ADM’s stock price declines due to fewer profits
Chicago ADM’s third-quarter earnings fell due to a weaker-than-expected operating profit in the company’s Ag Services and Oilseeds sector as well as Nutrition, which more than offset a solid quarter in Carbohydrate Solutions. In reaction, the share price of the Chicago-based corporation dropped, hitting a 52-week low of $69.46 on October 24 after closing at $72.40 on October 23. This was a 4.1% decrease.
During a conference call with analysts on October 24, Juan R. Luciano, Chairman, President, and CEO of ADM, stated, “The global market is increasingly dynamic with factors that create both opportunities and challenges for ADM to address.” “Consumer behavior has demonstrated increasing unpredictability in certain areas, with consumers spending more while decreasing in others. Additionally, our team has a track record of successfully navigating the effects of inflationary pressures, geopolitical tensions, and the dynamic supply and demand balances for commodities.
We are concentrated on carefully managing these outside forces at each company while simultaneously accelerating the progress we’ve made so far this year. Looking ahead, we anticipate surpassing our prior 2023 forecasts for the whole organization.
The third quarter ending September 30th saw net results attributable to ADM of $821 million, or $1.52 per share on the common stock. This is a 21% decrease from the same time last year, when net earnings were $1.03 billion, or $1.83 per share. The third-quarter results for fiscal 2023 showed a 1¢-per-share charge for acquisition expenditures and a 10¢-per-share charge for impairments and restructuring. Compared to $1.05 billion, or $1.86 per share, in the same period last year, adjusted earnings came to $880 million, or $1.63 per share.
The Ag Services and Oilseeds segment’s operating profit decreased by 21% to $848 million in the third quarter from $1.08 billion in the corresponding period last year. Crushing earnings dropped 28% to $250 million from $346 million during the quarter, while Ag Services profit slid 23% to $226 million from $292 million.
The business unit once again produced “solid results in an increasingly dynamic environment,” according to chief financial officer Vikram Luthar, even if he acknowledged that Ag Services and Oilseeds’ earnings were below the impressive third quarter of 2022.
He said that low water levels in the US river system, which constrained volume and barge capacity, and the change in export demand to Brazil because of that country’s enormous crop had a negative impact on outcomes in North America. According to him, there was also an insurance payout of $48 million for Hurricane Ida damages in the most recent quarter.
ADM, on the other hand, dominated the crushing subsegment in North America, where the fundamentally greater demand for vegetable oils maintains a good crush margin environment, despite a challenging year-over-year comparison, according to Mr. Luthar.
He declared, “To meet growing demand, we officially opened our new crush facility in Spiritwood, ND.” “We are in the process of commissioning and anticipate operating at full capacity by early November, adding 1.5 million tonnes of crush capacity annually.” We are still working to maximize our flex capacity in EMEA so that we may crush higher-margin soft seeds first, based on market prospects. Compared to the net-positive effects in the same quarter last year, there were significant net-positive mark-to-market timing effects throughout the quarter.
The Carbohydrate Solutions segment’s operating profit climbed by 49% to $460 million in the third quarter from $309 million in the previous year. Profit from starches and sweeteners increased by 21% during the quarter, from $327 million to $395 million. Vantage Corn Processors reported a $65 million profit for the quarter ending in the previous year, as opposed to a $18 million deficit.
Mr. Luthar called the Carbohydrate Solutions third-quarter performance “outstanding,” noting that the company profited from continuous supply chain and manufacturing network improvement at ADM.
He stated, “A strong margin environment across starches, sweeteners, wheat flour, and ethanol coupled with healthy demand drove higher subsegment sales year over year for starches and sweeteners.” “Our team has achieved double-digit growth in our BioSolutions platform year-to-date and won new customers.”
You may also like:
Food security in emerging nations: issues and remedies
Are drinks the secret to increasing cannabis use among consumers?
Managing the lack of labour for mushroom picking
Operating profit for the Nutrition business in the third quarter was $138 million, a 22% decrease from $177 million in 2022. Within the division, profits from animal nutrition dropped to $20 million from $31 million, while profits from human nutrition fell 19% to $118 million from $146 million in the same period last year.
According to Mr. Luthar, “strong results in flavors, health and wellness, and recovery in the base animal nutrition business were more than offset by persistent challenges in fulfilling demand in pet solutions and continued lower demand for plant-based proteins.” “Flavors delivered a 29% growth in operating profit on a constant currency basis, reporting impressive results in a complex operating environment.”
The nine months ending September 30th saw net earnings attributable to ADM of $2.92 billion, or $5.35 per share on the common stock. This represents a 12% decrease from $3.32 billion, or $5.87 per share, during the same period last year. In comparison to the same quarter last year, adjusted earnings were $3.07 billion, or $5.62 per share, as opposed to $3.35 billion, or $5.91 per share. The nine-month revenue drop was 6.2%, from $75.62 billion to $70.96 billion.