ADM reports growth of flavour operations amid challenging market results

US-based Archer Daniels Midland Company (ADM) has reported challenging market conditions affecting its overall first quarter results for 2019, including ongoing trade disruption with China.

The company recorded net revenues of $233 million for the period, compared with $396 mn for the same time last year, though there were encouraging signs for its flavouring operations, which are particularly active within the confectionery sector.

According to the business, its WFSI division results were higher year-over-year, with 21 per cent profit growth spread across all three businesses. 

The company reported that WILD Flavors delivered a notably strong performance. Year-over-year sales increased 11 per cent on a constant currency basis, and an improved product mix helped drive positive results.

However, the company said results for starches and sweeteners were down versus the first quarter of 2018, driven by pressured European sweetener industry volumes and margins, impacts of severe weather in North America, higher manufacturing costs at its Decatur complex, and weaker margins in flour milling.

“The first quarter proved more challenging than initially expected,” said Chairman and CEO Juan Luciano. “Impacts from severe weather in North America were on the high side of our initial estimates, and the ethanol industry environment limited margins and opportunities.
“Despite a challenging start to the year, we continue to make excellent progress on our key imperatives for 2019: improving performance in certain businesses, accelerating our Readiness efforts, and delivering results from our growth investments,” Luciano continued.

“We are very encouraged with our new Neovia business and the creation of a global Animal Nutrition platform. Readiness continues to expand our efforts to enhance our competitiveness. And additional actions we are announcing today will help us advance our goals to deliver best-in-class customer service along with long-term growth and shareholder value.

“With three quarters of the year still ahead of us, the continued advancement of our strategy, combined with an anticipated resolution of the U.S.-China trade situation and an expected acceleration of soybean meal demand driven by African Swine Fever, make us optimistic for the second half. Taking all of these factors into account, we remain committed to continuing to pull the levers under our control to deliver our objective of full-year earnings comparable to or higher than 2018.”

In response, the company said it was creating a series of measures to continue to underpin long-term-value creation, including plans to   repurpose its corn wet mill in Marshall, Minnesota, to produce higher volumes of food and industrial-grade starches (which are used considerably within confectionery). 

The company said it was also planning a series of internal restructuring plans that would streamline the business and promote enhanced engagement with its customer base.

 

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