In the company’s Ag Services segment, ADM started operations at its Medsofts joint venture in Egypt during the second quarter, a move Juan Luciano, chairman and chief executive officer, said continues ADM’s expansion of its distribution value chain through destination marketing capabilities and an asset-light approach.
“The Medsofts joint venture helps us diversify and expand our merchandising footprint, grow our logistics services and gets us closer to our customers as we deliver products directly to them,” Luciano said in an Aug. 2 conference call with analysts.
In the company’s corn business, ADM completed the sale of its sugarcane ethanol operations in Brazil and began operations at its Casablanca, Morocco-based corn wet mill. The company also expanded its sweetener portfolio by entering into a partnership to offer low-calorie non-bioengineered stevia and monk fruit ingredients.
ADM introduced new products and announced plans to expand and modernize facilities within its animal nutrition business during the quarter.
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| Juan Luciano, chairman and chief executive officer at ADM. |
“In our lysine business, we made process improvements that should improve yields in the second half of the year, and we are advancing on the strategic review of our ethanol dry mills assets,” Luciano said. “We have made management presentations to seven parties that have indicated interest in our dry mill assets. We will await all the proposals to determine what is the best value-maximizing strategy for ADM. We anticipate receiving bids back by the end of August and will then evaluate and determine our next steps in the process.”
Meanwhile, in oilseeds Luciano said ADM completed a canola crush expansion project at its plant in Lloydminster, Canada, and added soybean crushing capacity at its facility in Straubing, Germany. The latter move is expected to allow ADM to meet growing demand for non-bioengineered soybean meal and oil in Western Europe.
ADM added to its ingredient capabilities in South America with the full ownership acquisition of Amazon Flavors.
Looking ahead, Luciano said recent improved market dynamics have ADM poised for “better opportunities.”
“The outlook for the large U.S. crop and some of our businesses experiencing the improved margin conditions creates a platform for a more favorable environment in the second half of the year and some optimism as we start to move into early 2017,” he explained. “For Ag Services, current U.S. crop conditions indicate the growing season is progressing very well. This is expected to translate into improved export volumes and margins, higher utilization of our transportation network and better merchandising and handling opportunities for the second half of the year.
“For corn, the strategy and flexibility of our wet mills, along with continued operational excellence achievements and high capacity utilization rates, should support improved margins for our sweeteners and starches business for the second half of the year. Into the future, as global sweetener and starch demand continues to grow, our product and footprint expansions will provide diversification of both geography and starch sources to help maximize cost positions and drive value creation.”
Ethanol margins have improved since the beginning of the year, and Luciano said the forward demand environment from domestic consumption and exports appears favorable. However, he noted that the future margin environment will remain dependent upon industry production levels relative to demand and the resultant inventory levels.
“We have seen this inventory to margins relationship over the years and we have seen the margins being somewhat volatile as well,” he said.
Luciano said he envisions an improved outlook for oilseeds during the second half of the year behind continued strong global protein demand leveraging ADM’s flex capacity and improved crush margins.
Finally, Luciano said increased innovation in natural health and nutritional products are leveraging the company’s leadership in plant-based proteins, powders and specialty grains, setting the stage for future growth for WFSI.
“With organic growth, synergy execution and small bolt-on M.&A., we continue to build this business for the future,” he said.
