In a July 30th release, Archer-Daniels-Midland Corp. (ADM) posted financial results for the 2nd quarter, FY 2024. The Company can be regarded as a bellwether for the commodities trading and processing sector. Along with competitors Bunge, Cargill, Cofco and Dreyfus, all are subject to the risks of currency fluctuation, geopolitical events, climatic extremes, and increased cost of ingredients, labor and transport in a competitive world environment influenced by inflation, conflict and disparity in the quality of life between industrialized and developing nations.
For the 2nd Quarter of FY 2024 ending June 30th, net income was $486 million on total revenue of $22,248 million. Comparable figures for the 2nd quarter of fiscal 2023 ending June 30th 2022 were net income of $927 million on total revenue of $25,190 million. Diluted EPS fell from $1.70 for the 2nd quarter of fiscal 2023 to $0.98 for the most recent quarter.
Comparing the 2nd quarters of 2023 with 2024, revenue was down 11.7 percent. Gross margin was down from 7.5 percent to 6.3 percent but operating margin was down from 4.1 percent to 2.2 percent despite a 7.8 percent reduction in S&G.
Segment operating profits combined totaled $1,014 million ($ 1,525, Q2 FY 2023) with respective contributions (in $millions):-
- Ag Services and oilseeds $459 million. ($1,054)
- Carbohydrate solutions $357 million. ($319)
- Nutrition $ 109 million. ($185) Q2 FY 2024 Human, $103m; Animal, $6m)
- Other businesses $ 96 million ($86)
Juan Luciano Board Chair and CEO commented, “ADM delivered solid results in the quarter, in spite of challenging market conditions, and we are pleased with the progress we are making against our 2024 priorities and strategic initiatives,” Addressing ADM segments, he stated “In Ag Services & Oilseeds, large South American crops and shifts in farmer selling behaviors impacted results in the second quarter but we expect improved margin opportunities through the remainder of the year. In Carbohydrate Solutions, the team delivered solid results driven by favorable Starches & Sweeteners and ethanol margin environments, and we expect continued strong performance. Our actions to recover profitability in the Nutrition segment delivered sequential improvement in the quarter and set us up for continued increases moving forward”
Luciano concluded “With solid performance and continued strong cash flow, we have returned significant cash to shareholders through our repurchase efforts through the first two quarters. In the second half of the year, improvements in both crush and ethanol, our efforts in operational excellence, the focus on our key priorities, and our team’s agility give us confidence in our full-year expectations, despite uncertainties in the external environment.”
Guidance for FY 2024 was retained at an adjusted EPS of $5.25 to $6.25
ADM, has “identified and corrected” recording of sales between the Ag. Services and Oil Seeds Segment and the Nutrition Segment. The adjustments will have no ultimate effect on the balance sheet and statements of earnings reflecting the period January 2018 through September 2023.
On July 30th 2023, ADM posted assets of $36,327 million of which $6,970 million comprised goodwill and intangibles, against long-term debt of $8,248 million. The Company had an intraday market capitalization of $28,170 million on August 2nd. ADM trades with a forward P/E of 10.8 and has ranged over a 52-week period from $50.72 to $87.30 with a 50-day moving average of $61.95. Twelve-month trailing operating margin was 2.2 percent and profit margin 2.9 percent. Return on assets over the past twelve months was 3.4 percent and the return on equity 10.8 percent.