Archer-Daniels-Midland Company (ADM)

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Archer Daniels Midland (ADM)

Q1 2012 Earnings Call

November 01, 2011 9:00 am ET


Dwight Grimestad - Vice President of Investor Relations

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

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

Craig E. Huss - Chief Risk Officer, Senior Vice President and Chairman of Risk Management Committee

Juan R. Luciano - Chief Operating officer, Executive Vice President and Member of Risk Management Committee


David Driscoll - Citigroup Inc, Research Division

Diane Geissler - Credit Agricole Securities (USA) Inc., Research Division

Jeffrey D. Farmer - Jefferies & Company, Inc., Research Division

John E. Roberts - Buckingham Research Group, Inc.

Christina McGlone - Deutsche Bank AG, Research Division

Christine McCracken - Cleveland Research Company

Ryan Oksenhendler - BofA Merrill Lynch, Research Division

William Sawyer - Crédit Suisse AG, Research Division

Vincent Andrews - Morgan Stanley, Research Division



Good morning, and welcome to the Archer Daniels Midland First Quarter 2012 Earnings Call. [Operator Instructions] As a reminder, this conference call is being recorded. I would now like to introduce your host for today's conference call, Mr. Dwight Grimestad, Vice President, Investor Relations for Archer Daniels Midland Company. Mr. Grimestad, you may begin.

Dwight Grimestad

Thank you, Cristy. Good morning, and welcome to ADM's First 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 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.

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 government. 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 Senior Vice President and Chief Financial Officer, Ray Young, will review financial highlights and corporate results; and our Executive Vice President and Chief Operating Officer, Juan Luciano, will review our operations and outlook. Craig Huss, our Senior Vice President and Chief Risk Officer will join Pat, Ray and Juan during the question-and-answer portion of the call. And I will now turn the call over to Pat.

Patricia A. Woertz

Thank you, Dwight, and welcome, everyone to our first quarter conference call. This morning, we reported first quarter net earnings of $460 million or $0.68 per share on a fully diluted basis. Adjusted EPS, which excludes LIFO was $0.58 per share, 13% lower than last year's first quarter. Segment operating profit was $699 million. It was a difficult and challenging market environment this quarter. Margin conditions in our global Oilseed segment were generally weak, and net corn costs were high.

We, however, offset some of these pressures with first, good management of our commodity positions and also by capturing opportunities across our broad and diverse portfolio.

Looking ahead, we see the margin environment modestly improving, and we are optimistic about the long term. During the quarter, we focused on driving shareholder value by optimizing our existing asset base, expanding our core model and by buying back shares. We improved the productivity of our facilities, consolidated operations and continued our safety improvements. We acquired oilseed facilities in Poland and India, and expanded our Agricultural Services operations to support exports, and we returned capital to shareholders through dividends and share buybacks of $347 million. 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. As Pat noted, segment operating profit was $699 million, down $66 million or about 9% from a year ago. Quarterly net earnings were $460 million, up 33% from last year's first quarter.

Looking at our effective income tax rate for the quarter, we recorded taxes at 30%, based on the forecast geographic mix of earnings for fiscal year 2012. This is consistent with our guidance of 28% to 30% for the full year. Earnings per share were $0.68 on a fully diluted basis compared to last year's $0.54. We recorded a LIFO credit of $126 million pretax or approximately $0.11 per share compared to a $0.12 charge in the same period last year. Adjusting for specified items, ADM earned $0.58 per share compared to last year's $0.67 per share.

On Chart 19 in the appendix, you can see the reconciliation of reported earnings to adjusted earnings for the first quarter of fiscal year '12 and first quarter fiscal year '11, and our 4-quarter trailing ROIC of 8.6% exceeded our weighted average cost of capital by 220 basis points. Chart 20 in the appendix provides a historical look at our ROIC performance.

Turning to Slide 6. Slide 6 provides an operating profit summary and the components of our corporate line. One, we'll talk about the business segment results in this update. Let me touch on a few items of significance in the corporate line. I talked about LIFO earlier. Market prices for our LIFO base inventories fell in the quarter result in a credit of $126 million compared to a charge of $123 million last year. Our interest expense is lower due to lower interest rates. Unallocated corporate cost is slightly higher due to the absence of a one-time gain that was in last year's results. Last year's results was also negatively impacted by a loss on interest rate swaps.

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