10-QPeriod: Q2 FY2017

Archer-Daniels-Midland Co Quarterly Report for Q2 Ended Jun 30, 2017

Filed August 1, 2017For Securities:ADM

Summary

Archer-Daniels-Midland Co. (ADM) reported revenues of $14.94 billion for the second quarter of 2017, a decrease from $15.63 billion in the prior year's quarter, primarily due to lower average sales prices of agricultural commodities. Net earnings attributable to controlling interests were $276 million, a slight decrease from $284 million in Q2 2016. For the six months ended June 30, 2017, revenues were $29.93 billion, down from $30.01 billion in the prior year, while net earnings increased to $615 million from $514 million in the same period last year. The company highlighted improved global merchandising results and solid performance in its Corn Processing segment, partially offset by weaker South American origination margins and lower soybean crush margins. ADM continues to invest in its business transformation, IT, and innovation initiatives, which contributed to higher selling, general, and administrative expenses. The company also reported an increase in asset impairment, exit, and restructuring charges. ADM maintained a strong liquidity position with $0.7 billion in cash, cash equivalents, and short-term marketable securities at June 30, 2017, and unused lines of credit totaling $5.1 billion. Capital expenditures and acquisitions were significant during the period, reflecting ongoing strategic investments in its global operations and portfolio.

Financial Highlights

50 data points
Beta

Revenue

$14.94B

6.0% Gross Margin

Net Income

$276.00M

1.8% Net Margin

EPS (Diluted)

$0.48

Total Assets

$37.82B

Cash & Equivalents

$433.00M

Free Cash Flow

-$843.00M

Financial Statements
Beta
Revenue$14.94B
Cost of Revenue$14.05B
Gross Profit$892.00M
SG&A Expenses$525.00M
Interest Expense$86.00M
Net Income$276.00M
EPS (Basic)$0.48
EPS (Diluted)$0.48
Shares Outstanding (Basic)571.00M
Shares Outstanding (Diluted)574.00M

Key Highlights

  • 1Revenues for Q2 2017 decreased by 4.4% year-over-year to $14.94 billion, largely driven by lower commodity prices.
  • 2Net earnings attributable to controlling interests for Q2 2017 were $276 million, a slight decline from $284 million in Q2 2016.
  • 3For the first six months of 2017, net earnings increased by 19.6% year-over-year to $615 million.
  • 4Segment operating profit for Q2 2017 was $642 million, down from $680 million in the prior year's quarter.
  • 5Adjusted segment operating profit (a non-GAAP measure) increased by $85 million to $658 million in Q2 2017.
  • 6The company repurchased 6.2 million shares for approximately $263 million during the second quarter of 2017.
  • 7ADM had $0.7 billion in cash, cash equivalents, and short-term marketable securities, with $5.1 billion in unused credit lines at the end of Q2 2017.

Frequently Asked Questions

The primary driver of the revenue decrease in the second quarter of 2017 was lower average sales prices of agricultural commodities, particularly soybeans, corn, meal, and wheat, which impacted the Agricultural Services segment significantly.

Agricultural Services operating profit increased significantly due to strong merchandising and handling results, while Corn Processing operating profit also rose driven by sweeteners, starches, and improved ethanol margins. However, Oilseeds Processing operating profit decreased due to weak soybean crush and South American origination margins, and Wild Flavors and Specialty Ingredients saw a slight decrease due to softer conditions in some non-flavor ingredient markets.

ADM maintained a strong liquidity position with $0.7 billion in cash, cash equivalents, and short-term marketable securities, and had $5.1 billion in unused credit lines at June 30, 2017. The company generates cash from operations and has access to credit markets to fund its working capital and capital expenditures, with plans for significant capital expenditures and shareholder returns in the remainder of 2017.

ADM is involved in several legal proceedings, including those related to genetically modified corn products, and faces tax assessments in Brazil and Argentina related to commodity hedging losses and transfer pricing, respectively. While the company believes it has strong defenses and its financial statements reflect appropriate accounting, the ultimate resolution of these matters could result in significant financial impacts. The company also noted a confidential decision resolving a purchase price adjustment dispute related to its 2015 cocoa business sale.