CHICAGO, ILLINOIS, U.S. — The management team at Archer Daniels Midland Co. maneuvered its way through difficult external conditions in 2019, but a strong fourth quarter has the company upbeat about opportunities in 2020 and beyond.
Net earnings attributable to ADM in the year ended Dec. 31, 2019, totaled $1.379 billion, equal to $2.44 per share on the common stock, down 24% from $1.810 billion, or $3.19 per share, in fiscal 2018. In the fourth quarter of fiscal 2019, earnings increased to $504 million, or 90¢ per share, up 60% from $315 million, or 55¢ per share, in the same period a year ago. Adjusted operating profit in the fourth quarter increased to $1.028 billion from $860 million.
“I'm proud to look back on a year in which we delivered significant advancements in each of our strategic pillars,” Juan Luciano, president and chief executive officer, said during a Jan. 30 conference call with analysts. “In our optimize pillar, we advanced key business improvements and are seeing the results of our work at the Decatur (Illinois) corn complex and in our Golden Peanut and Tree Nuts business. We reshaped our North American wheat milling footprint, closing all less efficient mills and opening our brand-new, state-of-the-art facility in Mendota (Illinois). We completed the significant global organization redesign, including offering early retirement for certain North American colleagues and reducing management layers that is helping us enhance productivity and efficiency. And just in the fourth quarter, we entered into an agreement to sell our palm plantation operations in Brazil and sold our investment in CIP, advancing our ongoing efforts to ensure our asset portfolio maximizes returns and aligns with our core competencies.
“In our drive pillar, we launched the Ag Services and Oilseeds business unit. And we’re delivering on the synergies created by simplifying the business model, including capital reduction efforts. More widely, as part of our readiness efforts, we introduced a company-wide simplification initiative, which is streamlining decision-making and processes in order to drive accountability and realize additional value in the way we work. And we continued to drive standardization and efficiency by centralizing critical activities, including our new global operations organization.
“In our expand pillar, we expanded on our leadership position in the fast-growing alternative proteins through our partnership with Marfrig and by working with many other customers to create systems and solutions to meet their needs. We enhanced our global citrus platform with the addition of Florida Chemical and Ziegler, and we cut the ribbon on our expansion and enhancement of our flavor production capabilities in Beijing. We created an unparalleled global leader in animal nutrition, thanks to the addition of Neovia. And I’m extremely pleased with the integration, including running ahead of our internal targets for synergies. And just in the last few months, we further expanded our animal nutrition capabilities with the opening of our state-of-the-art technology center in Decatur and our new feed production facility in Vietnam. We continue to build our leadership position in the key market of food, beverages and supplements that enhance health and wellness with the acquisition of Brazil-based Yerbalatina Phytoactives, a pioneering leader in plant-based extracts. And we further enhanced our global destination marketing footprint this time expanding into Turkey, capping a year in which our overall destination marketing volumes grew by 10%.”
Revenues for the year increased to $64.656 billion from $64.341 billion. Revenues during the fourth quarter of fiscal 2019 increased 2% to $16.329 billion from $15.947 billion.
Operating profit in the Ag Services and Oilseeds segment fell 4% in fiscal 2019 to $1.935 billion, while profit in the fourth quarter rose 20% to $739 million. Within the segment, ag services operating profit fell 24% year-over-year to $502 million, while crushing profit eased 11% to $580 million and refined products and other increased 58% to $586 million.
“In North America, the delayed U.S. harvest contributed to lower export volumes, driving lower margins,” said Ray G. Young, executive vice-president and chief financial officer. “In South America, results benefited from improved margins driven by good export demand and farmer selling. In crushing, results were lower year-over-year. Overall, margins were solid though lower than the extremely high levels in the year-ago period when global margins were being supported by the very short soybean crop in Argentina. Strength in the vegetable oil market contributed to a very good canola crush margin environment in North America.”
Year-over-year operating profit in the Carbohydrate Solutions segment fell 32% in fiscal 2019 to $644 million, while fourth-quarter profit eased 12% to $174 million. Starches and sweeteners profit fell 10% during the full year but increased 7% in the fourth quarter.
“Improvements in manufacturing costs, including at our Decatur corn complex, helped support strong results as did higher income from corn coproducts in North America,” Young said. “In EMEA, we began to see some improvements in margin conditions, but results were lower year-over-year. Wheat milling results were up around globally. Bioproducts results were down compared to last year’s fourth quarter due to continued unfavorable ethanol conditions and some risk management hedging losses.”
Young said ADM will begin reporting the Carbohydrates Solutions business in two subsegments: Starches and Sweeteners and Vantage Corn Processors, or VCP. VCP is a newly created dry mill ethanol subsidiary that also will market ethanol produced at ADM’s wet mills, Young said. Meanwhile, the Starches and Sweeteners subsegment will include the results of all of ADM’s wet mill operations, including ethanol production, he added.
In the Nutrition segment operating profit increased to $418 million in fiscal 2019, up from $339 million in fiscal 2018. Fourth-quarter profit, meanwhile, increased to $102 million from $62 million in the same period a year ago. Within the segment, WFSI profit improved to $376 million from $318 million from $279 in the full year and increased to $83 million from $59 million in the fourth quarter.
Describing 2019 as an impressive year of growth for ADM’s Nutrition segment, Young said the company expects the growth story to continue in 2020.
“For the first quarter, we anticipate overall Nutrition segment results will be substantially higher than the first quarter of 2019 with growth in operating profit at around 20%,” he said. “WFSI should be up on the continued customer demand for our on-trend ingredients and our unparalleled expertise and service. Animal Nutrition will continue to benefit from our Neovia acquisition and the execution of the synergies we’ve identified, though we expect the global lysine pricing environment to remain challenged in the quarter. In addition, year-over-year comparisons will benefit from last year’s first quarter Neovia purchase price adjustment on inventory costs, which negatively impacted results one time.”