Global grains merchant Archer-Daniels-Midland Co missed Wall Street expectations for second-quarter profit on Tuesday, hit by lower soy crush margins and waning demand for US crops.
The company reported adjusted profit of $1.03 per share for the three months to June 30, against analyst expectations of $1.22 per share, LSEG data shows.
Soybean Prices
The company's Ag Services and Oilseeds arm, its largest business unit, suffered a 56% year-on-year plunge in quarterly operating profit due to a slew of challenges, from South American farmers slow to sell their crops amid rising export buyer demand, to global soybean crush margins getting squeezed and biodiesel margins tightening.
As soybean prices have fallen to their lowest in nearly four years, some buyers have shifted to Brazilian and Argentinian supplies, weighing on the company's North American business, ADM said.
Crush Margins
Sales of US soybeans have lagged. China, the world's largest soy buyer, has stepped up its purchases in recent weeks, but traders believe that most of the deals have involved low-priced Brazilian supplies.
Meanwhile, ADM's global soybean crush margins have been squeezed. Crushing plants produce high-protein soymeal feed for livestock and soyoil for food and fuel.
ADM and other US soy processors have faced pressure as biofuel producers cut back on their use of soyoil, turning instead to cheaper alternatives like imported used cooking oil.
Carbohydrate Solutions
Pre-market shares traded down 2.1% to $61.99 per share, as weakness in the Ag Services and Oilseeds segment and its Nutrition unit overshadowed a stronger quarter in Carbohydrate Solutions, which includes ethanol and sweeteners.
Carbohydrate Solutions segment operating profits were up 12% compared to the prior year period on higher starches and sweetener volumes and better margins, the company said.
Higher Manufacturing Costs
The Nutrition segment posted a 36% drop in its quarterly operating profit, due in part to higher manufacturing costs and continued downtime at its Decatur East soy processing plant following an accident in September.
ADM chief executive Juan Luciano said in a statement he expected the company to meet its full-year earnings-per-share guidance, in part from improving margins in crush and ethanol.
