Archer Daniels Midland Co. said on Friday it was considering spinning off its ethanol business after slim biofuel margins and Midwestern floods slammed the U.S. grains merchant’s profit, which tumbled 41% in the first quarter, reports Reuters.
Despite bullish signals for U.S. ethanol demand, Chief Financial Officer Ray Young told analysts “a case for consolidation” remains in the sector, which is in a historic downswing due to the U.S.-China trade war, excess domestic supply and weak margins.
ADM is creating an independent ethanol subsidiary which would allow options such as a potential spin-off of the business to existing ADM shareholders, the company said. The unit will include dry mills in Columbus, NE; Cedar Rapids, IA; and Peoria, IL.
