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ADM Profit Surges 74% as Grain Supplies Stay Tight

Company expects strong profits with strong global demand for the rest of 2022

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

Tight global grain supplies are expected to keep profits at ADM strong for the rest of the year, ADM's CEO said on Tuesday, with shipments from Ukraine likely to restart slowly.

Shares climbed 5% to their highest in more than a month after the company reported a 74% rise in second-quarter earnings.

Second quarter adjusted earnings per share of $2.15 reflect the team’s strong execution, delivering nutrition to billions of people around the globe, said Chairman and CEO Juan Luciano.

“In addition, our productivity initiatives are improving our capabilities and mitigating the impact of inflation, while our innovation projects are powering profitable growth, as we leverage our unique portfolio and globally integrated network to meet demand driven by the three enduring global trends of food security, health and well-being and sustainability," he said.

Ukraine war impact on global supplies

Last week, Russia and Ukraine signed a U.N.-backed deal reopen Ukrainian Black Sea ports for grain exports. Luciano cautioned during a conference call, however, that it will take time for large volumes to leave the country.

Luciano said he hopes to see Ukrainian exports of 20 million to 30 millions tonnes of grain trapped in the country grow over the next two to three months.

Second half of

Looking forward, Luciano said the company expects the combination of its strategic actions and continued good demand for products to propel very strong earnings in the second half of 2022, with strong cash flows enabling the company to accelerate approximately $1 billion in share repurchases into the back half of the year.

"Beyond that, we will continue to execute the growth plan we laid out at our Global Investor Day, while maintaining our focus on balanced capital allocation and optimizing ROIC," he said.

Second quarter highlights

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

  • Ag Services results more than doubled versus the year-ago quarter. Global Trade had an outstanding quarter: The destination marketing team’s ability to meet customer demand around the globe helped drive strong volumes and margins, and good execution in global freight, as well as net timing gains of about $65 million for the quarter, contributed to significantly higher year-over-year profits.
    North America had a solid performance as export volumes remained strong in a good global demand environment, though year-over-year results were lower due to the prior-year’s insurance settlement and strong positioning gains. South America results were higher, based on stronger origination volumes and better margins driven by strong global grain demand.
  • Crushing delivered substantially higher results. Strong soy crush margins drove improved performance in all three regions, as meal and oil demand remained robust. Positive net timing effects of approximately $90 million for the quarter, versus the $70 million of negative timing in the year-ago period, helped drive higher year-over-year results.
  • Refined Products and Other results were similar to the prior-year period, as strong demand for biofuels and food oils drove refining premiums and biodiesel margins, offset by approximately $150 million of negative timing effects versus negative $30 million in the prior-year quarter.
  • Equity earnings from Wilmar were significantly higher versus the second quarter of 2021.

Nutrition delivered 16% revenue growth — 20%1 on a constant currency basis — and 19% higher year-over-year operating profit.

  • Human Nutrition delivered higher year-over-year results as demand across its diverse product portfolio remained robust. Flavors grew revenue in North America, EMEA and South America, though profits were lower due to negative currency effects in EMEA as well as weaker results in APAC.
    Healthy demand for alternative proteins resulted in strong soy protein volumes and margins, as contributions from the Sojaprotein acquisition, as well as good demand for texturants, drove higher results in Specialty Ingredients.
    Strength across probiotics, including in the recently acquired Deerland business, as well as robust demand for fibers, contributed to a stronger quarter in Health and Wellness.
  • Animal Nutrition profits were up substantially year over year, driven by continued strong volumes and margins in amino acids.

Carbohydrate Solutions results were substantially higher versus the prior-year period.

  • The Starches and Sweeteners subsegment, including ethanol production from our wet mills, delivered much better results due to solid demand as food service volumes reached close to pre-pandemic levels. Corn co-products, including strong demand for corn oil, and effective risk management drove higher ethanol and sweetener margins.
  • Vantage Corn Processors results were slightly higher in an environment of good gasoline demand and strong ethanol blending economics. A $50 million recovery from the USDA Biofuel Producer Recovery Program helped offset the prior year’s strong industrial alcohol results from the now-sold Peoria facility as well as valuation losses on ethanol inventory as prices fell late in the quarter.
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