Archer Daniels Profit Rises 7.3% on Grain Trading
Archer Daniels Midland Co., the
worlds largest grain processor, said second-quarter profit rose
7.3 percent because of increased grain trading prompted partly by
reduced crops in Australia, Canada and the European Union.
Net income climbed to $473 million, or 73 cents a share, in
the three months ended Dec. 31, from $441 million, or 67 cents, a
year earlier, Decatur, Illinois-based Archer Daniels said today
in a statement. Sales gained 50 percent to $16.5 billion.
Archer Daniels, led by Chief Executive Officer Patricia
Woertz, is benefiting from a global wheat shortage that is
boosting shipments from the U.S., the worlds largest exporter of
the grain. Profit from storing and marketing grain more than
doubled to $315 million. The performance helped overcome an 18
percent decline in corn-processing earnings amid prices that some
analysts expect to continue rising to records.
“Results were driven by exceptional profitability in the
companys agricultural services division, Citigroup Inc.
analyst David Driscoll said in a report today. “Weak corn-
processing results represent a key concern as corn prices have
not let up and should remain an issue at ADM over the coming
quarters.
Per-share earnings topped the 71-cent average estimate of
six analysts surveyed by Bloomberg.
Archer Daniels fell $1.30, or 2.9 percent, to $44.20 as of
4:15 p.m. in New York Stock Exchange composite trading. The stock
reached an intraday high of $46, 2.8 percent less than a record
of $47.33 on Dec. 31. Before today, the shares had climbed 30
percent in the past three months.
`Booking Profit
Colin Symons, who helps manage $330 million including Archer
Daniels shares as chief investment officer of Symons Capital
Management, said some investors may reduce their holdings of the
company after the recent gains.
“We made a nice profit, Symons said today in an interview
from Pittsburgh. “I wont mind booking some of that profit.
Wheat futures more than doubled in the past year and reached
record prices on exchanges in Chicago, Kansas City and
Minneapolis as importers increased purchases on concern the
worlds growers wouldnt produce enough to meet demand.
Global inventories of wheat are expected to fall to 110.9
million metric tons by the end of the marketing year on May 31,
the lowest since 1978, the U.S. Department of Agriculture said
last month. U.S. stockpiles may fall to 292 million bushels, or
7.95 million tons, by May 31, USDA data show.
`Crop Imbalances
“Heightened demand, coupled with geographic crop
imbalances, drove volumes, prices and volatility in many key
markets, Woertz said in the statement.
Corn-processing profit fell 18 percent to $275 million
because of lower ethanol prices and higher corn costs. The unit
accounted for about 35 percent of the companys profit in its
fiscal 2007, according to Bloomberg data.
The units profit from corn bioproducts, which includes
ethanol refining, fell 30 percent to $128 million. Earnings from
the sale of sweeteners such as high-fructose corn syrup, used in
candy and sodas, fell 3.3 percent to $147 million.
“Current market conditions for corn-processing remain
mixed, John Rice, executive vice president for commercial and
production, said during a conference call with analysts and
investors. “We are looking cautiously ahead as forward cash
prices reflect market concerns about the industrys ability to
absorb new additional capacity scheduled to come into
production.
Archer Daniels ranks second among U.S. ethanol producers,
with annual capacity of 1.07 billion gallons, according to the
Washington-based Renewable Fuels Association. Poet LLC, based in
Sioux Falls, South Dakota, has capacity of 1.21 billion gallons.
Ethanol futures in the quarter averaged 16 percent lower
from a year earlier, while prices for corn, used to make ethanol
in the U.S., were 14 percent higher.
Earnings from crushing oilseeds rose 14 percent to $219
million on strong global demand for soy meal and oil.
