10-QPeriod: Q3 FY2010

Archer-Daniels-Midland Co Quarterly Report for Q3 Ended Dec 31, 2010

Filed February 9, 2011For Securities:ADM

Summary

Archer-Daniels-Midland Co. (ADM) reported strong financial performance for the three and six months ended December 31, 2010, with significant increases in net sales and earnings compared to the prior year. Net sales surged primarily due to higher commodity prices and increased sales volumes across key segments, particularly Agricultural Services and Oilseeds Processing. The company's earnings benefited from a substantial increase in segment operating profit, driven by strong performance in Corn Processing's Bioproducts division and Agricultural Services, despite higher LIFO inventory charges. The company's balance sheet reflects robust asset growth, with total assets increasing significantly, driven by higher inventories and receivables, indicating strong business activity. While debt levels remain substantial, the company maintained a healthy current ratio and a manageable debt-to-capital ratio, demonstrating continued financial flexibility. Management's outlook suggests continued focus on operational efficiency and leveraging market opportunities.

Key Highlights

  • 1Net sales for the three months ended December 31, 2010, increased by 32% to $20.9 billion, driven by higher commodity prices and increased sales volumes.
  • 2Net earnings attributable to controlling interests for the three months ended December 31, 2010, increased by 29% to $732 million, or $1.14 per diluted share.
  • 3The Agricultural Services segment showed significant growth, with sales up 41% to $10.8 billion for the quarter, driven by increased global sales volumes and higher average selling prices.
  • 4Corn Processing's Bioproducts division saw a substantial operating profit increase of $161 million for the quarter, primarily due to higher ethanol and lysine margins and increased ethanol sales volumes.
  • 5The company acquired full control of Golden Peanut Company LLC, a leading U.S. peanut handler, processor, and exporter, recognizing a pre-tax gain of $71 million on the revaluation of its previously held interest.
  • 6Total assets grew to $42.6 billion at December 31, 2010, up from $31.5 billion at June 30, 2010, reflecting increased inventories and receivables.
  • 7Cash used in operating activities for the six months was $4.1 billion, a significant change from the $1.4 billion generated in the prior year, largely due to increasing agricultural commodity prices and higher inventories.

Frequently Asked Questions

The primary drivers for the significant increase in net sales were higher average selling prices, largely due to increased underlying commodity costs, and higher sales volumes across key segments, supported by strong global demand.

The acquisition of the remaining 50% of Golden Peanut Company LLC resulted in ADM gaining full control of the company. This transaction led to the recognition of a pre-tax gain of $71 million on the revaluation of ADM's previously held equity interest.

The Corn Processing segment's Bioproducts division experienced enhanced operating profit primarily due to increased ethanol and lysine gross margins, as well as higher ethanol sales volumes, driven by favorable ethanol blending economics and the startup of new dry mill operations.

ADM maintained a strong liquidity position with $1.2 billion in cash, cash equivalents, and short-term marketable securities at December 31, 2010, and a current ratio of 1.6 to 1. The company also had $8.4 billion in credit lines, with $3.3 billion unused. While cash used in operations was significant, the company actively evaluated options to diversify funding sources.