Archer-Daniels-Midland Company (ADM)

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Archer Daniels Midland (ADM)

Q1 2012 Earnings Call

October 30, 2012 9:00 am ET


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, Executive Vice President and Member of Integrated Risk Management Committee

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


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

Vincent Andrews - Morgan Stanley, Research Division

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

Christine McCracken - Cleveland Research Company

Cornell Burnette

Christine Healy - Scotiabank Global Banking and Markets, Research Division



Good morning, and welcome to Archer Daniels Midland Company Conference Call for the Quarter Ended September 30, 2012. [Operator Instructions] As a reminder, this conference call is being recorded. I would now like to introduce your host for today's conference 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 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 Chief Financial Officer, Ray Young, will review financial highlights and corporate results. Our Chief Operating Officer, Juan Luciano, will review our operations and outlook. 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 welcome, everyone, to our first half year first quarter conference call. First, let me start with a word to our friends on the East Coast coping with the effects of the storm. Our thoughts are with you and your families as you manage through this, and we hope you stay safe and are able to recover quickly.

Turning to our results this morning. We reported first quarter net earnings of $182 million or $0.28 per share on a diluted basis. Our adjusted EPS was $0.50 per share. Segment operating profit was $498 million.

Our first quarter segment results were mixed. Oilseeds performance was strong. The ethanol industry experienced sustained negative margins and Agricultural Services managed well through a complicated quarter, challenged by the impacts of the drought.

As we look ahead to 2013, we are bringing online our large Paraguay soy processing plant as South American farmers are responding to market conditions with record plantings. And we're implementing plans to navigate the tight U.S. crop supply.

Longer term, we remain optimistic as we see continued growth in global demand for protein meal and other agricultural products. We continue to execute our strategy, aligning our business to serve rising demand from customers around the world.

During this first quarter, we focused actions that will improve ADM's returns. We made progress on our ongoing portfolio management efforts, including discussions to sell our shares of Gruma and our investment in GrainCorp in Australia. We are restructuring our pension and debt obligations, and we've engaged the organization in a focused effort to drive down working capital. And we are ahead of schedule on our target to achieve $150 million in annual run rate savings from our organizational restructure and other cost actions and plan to have that in place by the end of this current quarter.

I'm proud of our efforts and the results of our work to reduce cost and capital, and these actions and others will improve ADM's returns.

I'll now 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, quarterly segment operating profit was $498 million, down from last year's $721 million. This quarter's operating profit was negatively impacted by $146 million pretax impairment charge we took related to our investments in Gruma and its related affiliates. So excluding it, we earned $644 million in OP.

As Pat indicated, our intent to divest of Gruma is part of our ongoing portfolio management activities. We took the charge based upon a letter of intent we reached in mid-October to sell our interest to a Mexican third party. This agreement is subject to the approvals of the ADM and Gruma boards and to rights of first refusal on the part of the controlling shareholder.

Looking at our effective income tax rate for the quarter. We recorded taxes at about a 37.5% rate. The effective tax rate this quarter included approximately an 8% impact from factors associated with the change in fiscal year end from June 30 to December 31 and the estimate tax impact from the planned Gruma disposal.

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