AgriCensus Report

ADM Q4 profits slump despite surging crush margins

Agribusiness major Archer Daniels Midland posted a 60% slump in profits in the fourth quarter of last year, falling from earnings per share of 139 cents in Q4 2017 to just 55 cents in Q4 2018.

ADM reported earnings per share of 88 cents on revenue of $15.95 billion for the fourth quarter last year, falling short of analyst estimates of 92 cents and $16.8 billion.

The results came despite soaring profits in its oilseeds and origination business, which more than doubled to $432 million from $201 million in the fourth quarter last year as the company cashed in on low soybean prices in the US and high global soymeal prices.

Lower revenues from the company’s origination business, which includes grain trading and handling, hit profits after China slapped a tax on US soybeans, seeing a collapse in trading volumes in the US.

“Looking forward, the crush environment in 2019 will not be as spectacular as 2018. Given global demand and the strength we have outside China this business will maintain crush margins well above average over the last five years,” Juan Luciano, ADM CEO, told investors Tuesday.

Operating profit in the company’s carbohydrate solutions business, which includes its biofuels production, fell 31% due to poor ethanol margins amid record US supply.

ADM has been investing downstream in the feed chain in an attempt to gain a foothold in higher margin businesses.

In terms of soybean crush margins, ADM said it had locked in gross margins of $30-35/mt at its crushing facilities in the US with high utilisation rates. Meanwhile, in canola, margins were in the region of $42-45/mt.

In terms of rapeseed crush in Europe, the company said meal replacement from China as well as good demand in Europe had kept meal prices high, leaving margins at around $35/mt.

Finally, in Brazil it said its crush facilities at ports had locked in margins of $10-15/mt and $25-30/mt gross margins at “facilities that are geared towards the domestic market”.

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