10-QPeriod: Q1 FY2018

Archer-Daniels-Midland Co Quarterly Report for Q1 Ended Mar 31, 2018

Filed May 1, 2018For Securities:ADM

Summary

Archer-Daniels-Midland Co. (ADM) reported a solid first quarter for 2018, with net earnings attributable to controlling interests increasing by 16% to $393 million, or $0.70 per diluted share, compared to $339 million, or $0.59 per diluted share, in the prior year period. This improvement was driven by a 4% increase in revenues to $15.5 billion and stronger performance across several segments, particularly Oilseeds and Nutrition. The company demonstrated robust operational execution, with Oilseeds revenues rising 8% due to higher volumes, and Nutrition revenues growing 11% driven by strong demand for flavors and animal nutrition products. While Origination revenues saw a slight dip, overall segment operating profit increased, reflecting the company's ability to navigate commodity price fluctuations and capture market opportunities. ADM also benefited from a significantly lower effective tax rate of 14.7% due to the Tax Cuts and Jobs Act, contributing to the bottom-line growth.

Financial Highlights

49 data points
Beta

Revenue

$15.53B

5.7% Gross Margin

Net Income

$393.00M

2.5% Net Margin

EPS (Diluted)

$0.70

Total Assets

$41.10B

Cash & Equivalents

$797.00M

Free Cash Flow

-$3.77B

Financial Statements
Beta
Revenue$15.53B
Cost of Revenue$14.64B
Gross Profit$889.00M
SG&A Expenses$513.00M
Interest Expense$91.00M
Net Income$393.00M
EPS (Basic)$0.70
EPS (Diluted)$0.70
Shares Outstanding (Basic)563.00M
Shares Outstanding (Diluted)565.00M

Key Highlights

  • 1Net earnings attributable to controlling interests increased 16% to $393 million ($0.70 per diluted share) from $339 million ($0.59 per diluted share) in the prior year.
  • 2Total revenues rose 4% to $15.5 billion, driven by higher sales volumes across key segments.
  • 3Oilseeds segment revenues increased 8% to $5.6 billion, supported by strong demand and higher crush volumes and margins.
  • 4Nutrition segment revenues grew 11% to $1.0 billion, benefiting from robust demand for flavor ingredients and animal nutrition products.
  • 5The effective income tax rate significantly decreased to 14.7% from 25.8% in the prior year, primarily due to the Tax Cuts and Jobs Act.
  • 6Segment operating profit increased to $704 million from $676 million in the prior year, despite some headwinds in Origination and specific timing impacts in Oilseeds hedging.
  • 7Cash used in operating activities was substantial at $3.6 billion, reflecting significant working capital changes, primarily in inventories and trade payables.

Frequently Asked Questions

Earnings growth was primarily driven by an increase in revenues, particularly in the Oilseeds and Nutrition segments, and a significant reduction in the company's effective income tax rate due to the Tax Cuts and Jobs Act. Improved operational performance, including higher sales volumes and margins in certain segments, also contributed to the stronger results.

The Tax Cuts and Jobs Act enacted in late 2017 had a significant positive impact on ADM's first quarter 2018 results. It led to a substantial decrease in the effective tax rate from 25.8% in the prior year to 14.7% in the current quarter, contributing to higher net earnings.

The company used a significant amount of cash in operating activities ($3.6 billion) primarily due to working capital changes, particularly increases in inventories and trade payables. ADM maintains substantial liquidity with $8.1 billion in lines of credit, of which $5.1 billion was unused as of March 31, 2018. The company expects to manage its working capital effectively and believes it has access to sufficient financial resources to fund its operations and growth strategy.

The company is involved in routine legal actions, including tax matters in Brazil and Argentina, and a previous lawsuit related to genetically modified corn products which was settled. While the company believes it will prevail in its tax positions, these matters could potentially result in future financial impacts, though the company does not currently anticipate a material adverse effect on its financial condition.