Archer-Daniels-Midland's (ADM) forges every link the food chain from field to processing to store. One of the world's largest processors of agricultural commodities, the company converts corn, oilseeds, and wheat into products for food, animal feed, industrial, and energy uses at some 300 processing plants worldwide. The company is also a leading manufacturer of protein meal, vegetable oil, corn sweeteners, flour, biodiesel, ethanol, and other value-added food and feed ingredients. ADM operates an extensive US grain elevator and global transportation network that buys, stores, transports, and resells feed commodities for the ag processing industry, connecting crops with markets on six continents.
ADM's businesses -- agricultural services (the largest, accounting for about 47% of sales), oilseeds (soybeans, cottonseed, canola, and flaxseed) processing (about 39%), and corn processing (about 13%) -- can be best understood in the light of changing agricultural commodity prices. Commodity prices impact sales and the cost of products sold. And, in ADM's corn and other food and feed processing operations, commodity prices raise (or lower) the cost of raw materials. Energy prices, weather events, crop health, as well as government programs and shifts in population, can also influence ADM's performance.
A big part of ADM's business is getting products from one place to another. It has developed a comprehensive transportation network that moves commodities and processed products around the world. It owns or leases trucks, trailers, railroad tank and hopper cars, river barges, towboats, and ocean-going vessels.
The US is ADM's largest market, accounting for about 49% of total sales. Switzerland and Germany each represent about 10%, with more than 140 other countries contributing the rest. ADM currently owns or leases about 300 processing plants and more than 460 procurement facilities, nearly 35% of which operate on international soil.
In 2014 ADM's sales fell about 10% to $81.2 billion. Sales of ag services and corn processing were off as lower prices offset a higher volumes of sales while oilseeds processing contended with lower volume and lower prices.All three segments posted 10% decreases in revenue.
ADM's net income, on the other hand, leaped 67% higher in 2015 to $2.25 billion.The profit came from an 11% lower cost of products because of large harvests in the US and South America.
Cash flow from operations was $4.9 billion for 2014 compared to $5.2 billion in 2013. The decrease was attributed to a change in segregated cash and investments and accrued expenses.
ADM's acquisitions of two companies that supply natural ingredients and foods give it a foothold in a fast growing facet of the food business as consumers seek more natural, healthier fare and shying away from processed products. The company created a division based on those acquisitions to supply natural flavor ingredients, flavor systems, proteins, emulsifiers, soluble fiber, polyols, hydrocolloids, sorbitol, xanthan gum, natural health and nutrition products, and other specialty food and feed ingredients.
The company continued its international expansion with activities in Central America and China. ADM opened distribution and merchandising offices in El Salvador and Guatemala in 2015. In China, the company is building a feed-premix plant in Zhangzhou, bringing the number of Chinese feed plants to four. Back in the US, ADM opened a feed plant in Minnesota for the growing Midwest market.
As the company adds new products to its portfolio, it is keeps an eye on operations that fail to meet expectations. To that end, in 2015 ADM sold its chocolate business to Cargill for about $440 million and its cocoa business, including equipment and facilities, to Singaporean ingredients company Olam International for about $1.2 billion.
Mergers and Acquisitions
ADM made two deals in 2015 that boost its transportation capacity South American and Europe. Agri Port Services, ADM's joint steamship agency with North Lilly International, acquired Blue Ocean Agencia Martima Ltd., which services vessels at ports in Brazil. In Europe AMD acquired complete ownership of North Star Shipping and Minmetal. The acquisition adds export facilities on the Black Sea from the port of Constanta, Romania.