ADM's earnings rise on ethanol prices

January 4, 2007

BY Dave Nilles

The nation's largest ethanol producer had record net earnings for its second quarter, thanks in part to an increase in ethanol prices. Archer Daniels Midland Company (ADM) said its net earnings for the quarter ending Dec. 31, 2006, increased 20 percent to $441 million.

ADM's fiscal year ended June 30, 2006. "We had record results for the quarter and six months," said ADM President and CEO Patricia Woertz. "We are particularly pleased with the strong performance from all segments."

Ethanol, and to a lesser degree biodiesel, played a role in the increase. The company's corn processing operating profit increased $99 million to $335 million for the quarter and increased $235 million to $626 million for the six months ending Dec. 31. Increased starch, sweetener and ethanol selling prices contributed to the earnings improvement and were partially offset by increasing net corn costs, the company said.

Oilseed processing profits increased $64 million to $192 million for the quarter and increased $134 million to $362 million for the six months due principally to improved gross margins.

Overall, second quarter operating profit increased 46 percent to $767 million. Net earnings for the six months were $844 million, compared to $554 million for the same period in 2005.

At its Feb. 1 earnings conference call, ADM officials said they supported recent federal legislative activity to increase or enhance renewable fuels use. Senior Vice President Brian Peterson said ADM is supportive of an increase in the renewable fuels standard (RFS). The current RFS calls for 7.5 billion gallons of renewable fuels use in the United States by 2012. In his State of the Union address, President George W. Bush proposed a separate alternative fuels standard that would broaden the fuels included in the current RFS and increase the production target to 35 billion gallons. Various federal legislation increasing the current RFS has been proposed in Congress.

While supportive of renewed ethanol mandates, Peterson said it must consider feedstock supplies. "We're interested in seeing mandates and an increase in a renewable fuels standard be phased in to reflect the availability of raw materials," he said.

ADM is an investor in Mid-America Biofuels LLC, which operates a 30 MMgy biodiesel plant in Mexico, Mo. ADM is building biodiesel plants in Velva, N.D., and Rondonopolis, Brazil.

The company said its ethanol plant in Columbus, Neb., has started construction. ADM previously said it was building a 275 MMgy dry grind ethanol plant in Columbus.

ADM is also undergoing environmental permitting for a plant slated for Cedar Rapids, Iowa. The company already has operating plants in Decatur, Ill., Clinton, Iowa, Walhalla, N.D., Columbus, Neb., Marshall, Minn., Cedar Rapids and Peoria, Ill.

Dave Nilles is Online Editor for Ethanol Producer Magazine. Reach him at dnilles@bbibiofuels.com or (701) 373-0636.

Posted: 9:09 a.m. CST Thursday, February 1, 2007

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