10-QPeriod: Q1 FY2017

Archer-Daniels-Midland Co Quarterly Report for Q1 Ended Mar 31, 2017

Filed May 2, 2017For Securities:ADM

Summary

Archer-Daniels-Midland Co. (ADM) reported a strong first quarter for 2017, with net earnings attributable to controlling interests of $339 million, a significant increase from $230 million in the same period of 2016. This growth was driven by improved operating profit across all business segments, reflecting solid performance in agricultural services, corn processing, and oilseeds processing. The company saw an increase in revenues to $14.988 billion from $14.384 billion year-over-year, primarily due to higher sales volumes and increased average selling prices for key commodities like soybeans and canola oils. Operational efficiency and strategic initiatives contributed to the positive results. The company benefited from higher volumes in agricultural services and oilseeds processing, and improved margins in corn processing, particularly in sweeteners and starches, and bioproducts. While facing some challenges such as production disruptions in corn processing and competitive market conditions in oilseeds, ADM's diversified business model and global reach enabled it to navigate these effectively. The company also continued its strategic evaluation of capital intensity, aiming to optimize returns through portfolio management, including recent acquisitions and a planned divestiture. ADM's financial position remained robust, with substantial operating cash flow and a healthy liquidity position. The company reaffirmed its commitment to shareholder returns through dividends and share repurchases, while also investing in future growth. Investors can look to ADM's continued focus on operational execution, strategic acquisitions, and efficient capital allocation as key drivers for future performance.

Financial Highlights

50 data points
Beta

Revenue

$14.99B

5.8% Gross Margin

Net Income

$339.00M

2.3% Net Margin

EPS (Diluted)

$0.59

Total Assets

$39.63B

Cash & Equivalents

$476.00M

Free Cash Flow

-$1.69B

Financial Statements
Beta
Revenue$14.99B
Cost of Revenue$14.12B
Gross Profit$872.00M
SG&A Expenses$516.00M
Interest Expense$81.00M
Net Income$339.00M
EPS (Basic)$0.59
EPS (Diluted)$0.59
Shares Outstanding (Basic)576.00M
Shares Outstanding (Diluted)579.00M

Key Highlights

  • 1Net earnings attributable to controlling interests increased by 47.4% to $339 million in Q1 2017, compared to $230 million in Q1 2016.
  • 2Revenues grew by 4.2% to $14.988 billion in Q1 2017, up from $14.384 billion in the prior year's quarter, driven by higher sales prices and volumes.
  • 3Segment operating profit saw a significant increase of 18.3% to $676 million from $573 million, with all segments contributing to the growth.
  • 4Oilseeds Processing segment revenue increased by 5.8% to $5.282 billion, reflecting higher average sales prices, while Corn Processing revenue increased by 1.6% to $2.244 billion.
  • 5Cash provided by operating activities significantly improved to $409 million in Q1 2017, compared to $25 million in Q1 2016.
  • 6The company completed acquisitions of Crosswind Industries, Inc. and an 89% stake in Biopolis SL for $92 million in aggregate during the quarter.
  • 7Diluted earnings per common share rose to $0.59 in Q1 2017 from $0.39 in Q1 2016, reflecting the strong earnings growth.

Frequently Asked Questions

The primary driver of ADM's earnings growth in the first quarter of 2017 was improved operating profit across all of its business segments. This was supported by higher revenues resulting from increased sales volumes and higher average selling prices for key agricultural commodities, along with effective cost management and operational efficiencies.

All of ADM's business segments showed improved performance. Agricultural Services, Corn Processing, and Oilseeds Processing all reported higher revenues and segment operating profits. Specifically, Agricultural Services revenues increased due to higher sales volumes, Corn Processing benefited from strong domestic demand and improved margins in sweeteners and starches, and Oilseeds Processing saw growth from higher average sales prices.

ADM maintained a strong liquidity position in Q1 2017 with $0.7 billion in cash, cash equivalents, and short-term marketable securities. The company generated significant cash from operations ($409 million) and had substantial unused lines of credit ($5.1 billion out of $6.7 billion total). ADM expects to continue funding operations and growth through operating cash flow and credit facilities, while also committing to shareholder returns via dividends and share repurchases.

The company disclosed ongoing tax assessments in Brazil and Argentina related to commodity hedging losses and transfer pricing, totaling significant amounts. While ADM believes its tax positions are defensible and has not recorded liabilities for these assessments, they represent potential future financial impacts if the company is unsuccessful in its appeals. The company is also involved in litigation related to genetically modified corn products, but believes the outcome will not have a material adverse effect on its financial condition.