The Quarter that Was
It is not often that a company that measures quarterly revenue in the tens of billions posts better than 30% growth, but that is what ADM did for its fiscal second quarter. Sales jumped over 31% this period, led by incredibly strong results in the company's Ag Services business (merchandising/handling of grain), but oilseeds and corn processing were hardly laggards with nearly 28% and 22% growth respectively.
For the most part, ADM also did an admirable job of translating that sales momentum into better profitability. Segment operating profits jumped 40% overall, despite an 8% decline in the oilseeds business. As Ag Services' profits nearly tripled, that would have easily covered up a lot of mistakes elsewhere ... had there been many. While the company's bottom-line earnings are a mess of charges, gains and non-operating items, the company still handily beat estimates.
The Good and Bad of ADM
ADM owed this strong quarter in part to the weather troubles in places like Russia. With Russia's harvest compromised, U.S. agricultural exports boomed and ADM clearly benefited from its middleman role in that trade. This, by the way, is also why the cash flow performance was not so good and was so different than the reported earnings - as a huge global trader with large origination, storage and delivery capabilities in the grain market, ADM can (and sometimes must) be opportunistic about building inventories, and that can wreak havoc on cash flow in any given period.
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