In this file:
· ADM Q3 results: Robust growth in nutrition segment offsets weak grain exports and ethanol margins
· Archer Daniels Midland Company (ADM) Q3 2019 Earnings Call Transcript
ADM Q3 results: Robust growth in nutrition segment offsets weak grain exports and ethanol margins
By Benjamin Ferrer, Food Ingredients 1st
01 Nov 2019
Amid constrained North American grain export volumes and weak ethanol industry margins, Archer Daniels Midland Company (ADM) reports strong growth in its nutrition segment for the third quarter of 2019, ended September 30. In yesterday’s earnings call, the US global food processing and trading corporation outlined a higher-than-expected quarterly profit, in spite of the ongoing US-China trade conflict and the impacts of African swine fever (ASF) that has dampened demand for soy in China. Meanwhile, grain harvest in the autumn period was weighted by wet weather conditions.
“We stayed focused on the levers we could control advancing our strategic plan despite the difficult external environment. North American grain export volumes and margins remained limited,” says Juan Luciano, Chairman and CEO.
“Crush margins were part of the record-high 2018 levels and ethanol industry margins remained challenged. Despite all of these, we delivered the performance consistent with the perspectives we provided last quarter, including the strong year-over-year growth in our nutrition business,” he adds.
ASF continues to affect what crops some plants are processing, highlights Luciano. In China, the world’s largest hog producer and soybean importer has led to a tightening of ADM’s oilseed processing business both in the US and South America. The company has since turned its eye toward other export markets, including Vietnam.
“We actually continued to see strength outside China. In forecast outside China, soybean meal growth is about 3 percent,” highlights Luciano. “Big pork inflation has created incentives to increase weight before slaughtering. So we’re seeing higher feed on animals as well. So I think in general, we continue to be positive about soybean meal demand going forward. We don't see a significant decline.”
Extreme weather in the US, which caused historic late plantings in much of the Midwest and led to a delayed and wet harvest this autumn, has impacted ADM and other grain merchants’ supply chains, as noted by the company’s officials.
ADM is still unclear as to how adverse weather conditions will impact its bottom line next quarter. The company expects to see “some significant drying revenue” in the coming months, as US farmers deliver wet grain that will need to be dried, according to ADM CFO Ray Young.
In other highlights, the company completed its previously announced transaction with Cargill to exchange grain elevators in Illinois and Indiana. “We celebrated the opening of our new state-of-the-art mill in Mendota, Illinois, an important milestone in our ongoing process of replacing older, higher cost plants with more efficient facilities,” says Luciano.
In forward-looking statements, the CEO adds, “We are excited about our strategic growth activities, and particularly our participation and leadership in major global trends such as flexitarian diets, nutrition for health and sustainable materials.”
Q3 Financial Overview ...
Archer Daniels Midland Company (ADM) Q3 2019 Earnings Call Transcript
ADM earnings call for the period ending September 30, 2019.
Motley Fool Transcribers
Oct 31, 2019
Archer Daniels Midland Company (NYSE:ADM)
Q3 2019 Earnings Call
Oct 31, 2019, 9:00 a.m. ET
Questions and Answers
Ladies and gentlemen, thank you for standing by and welcome to the Archer Daniels Midland Company Third Quarter 2019 Earnings Conference Call. [Operator Instructions]
I'd now like to introduce you to the host for today's call, Victoria de la Huerga, Vice President, Investor Relations for Archer Daniels Midland Company. Ms. De la Huerga, you may begin.
Victoria de la Huerga -- Vice President of Investor Relations
Thank you, Jack. Good morning and welcome to ADM's third quarter earnings webcast. Starting tomorrow a replay of today's webcast will be available at adm.com. For those following the presentation please turn to slide 2, the Company's Safe Harbor statement, which says that some of our comments constitute forward-looking statements that reflect management's current views and estimates of future economic circumstances, industry conditions, Company performance and financial results.
These statements are based on many assumptions and factors that are subject to risks and uncertainties. ADM has provided additional information in its reports on file with the SEC concerning assumptions and factors that could cause actual results to differ materially from those in this presentation, and you should carefully review the assumptions and factors in our SEC report.
To the extent permitted under applicable law ADM assumes no obligation to update any forward-looking statements as a result of new information or future events. On today's webcast, our Chairman and Chief Executive Officer, Juan Luciano will provide an overview of the quarter and important actions we are taking to meet our strategic goals. Our Chief Financial Officer, Ray Young will review financial highlights and corporate results as well as the drivers of our performance. Then Juan will discuss our forward look. And finally, they will take your questions.
Please turn to slide 3. I will now turn the call over to Juan.
Juan R. Luciano -- Chairman, President and Chief Executive Officer
Thank you, Victoria. Good morning, everyone. Thank you all for joining us today. This morning we reported third quarter adjusted earnings per share of $0.77, down from $0.92 in the prior year quarter. Our adjusted segment operating profit was $764 million. Our team delivered solid results this quarter.
We stayed focused on the levers we could control advancing our strategic plan despite the difficult external environment. North American grain export volumes and margins remained limited. Crush margins were part of the record high 2018 levels and ethanol industry margins remained challenged. Despite all of these, we delivered the performance consistent with the perspectives we provided last quarter, including the strong year-over-year growth in our nutrition business.
Throughout the quarter, we continued to deliver on our strategic plan. In our optimize pillar we are successfully capturing synergies offered by the midyear combination of our Ag Services and Oilseeds business. By looking at the combined value chain of the new business, we've identified a wide range of opportunities to improve capital efficiency.
We have already executed more than $200 million of capital reduction initiatives. As part of our ongoing efforts to optimize our US origination footprint, we completed our previously announced transaction with Cargill to exchange grain elevators in Illinois and Indiana. We also celebrated the opening of our new state-of-the-art mill in Mendota, Illinois, an important milestone in our ongoing process of replacing older, higher cost plants with more efficient facilities.
And as we anticipated earlier this year, we're starting to see the positive impact of the measures we took to improve the long-term reliability of our Decatur complex. In our drive pillar, we are continuing to see growing benefits of the improved analytics, technologies and processes we put in place after we launched Readiness last year.
We're implementing innovative uses of AI, machine learning and robotic process automation across the Company to do everything from identifying and solving IT issues to reducing costs and improving efficiencies in our global business services center to helping our customer-facing teams, meet needs with more speed and flexibility.
On the organizational redesign we completed in the first half of the year, including transforming our IT foundational services and centralizing our global operations organization is delivering higher service levels at lower costs. In our expand pillar, a key element of our growth strategy is focusing on major global trends. Trends that have the potential to fundamentally change markets and in which we are solidifying our global leadership position.
The first of those game-changing trends is one we see in the headlines every day now, flexitarian diets. ADM has a rich history of a leader in plant-based meat alternatives. Today our full-time tree [Phonetic] of great tasting, innovative flavors, ingredients & solutions make us the provider of choice for customers looking to grow with this fast moving market.
Our new plant protein facilities in Campo Grande, Brazil and Enderlin, North Dakota are supporting the increased demand from our global customer base. And in the third quarter, we entered into a partnership with the world's largest beef patty producer to co-develop and produce a 100% alternative protein burger that is now being offered in Brazil.
Another major global trend is nutrition for health. We are capitalizing on...