Archer-Daniels-Midland Company (ADM)

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Archer Daniels Midland Company (ADM)

F2Q10 (Qtr End 12/31/09) Earnings Call Transcript

February 2, 2010 9:30 am ET


Dwight Grimestad – VP, IR

Pat Woertz – Chairman, President and CEO

Steve Mills – EVP and CFO

John Rice – EVP, Commercial and Production


Robert Moskow – Credit Suisse

Vincent Andrews – Morgan Stanley

John Roberts – Buckingham Research

David Driscoll – Citi Investment Research

Christine McCracken – Cleveland Research

Christina McGlone – Deutsche Bank

Ken Zaslow – BMO Capital Markets

Ann Gurkin – Davenport & Company

Diane Geissler – CSLA

Ian Horowitz – Rafferty Capital Markets

Alec Patterson – RCM



Good day ladies and gentlemen and welcome to the second quarter 2010 Archer Daniels Midland Company earnings conference call. My name is Josh, and I will be your coordinator for today. (Operator instructions) I would now like to turn the presentation over to our host for today’s call, the Vice President of Investor Relations, Dwight Grimestad. You may proceed.

Dwight Grimestad

Thank you, Josh. 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 The replay will also be available at that address.

For those following the presentation, please turn to slide two for 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.

Statements are based on many assumptions and factors, including availability and prices of raw materials, markets 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.

Slide three lists the matters we will discuss in our conference call today. And I will now turn the call over to our Chairman and Chief Executive Officer, Pat Woertz.

Pat Woertz

Thank you, Dwight, and turning to slide four, good morning everyone. I will begin with safety first. Through our second quarter, we reduced lost workday injury rate by 32%, and our total recordable incident rate by more than 9% compared to the full- fiscal year 2009, thanks to the ADM employees and contractors for their continued attention to safety.

Turning to our financial results, this morning we reported quarterly net earnings of 567 million or $0.88 per share. I am very pleased with the performance of our people and with our results this quarter. While our earnings in total were comparable to last year's strong second quarter, the market conditions and the mix of earnings were markedly different. This once again, I believe, demonstrates the ability of ADM’s team to utilize the geographic scope and diversity of our asset base to create value for our stockholders.

Steve will talk about our segment results in a moment, but first an update on our profitable growth strategy. We have brought online this quarter our Columbus, Nebraska, ethanol dry mill adding 300 million gallons of annual capacity. Our Clinton, Iowa, cogeneration plant, our Brazilian JV sugarcane ethanol plant, our first production line at Hazleton, Pennsylvania, the Cocoa processing plant.

Also we have increased ethanol production capacity at our Decatur, Illinois corn wet mill, and we brought online incremental processing capacity at several of our North American oilseed processing plants. We have integrated our recently acquired soft seed processing plant at Olomouc in the Czech Republic. We have started up the boilers at Columbus cogeneration plant. We are in startup at the bioplastics plant in Clinton, Iowa, and we are on track to start up our propylene glycol, ethylene glycol plant in Decatur later this quarter. And lastly our Cedar Rapids dry mill is scheduled to come online this summer, rather than in the fall.

So, looking at current operating conditions, we are seeing demand improving in some of our key markets we serve. We also see the US ethanol market reasonably balanced, and in South America growers are harvesting what appears to be a bountiful crop. So, we will discuss more of these topics during our operating results discussion.

So, I will now turn the call over to Steve, who will look at our segment results.

Steve Mills

Thanks Pat and good morning everyone. Turning to slide five, slide five reflects our financial highlights for this quarter. Segment operating profit was 970 million for the quarter, up 155 million or 19% from the 815 million from a year ago’s quarter. And in a moment I will discuss those segment results in a little bit more detail.

Quarterly net earnings and earnings per share both decreased 2%, and our tax rate has been reasonably steady. As you can see from the waterfall chart for the quarter on the lower left of the slide, we did not have any notable items this quarter other than LIFO, which had a 34 million or $0.05 a share after tax negative impact on earnings and EPS. Last year's quarter included $0.12 a share of LIFO income.

Turn page to slide six, where we show the quarter and year-to-date summary of our operating profit by segment, where you can see our results in a bit more detail.

We’ll turn to slide seven to begin a review of each individual segment, starting with Oilseeds Processing. The oilseeds operating profits this quarter were 352 million another good performance from this business unit.

Crushing and origination results increased 6 million to 193 million for the quarter due to stronger crush margins in North America and the absence of last year's South American fertilizer write-downs. These results were partially offset by weaker year-over-year European results.

Our crushing volumes were higher in the quarter as our recently completed plant expansions positioned us well to meet the increased demand for North American export meal and oil as the industry adjusted for the lack of soybean supply in South America.

Refining, packaging, biodiesel and other results decreased 10 million in the quarter to $76 million. Improved South American margins and volumes were more than offset by weaker European biodiesel earnings and lower North American results. And oilseed results in Asia rose 37 million to 83 million for the quarter. The results of our equity investee, Wilmar International Limited, continued to be strong.

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