ADM, Corn Products Report Mixed Quarterly Results, See Opportunities in 2010

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Researched by Industrial Info Resources (Sugar Land, Texas)--Agricultural products companies Archer Daniels Midland Company (NYSE:ADM) (ADM) (Decatur, Illinois) and Corn Products International (NYSE:CPO) (Westchester, Illinois) recently reported quarterly earnings with mixed results, but with the outlook for 2010 improving. ADM reported its second quarter and Corn Products reported its fourth quarter, both ended December 31, 2009. While ADM had narrow losses in net income and sales for the quarter, Corn Products had substantial increases in the same areas. However, Corn Products saw a slight decline in sales and a sharp decline in net income for full-year 2009.

Second-quarter net income for ADM was $567 million, down 1.9% year-over-year, while fourth-quarter net income for Corn Products was $56 million, a 21.34% increase year-over-year. Net sales for the period totaled $15.9 billion for ADM, a 4.56% decrease year-over-year, and $959 million for Corn Products, a 6.5% increase year-over-year.

But for full-year 2009, Corn Products saw a 7% decline in sales to $3.67 billion, and an 85% decline in net income to $41.1 billion. Ilene Gordon, president and chief executive officer of Corn Products, said the income decline was due largely to activity in the first half of the year, which had weak sales volumes, unfavorable foreign currency translations, and low product value.

For the quarter, ADM took a big hit from the company's Agricultural Services sector, which saw a 67.53% year-over-year decline in operating profits to $150 million, and from losses attributable to corporate costs and interest expenses, which totaled $186 million. ADM attributed the decline in Agricultural Services to weak merchandising and transportation results.

Still, the company performed strongly in operating profits for the Oilseed Processing segment, which saw a 10.34% year-over-year increase to $352 million, and the Corn Processing segment, which increased tenfold to $290 million, from $29 million in the same period last year. ADM attributes the results in Corn Processing to higher sales volumes and improved ethanol margins, which partly resulted from lower corn and manufacturing costs.

For the fourth quarter, Corn Products benefited from strong performances in the company's South America and Asia/Africa regions, which had 21% and 16% year-over-year gains in net sales, respectively. The two regions had increased sales volumes $29 million and $15 million, respectively. These gains were slightly offset by a 2% year-over-year decrease in North American net sales. For the full year, however, Corn Products saw declines in net sales and operating income from 2008 of 4% and 44%, respectively, in North America; 10% and 9% in South America; and 14% and 56% in Asia/Africa.

In a conference call, Gordon said that Corn Products expects to invest between $175 million and $200 million in 2010, compared to $141 million in 2009, with growth and cost-savings projects among the major plans. Gordon said the outlook for South America and Asia/Africa is positive, with expectations for strong growth in volume and better results in specialty products. However, she said Corn Products will face difficulties in North America.

"We expect North America to remain challenging," Gordon said. "We expect higher gross profits and operating income based on better volume and manufacturing efficiencies. We anticipate lower net sales, reflecting lower corn costs."

Patricia Woertz, chief executive officer of ADM, foresees steady growth in 2010. "Looking at current operating conditions, we're seeing demand improving in some of the key markets we serve. We also see the U.S. ethanol market reasonably balanced, and in South America growers are harvesting what appears to be a bountiful crop."

Industrial Info is tracking more than $47 million in ADM projects in the U.S., including a $36 million grassroot advanced bio-refinery plant in Decatur, Illinois, as well as a $1 million maintenance shutdown at the Winston, North Carolina, corn milling plant for Corn Products, which is set to be completed in May. For more information, visit Industrial Info's North American Industrial Database.

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