10-QPeriod: Q3 FY2013

Archer-Daniels-Midland Co Quarterly Report for Q3 Ended Sep 30, 2013

Filed November 1, 2013For Securities:ADM

Summary

Archer-Daniels-Midland Company (ADM) reported a mixed financial performance for the nine months ended September 30, 2013. While net earnings attributable to controlling interests saw a significant increase compared to the same period in 2012, driven by favorable LIFO inventory valuation adjustments and improved segment operating profits, overall sales remained relatively flat. The company is actively pursuing the acquisition of GrainCorp Limited, which has led to significant hedging activities and has placed some pressure on its credit ratings. ADM also continues to manage ongoing legal and tax matters, including an anti-corruption review and foreign tax assessments in Brazil and Argentina. Investors should note the substantial increase in cash provided by operating activities, largely due to significant changes in working capital and inventory levels. The company's liquidity remains strong with substantial unused lines of credit. However, the pending GrainCorp acquisition is a significant factor to monitor, as it carries substantial financial implications and regulatory hurdles. The company's segment performance showed strength in Corn Processing and some recovery in Oilseeds Processing and Agricultural Services, although Cocoa operations faced challenges.

Financial Highlights

50 data points
Beta

Revenue

$21.39B

5.4% Gross Margin

Net Income

$476.00M

2.2% Net Margin

EPS (Diluted)

$0.72

Total Assets

$41.45B

Cash & Equivalents

$3.25B

Free Cash Flow

$2.30B

Financial Statements
Beta
Revenue$21.39B
Cost of Revenue$20.24B
Gross Profit$1.16B
SG&A Expenses$429.00M
Interest Expense$105.00M
Net Income$476.00M
EPS (Basic)$0.72
EPS (Diluted)$0.72
Shares Outstanding (Basic)661.00M
Shares Outstanding (Diluted)664.00M

Key Highlights

  • 1Net earnings attributable to controlling interests increased by $103 million to $968 million for the nine months ended September 30, 2013, compared to the same period in 2012.
  • 2Total sales remained relatively flat at $65.7 billion for the nine months ended September 30, 2013.
  • 3Cash provided by operating activities significantly increased to $4.9 billion for the nine months ended September 30, 2013, up from $0.3 billion in the prior year period, driven by working capital changes and inventory management.
  • 4The company is actively pursuing the acquisition of GrainCorp Limited for approximately A$3.4 billion, which is subject to regulatory approvals.
  • 5Corporate results improved significantly, showing income of $103 million for the three months ended September 30, 2013, compared to a loss of $203 million in the prior year, largely due to favorable LIFO inventory valuation adjustments.
  • 6The company recorded a $54 million provision for potential disgorgement, penalties, and fines related to an ongoing anti-corruption compliance review.
  • 7Liquidity remains strong with $3.5 billion in cash, cash equivalents, and short-term marketable securities, and $8.7 billion in unused lines of credit.

Frequently Asked Questions

For the nine months ended September 30, 2013, ADM reported net earnings attributable to controlling interests of $968 million, an increase from $865 million in the same period of 2012. Total sales were largely flat at $65.6 billion. The company saw a substantial improvement in cash flow from operations, reaching $4.9 billion, primarily due to changes in working capital and inventory management.

The most significant strategic event is ADM's pending takeover bid for GrainCorp Limited, an Australian agribusiness company, valued at approximately A$3.4 billion. This acquisition is subject to regulatory approvals. The company is also managing an ongoing anti-corruption compliance review, which resulted in a $54 million provision for potential penalties and fines.

Performance varied across segments. Corn Processing showed strong growth, with sales increasing by 15% driven by higher ethanol volumes and prices. Oilseeds Processing sales decreased slightly due to lower sales volumes, though segment operating profit saw a modest increase. Agricultural Services experienced a 3% decrease in sales primarily due to lower U.S. volumes but improved operating profit excluding prior-year impairments. Cocoa operations faced challenges due to weaker margins and excess industry capacity.

ADM maintains a strong liquidity position with $3.5 billion in cash, cash equivalents, and short-term marketable securities as of September 30, 2013. The company also had $8.7 billion in unused lines of credit. The ratio of long-term debt to total capital was 22%, indicating a healthy financial flexibility.