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Archer Daniels Midland Profit Rises 29% on Strong Demand
posted by admin on 03/05/06

Stellar performance was driven by an increase in demand for processed oilseeds and corn byproducts such as ethanol.

Archer Daniels Midland Co., one of the world's largest agriculture processors, said Tuesday its fiscal third-quarter earnings rose 29%, driven by an increase in demand for processed oilseeds and corn byproducts such as ethanol.

The Decatur, Ill., company reported profit of $347.8 million, or 53 cents a share, for the period ended March 31, up from $269.1 million, or 41 cents a share, a year ago. The prior-year results included a one-time gain of 11 cents a share, from the sale of a business.

Analysts reporting to Thomson First Call expected, on average, fiscal third-quarter earnings of 46 cents a share.

Sales in the quarter rose 8% to $9.12 billion, from $8.48 billion last year. Wall Street expected $8.67 billion.

Profit from oilseeds -- or any number of seeds such as rapeseed and cottonseed that can be processed to produce vegetable oil -- increased $116 million to $177 million, thanks to improved market conditions across the globe, the company said.

Profit in the corn processing division, which includes the manufacturing of ethanol, increased $41 million to $219 million for the quarter. The company also cited improved selling prices for corn starch and sweetener. ADM is among the biggest processors of soybeans, corn, wheat and cocoa and produces soy meal and oil, biodiesel, ethanol, corn sweeteners and flour, with more than 250 processing plants.

It expects ethanol prices to rise in the next two quarters, company executives said during a conference call with analysts Tuesday. The company plans this week to ask its board of directors to take a look at building a second U.S. ethanol plant, to produce fuel from corn. The company said it expects that industrywide, U.S. ethanol capacity will increase from 4.5 billion gallons this year to 6.5 billion gallons over the next 12 to 18 months.

Allen Andreas, ADM chairman, said increased emphasis on making fuel from corn won't hurt food production since oils are extracted from corn before ethanol is made from corn starch. Inventories of U.S. vegetable oils have been increasing since last year, the company said.

Global biodiesel business continues to grow around the world, particularly in Europe and Asia, the company said. The business is just getting started in the U.S., but the company expects more government programs to bring biodiesel in line with ethanol. ADM will open its first biodiesel plant in October.

The company said it wouldn't comment on upcoming quarterly earnings, but said U.S. biodiesel plants coming online this fall with improve oilseed crushing margins. So far this year, ADM said that U.S. corn and oilseed crops look good, although crops went in late.
Patricia Woertz, who was named president and chief executive of ADM on April 28, said, "I think the real strength of this team in the depth and knowledge of this business. I want to affirm that the strategic direction I've seen here is quite strong." She said the company has good cost-management programs in place.

Mr. Andreas, who has stepped down as chief executive at ADM, said Ms. Woertz will quickly take over day-to-day operations at the company. Mr. Andreas said he plans to "stay around for a while" as chairman, looking at long-term opportunities for the company.

--Ann Keeton contributed to this article.
Write to the Online Journal's editors at newseditors@wsj.com

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