ADM increases operating profits on less than encouraging sales

By Peter Stiff

- Last updated on GMT

Related tags Operating profit Profit Archer daniels midland

Sales at Archer Daniels Midland (ADM) increased during the
company's financial second quarter signaling a recovery from the
effects of the US hurricanes last year.

One of the world's largest agricultural processors the company is a key supplier to the confectionery industry through its cocoa and sweeteners businesses.

Sales for the company's second quarter, ending 31 December 2005, were $9.3 billion (€7.7bn), an increase of three per cent compared to the same period in 2004.

Second quarter operating profit increased to $524 million (€435m), a rise of eight per cent.

Overall the first half results indicate the firm is still recovering from a disappointing first quarter.

ADM experienced a poor start to its financial year as earnings were affected by the summer's hurricanes in the US.

For the first six months ending 31 December sales declined by one per cent to $18 billion.

However operating profit rose by six per cent to $874 million.

For the second quarter profit margins remained stable at 19 per cent, compared to 18 per cent for the corresponding period of 2004.

However, first financial quarter results dragged overall margins for the first half down to 20.5 per cent from 22 per cent in 2004.

The company's corn processing segment, which incorporates its sweeteners and starches, recorded growth due to lower costs.

Meanwhile operating profits in ADM's 'other food ingredients and feeds' segment, which includes its cocoa business, fell due to impairment charges of $31 million and a $45 million decline in earning from private equity funds.

Corn processing's operating profit increased to $237 million, a rise of $105 million for the quarter. Over the first six months operating profit rose to $373 million, an increase of $138 million.

Sweeteners and starches in particular had an operating profit rise of $69 million to $114 million for the quarter. For the first half there was an increase of $107 million to $206 million.

ADM noted the increases in operating profit were slightly offset by higher energy costs.

The food ingredients and feeds segment had a drop in operating profit of $80 million, down to $66 million for the quarter. Profit decreased $78 million for the six months, down to $161 million.

Management said the results from the quarter reflected the company's strategic use of its worldwide network to expand its food and industrial markets.

US-based ADM is chasing 2004's sales figures of $34 billion, from which its operating profit was close to $1.6 billion.

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