Raises dividend payout ratio to 30 to 40 percent as part of balanced capital allocation framework
Plans to grow specialty food ingredient sales from $2.5 billion to $10 billion
CHICAGO--(BUSINESS WIRE)--Archer Daniels Midland Company (NYSE: ADM) today outlined a
comprehensive strategy to grow returns and economic value added (EVA) by
setting the competitive standard for the industries in which it operates
and by implementing a balanced capital allocation framework that
includes an increase in the company’s dividend payout ratio.
“Over the past few years, we’ve been working to grow ADM’s earnings
power and create greater value for our customers and our shareholders,”
Patricia Woertz, chairman and CEO, told analysts and shareholders at
ADM’s Investor Day. “We’ve made significant progress toward operational
excellence; we’ve developed and implemented an aggressive strategy for
growth; we’ve put the company in a very strong position financially; and
we have strengthened and developed the organization.
“Today, our company is exceptionally well-positioned—with an excellent
team managing the business and strong trends supporting our continued
growth.”
President and Chief Operating Officer Juan Luciano, who will become
ADM’s CEO effective Jan. 1, discussed actions the company is taking to
increase the number of levers under its control:
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Optimizing the core business through increased destination marketing,
portfolio management and an enhanced mix of value-added products.
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Driving operational efficiencies by leveraging technology for
competitive advantage, standardizing for scale, and optimizing
critical business processes and systems to improve productivity.
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Expanding strategically, through geographic expansion, by growing the
company’s market-facing units, and by incubating an innovation
platform.
“Our focus on these levers will enable us to fully capitalize on
enduring trends, set the competitive standard in our industries and
maintain our balanced approach to capital allocation,” Luciano said.
Ray Young, senior vice president and chief financial officer, reiterated
the company’s target adjusted return on invested capital of 10
percent—200 basis points above its 8 percent long-term weighted average
cost of capital—and its commitment to continue growing EVA.
The company will maintain a balanced approach to capital allocation, he
said, reinvesting approximately 30 to 40 percent of future operating
cash flows in value-generating capital projects, and the remaining 60 to
70 percent in strategic growth initiatives including mergers and
acquisitions and/or return of capital to shareholders. As part of this
capital allocation framework, and with growing earnings and more stable
cash flows, Young indicated that dividend payout ratio ranges will
increase from the historic range of 20 to 25 percent of earnings to a
medium-term range of 30 to 40 percent.
Other presentations outlined ADM’s plans to set the competitive
standards in the industries in which it operates:
With the industry’s most diverse geographic footprint and product
portfolio, Oilseeds Processing has many more opportunities to
grow EVA. Among its most significant projects, the business is growing
its specialty products portfolio to serve growing demand across Brazil
and expanding its origination network in Brazil’s northern frontier
region, where soybean production is projected to continue growing at a
20 percent compound annual rate through 2017.
Leaders of the company’s Corn Processing business said that while
the business has performed well in 2014, there remain significant
opportunities for further improvement and growth. The business has only
just begun expanding its geographic footprint outside the U.S.;
increasingly robust exports are expected to support favorable results in
the U.S. ethanol business; and the Sweeteners & Starches group is
continuing to expand the range of higher-margin products it generates
from raw material streams.
The Agricultural Services business unit plans to expand its crop
origination volumes outside the U.S. with the goal of doubling handling
volumes worldwide. The business also plans to expand its destination and
distribution network, which provides an opportunity to triple
margin-per-ton in the distribution network.
The company has set a goal of growing sales in its new WILD Flavors
and Specialty Ingredients business unit to $10 billion from $2.5
billion. Executives reiterated that combining the capabilities of newly
acquired WILD Flavors GmbH with ADM’s existing specialty ingredients
businesses should drive an estimated $125 million in revenue and cost
synergies within three years.
Research and Development leaders said that a wide range of
operational excellence and process-improvement initiatives should yield
$350 million in incremental cost savings by 2019. Executives also
discussed the company’s rich product-development pipeline to advance the
company’s ability to serve evolving customer demand and to drive sales
growth across the business.
Forward-Looking Statements
Some of the above statements constitute forward-looking statements.
ADM’s filings with the SEC provide detailed information on such
statements and risks, and should be consulted along with this release.
To the extent permitted under applicable law, ADM assumes no obligation
to update any forward-looking statements.
About ADM
For more than a century, the people of Archer Daniels Midland Company
(NYSE: ADM) have transformed crops into products that serve the vital
needs of a growing world. Today, we’re one of the world’s largest
agricultural processors and food ingredient providers, with more than
33,000 employees serving customers in more than 140 countries. With a
global value chain that includes more than 470 crop procurement
locations, 285 ingredient manufacturing facilities, 40 innovation
centers and the world’s premier crop transportation network, we connect
the harvest to the home, making products for food, animal feed, chemical
and energy uses. Learn more at www.adm.com.
Archer Daniels Midland Company
Media Relations
Jackie Anderson
media@adm.com
(217) 424-5413