10-QPeriod: Q3 FY2019

Archer-Daniels-Midland Co Quarterly Report for Q3 Ended Sep 30, 2019

Filed October 31, 2019For Securities:ADM

Summary

Archer-Daniels-Midland Co. (ADM) reported mixed financial results for the third quarter and first nine months of 2019. While total revenues saw an increase driven by higher sales volumes, net earnings attributable to controlling interests experienced a notable decline. This was primarily influenced by higher restructuring and pension settlement charges, increased interest expense related to recent acquisitions, and lower equity earnings from key investments. The company's Ag Services and Oilseeds segment faced challenges from global trade tensions and weather-related operational disruptions, impacting its overall segment operating profit. Despite the decrease in net earnings, ADM continued to execute its strategic initiatives, including significant acquisitions in the Nutrition segment (Neovia, Florida Chemical Company, and The Ziegler Group) aimed at bolstering its position as a leading nutrition company. The company also maintained a strong liquidity position, with substantial unused credit lines and a solid current ratio. Investors should monitor the impact of ongoing trade disputes and weather patterns on the Ag Services and Oilseeds segment, as well as the integration and performance of recent acquisitions within the Nutrition segment.

Financial Highlights

51 data points
Beta

Revenue

$16.73B

6.4% Gross Margin

Net Income

$407.00M

2.4% Net Margin

EPS (Diluted)

$0.72

Total Assets

$41.80B

Cash & Equivalents

$932.00M

Free Cash Flow

-$1.11B

Financial Statements
Beta
Revenue$16.73B
Cost of Revenue$15.65B
Gross Profit$1.08B
SG&A Expenses$578.00M
Interest Expense$97.00M
Net Income$407.00M
EPS (Basic)$0.72
EPS (Diluted)$0.72
Shares Outstanding (Basic)562.00M
Shares Outstanding (Diluted)563.00M

Key Highlights

  • 1Net earnings attributable to controlling interests decreased by $129 million to $407 million for the three months ended September 30, 2019, compared to the prior year period.
  • 2Total revenues increased by $926 million to $16.7 billion for the three months ended September 30, 2019, driven by higher sales volumes, particularly in the Nutrition and Ag Services segments.
  • 3The Nutrition segment saw significant revenue growth of 58% to $1.5 billion, largely due to recent acquisitions like Neovia, Florida Chemical Company, and The Ziegler Group.
  • 4The Ag Services and Oilseeds segment experienced a decline in operating profit by $61 million to $417 million, impacted by global trade tensions and weather-related operational disruptions.
  • 5Interest expense increased by $10 million to $97 million due to higher borrowings to fund recent acquisitions.
  • 6The company repurchased approximately 1.4 million shares of common stock during the third quarter of 2019.
  • 7The effective tax rate increased to 18.9% for the three months ended September 30, 2019, from 15.2% in the prior year period, primarily due to favorable discrete tax items in the prior year.

Frequently Asked Questions

The primary drivers for the decrease in net earnings were higher asset impairment, exit, and restructuring costs (including pension settlement charges), increased interest expense related to recent acquisitions, and lower equity in earnings of unconsolidated affiliates, partially offset by higher revenues.

The acquisitions, particularly in the Nutrition segment (Neovia, Florida Chemical Company, and The Ziegler Group), contributed significantly to revenue growth in that segment. However, these acquisitions also led to increased interest expense and higher selling, general, and administrative expenses due to integration and operational costs.

The Ag Services and Oilseeds segment faced challenges including global trade tensions with China, which impacted sales volumes and margins, and operational disruptions due to weather conditions (e.g., late harvest, high water levels on the Mississippi River system). Global crush margins were also below the record levels seen in the prior year.

ADM maintained a strong liquidity position with $1.0 billion in cash, cash equivalents, and short-term marketable securities at the end of the quarter. The company had $8.5 billion in available lines of credit, with $5.5 billion unused. The ratio of long-term debt to total capital remained at a manageable 29%, indicating a balanced approach to financing.