Additional $200 million savings expected from operational, technological improvements by end of 2014
Additional $1 billion in working cash expected from inventory reductions, asset sales in 2013
NEW YORK--(BUSINESS WIRE)--Operational improvements in areas ranging from energy and water use to
procurement, inventory management and maintenance are expected to enable
Archer Daniels Midland Company (NYSE: ADM) to realize $200 million in
additional cost savings by the end of 2014, and to free up an additional
$1 billion in cash by the end of 2013, the company will tell investors
today.
ADM Executive Vice President and Chief Operating Officer Juan Luciano
will tell the BMO Capital Markets 2013 Farm to Market Conference in New
York that the new targets reflect ADM’s focus on driving value from
existing assets as part of an overall emphasis on enhancing earnings
power and shareholder returns. He will note that company’s focus on what
it calls the 3C’s—cost, cash and capital—took on added importance in the
wake of last year’s U.S. drought, which sharply lowered the volume of
crops available for the company to originate and process.
Luciano will tell investors that ADM already achieved $150 million in
annual run‐rate savings following an organizational restructuring and
other cost-saving activities in 2012. The additional $200 million is
expected to come from reducing energy and water use; implementing a
companywide maintenance-management system; standardizing processes,
procedures and inventory controls; and leveraging the company’s scale in
the area of procurement.
The additional $1 billion in working cash improvements would bring the
total the company has unlocked since mid-2012 to $2 billion. ADM already
realized $1 billion in the last half of 2012 through better
inventory-management; monetization of underutilized assets as part of an
ongoing portfolio management effort; extracting cash from various joint
ventures; and improved processes for managing payables and receivables.
Luciano will note that the company’s employees have contributed more
than 1,700 suggestions for further cash improvements, and that these
will help ADM reach the next $1 billion milestone.
Capital Project Review Highlights Global Expansion
In a review of major strategic growth projects ADM has completed in
recent years, Luciano will explain that discipline and effective
execution strengthened returns on the investments. Among the highlights
he will cite:
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The recent opening of a large soybean crush plant in Paraguay was
completed on-time and several million dollars under budget, and its
first quarter operating profit exceeded projections.
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The 2012 acquisition of a port in Belém, Brazil, will significantly
enhance ADM’s ability to export grain from the country’s northern and
western regions.
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ADM captured 6.3 million Euros in first-year synergies following its
2011 acquisition of Poland’s Elstar Oils. Original projections were
for synergies of about 4 million Euros.
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The company’s Olenex edible oils joint venture with Wilmar
International Limited, announced in the summer of 2012, has given ADM
the ability to offer customers a wider oils and fats product portfolio
with a relatively small capital outlay. Customer response to date has
been highly positive.
In addition, Luciano will note that the company’s planned acquisition of
Australia’s GrainCorp is expected to be earnings‐accretive in the first
full year, and that run‐rate synergies of A$50‐70 million are expected
by the end of year two. The transaction remains subject to approval from
governments and GrainCorp shareholders.
Optimism about Ethanol Business
Also at the BMO conference, Luciano will update investors on ADM’s
ethanol business. A gradual drawdown in Renewable Fuel Identification
Numbers, or RINs, and an increase in mandated demand should restore
balance to the market and improve margins, according to Luciano.
As demand increases further, and as ADM continues its work to improve
yields, reduce costs and capitalize on co-product opportunities, ADM
expects to drive better returns from the ethanol business.
Reiterating Return Focus
Luciano will also reiterate ADM’s goal of achieving an Adjusted Return
on Invested Capital of 200 basis points above the company’s Weighted
Average Cost of Capital. He will also note that the company aims to
achieve an Adjusted ROIC at least equal to WACC even at the bottom of
the cycle.
About ADM
For more than a century, the people of Archer Daniels Midland Company
(NYSE: ADM) have transformed crops into products that serve vital needs.
Today, 30,000 ADM employees around the globe convert oilseeds, corn,
wheat and cocoa into products for food, animal feed, industrial and
energy uses. With more than 265 processing plants, 460 crop procurement
facilities, and the world’s premier crop transportation network, ADM
helps connect the harvest to the home in more than 140 countries. For
more information about ADM and its products, visit www.adm.com.
Archer Daniels Midland Company
Media Relations
Jackie Anderson, 217-424-5413
media@adm.com