ADM’s earnings top forecasts on strong crush margins, buoyant demand

By Karl Plume

CHICAGO (Reuters) -Archer-Daniels-Midland Co on Thursday said robust soy crushing margins and hefty global demand for crops had propelled the U.S. grains merchant to a record fourth-quarter profit and would keep driving strong results in 2023.

The solid quarterly earnings highlighted how global crop merchants like ADM have weathered rising energy costs and supply chain disruptions such as lower Black Sea grain exports following Russia’s invasion of Ukraine.

ADM reported a 46% operating profit jump in its core Ag Services and Oilseeds unit in the quarter ended Dec. 31, more than offsetting lower earnings from ethanol operations and in its high-margin Nutrition segment.

The company’s shares were down 0.4% at $85.22 at midday, lagging strength in the broader market in part due to the disappointing Nutrition segment result, which was below the consensus analyst estimate.

ADM and its agribusiness peers make money by processing, trading, and shipping crops around the world. The supply chain middlemen tend to thrive when crises like droughts or war trigger shortages.

“As we look forward to 2023, we expect another very strong year,” Chief Executive Juan Luciano said.

“We still see tightness in supply and demand balances in key products and regions,” he said, citing reduced Ukrainian grain supplies and smaller harvests in drought-hit Argentina.

Adjusted operating profit in Ag Services and Oilseeds rose as strong South American crop exports and good margins offset reduced U.S. exports and as quarterly oilseed crushing profits more than doubled.

Low water on the Mississippi River last autumn restricted barge shipments of newly harvested crops to U.S. Gulf Coast terminals during the peak post-harvest export season.

ADM’s adjusted net fourth-quarter earnings rose to $1.069 billion, or $1.93 per share, from $850 million, or $1.50 a share a year earlier, above the consensus estimate of $1.65 per share, based on Refinitiv data.

(Reporting by Karl Plume in Chicago, additional reporting by Sourasis Bose in Bengaluru; Editing by Sherry Jacob-Phillips, Jane Merriman, David Gregorio and Jan Harvey)