10-QPeriod: Q3 FY2017

Archer-Daniels-Midland Co Quarterly Report for Q3 Ended Sep 30, 2017

Filed October 31, 2017For Securities:ADM

Summary

Archer-Daniels-Midland Co. (ADM) reported a decline in net earnings attributable to controlling interests for the third quarter of 2017, down to $192 million from $341 million in the same period of 2016. This decrease was primarily driven by lower segment operating profit, particularly in Agricultural Services and Oilseeds Processing, due to competitive market conditions, compressed margins, and increased restructuring charges. For the nine months ended September 30, 2017, net earnings also saw a decrease, reporting $807 million compared to $855 million in the prior year. Despite revenue declines, the company's Corn Processing segment showed improved operating profit, and adjusted EBITDA saw a slight increase year-over-year for the nine-month period, indicating some resilience in core operations. ADM continues to manage its portfolio through strategic acquisitions and divestitures while focusing on efficiency and long-term returns. The company's financial position remains robust, with a healthy liquidity position and a stable debt-to-capital ratio. ADM continues to return capital to shareholders through share repurchases and dividends, reflecting management's confidence in its ongoing strategy. Investors should monitor segment performance, particularly the impact of agricultural commodity price volatility and global market dynamics on margins, as well as the company's progress in integrating recent acquisitions and executing its business transformation initiatives.

Financial Highlights

50 data points
Beta

Revenue

$14.83B

5.5% Gross Margin

Net Income

$192.00M

1.3% Net Margin

EPS (Diluted)

$0.34

Total Assets

$38.97B

Cash & Equivalents

$518.00M

Free Cash Flow

-$1.41B

Financial Statements
Beta
Revenue$14.83B
Cost of Revenue$14.02B
Gross Profit$812.00M
SG&A Expenses$478.00M
Interest Expense$79.00M
Net Income$192.00M
EPS (Basic)$0.34
EPS (Diluted)$0.34
Shares Outstanding (Basic)566.00M
Shares Outstanding (Diluted)569.00M

Key Highlights

  • 1Net earnings attributable to controlling interests decreased to $192 million for Q3 2017 from $341 million in Q3 2016.
  • 2Total revenues for Q3 2017 were $14.8 billion, a decrease of $1.0 billion compared to $15.8 billion in Q3 2016.
  • 3Segment operating profit decreased to $485 million in Q3 2017 from $645 million in Q3 2016.
  • 4The Corn Processing segment showed improved operating profit, increasing by 18% year-over-year for the third quarter.
  • 5Asset impairment, exit, and restructuring costs significantly increased to $107 million in Q3 2017 from $11 million in Q3 2016, largely due to an ethanol complex reconfiguration.
  • 6Cash provided by operating activities for the nine months ended September 30, 2017, increased to $2.2 billion from $1.3 billion in the prior year.
  • 7The company repurchased approximately 3.9 million shares in the third quarter of 2017.

Frequently Asked Questions

The decrease in net earnings for the third quarter of 2017 was primarily driven by lower segment operating profit, particularly in the Agricultural Services and Oilseeds Processing segments. This was influenced by competitive market conditions, compressed margins, and a significant increase in asset impairment, exit, and restructuring costs related to the reconfiguration of the Peoria, Illinois ethanol complex.

The Agricultural Services segment saw a decline in operating profit due to lack of U.S. grain export competitiveness and lower margins. The Corn Processing segment performed well, with operating profit increasing by 18% driven by strong sweetener and starch margins and improved ethanol margins. Oilseeds Processing operating profit decreased due to compressed global crush margins and competition. Wild Flavors and Specialty Ingredients operating profit also declined.

ADM maintained a healthy liquidity position, with $0.8 billion in cash, cash equivalents, and short-term marketable securities at September 30, 2017, and a current ratio of 1.6 to 1. The company's ratio of long-term debt to total capital remained stable at 27%. ADM has access to significant unused lines of credit, totaling $4.8 billion out of $6.9 billion available, providing financial flexibility.

The company is involved in several legal proceedings, including those related to genetically modified corn products, which it is vigorously defending. Additionally, ADM faces significant tax assessments in Brazil and Argentina related to commodity hedging losses and transfer pricing, respectively. While the company believes its tax positions are sound and intends to defend them, these matters could result in substantial future payments and expenses if resolved unfavorably.