CHAMPAIGN, Ill. - Food processor Archer Daniels Midland Co. said Monday its second-quarter profit rose 7 percent as higher earnings from oilseed processing and rising demand for feed grains offset declining margins in its ethanol business.
Profit for the quarter ended Dec. 31 rose to $473 million, or 73 cents per share, from $441 million, or 67 cents per share, a year ago. Those results did not include a $225 million inventory carrying charge that the company considers a one-time event, something some Wall Street analysts questioned.
Revenue rose 50 percent to $16.5 billion from $10.98 billion last year.
Analysts polled by Thomson Financial had forecast a profit of 74 cents per share excluding one-time items on revenue of $12.75 billion.
Its shares fell 37 cents to $45.13 in midday trading after sinking as low as $43.45 earlier in the session.
Decatur, Ill.-based Archer Daniel Midland's ethanol business had a second consecutive rough quarter, but its soybean processing segment performed well and continued to reflect overseas economic growth.
"ADM's record earnings for the second quarter and first half of fiscal 2008 demonstrate the value created by and the strengths of our broadly diversified asset base and product portfolio," Chief Executive Officer Patricia Woertz said in a statement.
Oilseed processing operating profit rose 14 percent to $219 million on strong global demand for protein and oil.
Corn processing operating profit fell 18 percent to $275 million on lower ethanol selling prices and higher corn costs.
Ethanol prices, after falling late last year, have bounced back, but Woertz told analysts that questions remain about whether the country's ethanol demand can live up to the number of plants being built. ADM has two of its own, expected to start producing late this year and next, but dozens of others are being planned or built around the country.
"When you look out many quarters, the market sees a question mark about whether the full capacity as it comes on stream will have a home," she said during a conference call with analysts.
Profit in ADM's agricultural service business, which includes grain trading and transportation, more than doubled to $315 million.
"The size of the crop this year," Woertz told analysts, "has been something that has given us tremendous opportunity."
ADM's other businesses were boosted by strong wheat sales, particularly overseas. Profit was up 35.2 percent in this catchall category that also includes cocoa processing, to $146 million from $108 million.
Some analysts argued during the conference call that the $225 million one-time inventory charge should be included in ADM's results from continuing operations, which would have driven earnings down by almost 50 percent.
The charge, more than double the $107 million reported a year earlier, relates to the LIFO — last-in, first-out — method ADM uses to account for its inventory.
Woertz seemed to concede the point.
"With the higher commodity prices we've seen the last couple of years, LIFO is more of a usual charge than an unusual charge," she said.
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