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ADM sales decline lifted by lower costs

01-Aug-2005

Archer Daniels Midland has reported a fourth-quarter profit, with lower costs offsetting a decline in sales.

The food-processing and agricultural-services giant reported net income of $195 (€160) million, or 30 cents a share, for the three months ended June 30, reversing a net loss of $103 million, or 16 cents a share, in the same period a year ago.

The company claimed that operating profit improvements were realized in all major segments except the corn processing segment. And importantly, ADM also saw a pronounced improvement in cash flow; the $1.5 billion figure was well above the negative result last year.

A major factor here was the $400 million litigation expense that ADM was hit with last year. The expense came from an anti-trust case that claimed the US firm conspired to fix the price of the food sweetener high fructose corn syrup used extensively in food and soft drink products.

However the yearly picture is less rosy; segment operating profit might have increased $83 million to $ 351 million for the quarter, but it declined for the year by $10 million to $ 1.551 billion.

The company's oilseeds processing operation saw the most impressive results. Profits increased $ 89 million to $ 74 million for the quarter and increased $ 54 million to $ 345 million for the year due to improved operating results in Europe, South America and Asia.

In addition, results for the fourth quarter and year include a charge for abandonment and write-down of long-lived assets of $13 million. Last year's results included abandonment losses of $1 million for the quarter and $4 million for the year.

However, corn processing operating profit declined $ 33 million to $ 117 million for the quarter and declined $ 131 million to $ 530 million for the year due principally to lower lysine selling prices and higher energy costs as compared to last year.

Sweeteners and starches operating profit increased $ 30 million to $ 92 million for the quarter due to higher sweetener and starch volumes and lower net corn costs partially offset by increased energy costs. But for the year, sweetener and starch operating profit declined $ 47 million to $ 271 million as higher sweetener and starch selling prices were more than offset by increased energy and net corn costs.

Last year's fourth quarter and fiscal year results also included a $ 15 million gain from an insurance-related lawsuit.

Bioproducts operating profit declined $ 63 million to $ 25 million for the quarter due to lower lysine selling prices and higher energy costs partially offset by lower net corn costs. For the year, Bioproducts operating profit declined $ 84 million to $ 259 million due to lower lysine selling prices and higher average net corn and energy costs. For the year, these declines were partially offset by higher ethanol selling prices.

ADM is among the biggest processors of soybeans, corn, wheat and cocoa and produces soy meal and oil, biodiesel, ethanol, corn sweeteners and flour, with more than 250 processing plants and more than 26,000 employees worldwide.

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