At a glance it looks like Archer Daniels Midland (ADM) had a great quarter, as net income more than doubled. In reality, the company gains were primarily from lower tax rates and change in accounting concerning inventory valuations.
A couple other factors in the rise in profits were increased sales prices as well as currency exchange-rates. Because Archer Daniels has less global exposure, they were able to perform better than their chief competitor Bunge Ltd (BG), which was down 50 percent from Wall Street expectations.
Even so, for now the company will enjoy a brief surge in stock price based on exceeding expectations of 69 cents a share, excluding items. Net income surged to $1.63 a share for the quarter ending September 30, or $1.05 billion. Last year in the same period net income was $441 millon, or 68 cents a share.
Revenue for the quarter grew by 65 percent to $21.16 billion, in spite of overall volume being about the same. Most of that was due to higher commodity costs which drove the prices up. That and hitting the currency exchange-rates at the right time drove the revenue increase.
Particularly strong in the quarter was the agricultural services and oilseed processing divisions. That was partly offset by the surging costs of energy and corn during the quarter.
Operational margins grew from 7.2 percent to 8.8 percent.
Much of ADM's success stems from their corn-processing facilities, whereby they're able to take the feedstock and put into whatever product has the best profits at any given time. That and their ability to manage the currency-exchange rates well has helped them immensely.
Still, the change in inventory valuation has helped them look much stronger than they really were during the quarter, and that needs to be strongly taken into consideration when looking at its seemingly overwhelming positive profits performance.
Looking ahead, commodity based companies will rebound as demand for resources rises again. Archer Midland Daniels will rise with them.
No comments:
Post a Comment