Global agribusiness giant ADM’s operating profit in the first quarter dropped by 38%, World Grain reported.
The drop in operating profit for the quarter ended 31 March included a 52% decrease in its Ag Services and Oilseeds segment, the 7 May report said.
“ADM’s first-quarter results were aligned with our outlook and market expectations and our business operated well in a dynamic external environment,” ADM CEO Juan Luciano was quoted as saying in a 6 May earnings call.
“With uncertainty related to global trade and regulatory policy continuing to have an impact on the business, we were able to drive positive momentum in focused areas.”
Net earnings of US$295M, were down from US$729M in the previous year’s first quarter. Revenues fell 8% from US$21.85bn to US$20.18bn. Total segment operating profit was US$747M, down from US$1.2bn.
ADM expected its plant in Decatur, Illinois, USA, would be operating at full capacity by the end of the second quarter, Luciano said. A dust explosion at the plant on 10 September 2023 had impacted soyabean protein production, World Grain wrote.
Within the Ag Services and Oilseeds segment, operating profit fell 52% from US$864M to US$412M.
“As we expected, market disruptions related to biofuel policy uncertainty negatively impacted biodiesel and renewable diesel margins and US vegetable oil demand,” ADM chief financial officer Monish Patolawala was quoted as saying.
“We also experienced higher global soyabean stock levels and an increase in Argentinian crush rates, which pressured global soyabean meal value. Additionally, trade policy uncertainty, particularly with Canada and China, created volatility throughout the quarter for canola meal and oil. Taken together, these factors resulted in significantly lower meal and vegetable oil values, pulling down margins across our businesses.”
Within the segment, crushing operating profit dropped 85% from US$313M to US$47M, driven by lower margins due to increased industry capacity, competitive meal exports from Argentina, higher manufacturing costs and lower vegetable oil demand due to biofuel and trade policy uncertainty.
“Consistent with the previously provided outlook, global soyabean and canola crush execution margins were significantly lower than the prior-year quarter,” Patolawala added.
“Global executed crush margins were approximately US$13/tonne lower in soyabeans compared to the prior-year quarter and approximately US$40/tonne lower in canola.”
In ag services, operating profit fell 31% from US$232M to US$159M, driven by lower volumes and margins, primarily due to tariff and trade policy uncertainty.
However, higher destination marketing volumes and related margins partially offset the negative impacts, World Grain wrote.
