The nation's largest agribusiness returned to its bread and butter in the latest quarter, helping Archer Daniels Midland
Tuesday, ADM stated that overall sales jumped 36% in the latest quarter, with operating income rising 23% to $797 million. The company's grain trading and transporting operation was the star, posting a 99% rise in operating income.
Last year's star, corn processing, saw profits plummet by $36 million, mostly because of a 48% plunge in the ethanol group. This follows an 18% drop in the previous quarter, reducing corn processing's contribution to operating income from 45% last year to just less than 33% in the latest quarter. ADM attributed the plunge in the ethanol group to falling ethanol prices and volumes, as well as higher corn prices.
The about-face in the ethanol business shouldn't be a surprise. The corn-based fuel has been pushed as a solution to global warming and dependence on foreign oil. Ethanol plants have been sprouting like weeds, with ethanol prices slumping sharply from their mid-2006 highs as a result. But the market ignored ADM's ethanol news, pushing the stock up more than 6% since the release.
ADM is making a big bet on bioenergy. It no longer identifies itself primarily as "the supermarket to the world," but as a bioenergy company that is "resourceful by nature." It's working not only on ethanol to mix with gasoline, but also on "biocrude" that could be refined into a fuel to replace it. ADM is partnering with ConocoPhillips
So is ADM on the road to become corn's answer to petroleum giant ExxonMobil