Global agribusiness giant ADM’s net earnings dropped 48% in the second quarter of this year due to lower soyabean crushing margins, World Grain reported.
The company’s net earnings of US$486M in the quarter ended 30 June were down 48% from US$927M in the same quarter of the previous year, the 31 July report said.
Earnings before income taxes were US$596M, down 47% from US$1.13bn in the previous year’s second quarter due to lower pricing and execution margins as well as higher corporate unallocated costs.
Lower pricing and execution margins reflected the impact of lower crushing and origination margins, according to Chicago-based ADM.
“Our team delivered solid results in challenging market conditions, highlighting the efforts of our teams across the business to manage through the commodity down cycle while putting our Nutrition business on a path to recovery,” ADM president and CEO Juan Luciano was quoted as saying in a 30 July earnings call.
Operating profit in ADM’s Ag Services and Oilseeds segment fell 56% to US$459M from US$1.05bn. Lower margins came in South America origination due to a smaller crop in the Brazilian state of Mato Grosso.
North American origination results were lower as increased supply from Brazil and Argentina shifted export competitiveness to South American origins.
“Our services and oilseeds results are significantly lower than the record results of prior years due to the ongoing rebalancing of the supply-and-demand environment and overall lower farmer selling,” Luciano said.
Within the segment, operating profit in Ag Services fell 68% to US$122M from US$380M. Operating profit in crushing dipped 41% to US$132M from US$224.
Global soyabean crushing margins decreased due to more balanced supply-and-demand conditions and lower soyabean values caused by increased imports of used cooking oil (UCO).
Soyabean meal demand in North America was increasing, which was likely to improve crushing margins, Luciano added.
“We’re going to leap into Q4 where we have hopefully a very large crop here in the USA,” he said.
“We expect to have plenty of raw materials … and demand for soyabean meal continues to be strong around the world.”
Operating profit in the segment’s Refined Products & Other declined 62% to US$137M from US$362M. Refining margins eased from historical levels due to increased pre-treatment capacity and higher imports of UCO, according to ADM.
