Reuters: Global Markets: ADM earnings beat estimates; shares rise

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ADM earnings beat estimates; shares rise May 1st 2012, 16:54 By Tom Polansek CHICAGO | Tue May 1, 2012 12:54pm EDT CHICAGO (Reuters) - Archer Daniels Midland Co's (ADM.N) fiscal third-quarter earnings topped analysts' expectations, pushing up share prices as the giant agribusiness company touted the outlook for large U.S. crop plantings. Ingredients company Corn Products International's (CPO.N) earnings also beat expectations. The company said it implemented price increases to help cover high raw material costs. Corn prices have stayed strong this year due to solid global demand and expectations for supplies to remain tight in the United States until the autumn harvest. Farmers are expected to plant the biggest corn crop in 75 years to take advantage of the high prices, which bodes well for grain processors and traders such as ADM because they have more products following the harvest. ADM's shares climbed 6.6 percent, or $2.05, to $32.88 at midday. Corn Products International's shares rose 0.9 percent, or 49 cents, to $57.55. "Planting is under way in North America, and we're encouraged by the projected corn and soybean acreage," ADM Chief Executive Patricia Woertz said. Decatur, Illinois-based ADM, one of the world's largest grain traders and processors, is one of four large players that dominate business in agricultural markets. The others are Bunge Ltd (BG.N), Cargill Inc CARG.UL and Louis Dreyfus. TIGHT CROP SUPPLY Grains companies are paying close attention to planting as U.S. corn supplies are projected to stay at their lowest level since the mid 1990s until the next harvest. Inventories were drained by demand and hot, dry weather that hurt last year's harvest. ADM said low U.S. crop inventories caused its North American grain export volumes to fall in the quarter that ended March 31. Yet, merchandising operations in the Black Sea region and other international areas saw "good volumes and margins," helping lift profits in ADM's agricultural services segment 4.7 percent from a year earlier to $179 million, according to the company. "Global supplies of corn and soybeans should tighten up until the North American harvest," ADM said. The increase in U.S. corn plantings could hurt oilseed processing as farmers are expected to reduce plantings of soybeans, constricting soy inventories. Supply concerns have pushed soybean futures to their highest price in nearly four years. South America's soybean harvest has suffered due to a drought, increasing demand for U.S. soybeans. "It's going to be difficult to buy beans going forward," Craig Huss, ADM's chief risk officer, said on a conference call with analysts. Oilseed processing profit fell 23 percent to $395 million due to poor margins in Europe, ADM said, noting margins improved in North and South America. WEAK ETHANOL MARGINS Ethanol was another dark spot for ADM, as margins were weak due to large supplies. Profits for its corn processing unit, which includes ethanol, dropped 36 percent from a year earlier to $130 million. "Depressed U.S. ethanol margins have slowed industry production, improving alignment of supply and demand," ADM said. Overall, ADM's fiscal third-quarter earnings fell to $399 million, or 60 cents a share, down 31 percent from $578 million, or 86 cents a share, a year earlier. Excluding restructuring costs and other adjustments, profit was 78 cents per share. That beat analysts' average forecast of 59 cents a share, according to Thomson Reuters I/B/E/S. ADM has been trying to cut costs to stay competitive with its rivals, with the sector feeling broad pressure from volatile global markets and poor margins for soy crushing. In January, the company announced its first ever global workforce reduction, eliminating about 1,000 jobs, or 3 percent of its employees. Job cuts have been "substantially completed" and will save ADM $150 million annually, more than expected, Woertz said on the conference call. Cargill, which also cut staff recently, this month reported a rebound in earnings after its worst quarter in a decade, led by record profits in its global food ingredient businesses and stronger results in energy trading. However, rival Bunge saw first-quarter income sink a greater-than-expected 60 percent from a year earlier due to falling fertilizer prices. CORN PRODUCTS Corn Products International, facing high raw materials costs for grain, said it implemented "appropriate price increases." Net profit for the Westchester, Illinois-based company was $94.2 million, or $1.21 per share, compared with $153.6 million, or $1.97 per share, a year ago. <Id:nL4E8G15AK> Excluding special items, the company earned $1.26 per share. Analysts, on an average, expected the company to earn $1.22 per share, on revenue of $1.59 billion, according to Thomson Reuters I/B/E/S. (Reporting By Tom Polansek; editing by John Wallace and Maureen Bavdek) Link this Share this Digg this Email Reprints

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