ADM hit by volatile soybean market in China

Related tags Soybean Adm

US ingredients giant ADM saw double-digit sales growth for the year
but overall profits were dragged down by a volatile soybean market
in China. The company said that many cancelled orders from soy meal
buyers there had particularly impacted results in the last quarter.

Sales for the US-based firm leapt 18 per cent for the year to $36.1 billion, but the agricultural processor saw fourth quarter results slip to a loss of $103 million due to the $400 million (€333m) settlement in the anti-trust case that claimed the US firm conspired to fix the price of the food sweetener high fructose corn syrup used expansively in food and soft drink products.

Although the pay out for the lawsuit had been largely expected the from the oil processing business were not and it was the drop in business from China that particularly hit the group.

ADM said the oilseed processing business sustained a $15 million operating loss after Chinese soybean producers who had over-purchased soybeans defaulted on agreements to buy more when soymeal demand in China collapsed, the result of price rationing and avian flu. The company said that caused a dramatic drop in soybean prices, which also prompted a loss in its South American operations.

ADM has become more vulnerable to the Chinese business, as some 30 per cent of its soybean crushing capacity is now located in that developing market through a joint venture.

But all other major segments - cocoa, corn processing, food and feed ingredients - of the business recorded improvements. Corn processing operating earnings rose to $150 million, boosted by increased volumes and selling prices of alcohol and lysine products that more than offset higher net corn costs. But the higher corn costs pushed earnings from sweetener and starch products lower.

CEO G. Allen Andreas said the legal settlement took care of the company's remaining significant litigation exposures. Net earnings for the fiscal year came in at $494.7 million, or 76 cents a share, compared with $451.1 million, or 70 cents a share, a year earlier.

ADM is one of the world's largest processors of soybeans, corn, wheat and cocoa. The ingredients side of the business supplies an extensive product range, to include vegetable oils and fats, lecithins, xanthan gum and acidulants, emulsifiers and thickeners.

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