10-QPeriod: Q3 FY2007

Archer-Daniels-Midland Co Quarterly Report for Q3 Ended Sep 30, 2007

Filed November 8, 2007For Securities:ADM

Summary

Archer-Daniels-Midland Company (ADM) reported a strong third quarter of fiscal year 2007, with net sales increasing significantly by 36% to $12.8 billion compared to the prior year period. This growth was driven by higher selling prices and volumes across key segments, particularly Oilseeds Processing and Agricultural Services. Net earnings also saw a healthy increase, rising to $441 million from $403 million year-over-year, bolstered by improved segment operating profits. Despite higher corn costs impacting the Corn Processing segment, overall performance was positively influenced by favorable agricultural commodity market conditions, including strong demand for oilseeds and global wheat shortages. The company maintained a solid financial position with robust liquidity, evidenced by a substantial working capital of $7.5 billion and a current ratio of 1.65. ADM's balance sheet strength was further demonstrated by an increase in net worth and a stable long-term debt to total capital ratio. The company continued its share repurchase program, demonstrating a commitment to returning value to shareholders. While facing some headwinds in the ethanol market, the diversified nature of ADM's operations, encompassing food, feed, and industrial products, positions it to navigate market fluctuations effectively.

Key Highlights

  • 1Net sales increased by 36% to $12.8 billion, driven by higher selling prices and volumes in Oilseeds Processing and Agricultural Services.
  • 2Net earnings rose to $441 million, up from $403 million in the prior year period, reflecting improved operational performance.
  • 3Oilseeds Processing segment operating profit increased by 23% to $209 million due to strong North American crushing margins and improved South American origination results.
  • 4Agricultural Services segment operating profit more than doubled to $229 million, benefiting from favorable commodity market conditions and increased merchandising and handling activities.
  • 5Corn Processing operating profit saw a decline, primarily due to increased corn costs and lower ethanol margins, though Sweeteners and Starches performance was strong.
  • 6The company maintained strong liquidity with working capital of $7.5 billion and a current ratio of 1.65.
  • 7ADM continued its share repurchase program, demonstrating a commitment to shareholder returns.

Frequently Asked Questions

ADM's net sales increased significantly due to higher selling prices and increased sales volumes, particularly in the Oilseeds Processing and Agricultural Services segments. Factors like strong demand for vegetable oil and soybean meal, as well as higher commodity prices for corn, soybeans, and wheat, contributed to this growth.

The Corn Processing segment experienced a decline in operating profit primarily due to higher net corn costs and reduced ethanol selling prices and volumes. This was largely a result of increased corn prices driven by agricultural commodity market dynamics and excess ethanol industry capacity. However, the Sweeteners and Starches sub-segment performed well due to higher industry capacity utilization.

ADM maintained a strong liquidity position. As of September 30, 2007, the company reported working capital of $7.5 billion and a current ratio of 1.65 to 1. This robust position is supported by significant cash, cash equivalents, marketable securities, and readily marketable commodity inventories.

ADM is preparing to adopt SFAS No. 157, Fair Value Measurements, in July 2008, which is expected to primarily result in expanded disclosures. The company is also evaluating the impact of SFAS No. 159, The Fair Value Option for Financial Assets and Financial Liabilities, also to be adopted in July 2008. The adoption of FIN 48, Accounting for Uncertainty in Income Taxes, effective July 1, 2007, was immaterial to the company.