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July 30, 2020 | businesswire.com
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ADM Reports Second Quarter Earnings

Net earnings of $469 million

ADM (NYSE: ADM) reported financial results for the quarter ended June 30, 2020.

“This was another strong quarter for ADM. I am proud of our team’s excellent work, as their execution of our strategy continued to deliver results,” said Chairman and CEO Juan Luciano. “Through good and challenging times alike, we have kept a strong and steady focus on transforming and improving our company. Thanks to that work, and thanks to the ADM colleagues who have gone above and beyond to support our customers and the global food supply chain, we are delivering on our purpose by providing high quality nutrition around the world.

“We’re also living up to our ideals,” Luciano continued. “From our ambitious new sustainability goals, to the continued expansion of products and services to meet evolving consumer needs, to the critical efforts we are all making to protect our employees and support our communities during challenging times, our team is making a positive impact.

“As we advance our strategy, we are increasingly seeing growing benefits flow to our bottom line. Our team is exceeding the targets we’ve set for those factors under our control, and as we look at the second half of the year, we’ll continue to advance our key focus areas: optimizing business performance, accelerating Readiness – which has been critical to our resilience and agility this year – and harvesting the benefits of strategic growth investments, especially in our Nutrition segment. We are in a strong position, with great momentum, and we are confident in our ability to continue to deliver strong earnings and returns in 2020 and beyond.”

Second Quarter 2020 Highlights

             

(Amounts in millions except per share amounts)

   

2020

 

 

2019

Earnings per share (as reported)

   

$

0.84

 

 

 

$

0.42

 

Adjusted earnings per share1

   

$

0.85

 

 

 

$

0.60

 

 

   

 

 

 

 

Segment operating profit

   

$

813

 

 

 

$

645

 

Adjusted segment operating profit1

   

$

804

 

 

 

$

682

 

Ag Services and Oilseeds

   

413

 

 

 

362

 

Carbohydrate Solutions

   

195

 

 

 

192

 

Nutrition

   

158

 

 

 

117

 

Other Business

   

38

 

 

 

11

 

 
  • EPS as reported of $0.84 includes a $0.02 per share charge related to asset impairment and restructuring accruals, a $0.02 per share charge related to early debt extinguishment, and a $0.03 per share credit related to the gain on sale of certain assets. Adjusted EPS, which excludes these items, was $0.85.1

1 Non-GAAP financial measures; see pages 5, 10, 11 and 13 for explanations and reconciliations, including after-tax amounts.

Results of Operations

Ag Services & Oilseeds delivered higher results versus the second quarter of 2019.

  • Ag Services results were substantially better year over year. Strong execution in South America helped deliver record quarterly origination and export volumes in a significantly improved margin environment, driven by a weaker Brazilian Real and strong farmer selling. Global trade delivered another strong quarter, as countries looked to secure stable supplies of food amid the pandemic. Lower interior grain margins affected results in North America.
  • Crushing was lower versus the prior-year period. South America delivered significantly higher year-over-year results in an environment of solid domestic meal demand and the weaker Brazilian Real. In EMEAI, crush volumes and margins remained solid. In North America, margins were impacted by COVID-19 effects on customers.
  • Refined Products and Other was higher year over year, driven by improved biodiesel volumes and margins in North and South America as well as strong volumes and margins in refined and packaged oils in South America. Demand was lower for biodiesel in EMEAI, and edible oils in both EMEAI and North America.
  • Wilmar results were lower year over year.

Carbohydrate Solutions results were similar to the year-ago quarter.

  • Starches and Sweeteners was lower year over year. Results were impacted by lower food service demand in North America and mark-to-market losses on corn oil contracts, partially offset by lower net raw material costs and strong risk management results. Wheat milling had another strong quarter, as solid retail demand and footprint optimization initiatives continued to drive results.
  • Vantage Corn Processors results were higher than the second quarter of 2019, driven by favorable risk management results on inventory positions and strong demand for industrial ethanol. While average industry ethanol margins were down versus the prior year, prices and margins improved throughout the quarter as lower production, including two idled ADM dry mills, and some recovery in driving miles led to falling industry stocks.

Nutrition continued to deliver significant year-over-year profit growth.

  • Human Nutrition results were higher versus the prior-year quarter. Flavors continued to deliver solid results, as favorable sales mix and margin expansion in North America was offset by some softness in EMEAI. Strong execution to meet rising customer demand for plant-based proteins and edible beans drove higher results in Specialty Ingredients. Health & Wellness delivered higher performance on strong sales for probiotics, improved volumes and margins in fiber, and additional fermentation income.
  • Animal Nutrition was again higher year over year. Despite impacts from COVID-19 on demand in some regions, continued execution on Neovia synergies, robust demand for pet food and treats, and improvement in amino acids drove better results.

Other Business results were higher, driven by improvements in captive insurance operations.

Other Items of Note

As additional information to help clarify underlying business performance, the table on page 10 includes reported earnings and EPS as well as adjusted earnings and EPS.

Segment operating profit of $813 million for the quarter includes charges related to asset impairment and restructuring activities of $14 million ($0.02 per share) and gains on the sale of certain assets of $23 million ($0.03 per share).

In Corporate results, interest expense decreased due to lower average borrowing costs from liability management actions taken in late 2019. Unallocated corporate costs for the quarter were higher year over year due to higher variable performance-related compensation expense accruals, and transfers of costs from business segments into Corporate due to centralization of certain activities. Other charges declined due to improved foreign hedging results on intercompany funding and improved investment performance. Corporate results also included debt extinguishment expenses of $14 million related to the early retirement of a bond.

The effective tax rate for the quarter was approximately 14 percent, very similar to the 13 percent in the prior year.

Note: Additional Facts and Explanations

Additional facts and explanations about results and industry environment can be found at the end of the ADM Q2 Earnings Presentation at www.adm.com/webcast.

Conference Call Information

ADM will host a webcast on July 30, 2020, at 7:00 a.m. Central Time to discuss financial results and provide a company update. To listen to the webcast, go to www.adm.com/webcast. A replay of the webcast will also be available for an extended period of time at www.adm.com/webcast.

Forward-Looking Statements

Some of our comments and materials in this presentation constitute forward-looking statements that reflect management’s current views and estimates of future economic circumstances, industry conditions, Company performance and financial results. These statements and materials are based on many assumptions and factors that are subject to risk and uncertainties. ADM has provided additional information in its reports on file with the SEC concerning assumptions and factors that could cause actual results to differ materially from those in this presentation, and you should carefully review the assumptions and factors in our SEC reports. To the extent permitted under applicable law, ADM assumes no obligation to update any forward-looking statements as a result of new information or future events.

About ADM

At ADM, we unlock the power of nature to provide access to nutrition worldwide. With industry-advancing innovations, a complete portfolio of ingredients and solutions to meet any taste, and a commitment to sustainability, we give customers an edge in solving the nutritional challenges of today and tomorrow. We’re a global leader in human and animal nutrition and the world’s premier agricultural origination and processing company. Our breadth, depth, insights, facilities and logistical expertise give us unparalleled capabilities to meet needs for food, beverages, health and wellness, and more. From the seed of the idea to the outcome of the solution, we enrich the quality of life the world over. Learn more at www.adm.com.

Financial Tables Follow

Source: Corporate Release

Segment Operating Profit, Adjusted Segment Operating Profit (a non-GAAP financial measure)

and Corporate Results

(unaudited)

           

 

Quarter ended

 

 

Six months ended

 

 

June 30

 

 

June 30

 

(In millions)

2020

2019

Change

 

2020

2019

Change

 

 

 

 

 

 

 

 

Segment Operating Profit

$

813

 

$

645

 

$

168

 

 

$

1,412

 

$

1,256

 

$

156

 

Specified items:

 

 

 

 

 

 

 

(Gains) losses on sales of assets and businesses

(23

)

 

(23

)

 

(23

)

(12

)

(11

)

Impairment, restructuring, and settlement charges

14

 

37

 

(23

)

 

58

 

46

 

12

 

Adjusted Segment Operating Profit

$

804

 

$

682

 

$

122

 

 

$

1,447

 

$

1,290

 

$

157

 

 

 

 

 

 

 

 

 

Ag Services and Oilseeds

$

413

 

$

362

 

$

51

 

 

$

835

 

$

779

 

$

56

 

Ag Services

171

 

90

 

81

 

 

335

 

165

 

170

 

Crushing

113

 

139

 

(26

)

 

183

 

355

 

(172

)

Refined Products and Other

78

 

71

 

7

 

 

159

 

143

 

16

 

Wilmar

51

 

62

 

(11

)

 

158

 

116

 

42

 

 

 

 

 

 

 

 

 

Carbohydrate Solutions

$

195

 

$

192

 

$

3

 

 

$

263

 

$

288

 

$

(25

)

Starches and Sweeteners

177

 

215

 

(38

)

 

276

 

350

 

(74

)

Vantage Corn Processors

18

 

(23

)

41

 

 

(13

)

(62

)

49

 

 

 

 

 

 

 

 

 

Nutrition

$

158

 

$

117

 

$

41

 

 

$

300

 

$

198

 

$

102

 

Human Nutrition

131

 

103

 

28

 

 

244

 

191

 

53

 

Animal Nutrition

27

 

14

 

13

 

 

56

 

7

 

49

 

 

 

 

 

 

 

 

 

Other Business

$

38

 

$

11

 

$

27

 

 

$

49

 

$

25

 

$

24

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Segment Operating Profit

$

813

 

$

645

 

$

168

 

 

$

1,412

 

$

1,256

 

$

156

 

 

 

 

 

 

 

 

 

Corporate Results

$

(261

)

$

(371

)

$

110

 

 

$

(485

)

$

(667

)

$

182

 

 

 

 

 

 

 

 

 

Interest expense - net

(86

)

(101

)

15

 

 

(163

)

(191

)

28

 

Unallocated corporate costs

(194

)

(132

)

(62

)

 

(383

)

(315

)

(68

)

Other charges

35

 

(12

)

47

 

 

(17

)

(18

)

1

 

Specified items:

 

 

 

 

 

 

 

LIFO credit (charge)

 

(25

)

25

 

 

91

 

(26

)

117

 

Early debt repayment expenses

(14

)

 

(14

)

 

(14

)

 

(14

)

Expenses related to acquisitions

 

 

 

 

 

(14

)

14

 

Impairment and restructuring charges

(2

)

(101

)

99

 

 

1

 

(103

)

104

 

Earnings Before Income Taxes

$

552

 

$

274

 

$

278

 

 

$

927

 

$

589

 

$

338

 

 

Segment operating profit is ADM’s consolidated income from operations before income tax excluding corporate items. Adjusted segment operating profit, a non-GAAP financial measure, is segment operating profit excluding specified items. Management believes that segment operating profit and adjusted segment operating profit are useful measures of ADM’s performance because they provide investors information about ADM’s business unit performance excluding corporate overhead costs as well as specified items. Segment operating profit and adjusted segment operating profit are not measures of consolidated operating results under U.S. GAAP and should not be considered alternatives to income before income taxes, the most directly comparable GAAP financial measure, or any other measure of consolidated operating results under U.S. GAAP.

Consolidated Statements of Earnings

(unaudited)

       

 

Quarter ended

 

Six months ended

 

June 30

 

June 30

 

2020

 

2019

 

2020

 

2019

 

(in millions, except per share amounts)

 

 

 

 

 

 

 

 

Revenues

$

16,281

 

 

$

16,297

 

 

$

31,251

 

 

$

31,601

 

Cost of products sold (1)

15,173

 

 

15,325

 

 

29,192

 

 

29,701

 

Gross profit

1,108

 

 

972

 

 

2,059

 

 

1,900

 

Selling, general, and administrative expenses (2)

638

 

 

602

 

 

1,302

 

 

1,261

 

Asset impairment, exit, and restructuring costs (3)

16

 

 

136

 

 

57

 

 

147

 

Equity in (earnings) losses of unconsolidated affiliates

(103

)

 

(90

)

 

(243

)

 

(191

)

Interest income

(15

)

 

(46

)

 

(55

)

 

(95

)

Interest expense

87

 

 

109

 

 

170

 

 

210

 

Other (income) expense - net (4)

(67

)

 

(13

)

 

(99

)

 

(21

)

Earnings before income taxes

552

 

 

274

 

 

927

 

 

589

 

Income tax (benefit) expense (5)

80

 

 

36

 

 

64

 

 

117

 

Net earnings including noncontrolling interests

472

 

 

238

 

 

863

 

 

472

 

 

 

 

 

 

 

 

 

Less: Net earnings (losses) attributable to noncontrolling interests

3

 

 

3

 

 

3

 

 

4

 

Net earnings attributable to ADM

$

469

 

 

$

235

 

 

$

860

 

 

$

468

 

 

 

 

 

 

 

 

 

Diluted earnings per common share

$

0.84

 

 

$

0.42

 

 

$

1.53

 

 

$

0.83

 

 

 

 

 

 

 

 

 

Average diluted shares outstanding

562

 

 

566

 

 

563

 

 

566

 

 

(1) Includes a charge (credit) related to changes in the Company’s LIFO reserves of $(91) million in the current YTD and $25 million and $26 million in the prior quarter and YTD, respectively.

(2) Includes acquisition-related expenses of $14 million in the prior YTD.

(3) Includes charges related to impairment of certain assets and restructuring of $16 million and $57 million in the current quarter and YTD, respectively, and $136 million and $147 million in the prior quarter and YTD, respectively.

(4) Includes gains of $23 million related to the sale of certain assets and early debt repayment expenses of $14 million in the current quarter and YTD and a settlement charge of $2 million in the prior quarter and YTD. Prior YTD also includes gains of $12 million related to the sale of certain assets and a step-up gain on an equity investment.

(5) Includes the tax expense (benefit) impact of the above specified items and tax discrete items totaling $(1) million and $19 million, in the current quarter and YTD, respectively, and the tax benefit impact of the above specified items and certain discrete items totaling $(58) million and $(44) million in the prior quarter and YTD, respectively.

Summary of Financial Condition

(unaudited)

         

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