ADM posts record profits, navigates lower lysine prices, and sees robust demand for meal and soy oil

27-Jan-2023 - Last updated on 27-Jan-2023 at 13:11 GMT

As ADM reports record profits, it flags headwinds in relation to its animal nutrition business for 2023 due to the impacts of weaker margins in amino acids and recovery in the global supply of lysine.

The US agribusiness group released its financial data yesterday for the quarter ended December 31, 2022 and the full year.

“ADM delivered another very strong quarter to complete an outstanding year, and the strategic work we have done throughout 2022 has positioned us well for 2023 and beyond,” said CEO, Juan Luciano, as the Chicago-based firm posted record annual profit of $4.34bn, a 60% increase on 2021, despite the challenges of the war in Ukraine and logistics issues.

A 46% hike in operating profit in its ag services and oilseeds division in the quarter contributed. Those earnings also offset the lower earnings from ethanol operations and its nutrition segment.

Crushing results were more than double those of the prior-year period. In North America, strong export volumes for soybean meal and growing domestic demand for renewable diesel contributed to strong margins, said the company. In EMEA, oil demand powered strong rapeseed margins, more than offsetting higher energy costs compared to the prior year.

Late last year ADM flagged that low water levels on the Mississippi River would reduce soy exports from North America. The company confirmed that reduction yesterday, but it said the dip in export volumes from North America was partially offset by the South American team, which “executed well to deliver higher margins and volumes.”

Luciano, on a conference call with analysts, said the organization continues to see a strong margin environment in the ag services and oilseeds business, with strong demand fundamentals ahead. It anticipates good crush margins in Europe and robust demand for meal and soy oil in the US. However, the ethanol sector will be more volatile due to inventory levels, noted the CEO.

Weaker animal nutrition performance

But there were weaknesses in certain areas. The results for the animal nutrition unit were lower in Q4 2022 than the prior year quarter.

Vikram Luthar, chief financial officer, ADM, on the call, said the company “benefited from strong margins in lysine, but in Q4, the compression in margins were sharper and faster than we expected, and that is going to continue over the course of 2023. So, we have to offset that plus drive growth.”

The CEO forecast that profit growth in the nutrition segment overall, taking account of both the human and animal side, will be “10% plus” this year, which would be “slightly below trend line growth.”