10-QPeriod: Q1 FY2016

Archer-Daniels-Midland Co Quarterly Report for Q1 Ended Mar 31, 2016

Filed May 3, 2016For Securities:ADM

Summary

Archer-Daniels-Midland Company (ADM) reported a significant decrease in net earnings for the first quarter of 2016 compared to the prior year. Net earnings attributable to controlling interests fell to $230 million from $493 million in Q1 2015, largely driven by weaker performance in the Agricultural Services and Oilseeds Processing segments. Revenues also declined by 18% year-over-year, impacted by lower sales prices and volumes across key segments. Despite the earnings dip, ADM continued to invest in strategic acquisitions and capital expenditures. The company acquired a controlling stake in Harvest Innovations and made progress on other strategic initiatives aimed at enhancing its value-added product portfolio and optimizing its capital deployment. Liquidity remains strong with substantial unused lines of credit, and the company remains committed to returning capital to shareholders through dividends and share repurchases.

Financial Highlights

50 data points
Beta

Revenue

$14.38B

5.4% Gross Margin

Net Income

$230.00M

1.6% Net Margin

EPS (Diluted)

$0.39

Total Assets

$39.68B

Cash & Equivalents

$706.00M

Free Cash Flow

-$155.00M

Financial Statements
Beta
Revenue$14.38B
Cost of Revenue$13.60B
Gross Profit$781.00M
SG&A Expenses$479.00M
Interest Expense$70.00M
Net Income$230.00M
EPS (Basic)$0.39
EPS (Diluted)$0.39
Shares Outstanding (Basic)595.00M
Shares Outstanding (Diluted)597.00M

Key Highlights

  • 1Net earnings attributable to controlling interests decreased to $230 million ($0.39 per diluted share) in Q1 2016 from $493 million ($0.77 per diluted share) in Q1 2015.
  • 2Total revenues declined by 18% to $14.4 billion, primarily due to lower sales prices and volumes in the Agricultural Services and Oilseeds Processing segments.
  • 3Segment operating profit decreased by $282 million to $573 million, impacted by a challenging merchandising environment, lower global crush margins, and weak U.S. export competitiveness.
  • 4The company acquired a controlling stake in Harvest Innovations for $84 million in February 2016, aligning with its strategy to expand its specialty ingredients business.
  • 5Cash provided by operating activities was $23 million for the quarter, down from $45 million in the prior year.
  • 6The company returned $0.2 billion in dividends and repurchased $0.3 billion of its stock during the quarter.
  • 7As of March 31, 2016, ADM had $6.1 billion in lines of credit, with $5.4 billion unused, indicating strong liquidity.

Frequently Asked Questions

The primary drivers for the decrease in net earnings were weaker performance in the Agricultural Services and Oilseeds Processing segments. This was attributed to a challenging merchandising environment, lower global crush margins, decreased U.S. export competitiveness, and lower commodity prices and volumes.

ADM continued its strategic acquisition efforts by purchasing a controlling stake in Harvest Innovations in February 2016 for $84 million. This acquisition is expected to enhance the company's specialty ingredients business and offer a more comprehensive solution for customer ingredient needs.

The company noted ongoing challenges in Agricultural Services due to weak export competitiveness and limited global merchandising opportunities. While Corn Processing saw solid demand for sweeteners and starches, ethanol faced pricing pressures due to high industry production. Oilseeds Processing volumes and margins remained solid despite some market headwinds. The company anticipates continued customer interest in innovative and healthy food products within its Wild Flavors and Specialty Ingredients segment.

ADM maintains strong liquidity with $1.2 billion in cash, cash equivalents, and short-term marketable securities, and significant unused credit facilities totaling $5.4 billion out of $6.1 billion. The company also returned capital to shareholders through $0.2 billion in dividends and $0.3 billion in share repurchases during the quarter. Expected capital expenditures for 2016 are around $1.0 billion.