Archer Daniels Midland Co.'s (ADM) first-quarter earnings fell
33% as the agricultural giant continued to be hurt by the 2012
drought in the Midwest.
ADM also confirmed its plan to acquire GrainCorp Ltd. (GNC.AU)
in a sweetened $3 billion deal accepted by the Australian company
last week, saying that it has completed due diligence.
With global demand for grains growing, ADM Chief Executive
Patricia Woertz said, "GrainCorp provides an excellent platform to
serve that growth, particularly in fast-growing markets in the
Middle East, Africa and Asia."
The company last week moved a step closer to the long-coveted
acquisition, when GrainCorp agreed to the takeover after a
six-month pursuit. ADM said at the time that it was conducting due
diligence. Buying GrainCorp would give the U.S. grain trader and
processor a crucial foothold for exporting grain to China and the
rest of Asia, a growth engine in the recent global commodities
boom.
ADM said Wednesday it will fund the acquisition through a
combination of operating cash flows and debt, and expects the deal
to add to earnings in the first year.
Moody's Investors Service on Tuesday placed ADM on review for a
downgrade on the proposed deal.
The deal is still subject to conditions including ADM receiving
a minimum acceptance of 50.1% of GrainCorp shares. ADM currently
owns 20% of GrainCorp's shares.
As part of the agreement, GrainCorp will pay its shareholders
dividends of 1 Australian dollar a share (U.S. $1.03), and an
additional A3.5 cents a share for each full month between Oct. 1
and the satisfaction or waiver of the regulatory conditions,
subject to GrainCorp being profitable over that period.
Ms. Woertz said ADM's latest period "was a challenging quarter,
with agricultural services negatively impacted by the ongoing
effects of last summer's U.S. drought."
She added that "in oilseeds, our earnings were reduced by
challenges in Brazil and depressed margins in cocoa."
Profit from ADM's agricultural-services segment, which includes
grain storage and exports, declined 42%, while the
oilseeds-processing segment reported an income decline of 42%.
Ms. Woertz added, however, that the ethanol business improved as
declining inventories supported overall margins. Operating profit
in ADM's corn-processing segment rose 15%.
ADM's corn-processing segment has been under pressure from high
corn prices caused by last year's drought in the Midwest, while
sluggish gasoline demand had pressured ethanol margins.
Overall for the latest quarter, Archer Daniels reported a profit
of $269 million, or 41 cents a share, down from $399 million, or 60
cents a share, a year earlier. Excluding a $25 million provision
expected in relation to a foreign bribery investigation, earnings
were down at 48 cents a share from 78 cents. Revenue increased 2.7%
to $21.73 billion.
Analysts polled by Thomson Reuters were recently projecting
per-share earnings of 51 cents a share on revenue of $21.33
billion.
Gross margin narrowed to 3.5% from 4.8%.
Shares edged down fractionally after hours to $33.50. Through
the close, the stock was up 23% since the start of the year.
Write to Kristin Jones at kristin.jones@dowjones.com
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