ADM Quarterly Earnings Reflect Positioning to Acquire GrainCorp


Archer Daniels Midland Co. reported a decline in its quarterly net earnings Tuesday as it continues to prepare for what would be the largest acquisition in company history.

ADM's net earnings for its fiscal year second quarter were $223 million, or 34 cents per share, which was down from $284 million, or 43 cents per share, from the same period one year earlier.

Company executives said during a conference call with financial analysts future results could benefit from a large but late U.S. harvest.

"After two substandard crop years, this recharge is essential for ADM," said Craig Huss, who plans to retire later this year as ADM's chief risk officer. "We plan to take advantage of it."

Chief Operating Officer Juan Luciano expects ADM's third quarter will continue to provide challenges. Its agricultural services sector in particular could benefit after the harvest, which Luciano said at this point is expected to begin in late September or early October.

The agricultural services profit decreased $42 million for the quarter.

"We feel good about large crops everywhere in our business," Luciano said.

The company continued an attempt to improve its balance sheet as it prepares to close a $3.1 billion deal to acquire Australian agribusiness GrainCorp. The deal remains on track to be completed by the end of the year, said Patricia Woertz, ADM chairman, president and CEO.

ADM completed a goal to free $1 billion in cash ahead of schedule and has started the process to reach another $1 billion target, Woertz said. The company plans to achieve $200 million in savings by the end of 2014 through methods such as improved maintenance of facilities, energy cost reductions and technology enhancements, Luciano said.

Having available cash is part of the adjustments being made to the company's balance sheet, said Ray Young, ADM chief financial officer.

Young said the changes aren't a sign of a more conservative fiscal direction for the company.

"We're preparing ourselves for GrainCorp and preparing for favorable harvests," Young said. "We're preparing the balance sheet for those opportunities. We have a balance sheet strong enough to handle the GrainCorp acquisition."

The company's net debt is the lowest since 2007, Young said.

ADM has received approval for the acquisition from six regulatory agencies while Woertz said it awaits a decision from the final groups in three countries, including Australia, China and South Korea, before the deal can be finalized.

"We're on track for what we thought would be the case," Woertz said.

Although ADM has acknowledged attempts to sell its cocoa business, Woertz said the sale is only a possibility being considered as part of an ongoing portfolio review.

"This isn't a business we have to sell," she said.

Cocoa and other results decreased $58 million during the quarter.

Corn processing showed an improvement of $149 million as ethanol results went up amid volatile industry conditions, Luciano said. He said as the ethanol industry continues to evolve with some companies idling plants, ADM would prefer to be a buyer and consolidate the market.