ADM reported its financial results for the quarter ended September 30, 2023.
According to Reuters, ADM shares fell 3.5% to $69.85, bucking broader stock market gains, as a weaker-than-expected profit in ADM's large Ag Services and Oilseeds segment and its high-margin Nutrition unit overshadowed a strong quarter in Carbohydrate Solutions, which includes ethanol and sweeteners.
ADM raised its full-year earnings guidance to "in excess of $7 a share" from "around $7" after a strong year to date and a favorable market outlook, noted Reuters. ADM also forecast a return to profit growth for Nutrition in 2024, but lowered 2023 profit guidance for the unit.
“ADM again delivered a strong quarter in increasingly dynamic market conditions as we continued to adjust our business model to meet the evolving needs of our customers," said ADM CEO Juan Luciano said in a statement. "Through targeted investments in innovation and a focus on efficiencies that align to our customers’ goals, we are strengthening critical partnerships and expanding our new profit opportunities to deliver additional shareholder value."
The company has capitalized on good demand for food, feed and biofuel, while record-large Brazilian corn and soybean harvests offset reduced supplies from drought-hit Argentina and war-torn Ukraine.
ADM's new North Dakota soy processing plant in Spiritwood will ramp up to full capacity by early November, and the company is set to benefit from strong U.S. soymeal demand, while top exporter Argentina is likely to run out of beans to crush next month, Luciano said.
“Ag Services & Oilseeds delivered another solid quarter, leveraging the strength of our Brazilian export capabilities, extending regenerative agriculture partnerships, and commissioning our Spiritwood production facility to serve growing demand for renewable green diesel," said Luciano.
"Carbohydrate Solutions segment drove strong results through excellent execution in favorable ethanol, starches and sweeteners margin environments, while extending customer wins in BioSolutions and formally advancing the Broadwing Energy project for lower carbon intensity power generation in Decatur," said Luciana.
"Within Nutrition, the outstanding growth of Flavors continues to outpace the market, and Health and Wellness is developing the next generation of evidence-based solutions, while we address pockets of softness in other areas of the portfolio," he continued. "With strong performance to date in 2023 and a constructive expectation for the remainder of the year, we are again raising our full-year earnings outlook.”
Ag Services & Oilseeds results were lower than the third quarter of 2022.
- Ag Services results were lower than the strong third quarter of 2022. South American origination results were higher year-over-year, as the team delivered significantly higher volumes and margins on strong export demand. Results for North American origination were lower year-over-year, driven by the shift of exports to South America. Effective risk management and higher volumes and margins in Global Trade led to strong results, however, lower year-over-year. The current quarter also included a $48 million insurance settlement related to damages from Hurricane Ida.
- Crushing results were much lower than the prior-year’s record third quarter. Global soy crush margins remained robust, but lower than the very strong levels of a year ago. In EMEA, we continued to optimize our flex capacity to higher margin softseeds, in line with market opportunities. In the quarter, there were large net positive mark-to-market timing effects, which were lower than the net positive impacts in the prior year quarter.
- Refined Products and Other results were higher than the prior-year period. EMEA results were higher year-over-year as strong export demand for biodiesel and domestic demand for food oil supported higher margins. In the quarter, there were large net positive mark-to-market timing effects which are expected to reverse as contracts execute in future periods.
- Equity earnings from Wilmar were significantly lower versus the third quarter of 2022.
Carbohydrate Solutions delivered an outstanding third quarter, significantly higher than last year.
- The Starches and Sweeteners subsegment results, including ethanol production from our wet mills, were higher year-over-year on a healthy demand environment during the quarter. North American starches and sweeteners delivered higher margins on similar volumes versus the prior year and capitalized on a strong ethanol backdrop. The global wheat milling business posted higher margins on similar volumes, supported by steady customer demand.
- Vantage Corn Processors results were significantly higher year-over-year on robust demand and margins for ethanol.
Nutrition results were significantly lower year-over-year.
- Human Nutrition results were much lower than the third quarter of 2022. Flavors results were substantially higher than the prior year, driven by pricing actions in EMEA and strong win rates in North America. Specialty Ingredients results were much lower year-over-year due to continued lower market demand for plant-based proteins in meat alternatives, inventory adjustments, and unplanned down time resulting from the recent Decatur incident. In Health & Wellness, a favorable impact related to the revised commercial agreement with Spiber, as well as stronger probiotics sales, led to higher results versus the prior year.
- Animal Nutrition results were lower compared to the same quarter last year due to lower contributions from amino acids and persistent demand fulfillment challenges in Pet Solutions, partially offset by cost optimization actions and improving volumes.
