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ADM earnings climb 60% on strong crush margins

Robust soy crushing margins, hefty global demand for crops propels ADM to a record fourth-quarter profit.

2 Lisa Selfie December 2020 Headshot
Courtesy of ADM
Courtesy of ADM

ADM has reported financial results for the quarter ended December 31, 2022.

Reuters reports robust soy crushing margins and hefty global demand for crops had propelled ADM to a record fourth-quarter profit and would keep driving strong results in 2023.

ADM delivered another very strong quarter to complete an outstanding year, and the strategic work we have done throughout 2022 has positioned us well for 2023 and beyond,” said Chairman and CEO Juan Luciano.

Earnings by segment

ADM reported a 46% operating profit jump in its core Ag Services and Oilseeds unit in the quarter ended December 31, more than offsetting lower earnings from ethanol operations and in its high-margin Nutrition segment.

For the full year, ADM delivered adjusted EPS of $7.85, adjusted segment operating profit of $6.6 billion, and trailing four-quarter average adjusted ROIC of 13.6%., said Luciano.

"We generated cash from operations before working capital of $5.3 billion, giving us the opportunity to continue to invest in ADM while returning $2.3 billion to our shareholders in the form of dividends and share repurchases," he said. "From Nutrition revenue growth that continues to outpace the industry; to Carbohydrates Solutions results that include 26% year-over-year revenue growth in BioSolutions; to an agile, global AS&O business that supported the global food system in the midst of challenging external forces, Team ADM delivered again in 2022."

Ag Services & Oilseeds delivered substantially higher year-over-year results.

  • Ag Services results were higher than the fourth quarter of 2021. Low water conditions reduced North American export volumes, partially offset by the South American team, which executed well to deliver higher margins and volumes. Global Trade results were lower than the strong fourth quarter of 2021, with lower ocean freight results partially offset by higher results in EMEA origination and destination marketing. The business benefited from a $110 million legal recovery related to the 2019 and 2020 closure of the Reserve, Louisiana, export facility.
  • Crushing results were more than double those of the prior-year period. In North America, strong export volumes for soybean meal and growing domestic demand for renewable diesel contributed to strong margins. In EMEA, oil demand powered strong rapeseed margins, more than offsetting higher energy costs compared to the prior year. Expanding margins drove negative timing impacts in the quarter of approximately $40 million.
  • RPO results were significantly higher year over year, as the business continued to execute well to meet demand for food oil, renewable diesel in the U.S. and biodiesel globally.
  • Equity earnings from Wilmar were much higher versus the fourth quarter of 2021.

Carbohydrate Solutions results were substantially lower year over year.

  • The Starches and Sweeteners subsegment, which includes ethanol production from our wet mills, delivered much higher year-over-year results. The North America business delivered solid volumes and strong margins in both starches and sweeteners, partially offsetting lower ethanol margins. The EMEA team effectively managed risk and delivered improved results on better margins in a continued dynamic environment. The global wheat milling business delivered higher margins driven by solid customer demand.
  • Vantage Corn Processors results were substantially lower, as higher ethanol inventory levels pressured margins, especially compared to the very strong margin environment in the fourth quarter of 2021.

Nutrition delivered revenue growth of 7% for the quarter, and 11%1 on a constant currency basis. Q4 operating profits were significantly lower than the prior-year quarter’s.

  • Human Nutrition results were lower than those of the fourth quarter of 2021. Flavors results were similar to the prior year, as strong revenue growth helped offset demand fulfillment challenges. Specialty Ingredients continued to see strong demand for its product portfolio, including plant-based proteins, offset by inventory adjustments. Health & Wellness was higher year over year, driven primarily by the bioactives portfolio, including the results from the Deerland acquisition.
  • Animal Nutrition results were substantially lower than the prior-year quarter, primarily due to lower margins in amino acids driven by recovery in the global supply of lysine; pet nutrition volumes were lower in Latin America, partially driven by demand fulfillment challenges. Feed results were stronger, driven by APAC and Latin America, partially offset by the impact of softer demand in EMEA.

Looking ahead

“As we look ahead, we are strengthening our focus on controllable actions to mitigate the impact of market forces, and we will continue to improve our global capabilities to serve our customers," said Luciano.

"We are also increasing our investments in the decarbonization of some of our large production facilities to enable the evolution of our Carbohydrate Solutions segment, and investing in our future by empowering new food technology platforms to address evolving consumer preferences and longer-term food security needs.

"We remain committed to balanced capital allocation, which includes returning cash to shareholders," he continued. "We are pleased to announce today that we’re raising our quarterly dividend by 12.5%, to $0.45 per share, representing our 50th consecutive year of dividend increases.”

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