CPO Ingredion, Inc.

Leading food processing company Archer Daniels Midland Company (ADM) reported disappointing second-quarter 2012 results in terms of earnings per share, significantly missing the Zacks Consensus Estimate.

Archer Daniels’ adjusted earnings per share of 51 cents in the quarter was below the Zacks Consensus Estimate of 77 cents and fell short of the year-ago earnings of $1.20 per share. Earnings in the quarter declined primarily due to ongoing weakness in global oilseeds margins, lower results in corn and poor international merchandising results.

On a reported basis, including a LIFO charge of 6 cents per share and asset impairment costs of 33 cents per share, quarterly earnings were down approximately 89% to 12 cents per share from the prior-period earnings of $1.14 per share.

Quarterly Details

Archer Daniels' quarterly net sales surged 11.4% year over year to $23,306 million, marginally beating the Zacks Consensus Estimate of $23,077 million. The growth in net sales was mainly attributable to a 28.5% rise in Oilseeds Processing revenues to $7,513 million and 29.0% increase in Corn Processing revenues to $3,158 million, offset by a 1.2% decline in Agricultural Services to $11,304 million.

Total segment operating profit, excluding the impact of the PHA-related charges of $339 million, declined 52% to $648 million. On a GAAP basis, segment operating profit was $309 million compared with $1,362 million in the year-ago quarter.

GAAP operating profit for Agricultural Services segment declined $268 million to $158.0 million due to poor international merchandising results and lower U.S. export volumes.

Archer Daniels' Corn Processing segment's operating profit (GAAP) reflected a drastic fall of $532 million, reporting an operating loss of $133 million. The segment’s operating profit included $339 million in asset impairment charges related to the PHA renewable plastic production facility. The loss was also attributed to high corn costs in the quarter, partly due to economic hedge benefits recognized last year.

Archer Daniels' Oilseeds Processing segment recorded a quarterly operating profit (GAAP) of $253 million compared with an operating profit of $325 million in the year-ago period. The $72 million decline was primarily due to the continued global weakness in oilseeds processing margins.

Operating profit from the other business segment came in at $31 million, down $181 million from last year.

Archer Daniels, which competes with Bunge Limited (BG) and Corn Products International Inc. (CPO), currently has a Zacks #3 Rank, implying a short-term Hold rating on the stock. The company retains a long-term Underperform recommendation.

 
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