10-QPeriod: Q2 FY2019

Archer-Daniels-Midland Co Quarterly Report for Q2 Ended Jun 30, 2019

Filed August 1, 2019For Securities:ADM

Summary

Archer-Daniels-Midland Co. (ADM) reported decreased net earnings attributable to controlling interests of $235 million for the three months ended June 30, 2019, down from $566 million in the prior year period. This decline was driven by lower operating results across several segments, including Origination, Oilseeds (Crushing and Origination), and Carbohydrate Solutions (Bioproducts). Significant factors impacting performance included challenging weather conditions, global trade tensions, and pressured ethanol margins. Despite the overall decline in earnings, the Nutrition segment saw robust revenue growth of 50% due to acquisitions, highlighting the company's strategic shift towards this area. The company also maintained a strong liquidity position with $849 million in cash and cash equivalents and $5.8 billion in unused credit lines, supporting its ongoing capital expenditures and growth strategies. Investors should monitor the company's ability to navigate commodity price volatility and operational challenges while continuing its strategic expansion in the Nutrition sector.

Financial Highlights

51 data points
Beta

Revenue

$16.30B

6.0% Gross Margin

Net Income

$235.00M

1.4% Net Margin

EPS (Diluted)

$0.42

Total Assets

$42.62B

Cash & Equivalents

$849.00M

Free Cash Flow

-$863.00M

Financial Statements
Beta
Revenue$16.30B
Cost of Revenue$15.32B
Gross Profit$972.00M
SG&A Expenses$602.00M
Interest Expense$109.00M
Net Income$235.00M
EPS (Basic)$0.42
EPS (Diluted)$0.42
Shares Outstanding (Basic)565.00M
Shares Outstanding (Diluted)566.00M

Key Highlights

  • 1Net earnings attributable to controlling interests decreased to $235 million for Q2 2019 from $566 million in Q2 2018.
  • 2Total revenues decreased by $771 million to $16.3 billion for Q2 2019 compared to $17.1 billion in Q2 2018.
  • 3The Nutrition segment showed significant growth, with revenues increasing by 50% to $1.5 billion, driven by acquisitions.
  • 4Origination and Oilseeds segments experienced declines in operating profit due to lower volumes and margins, influenced by weather and trade tensions.
  • 5Carbohydrate Solutions segment's operating profit decreased by 22%, largely due to pressured ethanol margins.
  • 6The company maintained a strong liquidity position, with $849 million in cash and cash equivalents and $5.8 billion in unused credit lines as of June 30, 2019.
  • 7The company is undertaking significant acquisitions, notably Neovia, Florida Chemical Company, and Ziegler Group, strengthening its Nutrition segment.

Frequently Asked Questions

The decrease in net earnings was primarily driven by lower operating results in the Origination, Oilseeds (specifically Crushing and Origination), and Carbohydrate Solutions (specifically Bioproducts) segments. These declines were attributed to factors such as challenging weather conditions impacting logistics, global trade tensions, and pressured ethanol industry margins.

The acquisitions, particularly in the Nutrition segment (Neovia, Florida Chemical Company, and Ziegler Group), significantly boosted revenues by 50% in that segment. While contributing positively to Nutrition's growth, the overall impact on consolidated net earnings was offset by declines in other segments and increased corporate expenses related to integration and restructuring.

As of June 30, 2019, ADM maintained a solid liquidity position with $849 million in cash and cash equivalents and $5.8 billion in unused credit lines. The company's debt-to-capital ratio remained stable at 29%, indicating financial flexibility to fund operations, capital expenditures, and strategic growth initiatives.

Key challenges include navigating the volatility of agricultural commodity prices, ongoing global trade tensions that affect export markets, adverse weather conditions impacting operations and logistics, and intense competition within certain segments like ethanol. The company must also successfully integrate its recent acquisitions and continue to execute its strategic shift towards the higher-growth Nutrition sector.