Juan Luciano, CEO and chairman of Archer Daniels Midland Company (ADM), said the Illinois-based company saw some improvements in Q1 2018 compared to the first quarter of the year prior.
“The team executed exceptionally well in the first quarter and we harvested the benefits of the strategic actions we’ve taken over the last few years delivering strong results,” he said.
ADM’s net income for the quarter, which ended March 31 2018, was up 16% from Q1 2017 to $396m.
“Last month we realigned our business units to further accelerate our growth efforts and each of those business teams performed well this quarter,” he said on an earnings conference call.
Soybean processing
ADM said global market dynamics continued to push soybean crush margins higher; it reported crush volume records in North and South America, noting strong origination volumes and improving margins in South America due to farmer selling accelerating.
However, the agribusiness player said improving crush margins resulted in negative timing effects of more than $100m on forward hedges, which led to crushing and origination results that were lower than the year-ago period. It expects the majority of those impacts to reverse over the course of 2018.
Animal nutrition
It said its animal nutrition segment results improved "significantly" at $23m, compared to the $4m recorded for that segment in Q1 2017.
“The team’s strong inventory position helped up capitalize on higher sales prices,” said CFO of ADM, Ray Young. “On the specialty animal feed side, improvements in the lysine business continue to contribute to results.”
Animal nutrition sales are forecast to continue their positive trajectory, with an overall expectation of a 20% growth, or more, in operating profits when compared to 2017, said AMD.
The company said its North American grain decreased, there was a lack of export competitiveness in the US lowered volumes and margins.
Sorghum
As it is one of the main exporters of sorghum to China, the company is anticipating a negative impact of about $30m next quarter based on disruptions to that market.
“Looking forward, we are focusing our growth efforts on five key platforms – animal nutrition, bio-actives, carbohydrates, human nutrition and taste, as well as geographic regions that are seeing increasing consumer demand,” said the CEO. “Through readiness, we continue to reduce costs, we’re enhancing our agility, streamlining and standardizing our processes, and implementing innovative technologies.”
He said the company is expanding its readiness efforts to include performance excellence and cover the entire business model.
Joe Taets, a company executive, has been asked to lead the project moving forward.
“The continued execution of our strategic plan combined with our first quarter results, improving market conditions, and the benefits of US tax reform lead us to be even more confident about 2018,” said Luciano.