10-QPeriod: Q2 FY2018

Archer-Daniels-Midland Co Quarterly Report for Q2 Ended Jun 30, 2018

Filed July 31, 2018For Securities:ADM

Summary

Archer-Daniels-Midland Co. (ADM) reported a strong performance for the quarter and six months ended June 30, 2018, driven by robust demand across its key segments. Net earnings attributable to controlling interests saw a significant increase, more than doubling compared to the prior year period. This growth was supported by higher sales volumes and prices across various product lines, particularly in Origination and Oilseeds. The company also benefited from a lower effective tax rate due to the Tax Cuts and Jobs Act and a favorable discrete tax item in Brazil, which significantly boosted net income. ADM continued its strategic portfolio optimization with announced acquisitions in the Nutrition segment, particularly in animal nutrition and probiotics, signaling a focus on higher-growth, value-added areas. While the company faced some challenges, such as production issues in its corn complex and the impact of global trade tensions on soybean tariffs, its diversified business model and effective risk management strategies helped mitigate these risks. The company maintains a solid liquidity position and a strong balance sheet, with ample access to credit markets and a disciplined approach to capital allocation. Investors can look forward to ADM's continued focus on strategic growth and operational efficiency.

Financial Highlights

49 data points
Beta

Revenue

$17.07B

6.9% Gross Margin

Net Income

$566.00M

3.3% Net Margin

EPS (Diluted)

$1.00

Total Assets

$38.76B

Cash & Equivalents

$851.00M

Free Cash Flow

$212.00M

Financial Statements
Beta
Revenue$17.07B
Cost of Revenue$15.89B
Gross Profit$1.18B
SG&A Expenses$560.00M
Interest Expense$89.00M
Net Income$566.00M
EPS (Basic)$1.00
EPS (Diluted)$1.00
Shares Outstanding (Basic)564.00M
Shares Outstanding (Diluted)567.00M

Key Highlights

  • 1Net earnings attributable to controlling interests significantly increased by $290 million for the three months ended June 30, 2018, reaching $566 million, compared to $276 million in the prior year period.
  • 2Total revenues for the three months ended June 30, 2018, increased by $2.1 billion to $17.1 billion, driven by higher sales volumes and prices across key segments.
  • 3The effective tax rate decreased significantly to 13.2% for the three months ended June 30, 2018, from 28.2% in the prior year period, primarily due to the Tax Cuts and Jobs Act and a favorable tax item in Brazil.
  • 4Segment operating profit increased by $260 million to $902 million for the three months ended June 30, 2018, reflecting strong performance in Origination and Oilseeds.
  • 5ADM announced several strategic acquisitions in the Nutrition segment, including Probiotics International Limited and Neovia, to expand its animal nutrition and value-added product offerings.
  • 6The company reported strong Adjusted EBITDA of $991 million for the three months ended June 30, 2018, up from $725 million in the prior year period.
  • 7Capital expenditures were $0.4 billion for the six months ended June 30, 2018, and the company expects approximately $0.8 billion for the full year 2018.

Frequently Asked Questions

Revenue growth was primarily driven by higher sales volumes and increased sales prices across its segments. Specifically, the Origination segment saw a significant increase in revenues due to higher volumes and prices, while the Oilseeds segment also benefited from increased sales prices and volumes. Growth in Carbohydrate Solutions and Nutrition segments was also notable.

The Tax Cuts and Jobs Act, enacted in December 2017, significantly reduced ADM's effective tax rate. For the three months ended June 30, 2018, the effective tax rate decreased to 13.2% from 28.2% in the prior year period, leading to a substantial decrease in income tax expense and a corresponding increase in net earnings.

ADM announced several significant portfolio actions, including agreements to acquire Probiotics International Limited (PIL) and Neovia, which are expected to strengthen its Nutrition segment, particularly in animal nutrition and probiotics. The company also completed the acquisition of a 50% equity stake in Aston Foods and Food Ingredients and reached an agreement to acquire Rodelle Inc. These moves indicate a strategic focus on expanding its value-added product offerings and higher-growth areas.

ADM acknowledges the volatility caused by escalating global trade tensions, including tariffs on U.S. soybeans. The company's diversified business model and global reach help mitigate these risks. In Origination, higher global demand for U.S. products and strong export competitiveness contributed to higher volumes and margins. The company also engages in effective risk management, including hedging strategies, to navigate commodity price fluctuations and market uncertainties.