10-QPeriod: Q3 FY2011

Archer-Daniels-Midland Co Quarterly Report for Q3 Ended Dec 31, 2011

Filed February 6, 2012For Securities:ADM

Summary

Archer-Daniels-Midland Co. (ADM) reported its financial results for the quarter and six months ending December 31, 2011. For the three months ended December 31, 2011, net sales increased to $23.3 billion from $20.9 billion in the prior year, driven by higher average selling prices across segments. However, net earnings attributable to controlling interests significantly decreased to $80 million ($0.12 per share) from $732 million ($1.14 per share) in the comparable prior year period. This decline was largely due to substantial asset impairment charges and exit costs of $352 million, primarily related to the bioplastics business, coupled with lower segment operating profit in key areas like Oilseeds Processing and Corn Processing. For the six months ended December 31, 2011, net sales rose to $45.2 billion from $37.7 billion in the prior year. Net earnings attributable to controlling interests also saw a significant decrease, falling to $540 million ($0.81 per share) from $1,077 million ($1.68 per share) in the same period last year. This was also significantly impacted by the $352 million impairment charges and exit costs, along with challenging conditions impacting most reportable segments. Despite the earnings drop, the company maintained a strong liquidity position with $1.5 billion in cash, cash equivalents, and short-term marketable securities and an unused portion of $6.2 billion from its $7.0 billion credit lines.

Key Highlights

  • 1Net sales for the three months ended December 31, 2011, increased by 11% to $23.3 billion, driven by higher average selling prices across segments.
  • 2Net earnings attributable to controlling interests significantly declined by 89% year-over-year to $80 million for the three-month period, impacted by substantial asset impairment charges.
  • 3For the six months ended December 31, 2011, net sales grew by 20% to $45.2 billion, while net earnings attributable to controlling interests decreased by 50% to $540 million compared to the prior year.
  • 4The company recorded $352 million in asset impairment charges and exit costs in the current period, primarily related to the bioplastics business within the Corn Processing segment.
  • 5Segment operating profit declined significantly, with Oilseeds Processing down 22% and Corn Processing showing a loss of $133 million (impacted by impairment charges) for the three-month period.
  • 6The company maintained a strong liquidity position with $1.5 billion in cash, cash equivalents, and short-term marketable securities at December 31, 2011, and had $6.2 billion in unused credit lines.
  • 7Dividends per common share increased to $0.175 for the quarter, up from $0.150 in the prior year quarter.

Frequently Asked Questions

The significant decrease in net earnings for the three months ended December 31, 2011, was primarily driven by $352 million in asset impairment charges and exit costs related to the company's bioplastics business. Additionally, lower segment operating profits in key segments like Oilseeds Processing and Corn Processing contributed to the decline, despite an 11% increase in net sales.

Compared to the three months ended December 31, 2010, net sales increased by 11% to $23.3 billion. However, net earnings attributable to controlling interests saw a substantial drop of 89% to $80 million. For the six-month period, net sales grew by 20% to $45.2 billion, while net earnings attributable to controlling interests decreased by 50% to $540 million.

As of December 31, 2011, ADM maintained a strong liquidity position with $1.5 billion in cash, cash equivalents, and short-term marketable securities. The company also had $7.0 billion in lines of credit, with $6.2 billion remaining unused. The ratio of long-term debt to total capital was 27%, indicating a healthy balance sheet.

The company is involved in an ongoing internal review of its anti-corruption compliance program and certain transactions that may have violated laws. While government agencies could impose penalties, the company believes these events have not had, and are not expected to have, a material impact on its financial condition. Additionally, there are ongoing tax assessments in Brazil related to commodity hedging losses, which the company is contesting.