ADM Q3 2024 $ADM (+1,17%)

Financial performance:

Net profit: For the quarter ended September 30, 2024, net income was only $18 million, a significant decrease from $821 million in the same quarter last year.

Adjusted net income: Adjusted net income for the quarter was USD 530 million, compared to USD 880 million in the prior year.

Adjusted EPS: Adjusted earnings per share (EPS) were $1.09, compared to $1.63 in the prior year.

Balance sheet overview:

• Invested Capital: Total invested capital amounted to USD 32,025 million as at September 30, 2024.

Results of operations by segment:

Ag Services and Oilseeds: Operating profit fell to USD 480 million, a decrease of 43% compared to the previous year. The decline is due to lower results in South America and lower margins in refining and biodiesel production.

Carbohydrate Solutions: Operating profit was USD 452 million, a slight decrease of 3% compared to the previous year. However, the segment continued to benefit from a strong performance in starches and sweeteners.

Nutrition: Operating profit decreased 19% to $105 million, primarily due to higher costs and lower margins in human nutrition.

Cash flow overview:

• Operating cash flow: For the nine months ended September 30, 2024, operating cash flow was USD 2,468 million, an increase compared to USD 1,891 million in 2023.
• Cash flow before working capital: This amounted to USD 2,341 million for the nine months.

Key figures and profitability metrics:

• Adjusted return on invested capital (ROIC): The adjusted return on invested capital for the last four quarters to September 30, 2024 was 6.6%.

Segment information:

• Ag Services and Oilseeds: The decline in operating profit was impacted by lower results in South America and lower refining and biodiesel margins.
• Carbohydrate Solutions: The segment reported a solid performance in starches and sweeteners, but slightly lower profits.
• Nutrition: The segment reported declining profits due to higher costs and lower margins in human nutrition.

Competitive position:

The company faces challenges in maintaining margins due to increased competition and current market conditions, particularly in the Ag Services and Oilseeds segments.

Management forecasts and comments:

• EPS guidance: The company has lowered its full-year 2024 EPS guidance to a range of $4.50 to $5.00.

Risks and opportunities:

• Risks: The company is struggling with slowing market demand, internal operational challenges and uncertainties related to legal and regulatory frameworks.
• Opportunities: Despite the challenges, the company sees opportunities in the area of cost optimization as well as in strong sub-services such as animal nutrition.

Summary of results:

The company is experiencing a difficult financial year with significant declines in net profit and operating profits in all segments. The adjusted key figures show a slightly more positive picture, but also indicate a decline compared to the previous year. The company is adjusting its financial strategy and has lowered its EPS forecast for the year. While operational challenges and market conditions remain as key risks, strategic cost optimization and strengths in certain segments offer potential for future improvements.

Positive aspects:

Equity income from Wilmar investment: Equity earnings from the Wilmar investment increased to USD 62 million in the quarter, up from USD 35 million in the prior year quarter. This shows a positive development of this investment.

Animal Nutrition (sub-segment): The Animal Nutrition sub-segment recorded an operating profit of USD 19 million, an increase of 58 % compared to the same quarter last year. This improvement is due to cost optimization and lower input costs.

Starch & Sweetener segment: This segment reported a 13% increase in operating profit compared to the same period last year, supported by strong volumes and margins.

Cash flow from operating activities: Net cash flow from operating activities for the nine months ended September 30, 2024 was USD 2,468 million, an increase from USD 1,891 million in the prior year period, indicating improved cash generation.

Insurance proceeds: The company received significant insurance proceeds, including $47 million for Decatur West insurance claims and $25 million for Decatur East, which positively impacted financial results.

Negative aspects:

Decrease in net income: Net income for the quarter ended September 30, 2024 was only $18 million, a drastic decrease from $821 million in the same quarter last year.

Ag Services and Oilseeds segment: Operating profit for this segment was $480 million, a decrease of 43% compared to the same quarter last year, primarily due to weaker results in South America and reduced margins.

Nutrition Segment: Nutrition segment operating profit decreased 19% to $105 million due to higher costs and lower margins in human nutrition.

Reduction in EPS guidance: The company has lowered its full-year 2024 EPS guidance to a range of $4.50 to $5.00, reflecting ongoing challenges and uncertainties.

Operational challenges: The company is facing operational challenges, including slower market demand and internal issues impacting overall performance.