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) |
|||||||||||
