Following the severe drought in 2012,
Archer Daniels Midland Company
) has been laying greater emphasis on the three C's - Cost, Cash
and Capital to remain on the growth trajectory. Therefore, the
company doubled its cost-cutting target for 2014 to $400
Last year, the company targeted to save $200 million by the end
of 2014 through its cost-cutting initiatives. However, at the
recently held BMO Farm to Market conference in New York, the
company's Chief Operating Officer (CEO), Juan Luciano revealed that
it has successfully achieved this target with over half of the year
To maintain its profitability amid volatility in the global
agriculture-based business, the company has been aggressively
focusing on cost cutting measures since 2012. In 2012 alone, this
leading food processing company saved approximately $150 million by
cutting 1,000 jobs at several of its plants and offices across the
With bolstered confidence, the company set the target of $200
million cost savings by the end of 2014. However, having
successfully met this, the company has targeted to save an
additional $200 million in the remaining period of 2014 through its
cost-cutting measures. Notably, we believe that Archer Daniels is
well positioned to achieve its target.
Luciano further reveals that apart from cost savings, the
company is focusing on several other aspects to enhance shareholder
return. Archer Daniels is strategically undertaking steps to manage
its business portfolio, which will expectedly help in realizing
value from its businesses and investing the same in the best
possible resources to enhance returns.
This is evident from the company's latest move to vend its South
American fertilizer business to The Mosaic Company, which is
expected to increase returns and help maintain an amicable
relationship with cultivators.
Moreover, Archer Daniels has hired advisors to facilitate sale
of the chocolate business and has decided to keep the cocoa press
assets. Archer Daniels has observed that the cocoa press business
is gaining momentum due to improvement in crop supplies and
believes that there is immense growth potential in cocoa press,
which will help it to meet its return objectives.
Further, in an effort to enhance its global origination network
and serve customers better, Archer Daniels bought the remaining 20%
stake of Alfred C. Toepfer International last month, which operates
offices in the Americas, Africa, Asia, Australia and Europe. We
believe this will enhance Archer Daniels' global reach. These
strategic initiatives offer a strong upside potential to the
company in the long run.
Archer Daniels Midland is a major global food processing
company. It processes oilseeds, corn, wheat, cocoa and other
foodstuffs. It is also a giant manufacturer of vegetable oil,
protein meal, corn sweeteners, flour, biodiesel, ethanol and other
value-added food and feed ingredients. Moreover, the company has a
worldwide grain elevator and transportation network for
procurement, storage, cleansing and transportation of agricultural
Other Stocks Worth Considering
Archer Daniels currently carries a Zacks Rank #3 (Hold).
However, some other better-ranked stocks that are worth a look in
the agricultural products industry include
Fresh Del Monte Produce Inc.
) which carries a Zacks Rank #1 (Strong Buy) along with
) both carrying Zacks Rank #2 (Buy).
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