Archer Daniels Surprises - Analyst Blog

Archer Daniels Midland Company (ADM) reported robust second quarter 2011 results. Net income for the reported quarter was $732 million or $1.14 per share compared with $567 million or 88 cents in the year-ago quarter. Quarterly earnings also outpaced the Zacks Consensus Estimate of 77 cents per share.

The robust quarterly result was primarily attributable to increased segmental profit, which was partially offset by negative discrepancy from changes in Last-In-First-Out (LIFO) inventory valuations caused by higher agricultural commodity prices.

Quarterly Details

Archer Daniels' quarterly net sales increased 31.5% year over year to $20.9 billion, also beating the Zacks Consensus Estimate of $17.6 billion. The growth was mainly attributable to a robust 40.8% growth in Agricultural Services to $10.8 billion, a 27.5% rise in Oilseeds Processing revenues to $6.2 billion and an increase of 22.5% in Corn Processing revenues to $2.5 billion.

Total segment operating profit for Archer Daniels increased to $1.4 billion from $970 million in the prior-year quarter. Operating profit for Agricultural Services segment grew $276 million to $426 million from $150 million in the year-ago period, reflecting strong results from global merchandising operations and record export volumes from the United States.

Archer Daniels' Corn Processing segment climbed to an operating profit of $399 million from $290 million last year. The increase was primarily attributed to a significant improvement in bio-products performance, stemming from better margins for ethanol and lysine. However, growth in the segment operating income was partially offset by lower average selling prices of sweeteners and starches and higher net corn costs.

Archer Daniels' Oilseeds Processing segment recorded a quarterly operating profit of $325 million compared with an operating profit of $352 million in the year-ago period, due to adverse mark-to-market timing effect in Europe and decline in performance in Asia. Operating profit from the Other business segment came in at $212 million as compared with an operating profit of $178 million in the year-ago quarter.

The long-term debt-to-capitalization ratio of 30.7% compared favorably with a long-term debt-to-capitalization ratio of 32.9% in the prior-year quarter.

Archer Daniels, which competes with Bunge Limited (BG) and Corn Products International Inc. (CPO), currently has a Zacks #3 Rank, implying a short-term Hold rating on the stock. Besides, the company retains a long-term Neutral recommendation.

 
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