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Solid Demand to Aid Archer Daniels (ADM) Amid Inflation
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Archer Daniels Midland Company (ADM - Free Report) has been gaining from robust global demand, continued strength in the Nutrition unit and a solid product portfolio. Persistent growth in the Nutrition segment bodes well.
This led to the impressive fourth-quarter 2022 results wherein the top and bottom lines beat the Zacks Consensus Estimate and advanced year over year. This marked the 14th straight quarter of an earnings beat. Revenues advanced 13.6% year over year to $26,231 million. Solid sales across all segments contributed to the top line. Adjusted earnings of $1.93 per share jumped 28.7% from $1.50 in the year-ago quarter. On a reported basis, Archer Daniels’ earnings were $1.84 per share, up 33.3% from the prior-year quarter’s $1.26.
The company reported an adjusted segmental operating profit of $1,665 million in fourth-quarter 2022, up 17.8% from the year-ago quarter. On a GAAP basis, ADM’s segmental operating profits grew 16.1% year over year to $1,611 million. This marked the 14th straight quarter of adjusted operating profit growth.
Continued strength in its Nutrition segment remains a major growth driver. In fourth-quarter 2022, revenues in the segment rose 7.3% year over year and 11% on a cc basis. Although the Human Nutrition unit remained dismal year over year, the Health & Wellness business witnessed year-over-year growth, driven by the bioactives portfolio, including the results of the Deerland acquisition.
The Flavors unit gained from strong revenue growth, which somewhat offset demand-fulfillment challenges. Specialty Ingredients continued to witness solid demand for its product portfolio, including plant-based proteins. Management expects the Nutrition unit to remain positive in 2023, with more than 10% growth in operating profit.
In response to growing trends for all things sustainable, Archer Daniels has been making efforts to expand its solutions portfolio, which forms part of its Carbohydrate Solutions unit. It collaborated with LG Chem to produce lactic and polylactic acids for bioplastics, which is a plant-based product. Earlier, the company launched Biosolutions to expand its portfolio of sustainable higher-margin solutions, particularly for pharmaceuticals and personal care markets.
Such endeavors are likely to help attain 10% revenue growth on an annual basis. In a recent development, Archer Daniels entered a joint venture with Gevo to help meet the demand for low-carbon, sustainable aviation fuel. It also shut down its ethanol facility in Peoria last October. The company is utilizing innovative technologies to develop products and boost operating capabilities.
The company remains on track with the Readiness goals of driving business improvement, standardizing functions and enriching consumers’ experience. As a part of readiness efforts, it introduced a company-wide simplification initiative. Its strategic pillars for growth, as well as the aforementioned initiatives, are guided and supported by the Readiness program, focused on accelerating and enhancing competitiveness.
However, Archer Daniel’s has been reeling under the global impacts of inflation. The company has been witnessing higher IT operating and project-related costs. Elevated increased corporate costs, stemming from higher interest expenses, act as deterrents.
Other staples companies facing the heat due to inflation are Conagra Brands (CAG - Free Report) , Campbell Soup (CLX - Free Report) and TreeHouse Foods (THS - Free Report) .
Conagra has been encountering cost inflation and supply-chain challenges for a while now. Management expects the inflationary landscape to persist in fiscal 2023.
It anticipates supply-chain hurdles associated with the dynamic landscape. Gross inflation (input cost inflation before hedging and other sourcing gains) is, however, anticipated to moderate through the remaining part of fiscal 2023.
Campbell Soup has been struggling with cost inflation for a while. During the first quarter of fiscal 2023, the company’s adjusted gross profit margin contracted 30 basis points (bps) to 32.2% due to continued cost inflation and increased other supply-chain costs, and unfavorable volume/ mix.
Inflation and increased other supply-chain costs had an adverse impact of 1,260 basis points (bps). On its last reported quarter’s earnings call, management expected to keep witnessing cost inflation throughout fiscal 2023.
Tree House highlighted that input cost inflation continued across certain commodities like coco. The company has been seeing the impact of rising input costs across non-trading commodities like boil blades, and commodity derivatives like corn syrup and casing.
Headwinds related to labor and supply chains continue to affect the industry persistently. Management anticipates flavor and supply chain-related issues to continue.
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Solid Demand to Aid Archer Daniels (ADM) Amid Inflation
Archer Daniels Midland Company (ADM - Free Report) has been gaining from robust global demand, continued strength in the Nutrition unit and a solid product portfolio. Persistent growth in the Nutrition segment bodes well.
This led to the impressive fourth-quarter 2022 results wherein the top and bottom lines beat the Zacks Consensus Estimate and advanced year over year. This marked the 14th straight quarter of an earnings beat. Revenues advanced 13.6% year over year to $26,231 million. Solid sales across all segments contributed to the top line. Adjusted earnings of $1.93 per share jumped 28.7% from $1.50 in the year-ago quarter. On a reported basis, Archer Daniels’ earnings were $1.84 per share, up 33.3% from the prior-year quarter’s $1.26.
The company reported an adjusted segmental operating profit of $1,665 million in fourth-quarter 2022, up 17.8% from the year-ago quarter. On a GAAP basis, ADM’s segmental operating profits grew 16.1% year over year to $1,611 million. This marked the 14th straight quarter of adjusted operating profit growth.
Continued strength in its Nutrition segment remains a major growth driver. In fourth-quarter 2022, revenues in the segment rose 7.3% year over year and 11% on a cc basis. Although the Human Nutrition unit remained dismal year over year, the Health & Wellness business witnessed year-over-year growth, driven by the bioactives portfolio, including the results of the Deerland acquisition.
The Flavors unit gained from strong revenue growth, which somewhat offset demand-fulfillment challenges. Specialty Ingredients continued to witness solid demand for its product portfolio, including plant-based proteins. Management expects the Nutrition unit to remain positive in 2023, with more than 10% growth in operating profit.
In response to growing trends for all things sustainable, Archer Daniels has been making efforts to expand its solutions portfolio, which forms part of its Carbohydrate Solutions unit. It collaborated with LG Chem to produce lactic and polylactic acids for bioplastics, which is a plant-based product. Earlier, the company launched Biosolutions to expand its portfolio of sustainable higher-margin solutions, particularly for pharmaceuticals and personal care markets.
Such endeavors are likely to help attain 10% revenue growth on an annual basis. In a recent development, Archer Daniels entered a joint venture with Gevo to help meet the demand for low-carbon, sustainable aviation fuel. It also shut down its ethanol facility in Peoria last October. The company is utilizing innovative technologies to develop products and boost operating capabilities.
The company remains on track with the Readiness goals of driving business improvement, standardizing functions and enriching consumers’ experience. As a part of readiness efforts, it introduced a company-wide simplification initiative. Its strategic pillars for growth, as well as the aforementioned initiatives, are guided and supported by the Readiness program, focused on accelerating and enhancing competitiveness.
However, Archer Daniel’s has been reeling under the global impacts of inflation. The company has been witnessing higher IT operating and project-related costs. Elevated increased corporate costs, stemming from higher interest expenses, act as deterrents.
Other staples companies facing the heat due to inflation are Conagra Brands (CAG - Free Report) , Campbell Soup (CLX - Free Report) and TreeHouse Foods (THS - Free Report) .
Conagra has been encountering cost inflation and supply-chain challenges for a while now. Management expects the inflationary landscape to persist in fiscal 2023.
It anticipates supply-chain hurdles associated with the dynamic landscape. Gross inflation (input cost inflation before hedging and other sourcing gains) is, however, anticipated to moderate through the remaining part of fiscal 2023.
Campbell Soup has been struggling with cost inflation for a while. During the first quarter of fiscal 2023, the company’s adjusted gross profit margin contracted 30 basis points (bps) to 32.2% due to continued cost inflation and increased other supply-chain costs, and unfavorable volume/ mix.
Inflation and increased other supply-chain costs had an adverse impact of 1,260 basis points (bps). On its last reported quarter’s earnings call, management expected to keep witnessing cost inflation throughout fiscal 2023.
Tree House highlighted that input cost inflation continued across certain commodities like coco. The company has been seeing the impact of rising input costs across non-trading commodities like boil blades, and commodity derivatives like corn syrup and casing.
Headwinds related to labor and supply chains continue to affect the industry persistently. Management anticipates flavor and supply chain-related issues to continue.