- Posted by Marina
Earnings at global agri-major Archer Daniels Midland (ADM) for the first quarter of 2020 fell on the year but beat market analysts’ estimates as the group’s CEO said the company experienced a limited impact to its trading performance from the Covid-19 pandemic.
The group’s Q1 financial performance was helped by strong farmer selling in Brazil that drove its origination business, and a solid performance from its agricultural services and nutritional businesses.
“We are operating around the globe with very minimal disruptions,” Chairman and CEO Juan Luciano said, but added that there are “many unknowns and ADM isn’t immune from some of the negative effects of this pandemic.”
The “A” in the so-called ABCD of major agriculture companies, ADM’s Q1 results offer a first glimpse at the effects of the pandemic on the sector after lockdowns around the world disrupted supply chains, stunted biofuel demand, and forced processors to close.
Earnings at its Ag Services and Oilseeds segment rose 1.2% on the year to $422 million mainly due to a near doubling in Ag Service results, which jumped to $164 million on stronger origination in Brazil and no repeat of the floods that hit North America at the start of last year.
ADM’s results for its crushing operations, however, sank 66% to $70 million despite strong volumes and solid margins.
This meant the unit struggled to repeat last year’s exceptional results following a shortage of soybeans in Argentina.
Results at the company’s Refined Products and Other – which includes its biodiesel trading – were a touch better on the year with Q1 ending just two weeks after lockdowns hit Europe and North America and cut diesel demand.
It also means that ADM’s ethanol sector recorded limited impact during the first quarter when the virus was spreading through the US as the plunge in domestic ethanol demand only occurred from late March.
ADM’s subsidiary, Vantage Corn Processors, which operates several dry ethanol mills posted a $31 million loss for the quarter, an improvement from the $39 million loss racked up last year.
“Effective risk management, combined with the lack of the severe weather impacts seen in the first quarter of 2019, helped offset weak industry ethanol margins caused by significantly decreased demand,” ADM said.
The plunge in ethanol demand forced the group to idle two of its facilities earlier this month as low demand hit the sector.
The group’s earnings per share for Q1 came in at $0.69 up from last year’s $0.41 and beating the average Wall Street estimate of $0.56, while the group’s total revenue for the quarter fell 2.2% to about $15 billion.