ADM Reports Third Quarter Earnings of $0.94 per Share, $0.92 per Share on an Adjusted Basis

Archer Daniels Midland Company (NYSE: ADM) today reported financial results for the quarter ended September 30, 2018.

“The team delivered another strong quarter, capitalizing on robust global demand with good execution and great utilization of our global footprint,” said ADM Chairman and CEO Juan Luciano.

“For the last several years, through good conditions and bad, we’ve remained focused on serving our customers and delivering our strategic plan — optimizing our core, driving efficiencies, and expanding strategically. Now, as we look forward to 2019, we are continuing to enhance our earnings power, both through our growth investments and our Readiness initiative, which is beginning to drive fundamental changes in the way we run our company.

“Thanks to the team’s great work and the growing benefits of our strategic actions, we expect a solid end to 2018, as well as continued momentum for growth in earnings and returns in 2019 and the years to follow.”

• EPS as reported of $0.94 includes a $0.01 per share charge related to LIFO, a $0.04 per share gain related to the sale of a business and an equity investment, and a $0.01 per share tax expense related to U.S. tax reform and certain discrete items. Adjusted EPS, which excludes these items, was $0.92.1

1 Non-GAAP financial measures; see pages 4, 9, 10, and 11 for explanations and reconciliations, including after-tax amounts.

Results of Operations

Origination results were up substantially year over year.

Merchandising and Handling was significantly higher versus the weak third quarter of 2017. In North America, the business managed risk well in a volatile price environment, and capitalized on its asset base to deliver higher volumes and margins, including strong export sales to customers in markets outside of China. In Global Trade, good utilization of the company’s global network of origination assets and continued expansion of destination marketing volumes and margins drove solid results.

Transportation results more than doubled year over year, driven by higher volumes and margins in ARTCO.

Oilseeds results were also up significantly over the prior-year period.

Crushing and Origination set a new record for crush volumes, leveraging its strong global asset base and the company’s growing destination marketing capabilities to capitalize on higher global crush margins. Soybean crush was the major driver of earnings growth, with North America, EMEA and South America all delivering substantially higher results year over year. Softseeds results had a significant improvement from the third quarter of 2017, with particularly good results in EMEA.

Refining, Packaging, Biodiesel and Other was down versus the third quarter of 2017. Biodiesel was up substantially year over year, and edible oils continued to perform well. Peanut shelling margins were significantly lower, primarily caused by large peanut inventories and difficult market conditions.

Asia was higher on strong Wilmar results.

Carbohydrate Solutions results were slightly lower than the year-ago quarter.

Starches and Sweeteners delivered solid results, slightly below the strong prior-year period. EMEA sweeteners continued to benefit from recent acquisitions, delivering good results despite sugar oversupply in the region. Flour milling was higher, benefiting from strong wheat procurement results and timing effects. North American liquid sweeteners were negatively impacted by higher input and manufacturing costs.

Bioproducts results were down, as positive results from effective ethanol risk management as well as beverage and industrial alcohols were offset by an extremely weak ethanol industry margin environment.

Decatur plant downtime issues continued to impact North American results.

Nutrition results were in line with the prior-year period, with very strong WFSI results offset by a weaker performance in Animal Nutrition.

WFSI results were significantly higher year over year. The business delivered 10 percent year-over-year sales growth on a constant currency basis, and more than 30 percent growth in operating profit. WILD EMEA and North America results were substantially higher on portfolio mix and improved volumes. In Specialty Ingredients, emulsifiers and proteins continued to perform well. The Health & Wellness business continued to grow with the addition of Protexin.

In Animal Nutrition, issues that developed during the quarter constrained lysine production volumes and increased manufacturing costs, contributing to lower year-over-year results. Lower premix margins also impacted results.

Other results increased due to improved captive performance underwriting performance.

Other Items of Note

ADM made changes to its segment reporting in the first quarter of 2018 to reflect the company’s new operating structure. To assist in reconciling the new segment results to the prior presentation, the table on page 11 provides financial information under the historical segmentation.

As additional information to help clarify underlying business performance, the table on page nine includes reported earnings and EPS as well as adjusted earnings and EPS.

Segment operating profit of $881 million for the quarter includes gains of $21 million ($0.04 per share) related to the sale of a business and an equity investment, as well as a $1 million charge related to a settlement.

In Corporate results, unallocated corporate costs for the quarter increased principally due to performance-related compensation accruals. Higher project spending in information technology and growth-related projects also contributed to the increase.

Other charges for the quarter in Corporate improved due to better results from the company’s investment in Compagnie Industrielle et Financiere des Produits Amylaces SA (CIP).

The effective tax rate for the quarter was approximately 15 percent, up from approximately 13 percent in the prior year. The current quarter rate includes the effects of U.S. tax reform and the 2017 biodiesel tax credit recorded in the first quarter, along with certain favorable second quarter discrete tax items which impact the Company’s overall calendar-year rate.

Conference Call Information

ADM will host a webcast on November 6, 2018, at 8 a.m. Central Time to discuss financial results and provide a company update. A financial summary slide presentation will be available to download approximately 60 minutes prior to the call. To listen to the webcast or to download the slide presentation, go to www.adm.com/webcast. A replay of the webcast will also be available for an extended period of time at www.adm.com/webcast.

Forward-Looking Statements

Some of the above statements constitute forward-looking statements. These statements are based on many assumptions and factors that are subject to risk and uncertainties. ADM has provided additional information in its reports on file with the SEC concerning assumptions and factors that could cause actual results to differ materially from those in this presentation, and you should carefully review the assumptions and factors in our SEC reports. To the extent permitted under applicable law, ADM assumes no obligation to update any forward-looking statements.

About ADM

For more than a century, the people of Archer Daniels Midland Company (NYSE: ADM) have transformed crops into products that serve the vital needs of a growing world. Today, we’re one of the world’s largest agricultural processors and food ingredient providers, with approximately 31,000 employees serving customers in more than 170 countries. With a global value chain that includes approximately 500 crop procurement locations, 270 food and feed ingredient manufacturing facilities, 44 innovation centers and the world’s premier crop transportation network, we connect the harvest to the home, making products for food, animal feed, industrial and energy uses. Learn more at www.adm.com.

Financial Tables Follow

Segment operating profit is ADM’s consolidated income from operations before income tax excluding corporate items. Adjusted segment operating profit, a non-GAAP measure, is segment operating profit excluding specified items and timing effects. Timing effects relate to hedge ineffectiveness and mark-to-market hedge timing effects. Management believes that segment operating profit and adjusted segment operating profit are useful measures of ADM’s performance because they provide investors information about ADM’s business unit performance excluding corporate overhead costs as well as specified items and significant timing effects. Segment operating profit and adjusted segment operating profit are not measures of consolidated operating results under U.S. GAAP and should not be considered alternatives to income before income taxes, the most directly comparable GAAP financial measure, or any other measure of consolidated operating results under U.S. GAAP.

(1) Includes a charge (credit) related to changes in the Company’s LIFO reserves of $7 million and ($14 million) in the current quarter and YTD, respectively, and $0 and ($4 million) in the prior quarter and YTD, respectively.

(2) Includes restructuring charges of $1 million in the current quarter and charges related to impairment of certain assets and restructuring charges of $41 million in the current YTD and $107 million and $140 million, in the prior quarter and YTD, respectively.

(3) Includes current quarter and YTD gains of $21 million related to the sale of a business and an equity investment, prior quarter gains of $12 million related to the sale of an asset and an adjustment of the proceeds of the 2015 sale of the cocoa business, and prior YTD gains related to the sale of the crop risk services business ($77 million) and the sale of an asset ($6 million), partially offset by an adjustment of the proceeds of the 2015 sale of the cocoa business of $63 million.

(4) Includes a settlement charge of $1 million in the current quarter and YTD and a debt extinguishment charge of $11 million related to the early redemption of the Company’s $559 million notes due on March 15, 2018 and a settlement charge of $5 million in the prior YTD.

(5) Includes the tax expense (benefit) impact of the above specified items and tax discrete items totaling $3 million and ($11 million) in the current quarter and YTD, respectively, and ($40 million) and ($13 million) in the prior quarter and YTD, respectively.

(a) Cash flows related to the Company’s retained interest in securitized receivables as required by ASU 2016-15 which took effect January 1, 2018. Prior period amounts have been restated to conform to the current presentation.

Adjusted net earnings reflects ADM’s reported net earnings after removal of the effect on net earnings of specified items as more fully described above. Adjusted EPS reflects ADM’s fully diluted EPS after removal of the effect on EPS as reported of specified items as more fully described above. Management believes that Adjusted net earnings and Adjusted EPS are useful measures of ADM’s performance because they provide investors additional information about ADM’s operations allowing better evaluation of underlying business performance and better period-to-period comparability. These non-GAAP financial measures are not intended to replace or be alternatives to net earnings and EPS as reported, the most directly comparable GAAP financial measures, or any other measures of operating results under GAAP. Earnings amounts described above have been divided by the company’s diluted shares outstanding for each respective period in order to arrive at an adjusted EPS amount for each specified item.

Adjusted ROIC is Adjusted ROIC earnings divided by adjusted invested capital. Adjusted ROIC earnings is ADM’s net earnings adjusted for the after tax effects of interest expense, changes in the LIFO reserve and other specified items. Adjusted invested capital is the sum of ADM’s equity (excluding noncontrolling interests) and interest-bearing liabilities adjusted for the after tax effect of the LIFO reserve, and other specified items. Management believes Adjusted ROIC is a useful financial measure because it provides investors information about ADM’s returns excluding the impacts of LIFO inventory reserves and other specified items and increases period-to-period comparability of underlying business performance. Management uses Adjusted ROIC to measure ADM’s performance by comparing Adjusted ROIC to its weighted average cost of capital (WACC). Adjusted ROIC, Adjusted ROIC earnings and Adjusted invested capital are non-GAAP financial measures and are not intended to replace or be alternatives to GAAP financial measures.

Segment operating profit is ADM’s consolidated income from operations before income tax excluding corporate items. Adjusted segment operating profit, a non-GAAP measure, is segment operating profit excluding specified items and timing effects. Timing effects relate to hedge ineffectiveness and mark-to-market hedge timing effects. Management believes that segment operating profit and adjusted segment operating profit are useful measures of ADM’s performance because they provide investors information about ADM’s business unit performance excluding corporate overhead costs as well as specified items and significant timing effects. Segment operating profit and adjusted segment operating profit are not measures of consolidated operating results under U.S. GAAP and should not be considered alternatives to income before income taxes, the most directly comparable GAAP financial measure, or any other measure of consolidated operating results under U.S. GAAP.

View source version on businesswire.com: https://www.businesswire.com/news/home/20181106005192/en/