Archer-Daniels-Midland Company (ADM)

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Archer Daniels Midland (ADM)

Q2 2013 Earnings Call

February 05, 2013 9:00 am ET

Executives

Ruth Ann Wisener - Vice President of Investor Relations

Patricia A. Woertz - Executive Chairman, Chief Executive Officer, President and Chairman of Executive Committee

Ray G. Young - Chief Financial Officer and Senior Vice President

Juan R. Luciano - Chief Operating Officer and Executive Vice President

Craig E. Huss - Chief Risk Officer and Senior Vice President

Analysts

Kenneth B. Zaslow - BMO Capital Markets U.S.

Ann P. Duignan - JP Morgan Chase & Co, Research Division

David Driscoll - Citigroup Inc, Research Division

Farha Aslam - Stephens Inc., Research Division

Gregory A. Van Winkle - Morgan Stanley, Research Division

Christine McCracken - Cleveland Research Company

Robert Moskow - Crédit Suisse AG, Research Division

Tim J. Tiberio - Miller Tabak + Co., LLC, Research Division

Ryan Oksenhendler - BofA Merrill Lynch, Research Division

Ann H. Gurkin - Davenport & Company, LLC, Research Division

Eric J. Larson - CL King & Associates, Inc., Research Division

Presentation

Operator

Good morning, and welcome to Archer Daniels Midland Company Conference Call for the Quarter Ended December 31, 2012. [Operator Instructions] As a reminder, this conference call is being recorded. I would now like to introduce your host for today's call, Ms. Ruth Ann Wisener, Vice President, Investor Relations for Archer Daniels Midland Company. Ms. Wisener, you may begin.

Ruth Ann Wisener

Thank you. Good morning, and welcome to ADM's second quarter earnings conference call. Before we begin, I would like to remind you that we are webcasting this presentation on our website, adm.com. The replay will also be available at that address.

For those following the presentation, please turn to Slide 2, the company's Safe Harbor statement, which says that some of the comments constitute forward-looking statements that reflect management's current views and estimates of future economic circumstances, industry conditions, company performance and financial results. The statements are based on many assumptions and factors, including availability and prices of raw materials, market conditions, operating efficiencies, access to capital and actions of governments. Any changes in such assumptions or factors could produce significantly different results. To the extent permitted under applicable law, the company assumes no obligation to update any forward-looking statements as a result of new information or future events.

Please turn to Slide 3. On today's call, our Chairman and Chief Executive Officer, Pat Woertz, will provide an overview of the quarter. Our Chief Financial Officer, Ray Young, will review financial highlights and corporate results. Our Chief Operating Officer, Juan Luciano, will review our operations. And then, Craig Huss, our Chief Risk Officer, will join Pat, Ray and Juan during the question-and-answer portion of the call.

Please turn to Slide 4. I will now turn the call over to Pat.

Patricia A. Woertz

Thank you, Ruth Ann, and hello, and welcome, everyone, to our second quarter conference call. As you may recall, we moved our fiscal year to align with the calendar. So to accommodate that shift, we had a 6-month fiscal year. The quarter we are reporting today is the second and final quarter of that abbreviated fiscal year.

This morning, we reported second quarter net earnings of $510 million or $0.77 per share on a diluted basis. Our adjusted EPS was $0.60 per share. Segment operating profit was $808 million.

The ADM team managed very well despite challenges from the U.S. drought and from persistent negative margins in the ethanol industry. Our results in Oilseeds and Agricultural Services demonstrated the ability of our people to use our global asset network to prepare for and to manage in a wide range of conditions.

In North America, we fully utilized our oilseeds crushing capacity to meet strong global demand. And we adjusted our transportation and origination network to move goods efficiently despite constrained river traffic and a smaller corn crop. In South America, we leveraged our origination and transportation and export facilities to move their record corn crop to world markets. And in Europe, we made some operational changes, and the market responded to reduced imports.

During our abbreviated fiscal year, we drove meaningful improvements in capital, cost and cash to enhance our future competitiveness. We continued taking action to improve underperforming businesses. As part of our ongoing portfolio management, we sold $570 million of noncore investments. And through a company-wide focus, we unlocked more than $1 billion in working cash. I'm very proud of the work we've done, and I'm confident we will see the results.

Now I'll turn the call over to Ray.

Ray G. Young

Thanks, Pat, and good morning, everyone. Slide 5 provides some financial highlights for the quarter, which I'll run through briefly. Quarterly segment operating profit was $808 million, up from last year's $342 million. This quarter's operating profit was positively impacted by $101 million in gains relating to our investment in GrainCorp and gains on various asset monetizations. Last year's second quarter results were negatively impacted by the $339 million asset impairment charge related to our PHA business. So after adjusting for these factors, our segment operating profit this quarter improved by $26 million from the same period last year.

Looking at our effective income tax rate, our abbreviated fiscal year effective tax rate was 30%, in line with the rate for the same 6-month period last year. We recorded taxes in the first quarter at a rate of 37.5%. So in order to average into the 6-month fiscal rate of 30%, we recorded an effective tax rate of 27% in the second quarter.

Our earnings per share were $0.77 on a fully diluted basis compared to last year's $0.12. Our adjusted earnings were $0.60 per share compared to last year's $0.51 per share. On Chart 17 in the Appendix, you can see the reconciliation of reported earnings to adjusted earnings for the second quarters of fiscal year '12 and a half and fiscal year '12, as well as for the 4 quarters ending December 31, 2012.

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