Archer Daniels Midland (ADM)

Q4 2012 Earnings Call

July 31, 2012 9:00 am ET

Executives

Ruth Ann Wisener - Vice President of Investor Relations

Patricia A. Woertz - Executive Chairperson, Chief Executive Officer, President and Chairman of Executive Committee

Ray G. Young - Chief Financial Officer and Senior Vice President

Juan R. Luciano - Chief Operating officer, Executive Vice President and Member of Risk Management Committee

Craig E. Huss - Chief Risk Officer, Senior Vice President and Chairman of Risk Management Committee

Analysts

Ryan Oksenhendler - BofA Merrill Lynch, Research Division

Robert Moskow - Crédit Suisse AG, Research Division

Kenneth B. Zaslow - BMO Capital Markets U.S.

David Driscoll - Citigroup Inc, Research Division

Christine McCracken - Cleveland Research Company

Vincent Andrews - Morgan Stanley, Research Division

Tim J. Tiberio - Miller Tabak + Co., LLC, Research Division

Ann H. Gurkin - Davenport & Company, LLC, Research Division

Ian Horowitz - Topeka Capital Markets Inc., Research Division

John E. Roberts - The Buckingham Research Group Incorporated

Eric J. Larson - CL King & Associates, Inc.

Presentation

Operator

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Good morning, and welcome to the Archer Daniels Midland Fourth Quarter and Fiscal Year 2012 Earnings Call. [Operator Instructions] As a reminder, this conference call is being recorded. I would now like to introduce your host for today's conference call, Ms. Ruth Ann Wisener, Vice President, Investor Relations, for Archer Daniels Midland Company. Ms. Wisener, you may begin.

Ruth Ann Wisener

Thank you, Cristy. Good morning, and welcome to ADM's Fourth Quarter Earnings Conference Call. Before we begin, I would like to remind you that we're webcasting this presentation on our website, adm.com. The replay will also be available at that address.

For those following the presentation, please turn to Slide 2, the company's Safe Harbor statement, which says that some of the comments constitute forward-looking statements that reflect management's current views and estimates of future economic circumstances, industry conditions, company performance and financial results. Statements are based on many assumptions and factors, including availability and prices of raw materials, market conditions, operating efficiencies, access to capital and actions of government. Any changes in such assumptions or factors could produce significantly different results. To the extent permitted under applicable law, the company assumes no obligation to update any forward-looking statements as a result of new information or future events.

Please turn to Slide 3. On today's call, our Chairman and Chief Executive Officer, Pat Woertz, will provide an overview of the quarter. Our Senior Vice President and Chief Financial Officer, Ray Young, will review financial highlights and corporate results. Our Executive Vice President and Chief Operating Officer, Juan Luciano, will review our operations and outlook. And then, Craig Huss, our Senior Vice President and Chief Risk Officer, will join Pat, Ray and Juan during the question-and-answer portion of the call.

Please turn to Slide 4. I will now turn the call over to Pat.

Patricia A. Woertz

Thank you, Ruth Ann, and welcome, everyone to our fourth quarter conference call. This morning, we reported fourth quarter net earnings of $284 million or $0.43 per share on a diluted basis. Our adjusted EPS was $0.38 per share. Our segment operating profit was $544 million. For the full fiscal year, net earnings were $1.2 billion or $1.84 per share, adjusted EPS was $2.25 per share and segment operating profit for the year was $2.5 billion.

In a challenging fourth quarter, we saw solid results from our global oilseeds business, particularly in South America. They were more than offset by negative U.S. ethanol margins and weaker U.S. merchandising results. During the 2012 fiscal year, we have worked to optimize profits in this environment and we have also implemented actions that will improve ADM's earnings power and return. We restructured our organization to improve productivity. Through that and other cost actions, we expect to reach more than $150 million in annual run rate savings by March of 2013. This year, we invested $1.5 billion in capital -- $1.5 billion in capital spending and $200 million in acquisitions with the focus on our growth CapEx on investments outside the U.S. For the second half of the calendar year 2012, July through December, we are planning about $500 million to $600 million of capital spending. Later this morning in his remarks, Juan will discuss our plans to buy a port and upgrade it in Northern Brazil.

During the 2012 fiscal year, we managed our portfolio very carefully, shuttering operations in oilseeds, corn and milling that were not part of our objectives for profits or returns, and we returned nearly $1 billion to shareholders through dividends and share repurchases.

As we look ahead, while the drought in the U.S. has reduced the potential size of the U.S. corn crop, we are tracking the development of other crops in North America and in Europe. While U.S. crop carryouts are expected to be low, we have an exceptional and experienced business team to manage through this environment. Conditions like these demonstrate the vital role of our global agribusiness. As weather has regional effects on crops, we respond by working with our customers to provide the best alternatives to meet their needs from all growing regions of the world.

Now I'll turn the call over to Ray.

Ray G. Young

Thanks, Pat, and good morning, everyone. Slide 5 provide some financial highlights for the quarter, which I'll run through briefly. As Pat noted, quarterly segment operating profit was $544 million, down from last year's $921 million. Quarterly net earnings were $284 million, down 25% from last year's fourth quarter. Looking at our effective income tax rate for the quarter, we recorded taxes at 30%, resulting in an annual rate of 30% for the fiscal year. Our earnings per share were $0.43 on a fully diluted basis compared to last year's $0.58. Our adjusted earnings were $0.38 per share compared to last year's $0.69 per share. For the full fiscal year 2012 our adjusted earnings were $2.25 per share, down from the $3.45 level in fiscal year 2011. On Chart 18 in the appendix, you can see the reconciliation of reported earnings to adjusted earnings for the fourth quarters of fiscal year '12 and fiscal year '11, as well as for both fiscal years.

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