- Long-term debt to total capital ratio remained stable at 27% at year-end 2017, indicating a consistent capital structure.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-KFY2017filed February 16, 2018Financial Statements
FY2017 against FY2016
| Line item | FY2017FY2016 | Change |
|---|---|---|
| Revenue | $60.83B$62.35B | −2.4% |
| Cost of Revenue | $57.31B$58.73B | −2.4% |
| Gross Profit | $3.52B$3.62B | −2.8% |
| R&D Expenses | $129.00M$123.00M | +4.9% |
| SG&A Expenses | $1.98B$1.98B | −0.2% |
| Interest Expense | $330.00M$293.00M | +12.6% |
| Net Income | $1.59B$1.28B | +24.7% |
| EPS (Basic) | $2.80$2.18 | +28.4% |
| EPS (Diluted) | $2.79$2.16 | +29.2% |
| Shares Outstanding (Basic) | 569.00M588.00M | −3.2% |
| Shares Outstanding (Diluted) | 572.00M591.00M | −3.2% |
05—Questions
Frequently Asked Questions
What were the main drivers of ADM's revenue change in 2017?
ADM's revenues decreased slightly in 2017 to $60.8 billion from $62.3 billion in 2016. This was primarily due to lower sales volumes, particularly in Agricultural Services and Corn Processing, influenced by factors like reduced unprocessed commodity volumes and challenging ethanol market conditions.
How did the Tax Cuts and Jobs Act impact ADM's financial results?
The Tax Cuts and Jobs Act enacted in late 2017 significantly benefited ADM by reducing its effective tax rate from 29.3% in 2016 to 0.4% in 2017. This was largely due to a reduction in the U.S. federal corporate tax rate and the recognition of a provisional tax benefit related to the Act.
What strategic actions did ADM take in 2017?
In 2017, ADM continued its strategic growth and portfolio optimization. Key actions included acquisitions such as Crosswind Industries (pet treats) and Biopolis SL (microbial technology) to bolster its specialty ingredients and nutrition offerings. The company also divested its crop risk services business and made significant investments in facility upgrades and expansions across various segments.
How is ADM's business segmented, and how did each segment perform in 2017?
ADM operates in four main segments: Agricultural Services, Corn Processing, Oilseeds Processing, and Wild Flavors and Specialty Ingredients (WFSI). In 2017, Corn Processing saw improved operating profit due to strong demand for sweeteners and starches. WFSI also experienced a slight increase in operating profit. However, Agricultural Services had mixed results, with improved Merchandising and Handling offset by lower Milling and Other and Transportation results. Oilseeds Processing saw a decrease in operating profit due to lower soybean crush margins and weaker origination margins.
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