10-QPeriod: Q3 FY2006

Archer-Daniels-Midland Co Quarterly Report for Q3 Ended Dec 31, 2006

Filed February 6, 2007For Securities:ADM

Summary

Archer-Daniels-Midland Company (ADM) reported strong financial performance for the second quarter and first half of fiscal year 2007, ending December 31, 2006. The company saw significant increases in net sales and earnings, driven by robust performance across its core segments, particularly Oilseeds Processing and Corn Processing. This growth was fueled by favorable market conditions, including strong demand for biodiesel and ethanol, alongside robust agricultural commodity prices. ADM demonstrated improved profitability with operating profit up substantially in both Oilseeds and Corn Processing. The company also maintained a strong liquidity position with substantial working capital and a healthy current ratio. Despite some increases in inventory purchase obligations, ADM's balance sheet remains strong with a well-managed debt-to-capital ratio, indicating financial flexibility for future operations and investments.

Key Highlights

  • 1Net sales increased by 18% to $11.0 billion for the quarter ended December 31, 2006, compared to the prior year period, driven by higher commodity prices and increased sales volumes in key segments.
  • 2Net earnings for the quarter rose to $441.3 million, a significant increase from $367.7 million in the same period last year, resulting in basic and diluted EPS of $0.67.
  • 3Operating profit saw a substantial increase of 46% to $767.0 million for the quarter, with notable growth in Oilseeds Processing (up 50%) and Corn Processing (up 42%).
  • 4The Corn Processing segment, particularly Bioproducts (ethanol), experienced strong performance due to increased ethanol contract prices and robust demand, despite some fluctuations in sales volumes.
  • 5The company maintained a strong liquidity position, with working capital of $6.2 billion and a current ratio of 1.7:1 as of December 31, 2006.
  • 6ADM's long-term debt to total capital ratio remained healthy at 27% as of December 31, 2006, indicating financial stability and flexibility.
  • 7The company is actively repurchasing shares, with over 4.4 million shares purchased during the quarter under its authorized repurchase program.

Frequently Asked Questions

ADM's revenue growth was primarily driven by increased selling prices of agricultural commodities and corn processing products, as well as increased sales volumes of agricultural commodities and oilseed processing products. Favorable market conditions, such as strong biodiesel and ethanol demand, and robust agricultural commodity prices significantly contributed to these increases.

All segments showed improved operating profits. Oilseeds Processing saw a 50% increase due to improved market conditions globally, including strong demand for vegetable oil and protein meal. Corn Processing experienced a 42% rise, largely driven by higher ethanol prices and strong demand for sweeteners and starches. Agricultural Services increased by 31%, benefiting from improved transportation and global grain merchandising operations.

ADM reported substantial liquidity with working capital of $6.2 billion and a current ratio of 1.7 to 1 as of December 31, 2006. The company's net worth increased to $10.8 billion, and its long-term debt to total capital ratio was a healthy 27%, indicating strong financial flexibility and a solid balance sheet.

Yes, ADM is required to adopt new accounting standards. FIN 48, 'Accounting for Uncertainty in Income Taxes,' is effective July 1, 2007. SFAS 157, 'Fair Value Measurements,' is effective July 1, 2008, and SFAS 158, 'Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans,' requires balance sheet recognition of funded status starting June 30, 2007, with measurement date changes effective June 30, 2009. The company is assessing the impact of these standards.