Nutrition marrs an otherwise great year for ADM

By Jess Halliday and Lorraine Heller

- Last updated on GMT

Related tags Nutrition Marketing Health

ADM's food and feed ingredients were a blip on the face of an
otherwise rosy full year 2006, due to a slip in operating profits
partly attributed natural health and nutrition operations.

The US agri-giant yesterday announced that net earnings for its final quarter more than doubled, pushing up earnings for the year ended June 30 2006 by 26 percent to $1.3bn. According to ADM's president and chief executive officer Patricia Woertz, the company is well positioned to capitalize on opportunities for continued growth.

A weak performance from the company's natural health and nutrition, wheat milling and cocoa operations resulted in a $105m decline in operating profit in its food and feed business for the year to $159m. The sector was also impacted by asset abandonment charges.

In its conference call to discuss the results, the company did not give reasons for the health and nutrition results, which seem to go against the overall market grain towards healthier eating.

"Decline in food and feed ingredients was mainly due to poor results in the specialty food ingredients sector,"​ said senior VP corporate affairs Brian Peterson in a conference call to discuss the results.

ADM's portfolio of nutrition and health ingredients is made up of isoflavones, healthful vegetable oils, natural-source vitamin E, soy proteins and branded of plant sterols.

In its publicity material ADM touts the nutrition field as ranking among the fastest-growing market segments in the worldwide food industry.

"At ADM we apply our expertise in the processing of virtually every food crop, to identify and extract compounds that have proven health benefits,"​ it says.

Demand for sports and energy beverages, however, was good news for the company's sweeteners and starches operations, which increased its earnings by 59 percent to $431m for the year.

"Sweetener industry volumes sales are growing primarily due to growth in sales of power and every drinks,"​ said Peterson.

For the company at large, new developments announced in the fourth quarter included plans for a new cocoa plant in Hazleton, Pennsylvania, as well as ethanol expansion in Iowa and the expansion of its oil refinery in Hamburg, Germany.

The company's segment operating profit was up 82 percent for the quarter and 33 percent for the year, to reach a total of $2bn.

Net sales, however, saw a much more moderate increase of just 2 percent to $37bn, compared to $36bn last year.

ADM's oilseed processing business also recorded a strong performance on the back of improved market conditions in all markets, with operating profit rising 73 percent to $598m.

The increased profit from this segment comes just a week after competitor Bunge reported a sharp fall in profit after farmers' protests in Brazil disrupted its oilseed processing business.

The positive results come at a good time for ADM, which has recently been hit by an internal scandal, after a number of its employees improperly graded some of its grain export shipments.

As a result of the violations, the company fired three of its employees and disciplined others.

"Our internal review indicates that sales to only one customer were involved where these improper actions occurred. We are in the process of notifying this customer,"​ said the firm in a statement.

ADM would not respond to additional questions regarding the matter.

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