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CHICAGO — Weaker-than-expected operating profit in the company’s Ag Services and Oilseeds segment and Nutrition more than offset a strong quarter in Carbohydrate Solutions, leading to an earnings decline at ADM in the third quarter. The Chicago-based company’s share price dipped in response, falling to a 52-week low of $69.46 on Oct. 24, down 4.1% from the close of $72.40 on Oct. 23.
“The global market is increasingly dynamic with factors that create both opportunities and challenges for ADM to address,” Juan R. Luciano, chairman, president and chief executive officer, said during an Oct. 24 conference call with analysts. “Consumer behavior has shown growing variability spending more in some categories while slowing spending in others. And our team has a proven ability to manage through this and the impact of geopolitical tensions, inflationary pressures and the constantly adjusting balances of commodity supply and demand.
“Within each business, we are focused on navigating these external factors carefully while we’re also building on the momentum we’ve seen through the year-to-date. As we look ahead, we are on track to exceed our 2023 previous expectations for the total company.”
Net earnings attributable to ADM in the third quarter ended Sept. 30 totaled $821 million, equal to $1.52 per share on the common stock, down 21% from $1.03 billion, or $1.83 per share, in the same period a year ago. Fiscal 2023 third-quarter results included a 10¢ per share charge related to impairments and restructuring, and a 1¢-per-share charge related to acquisition expenses. Adjusted earnings totaled $880 million, or $1.63 per share, down from $1.05 billion, or $1.86 per share, in the same period a year ago.
Revenues for the third quarter decreased 12% to $21.7 billion from $24.68 billion.
Operating profit in the Ag Services and Oilseeds segment fell 21% to $848 million in the third quarter, down from $1.08 billion in the same year-ago quarter. Ag Services profit eased 23% in the quarter to $226 million, down from $292 million, while crushing profit decreased 28% to $250 million from $346 million.
While acknowledging that Ag Services and Oilseeds results were lower than the strong third quarter of 2022, Vikram Luthar, chief financial officer, noted the business unit once again delivered “solid results in an increasingly dynamic environment.”
He said results in North America were adversely affected by the shift of export demand to Brazil due to the large crop there as well as low water levels in the US river system, which limited volume and barge capacity. The most recent quarter also included a $48 million insurance settlement related to damages from Hurricane Ida, he said.
Meanwhile, in the crushing subsegment, ADM delivered a strong quarter against a tough year-over-year comparison, led by North America, where the crush margin environment remains well supported by structurally higher demand for vegetable oils, Mr. Luthar said.
“We officially opened our new crush facility in Spiritwood, ND, to meet growing demand,” he said. “We are currently in the commissioning process and expected to be running at full rates in early November, adding an additional 1.5 million tonnes of crush capacity per year. In EMEA, we continue to optimize our flex capacity to prioritize crush of higher-margin soft seeds in line with market opportunities. In the quarter, there were large net-positive mark-to-market timing effects which were lower than the net-positive impacts in the prior-year quarter.”
Operating profit in the Carbohydrate Solutions segment increased 49% in the third quarter to $460 million from $309 million a year ago. Starches and sweeteners profit rose 21% in the quarter to $395 million from $327 million. Vantage Corn Processors posted income of $65 million, which compared with a loss of $18 million in the year-ago quarter.
Describing the third-quarter results in Carbohydrate Solutions as “outstanding,” Mr. Luthar said the unit benefited from the ongoing optimization of ADM’s production and supply chain network.
“The starches and sweeteners subsegment were higher year-over-year on a healthy demand and strong margin environment across starches, sweeteners, wheat flour and ethanol,” he said. “Our team generated new customer wins and delivered double-digit growth year-to-date in our BioSolutions platform.”
In the Nutrition segment operating profit in the third quarter was $138 million, down 22% from $177 million in 2022. Within the segment, human nutrition profit decreased 19% to $118 million from $146 million in the year-ago quarter, while animal nutrition dipped to $20 million from $31 million.
“Strong results in flavors, health and wellness and recovery in the base animal nutrition business, were more than offset by continued lower demand for plant-based proteins and persistent demand fulfillment challenges in pet solutions,” Mr. Luthar said. “Flavors reported impressive results in a complex operating environment, delivering a 29% growth in operating profit on a constant currency basis.”
Net earnings attributable to ADM in the nine months ended Sept. 30 totaled $2.92 billion, equal to $5.35 per share on the common stock, down 12% from $3.32 billion, or $5.87 per share, in the same period a year ago. Adjusted earnings totaled $3.07 billion, or $5.62 per share, down from $3.35 billion, or $5.91 per share, in the same period a year ago. Revenues for the nine months decreased 6.2% to $$70.96 billion from $75.62 billion.
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