USA – Archer Daniels Midland Co (ADM), a global grain trader and food processor, reported a 41.3% decline in adjusted profit for the second-quarter ending 30th June 2019 attributed to challenging industry conditions experienced during the period.
The Chicago-based company cited the US- China trade war and severe U.S. weather this spring that disrupted production and transportation to have impacted its performance.
During the period under review, its adjusted net earnings for the quarter fell to US$340 million, or 60 cents per share, from US$579 million, or $1.02 per share, a year earlier while revenue dropped 4.5% to US$16.3 billion.
“We took aggressive action in the face of challenging external conditions, and we are confident that our work over the first half of the year will help deliver a stronger back half,” said Chairman and chief executive Juan Luciano.
“Just as important, our transformative changes are positioning ADM to capitalize on significant market opportunities, and grow earnings and returns in 2020 and beyond.
“We are also seeing early signs of how African Swine Fever might impact global animal protein markets, and eventually support incremental soybean meal demand in key meat-producing regions outside of China,” he said.
ADM had been banking on the dispute to have eased by the second quarter and had based a rebound of the company’s operating performance in the second half on broad grain purchases from China this summer. However, such big purchases have not materialized.
Merchandising and handling results were lower when compared to the extremely strong second quarter of 2018. High water conditions were more severe than originally anticipated at the beginning of the quarter, causing a negative impact of approximately US$40 million.
Despite an overall decline in performance of its starches and sweeteners divisions, North America delivered solid sales and margin but were offset by low sugar prices and high water impacts in other markets.
WILD Flavors North America demonstrated very strong sales and margin growth, but was offset by changes in customer order patterns in EMEAI and lower sales in APAC while specialty Ingredients was lower due to isolated production shortfalls.
However, Health & Wellness continued on its growth trajectory, driven by both contributions from acquisitions as well as organic sales and margin improvements.
Luciano noted that “fast-growing consumer trends such as plant-based proteins are creating long-term growth opportunities for our comprehensive portfolio of food and beverage solutions.”
Going forward, he said that the company remains focused on executing the strategic plan to ensure that ADM is poised to capitalize on these market opportunities and create value for our shareholders.
“We’re seeing the results of our efforts to turn around underperforming businesses. We continue to enhance our efficiency, customer service and competitiveness through Readiness. And we’re harvesting the benefits of Neovia and other growth investments,” he added.
