10-QPeriod: Q1 FY2014

Archer-Daniels-Midland Co Quarterly Report for Q1 Ended Mar 31, 2014

Filed May 2, 2014For Securities:ADM

Summary

Archer-Daniels-Midland Co. (ADM) reported net earnings attributable to controlling interests of $267 million for the three months ended March 31, 2014, which was slightly down from $269 million in the same period of the prior year. Despite a 5% decrease in total revenues to $20.7 billion, primarily driven by lower average selling prices across key segments, the company demonstrated resilience in its operational performance. Segment operating profit saw an increase of $61 million to $691 million, largely attributed to improved ethanol margins and strong performance in Oilseeds Processing, which benefited from high capacity utilization and favorable margin environments. However, corporate charges increased significantly due to a substantial increase in LIFO inventory valuation charges resulting from rising agricultural commodity prices. The company also announced significant portfolio management actions, including agreements to sell its fertilizer blending business and pursue the sale of its chocolate processing assets, alongside plans to acquire full ownership of Alfred C. Toepfer International, aimed at enhancing shareholder value.

Financial Highlights

50 data points
Beta

Revenue

$20.70B

3.3% Gross Margin

Net Income

$267.00M

1.3% Net Margin

EPS (Diluted)

$0.40

Total Assets

$41.44B

Cash & Equivalents

$1.08B

Free Cash Flow

-$546.00M

Financial Statements
Beta
Revenue$20.70B
Cost of Revenue$20.02B
Gross Profit$675.00M
SG&A Expenses$393.00M
Interest Expense$93.00M
Net Income$267.00M
EPS (Basic)$0.40
EPS (Diluted)$0.40
Shares Outstanding (Basic)660.00M
Shares Outstanding (Diluted)663.00M

Key Highlights

  • 1Net earnings attributable to controlling interests were $267 million, a slight decrease from $269 million in the prior year's quarter.
  • 2Total revenues decreased by 5% to $20.7 billion, primarily due to lower average selling prices across segments.
  • 3Segment operating profit increased by $61 million to $691 million, driven by strong ethanol margins and improved Oilseeds Processing results.
  • 4Corporate charges increased by $70 million to $325 million, mainly due to a significant increase in LIFO inventory valuation charges.
  • 5The company repurchased approximately 4.3 million shares of common stock during the quarter.
  • 6Announced strategic portfolio actions, including the sale of fertilizer blending business and chocolate processing assets, and the planned acquisition of full ownership of Alfred C. Toepfer International.
  • 7The company repaid $1.15 billion in convertible senior notes in February 2014.

Frequently Asked Questions

The primary driver for the decrease in total revenues was lower average selling prices across the Oilseeds Processing, Corn Processing, and Agricultural Services segments, which was partially offset by higher sales volumes in some areas.

The company's hedging activities, particularly related to commodity and ethanol contracts, had a mixed impact. While intended to manage price risk, 'hedge timing effects' and 'ineffectiveness' led to significant charges in segment operating profit. For instance, corn hedge timing effects resulted in a $65 million charge in the current quarter compared to $44 million in the prior year, impacting Corn Processing segment profit.

ADM announced three significant portfolio management actions on April 15, 2014: signing an agreement to sell its fertilizer blending business in Brazil and Paraguay, planning to pursue the sale of its chocolate processing assets, and planning to acquire the remaining shares for full ownership of Alfred C. Toepfer International. The company also repaid $1.15 billion in convertible senior notes in February 2014.

Cash used in operating activities was $0.4 billion for the quarter, a shift from cash provided in the prior year's quarter. Cash used in financing activities was significant at $1.5 billion, largely due to the repayment of maturing convertible debt. The company maintained substantial unused lines of credit totaling $6.6 billion out of $6.9 billion available, and its long-term debt to total capital ratio remained conservative at 21%.