(Bloomberg) -- Archer-Daniels-Midland Co.’s quarterly profit shrank more than expected as the grain trading giant faces a downturn in crop markets.
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Chicago-based ADM reported earnings excluding some items of $1.03 a share for the second quarter, down 46% from a year earlier. That was the lowest profit since 2020 for the period, trailing the $1.24 average of analyst estimates compiled by Bloomberg. The company’s shares slid 2.4% in New York before regular trading hours.
Crop traders’ profits have been under pressure from ampler supplies of grains and lower price swings, reversing the windfalls from previous years after crop losses and trade disruptions sent grain prices to all-time highs. The profits they make from processing soybeans into meal and oil — a key earnings driver — have also eroded, partly due to increased competition from used cooking oil into the US.
ADM said slower farmer selling in top soybean producer Brazil and higher logistics costs related to take-or-pay contracts “led to much lower margins” at the the company’s largest business. It also faced “limited carries and trading opportunities” in North America as increased supply from Brazil and Argentina “shifted export competitiveness to South American origins.”
The company’s troubled nutrition unit also saw profits plunge from a year earlier due to unplanned downtime at its Decatur East facility, higher costs and lower pricing for food ingredients such as emulsifiers. Meanwhile, profits rose at the unit engaged in corn milling, driven by higher margins for production of starches and sweeteners as well as by increased ethanol exports.
The trader’s operations generated roughly $1.7 billion in cash in the first half of the year, down from $2.5 billion a year earlier. Meanwhile, ADM spent $2.3 billion in the period to repurchase shares, up from $1 billion a year earlier.
ADM said it expects “improved margin opportunities through the remainder of the year.” The company still kept its full-year earnings forecast at a range between $5.25 to $6.25 a share.
(Updates with details throughout)
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