10-QPeriod: Q2 FY2013

Archer-Daniels-Midland Co Quarterly Report for Q2 Ended Jun 30, 2013

Filed August 7, 2013For Securities:ADM

Summary

Archer-Daniels-Midland Co. (ADM) reported a decline in net earnings attributable to controlling interests for the three and six months ended June 30, 2013, compared to the prior year period. This was largely driven by a combination of factors, including lower segment operating profit in Oilseeds Processing and Agricultural Services, higher corporate costs, and specific charges related to strategic initiatives. Net sales showed a slight increase for the six-month period, indicating resilience in demand despite some volume declines. The company is actively pursuing strategic growth opportunities, notably its pending acquisition of GrainCorp, which has progressed through regulatory approvals. Concurrently, ADM is exploring the divestiture of its cocoa business. These strategic moves, alongside ongoing operational challenges and market factors like commodity price fluctuations and weather impacts, are shaping the company's financial performance and outlook. Investors should monitor the progress of the GrainCorp acquisition, the outcome of the cocoa business review, and the company's ability to navigate commodity market volatility.

Financial Highlights

50 data points
Beta

Revenue

$22.54B

3.6% Gross Margin

Net Income

$223.00M

1.0% Net Margin

EPS (Diluted)

$0.34

Total Assets

$40.24B

Cash & Equivalents

$1.85B

Free Cash Flow

$1.80B

Financial Statements
Beta
Revenue$22.54B
Cost of Revenue$21.73B
Gross Profit$807.00M
SG&A Expenses$452.00M
Interest Expense$107.00M
Net Income$223.00M
EPS (Basic)$0.34
EPS (Diluted)$0.34
Shares Outstanding (Basic)661.00M
Shares Outstanding (Diluted)663.00M

Key Highlights

  • 1Net earnings attributable to controlling interests decreased by $61 million (to $223 million) for the three months ended June 30, 2013, and by $191 million (to $492 million) for the six months ended June 30, 2013, compared to the respective prior year periods.
  • 2Net sales and other operating income increased slightly to $44.3 billion for the six months ended June 30, 2013, driven primarily by higher average selling prices, though sales volumes experienced some declines.
  • 3The company is in the process of acquiring GrainCorp for approximately A$3.4 billion, with significant regulatory approvals already secured.
  • 4ADM is exploring the potential sale of its cocoa business, having announced exploratory discussions.
  • 5Corporate costs increased significantly, including charges for an anti-corruption matter ($54 million for the six months) and unrealized losses on Australian dollar currency hedges related to the pending GrainCorp acquisition ($51 million for the six months).
  • 6Inventories decreased by approximately $2.0 billion from June 30, 2012, to June 30, 2013, attributed to lower quantities (due to drought impacts) and lower prices.
  • 7Cash provided by operating activities was $2.3 billion for the six months ended June 30, 2013, a substantial improvement from cash used of $0.1 billion in the prior year period.

Frequently Asked Questions

The decrease in net earnings for the three and six months ended June 30, 2013, was primarily due to lower segment operating profits in Oilseeds Processing and Agricultural Services, higher corporate costs (including charges for an anti-corruption matter and hedging losses related to the GrainCorp acquisition), and less favorable LIFO inventory valuation adjustments compared to the prior year.

The acquisition of GrainCorp is progressing, with several key regulatory approvals already obtained. The offer is valued at approximately A$3.4 billion. While the acquisition is expected to enhance ADM's global reach, it also led to unrealized losses of $51 million on currency hedges during the six months ended June 30, 2013, and has placed the company's credit rating under review.

ADM has completed its internal review of its anti-corruption compliance program and is in discussions with the DOJ and SEC to resolve the matter. Charges for estimated potential disgorgement, penalties, and fines amounted to $54 million for the six months ended June 30, 2013, with a corresponding liability of $54 million recorded in accrued expenses and other payables. The company does not expect a material impact on its overall business or financial condition.

Commodity price fluctuations had a mixed impact. While higher average selling prices supported net sales, particularly in Corn Processing, they also increased the cost of goods sold. The company experienced tighter supplies and higher prices for certain commodities due to the prior year's drought, impacting volumes, while also anticipating lower prices from the expected larger 2013 harvest. Cocoa margins remained pressured due to excess industry capacity and lower selling prices.