Reduced sales and lower prices for ethanol, a fuel derived from corn, contributed to the subpar fiscal third-quarter results, the company said.
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Overall, ADM said net earnings for the January-March quarter were $269.1 million, or 41 cents per share, up from $226.8 million, or 35 cents per share, a year earlier. But operating profit fell 25 percent to $377 million, reflecting weakness in the oilseeds processing and corn processing units.
Revenue decreased by 9 percent to $8.5 billion from $9.3 billion.
The company's stock tumbled $3.64, or 17 percent, to $17.99 on the New York Stock Exchange -- down nearly 30 percent from the 52-week high of $25.37 reached March 7.
Decatur, Ill.-based ADM, one of the world's largest ethanol producers, said profits in its bioproducts sector declined $42 million in the quarter to $98 million due partly to lower ethanol sales. That contributed to an overall decline of $54 million in the company's corn processing segment, which also includes the manufacturing of corn sweeteners and starches.
"We believe that ethanol profits will decline further because there is currently an oversupply in the ethanol markets," Morningstar's Mark Hugh Sam wrote in an analyst note Friday. "ADM has locked in prices above the current prices for ethanol, but over the next year, these contracts will expire, forcing ADM to sell at lower prices."
ADM management had warned investors in February and March that ethanol prices were not mirroring gasoline prices and that corn sweetener prices were flat. Current ethanol prices are in the $1.20 per gallon range, but the company has ethanol contracts priced at $1.40 to $1.50 per gallon that don't expire until September.
"Exactly how ADM earnings from operations could have been as low as 30 cents per share ... with ethanol prices locked in was a question asked to us by more than one shareholder," analyst John McMillin of Prudential Equity Group LLC wrote in an investment note Friday.
Company officials said they expect ethanol prices to go back up and remain bullish because new markets for the corn-based fuel continue to develop.
"We are really optimistic about our renewable fuels business and our ethanol business," G. Allen Andreas, chairman and chief executive officer, told analysts in a conference call. "There is the potential for substantial expansion and we anticipate a better supply and demand balance as our contracts are used up."
Higher energy costs and reduced selling prices for lysine, a popular livestock feed additive, also contributed to the decline in corn processing profits, despite lower corn prices. Andreas said the company must adjust to higher energy costs but said ADM still expects to show solid profits in its corn segment this year.
Operating profit from soybean, peanut and other oilseed products in the quarter fell to $61 million from $118 million due to declining results in North America and Asia, where processing plants are operating at less than full capacity, the company said.
"The results in North America, frankly, are disappointing to us," Brian Peterson, senior vice president for corporate affairs. "Over the past four years, ADM has closed six plants in an effort to improve our efficiencies in this industry."
For the nine months ended March 30, ADM's net earnings were $849 million, or $1.29 per share, compared with $598 million, or 92 cents per share, a year earlier. Revenue was flat at $26.5 billion.
ADM has more than 250 processing plants around the world manufacturing ethanol, biodiesel, cocoa, high fructose corn syrup and other products derived from agricultural commodities. The company employs more than 26,000 people.
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On the Net:
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