ADM reported record first-quarter profit, but its shares fell as it forecast full-year earnings below some analyst estimates and investors focused on thinner oilseed crush margins, reports Reuters.
A record-large Brazilian soybean crop and strong exports lifted earnings in the grain merchant's Ag Services and Oilseeds segment, its largest by revenue and volumes, more than offsetting weaker results in its ethanol and nutrition businesses.
“ADM’s integrated value chain has helped each of our business segments to deliver strong earnings in the quarter," said Juan Luciano, chairman and CEO. "Our foundational businesses in Ag Services & Oilseeds and Carbohydrate Solutions both continue to manage market volatility and deliver strong margins across the value chain.
"We continue to see healthy pipeline growth and win rates in Human Nutrition that support our confidence in the earnings growth in the Nutrition segment, even as we navigate temporary challenges, particularly in parts of Animal Nutrition," Luciano added. "With a strong balance sheet and healthy cash flows, ADM is poised to continue investing in profitable growth, and we are excited about our strategic plan for 2023 and beyond.”
Quarterly results of operations
Ag Services & Oilseeds results were significantly higher than the first quarter of 2022.
- Ag Services results were much higher than the first quarter of 2022. In South American origination, excellent risk management and higher export demand due to the record Brazilian soybean crop drove significantly higher year-over-year results. Results for North America origination were also higher, driven by stronger soybean exports. In global trade, solid margins and efficient execution led to strong results.
- Crushing results were in line with the first quarter last year. In North America, the team executed well, capitalizing on historically strong soybean and softseed crush margins that were supported by robust demand for renewable fuels. In EMEA, crush margins were lower year-over-year as trade flows adjusted from the dislocations caused last year by the war in Ukraine. Additionally, there were approximately $240 million of positive timing effects in the quarter, including positive impacts from declining crush margins at the end of the period.
- Refined products and other results were substantially higher than the prior-year period. North America biodiesel results were higher with record volumes and strong margins, supported by favorable blend economics and tight diesel stocks. In EMEA, domestic demand for food oil and export demand for biodiesel drove strong margins.
- Equity earnings from Wilmar were lower versus the first quarter of 2022.
Carbohydrate Solutions delivered solid results in Q1, though lower than the very strong first quarter of the prior year.
- Starches and sweeteners subsegment capitalized on solid demand in the quarter. North America starches and sweeteners delivered strong volumes and margins. Ethanol margins, pressured by high industry stock levels, were down relative to the same quarter last year. In EMEA, the team effectively managed margins in a dynamic operating environment to deliver improved results. The global wheat milling business posted much higher margins driven by robust customer demand.
- Vantage Corn Processors results were significantly lower due to weaker ethanol margins.
Nutrition results were significantly lower year-over-year versus the record prior-year quarter.
- Human nutrition results were in line with the first quarter of 2022, as the business continued to manage demand fulfillment challenges and destocking in certain categories. Flavors results were slightly lower than the prior year as strong results in EMEA were offset by lower results in North America. Specialty Ingredients results were higher year-over-year driven by healthy margins. Health & Wellness results were lower year-over-year.
- Animal nutrition results were significantly lower compared to the same quarter last year, primarily due to much lower margins in amino acids.
Other business results were significantly higher than the prior-year quarter due to improved ADM Investor Services earnings on higher interest income. Captive insurance results were in line with the prior year.
