CHICAGO, ILLINOIS, U.S. — Solid profit growth, improved returns on invested capital and higher cash flows highlighted a strong year for Archer Daniels Midland Co. But a weaker fourth quarter and a failure to live up to analysts’ forecasts led to a drop in the company’s share price. After closing at $44.49 on Feb. 4, ADM’s share price fell nearly 7% to a mid-day low of $41.42 on Feb. 5.
Net earnings attributable to ADM in the year ended Dec. 31, 2018, totaled $1.810 billion, equal to $3.19 per share on the common stock, up 13% from $1.595 billion, or $2.79 per share, in fiscal 2017. In the fourth quarter of fiscal 2018, earnings fell to $315 million, or 55¢ per share, down 60% from $788 million, or $1.39 per share, in the same period a year ago. The most recent quarterly results included charges related to asset impairments as well as restructuring and settlement charges. The fiscal 2017 fourth quarter include $249 million in income tax benefits. Adjusted operating profit in the fourth quarter increased to $860 million from $793 million.
“2018 was a year in which regardless of market conditions, we continued to execute, improve and grow, resulting in a range of impressive accomplishments,” Juan Luciano, president and chief executive officer, said during a Feb. 5 conference call with analysts. “In our ‘optimize pillar,’ we divested our Bolivian oilseeds business, took important steps to optimize our U.S. origination footprint and engineered significant turnarounds in our global trade and South American origination businesses.
“In our ‘drive pillar,’ for the year, we delivered cost savings of more than $300 million on a run rate basis, far outpacing our target of $200 million.
“In our ‘growth pillar,’ we opened, expanded and enhanced multiple facilities around the globe, including five new and renovated ingredient manufacturing facilities and three labs and customer innovation centers. We announced Grainbridge, an important joint venture with Cargill in the digital innovation space. We launched the SoyVen Crush joint venture in Egypt and expanded into the Russian starches and sweeteners market with our Aston joint venture. We grew our Brazilian oilseeds, crush and value-added footprint with the Algar acquisition, and we expanded our taste and wellness portfolios with the acquisitions of Rodelle and Protexin. We’re also now adding citrus flavor capabilities via our acquisition of Florida Chemical Co. And of course, we just closed on our Neovia acquisition, creating a true global leader in value-added products and solutions for both production and companion animals.”
Revenues for the year increased nearly 6% to $64.341 billion from $60.828 billion. Revenues during the fourth quarter of fiscal 2018 eased to $15.947 billion from $16.070 billion.
Operating profit in the Origination segment increased 35% in fiscal 2018 to $546 million, while profit fell 30% in the fourth quarter to $183 million. Merchandising and handling profit rose 39% during the year to $442 million, while transportation profit increased 21% to $104 million.
“The team not only did a great job in 2018 of moving swiftly to manage changing trade flows, allowing us to minimize disruptions and capitalize on new opportunities, but they also continue to grow our value-added services, including destination marketing, which exceeded $20 million metric tons, doubling the 2014 volumes a year earlier than our goal,” said Ray G. Young, executive vice-president and chief financial officer. “Looking ahead into the first quarter of Origination, we expect positive carries in the North American grain business and improved year-over-year results for ARTCO, partially offset by normalized margins in global trade. Overall, we expect first quarter 2019 Origination results to be significantly higher than the first quarter of 2018.”
Oilseeds Processing profit surged 79% in the full year and 115% in the fourth quarter, to $1.474 billion and $432 million, respectively. Crushing and Origination results were the main driver, increasing 216% during the full year and 467% during the fourth quarter.
Young said crush volumes during the fourth quarter were among the highest ever as the business continued to leverage its global asset footprint to capitalize on solid demand for soybean meal and strong crush margins.
Year-over-year operating profit in the Carbohydrate Solutions segment decreased 12% in fiscal 2018 to $945 million, while fourth-quarter profit fell 31% to $197 million. Starches and sweeteners profit eased 4% during the full year and 13% in the fourth quarter.
“Despite full-year results for Carbohydrate Solutions being down versus 2017, the team did a great job managing through difficult conditions,” Young said. “The business delivered higher year-over-year volumes in sweeteners, showed the value of innovation and superb customer service by working with customers to form like-new solution for sweetener needs and moved quickly to increase starch production to capitalize on margins and a growing demand environment.”
In the Nutrition segment operating profit increased to $339 million in fiscal 2018, up from $312 million a year ago. Fourth-quarter profit, meanwhile, fell to $62 million from $73 million in the same period a year ago. Within the segment, WFSI profit improved to $318 million from $279 in the full year and improved to $59 million from $56 million in the fourth quarter.