What caused revenue to fall?
Archer Daniels Midland’s (ADM) revenue fell 9% YoY (year-over-year) to $15.63 billion in 2Q16—compared to $17.19 billion in the same quarter last year. Sales also missed estimates by 7%. The company earns its revenue through its five segments—the Agricultural Services, Corn Processing, Oilseeds Processing, WILD Flavors and Specialty Ingredients, and Others. The Agricultural Services segment accounted for almost 41% of the company’s revenue in the second quarter.
What impacted the revenue?
Challenging market conditions and global dynamics continued throughout the second quarter. This impacted the company’s segmental performance. Revenue declined for three of the company’s major segments which contributed 95% to total revenue in the second quarter. The revenue fell 9% to $6.3 billion—compared to $7.0 billion in 2Q15 for the Agricultural Services segment. It was led by weak grain handling margins and merchandising results. There were limited merchandising, warehousing, and storage opportunities due to fewer grain carries.
The Oilseeds Processing segment’s revenue also fell 11% to $6.09 billion from $6.82 billion in 2Q15. Weak canola margins and lower soy crush margins caused lower crushing and origination results. The Corn Processing segment’s revenue also fell 9% compared to the same quarter last year, but it improved sequentially. Higher volumes and pricing along with improved margins from optimizing the product grind in the corn wet mills benefited sweeteners and starches’ results for the second quarter. The WILD Flavors segment was in line with the same quarter last year.
Peers’ revenue growth
Archer Daniels Midland’s industry competitors include Bunge (BG), Ingredion (INGR), and Flowers Foods (FLO). Bunge and Flowers Foods’ revenue both fell by 2% for their most recent reported quarter. Ingredion’s revenue was in line with its previous quarter. The PowerShares Buyback Achievers Portfolio (PKW) and the SPDR S&P Dividend ETF (SDY) both invest 1.3% of their portfolios in Archer Daniels Midland.