By Karl Plume
CHICAGO (Reuters) -Archer-Daniels-Midland beat Wall Street expectations for second-quarter profit on Tuesday and raised its 2023 earnings outlook, as the grains merchant benefited from a record Brazilian harvest and robust global demand.
Results, however, were below ADM's record second quarter a year ago due to headwinds from lower oilseed processing margins and reduced North American crop exports.
ADM shares were up 1.7% at midmorning.
The earnings beat extended a streak of better-than-anticipated profits for the company, which makes money by processing, trading and shipping crops around the world, often thriving when crises such as droughts or wars trigger shortages.
ADM raised its full-year 2023 earnings guidance to "around $7 per share," at the high end of a previous outlook range of $6 to $7.
ADM and its agribusiness peers, including Bunge (NYSE:BG), Cargill and Louis Dreyfus, have capitalized on strong demand for food, feed and biofuel, while global food supply chain disruptions boosted prices.
"The world has become a more complicated place where geopolitics and ... the weather has become more violent and more volatile," CEO Juan Luciano said. "All that volatility and all that uncertainty increases the value of our investments."
But rising raw commodity costs and tight crop supplies have squeezed margins for the grains traders.
ADM posted lower year-over-year results in its three largest business segments.
Reduced crushing margins and historically weak U.S. crop exports weighed on results from ADM's Ag Services and Oilseeds segment, its largest by revenue and volume.
ADM's Carbohydrate Solutions unit capitalized on strong demand for sweeteners and starches, though results were dented by weaker ethanol margins.
Results in the company's high-margin Nutrition segment struggled in what ADM called a "challenging demand environment."
ADM posted an adjusted profit of $1.89 per share for the three months ended June 30, compared with analysts' average estimate of $1.60 per share, according to Refinitiv data.