Archer Daniels Midland quarterly earnings disappoint Wall Street, stock price droops

By MARJORIE KORN, MEDILL NEWS SERVICE

Archer Daniels Midland Co. posted a decline in net earnings in its fiscal fourth quarter 2008 on Tuesday, causing its shares to drop 7 percent to just above $26 at midday, from $27.94 at the opening of trading. The company attributed the profit decrease to one-time gains during the fourth quarter of 2007.

Analysts polled by Zacks Investment Research expected the company to earn 69 cents per diluted share.

Net earnings for the Decatur, Ill.-based company fell 62 percent for the quarter ended June 30 to $167 million, or 58 cents per diluted share, from $439 million, or $1.47 per diluted share. For the full-year ended June 30, net earnings fell 11 percent to $822 million, or $2.79 per diluted share, from $992 million, or $3.30 per diluted share.

Steve Mills, ADM executive vice president and chief financial officer, said in a conference call with investors that one-time sales of assets and securities, as well as non-cash gains on contributions on several Asian joint ventures, affected net earnings in the year-earlier quarter.

Patricia Woertz, chairman and CEO, spoke of the “changing market dynamics” that affected ADM, which included higher and increasingly volatile commodity prices as well as questions over the future of ethanol. ADM is the country’s largest producer of ethanol.

Vincent Andrews of Morgan Stanley asked during the conference call if the increased demand for commodities and foodstuffs from Asia was easing at all. John Rice, executive vice president at ADM, said he expects the magnitude of Asia’s demand to continue.

As ADM and other commodity price-dependent companies try to predict the near- and long-term outlook for commodity prices–particularly grains–a large component of their estimations will center on the projected demand from emerging markets, which are realizing a higher standard of living due to a growing middle-class.

On Tuesday, the AP reported that, “Oil prices fell to near $120 a barrel Tuesday in Asia on expectations the economic downturn in the U.S. will erode consumer demand for crude products.” The question will become whether a protracted downturn in the U.S. economy and American consumerism will significantly affect Asia’s long-term growth and demand.

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