10-QPeriod: Q1 FY2013

Archer-Daniels-Midland Co Quarterly Report for Q1 Ended Mar 31, 2013

Filed May 7, 2013For Securities:ADM

Summary

Archer-Daniels-Midland Co. (ADM) reported net sales of $21.7 billion for the first quarter of 2013, a slight increase from $21.1 billion in the prior year's quarter. However, net earnings attributable to controlling interests saw a significant decline, dropping to $269 million from $399 million in the first quarter of 2012, primarily due to lower segment operating profit, particularly in the Oilseeds Processing and Agricultural Services segments. This decrease was partially offset by a lower LIFO inventory valuation charge and the absence of restructuring costs incurred in the prior year. The company also provided an update on its ongoing anti-corruption investigation, recording a $25 million provision for potential penalties. ADM's financial position remained solid, with total assets of $43.2 billion and total liabilities of $25.1 billion as of March 31, 2013. The company highlighted its acquisition plans for GrainCorp Limited, indicating a significant strategic move. Despite the decrease in earnings, ADM maintained its dividend payment, reflecting a continued commitment to shareholder returns.

Financial Highlights

50 data points
Beta

Revenue

$21.73B

3.5% Gross Margin

Net Income

$269.00M

1.2% Net Margin

EPS (Diluted)

$0.41

Total Assets

$43.23B

Cash & Equivalents

$1.45B

Free Cash Flow

$109.00M

Financial Statements
Beta
Revenue$21.73B
Cost of Revenue$20.97B
Gross Profit$756.00M
SG&A Expenses$436.00M
Interest Expense$106.00M
Net Income$269.00M
EPS (Basic)$0.41
EPS (Diluted)$0.41
Shares Outstanding (Basic)661.00M
Shares Outstanding (Diluted)662.00M

Key Highlights

  • 1Net sales increased to $21.7 billion for Q1 2013 from $21.1 billion in Q1 2012.
  • 2Net earnings attributable to controlling interests decreased significantly to $269 million in Q1 2013 from $399 million in Q1 2012.
  • 3Segment operating profit declined by $288 million, primarily driven by lower profits in Oilseeds Processing and Agricultural Services.
  • 4The company recorded a $25 million provision for potential penalties related to its ongoing anti-corruption investigation.
  • 5ADM announced a takeover bid implementation deed for GrainCorp Limited, signaling a major strategic acquisition initiative.
  • 6Inventories decreased to $12.4 billion from $13.8 billion at the end of 2012.
  • 7Dividends per common share increased to $0.19 in Q1 2013 from $0.175 in Q1 2012.

Frequently Asked Questions

The decrease in net earnings was primarily driven by lower segment operating profit, particularly in the Oilseeds Processing and Agricultural Services segments. Factors such as reduced margins in soft seed crushing, higher trucking costs in South America, and weaker cocoa press margins negatively impacted profitability. While net sales saw a slight increase, lower operating profit led to the decline in net earnings.

ADM has completed its internal review of the anti-corruption compliance program and related transactions. The company has initiated discussions with the Department of Justice and SEC for resolution. For the quarter ended March 31, 2013, ADM recorded a $25 million provision for estimated potential disgorgement, penalties, or fines related to this matter. The ultimate settlement is uncertain and could potentially exceed this provision.

The announcement of the takeover bid implementation deed for GrainCorp Limited, with an intended cash offer of Australian $12.20 per share, represents a significant strategic move for ADM. This proposed acquisition, valued at approximately Australian $3.4 billion, indicates ADM's intention to expand its global footprint and operations. The offer is subject to regulatory approvals and shareholder acceptance, and major credit rating agencies have placed ADM's credit rating under review due to the acquisition funding plans.

The filing details ADM's use of various derivative instruments for hedging purposes, including commodity contracts, foreign exchange contracts, and interest rate contracts. For derivatives not designated as hedging instruments, the company reported a pre-tax gain of $95 million in Q1 2013, primarily from commodity and FX contracts, compared to a pre-tax loss of $52 million in Q1 2012. For derivatives designated as hedging instruments, a pre-tax loss of $45 million was recognized in Q1 2013.