Archer Daniels Midland (ADM) has said that “severe weather in North America” was one of the main factors behind a 40% dip in net earnings in its first-quarter results.
The company posted revenue of $15.3 billion – down 1.4% on the same period last year – while net earnings fell from $393 million in the opening three months of 2018 to $233 million in the first three months of 2019.
ADM boss Juan Luciano said that unfavourable weather in North America, coupled with the environment in the ethanol industry, were the cause of the weaker figures.
“The first quarter proved more challenging than initially expected,” Luciano said. “Impacts from severe weather in North America were on the high side of our initial estimates, and the ethanol industry environment limited margins and opportunities.
“Despite a challenging start to the year, we continue to make excellent progress on our key imperatives for 2019: improving performance in certain businesses, accelerating our readiness efforts, and delivering results from our growth investments. We are very encouraged with our new Neovia business and the creation of a global Animal Nutrition platform. Readiness continues to expand our efforts to enhance our competitiveness. And additional actions we are announcing today will help us advance our goals to deliver best-in-class customer service along with long-term growth and shareholder value.”
The company has announced several new measures “to underpin long-term-value creation”: it plans to repurpose its corn wet mill in Marshall, Minnesota to produce higher volumes of food and industrial-grade starches, as well as liquid feedstocks, for food and industrial uses. The company will phase out production of high-fructose corn syrup at the facility as soon as committed deliveries are complete.
It will also establish an entirely new ethanol subsidiary, which will report as an individual segment and allow ADM to advance ‘strategic alternatives’, which could include spinning the business of to existing shareholders. The subsidiary will include the dry mills at Columbus, Nebraska; Cedar Rapids, Iowa; and Peoria, Illinois.
ADM will also embark on a series of ‘organisational changes’ to enhance productivity and effectiveness, including offering early retirement to some staff in the US and Canada.
Luciano continued: “With three quarters of the year still ahead of us, the continued advancement of our strategy, combined with an anticipated resolution of the US-China trade situation and an expected acceleration of soybean meal demand driven by African Swine Fever, make us optimistic for the second half. Taking all of these factors into account, we remain committed to continuing to pull the levers under our control to deliver our objective of full-year earnings comparable to or higher than 2018.”
In the past quarter, ADM has acquired a couple of citrus ingredients producer – first, citrus flavours producer Florida Chemical Company (FCC) in January; then German citrus flavours supplier Erich Ziegler in March. It has also agreed to buy the remaining 50% stake in UK-based grain trader Gleadell Agriculture.
Additionally, a new partnership with Paradigm for Parity will commit it to achieving gender parity across its senior leadership structure by 2030.
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