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Fourth quarter glum for ethanol producer Archer Daniels Midland

Tuesday, August 5, 2008 | 4:34 p.m. CDT

ST. LOUIS - Archer Daniels Midland Co. said Tuesday its fourth-quarter profit plunged 61 percent, coming in below expectations, even though revenues soared. The results disappointed analysts who worry ADM's future might only get tougher as grain prices fall from historically high levels.

The Decatur-Ill.-based food processor and ethanol producer said profit for the quarter ended June 30 fell to $372 million, or 58 cents per share.

That's down from $955 million, or $1.47 cents per share, in the year-ago quarter, which included after-tax gains on asset sales of $616 million, or 95 cents per share.

The fourth-quarter 2008 results fell below expectations on Wall Street for a profit of 67 cents per share, according to Thomson Financial. The company's stock dropped to a new 52-week low of $25.40 Tuesday, and closed down $1.53, or 5.6 percent, at $25.87.

The lackluster results bode poorly for ADM and might cause some analysts to rethink their broader belief that agribusiness profits will grow along with an increasing global demand for grains and meat, Citigroup analyst David Driscoll said in a note.

Chief Executive Patricia Woertz said it could be harder for ADM to see the same kind of revenue growth over the next 12 months as commodity prices begin to fall from their record highs hit in June. But she said the company was positioning itself to handle adversity.

Woertz said she was confident ADM's ethanol business will remain strong, and the federal government will keep in place mandates requiring the United States to use 9 billion gallons of alternative fuel annually by 2009.

Political opposition to the mandate has grown as grain prices have risen, and some lawmakers say the mandates should be revised. Woertz said Congress seems unlikely to change its policy.

As a major shipper and seller of grains on the global market, ADM benefited from crop prices that hit all-time highs this year.

Revenue for the fourth quarter rose to $21.78 billion from $12.21 billion last year. Revenue rose 59 percent for the fiscal year, jumping to $69.82 billion from $44.02 billion in 2007.

But net income for the year fell 17 percent to $1.80 billion, or $2.79 a share, down from $2.16 billion, or $3.30 a share the year before

The company said 90 percent of its increased revenue came from higher prices for commodities. The remaining 10 percent of revenue growth came from higher sales volume for ethanol and merchandised oilseeds.

ADM executives said Tuesday the company's 2008 results were down from the year before in part because of major asset sales during 2007 that boosted net income.

The company traded holdings in a Chinese joint venture for shares in Wilmar International Ltd. in a deal worth $440 million, during the fourth quarter of 2007, and sold an investment in Agricore United for $153 million. Other revenue came from smaller equity deals.

 


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