Adm reports fourth quarter earnings of $0.73 per share, $0.75 per
share on an adjusted basis
Chicago--(business wire)--archer daniels midland company (nyse: adm) today reported financial results for the quarter ended december 31, 2016. “we capitalized on an improved environment, delivering stronger fourth quarter performance after working through difficult market conditions earlier in the year,” said adm chairman and ceo juan luciano. “ag services saw strong results in north america and weak results from the global trade desk. the corn business delivered a good quarter, led by sweeteners and starches, and saw solid results from bioproducts. oilseeds results were comparable to last year despite lower global crush margins. in wfsi, wild flavors continued to deliver earnings growth, while some of our specialty ingredients businesses faced challenges, which we are addressing. “we have continued to take important steps to advance our strategic plan by completing additional acquisitions, organic growth projects and portfolio management actions; exceeding our 2016 target for run-rate cost savings; and progressing in our efforts to reduce capital intensity. in line with our balanced capital allocation framework, we returned $1.7 billion to shareholders in dividends and share buybacks during the year. “with expected improvements across all of our businesses throughout the year and additional contributions from recent projects and new facilities as they ramp up, we are optimistic about improving results throughout 2017.” fourth quarter 2016 highlights 1 non-gaap financial measures; see pages 4 and 9 for explanations and reconciliations, including after-tax amounts. fourth quarter 2016 highlights (continued) eps as reported of $0.73 includes a $0.03 per share charge related to asset impairments, restructuring and settlements; a $0.04 per share opeb curtailment gain; and certain discrete tax expense items of $0.03 per share. adjusted eps, which excludes these items, is $0.751. trailing four-quarter-average adjusted roic was 5.9 percent1, 70 basis points below annual wacc of 6.6 percent. the effective tax rate was 32 percent for the quarter and 29 percent for fiscal year 2016, compared to negative 2 percent in the year-ago quarter and 19 percent for fiscal year 2015, due to changes in the geographic mix of earnings and discrete tax items. (see other items of note on page 3 for further details.) during 2016, the company returned $1.7 billion to shareholders through dividends and share repurchases. 1 non-gaap financial measures; see pages 9 and 10 for explanations and reconciliations, including after-tax amounts. results of operations ag services saw good execution in north america amid strong global demand for u.s. commodities. merchandising and handling results increased on strong export volumes in an improved margin environment. however, the global trade desk incurred losses, driven by poor execution and limited forward merchandising opportunities. transportation performed well, with modest improvements in results despite an environment of lower freight rates. milling and other had another strong quarter driven by solid product margins—including wheat merchandising and handling income—and sales volumes. corn processing posted significantly improved results. good performance in sweeteners and starches was driven by solid demand in north america and improved contributions from international operations. higher results in bioproducts were driven by improved ethanol margins and volumes as a result of robust domestic and export demand. animal nutrition posted improved results, in part due to operational improvements in the company’s lysine production processes. oilseeds processing results were comparable to the challenging year-ago period. in crushing and origination, south america results were impacted by reduced volumes as a result of the short 2016 soybean and corn crops in brazil. global soybean crush margins were negatively impacted by ample substitute proteins worldwide, despite strong global crush volumes. softseeds performance improved due to higher volumes and margins, driven by more favorable seed supply and better demand for oil. refining, packaging, biodiesel and other posted continued strong performance, bolstered by good demand for refined oils and biodiesel. results in asia improved over the prior-year quarter, reflecting increased ownership and improved results from wilmar. in wfsi, the wild flavors business delivered solid year-over-year growth, with results from the eatem foods acquisition in north america and good sales in emeai and asia pacific more than offsetting weaker sales in latin america. however, overall results declined in the quarter due to continued challenges in certain specialty ingredients businesses. the company began implementing the restructuring of the specialty commodities unit, and saw ongoing market softness in hydrocolloids and fibers, as well as the effects of a short crop in edible beans. other financial operating profit improved on better claims and underwriting results in insurance operations, and a strong performance from adm investor services. other items of note as additional information to help clarify underlying business performance, the tables on page 9 include both reported eps as well as adjusted eps excluding significant timing effects. segment operating profit of $806 million as reported for the quarter includes charges of $16 million related to asset impairment and restructuring activities. prior-year segment operating profit included impairment and restructuring charges of $146 million, in addition to a net gain of $212 million on the sale of the global cocoa and chocolate businesses and a $185 million gain on the revaluation of the company’s previously held investment in eaststarch c.v. in conjunction with the acquisition of the remaining interest. corporate other results include a $38 million opeb curtailment gain related to changes to the u.s. retiree medical program and restructuring charges of $3 million. corporate unallocated costs were up due to higher project spending in 2016 compared to 2015. prior-year corporate unallocated included impairment, restructuring and settlement charges of $25 million. higher effective tax rates in the fourth quarter of 2016 compared to the fourth quarter of 2015 were due to changes in the geographic mix of earnings, as well as approximately $18 million of discrete tax expenses in 2016, compared to approximately $100 million of discrete tax benefits in 2015, which were a result of portfolio management actions taken in the year-ago quarter. conference call information adm will host a webcast on feb. 7, 2017, at 8 a.m. central time to discuss financial results and provide a company update. a financial summary slide presentation will be available to download approximately 60 minutes prior to the call. to listen to the webcast or to download the slide presentation, go to www.adm.com/webcast. a replay of the webcast will also be available for an extended period of time at www.adm.com/webcast. forward-looking statements some of the above statements constitute forward-looking statements. these statements are based on many assumptions and factors that are subject to risk 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 reports. to the extent permitted under applicable law, adm assumes no obligation to update any forward-looking statements. about adm for more than a century, the people of archer daniels midland company (nyse: adm) have transformed crops into products that serve the vital needs of a growing world. today, we’re one of the world’s largest agricultural processors and food ingredient providers, with approximately 32,000 employees serving customers in more than 160 countries. with a global value chain that includes approximately 500 crop procurement locations, 250 ingredient manufacturing facilities, 38 innovation centers and the world’s premier crop transportation network, we connect the harvest to the home, making products for food, animal feed, industrial and energy uses. learn more at www.adm.com. financial tables follow (unaudited) segment operating profit is adm’s consolidated income from operations before income tax excluding corporate items. adjusted segment operating profit is segment operating profit adjusted, where applicable, for specified items and timing effects (see items denoted*). timing effects relate to hedge ineffectiveness and significant mark-to-market hedge timing effects. management believes that segment operating profit and adjusted segment operating profit are useful measures of adm’s performance because they provide investors information about adm’s business unit performance excluding corporate overhead costs as well as specified items and significant timing effects. segment operating profit and adjusted segment operating profit are non-gaap financial measures and are not intended to replace earnings before income tax, the most directly comparable gaap financial measure. segment operating profit and adjusted segment operating profit are not measures of consolidated operating results under u.s. gaap and should not be considered alternatives to income before income taxes or any other measure of consolidated operating results under u.s. gaap. (unaudited) other (income) expense - net consists of: (a) current period gain in ag services (q4 $4 million, ytd $51 million) related principally to realized contingent consideration from the sale of the company’s equity investment in gruma s.a.b de c.v. in december 2012 of $48 million partially offset by a $5 million loss on sale of assets; corn (q4 $2 million gain & ytd $60 million gain) related principally to finalization of the gain on sale of the company’s brazilian sugar ethanol facilities; wfsi (q4 $0 & ytd $12 million) related to the gain on revaluation of the remaining interest to settlement value in conjunction with the acquisition of the remaining interest in amazon flavors; corporate (q4 $0 and ytd $5 million loss) related to a loss on sale of an equity investment; and individually insignificant disposal gains in oilseeds and other (q4 $7 million; ytd $12 million). prior period gain includes disposals in ag services (q4 $6 million, ytd $35 million) related principally to the revaluation of the company's previously held investments in north star shipping and minmetal in conjunction with the acquisition of the remaining interest in q2; corn (q4 $192 million, ytd $200 million) related principally to the revaluation of the company’s previously held investment in eaststarch c.v. in conjunction with the acquisition of the remaining interest in q4 and the sale of the lactic business in q2; oilseeds (q4 $230 million, ytd $332 million) related to the sales of the global cocoa business in q4 and the global chocolate business in q3 and the barcarena export terminal transaction in q2; and individually insignificant gains in wild flavors and specialty ingredients and corporate (q4 and ytd $5 million) (unaudited) (unaudited) (unaudited) (1) the overall decrease in corn for the quarter and year ended december 31, 2016 relates to the disposal of the sugar ethanol operations in may 2016 partially offset by volumes from the acquisition of eaststarch c.v. in november 2015. (unaudited) adjusted eps and adjusted eps excluding timing effects reflect adm’s fully diluted eps after removal of the effect on eps as reported of certain specified items and timing effects as more fully described above. management believes that these are useful measures of adm’s performance because they provide investors additional information about adm’s operations allowing better evaluation of underlying business performance and better period-to-period comparability. these non-gaap financial measures are not intended to replace or be an alternative to eps as reported, the most directly comparable gaap financial measure, or any other measures of operating results under gaap. earnings amounts described above have been divided by the company’s diluted shares outstanding for each respective quarter in order to arrive at an adjusted eps amount for each specified item and timing effect. (unaudited) (1) (2) adjusted roic is adjusted roic earnings divided by adjusted invested capital. adjusted roic earnings is adm’s net earnings adjusted for the after tax effects of interest expense, changes in the lifo reserve and other specified items. adjusted invested capital is the sum of adm’s equity (excluding noncontrolling interests) and interest-bearing liabilities adjusted for the after tax effect of the lifo reserve, and other specified items. management believes adjusted roic is a useful financial measure because it provides investors information about adm’s returns excluding the impacts of lifo inventory reserves and other specified items and increases period-to-period comparability of underlying business performance. management uses adjusted roic to measure adm’s performance by comparing adjusted roic to its weighted average cost of capital (wacc). adjusted roic, adjusted roic earnings and adjusted invested capital are non-gaap financial measures and are not intended to replace or be alternatives to gaap financial measures.
