ADM ‘committed’ to Graincorp deal as profit slumps

10/10/2018 Posted by admin

Archer Daniels Midland, the US agribusiness giant bidding $2.7 billion for Graincorp, reported a 60 per cent fall in its quarterly profit on Monday, due partly to the US drought.
Nanjing Night Net

Net profit for the September quarter fell to $US182 million, from $US460 million a year earlier. Sales were flat, falling 0.4 per cent to $US21.8 billion. ADM shares are yet to trade this week as the market was closed due to Hurricane Sandy, but the figures beat analyst estimates.

Meanwhile, Summa Group, Russia’s biggest port operator, is raising money for a foreign grain trading acquisition and was considering an offer for Graincorp before ADM made its takeover bid, Bloomberg says quoting two people with knowledge of the matter.

The Moscow-based company is seeking to expand its presence in Asia and around the world, and hasn’t ruled out a counterbid for Graincorp, according to a third person, who asked not to be identified before plans are decided.

Summa submitted a formal request to VEB, the Russian development bank where Prime Minister Dmitry Medvedev is supervisory board chairman, to fund a possible acquisition of GrainCorp, said the two people, who declined to be identified because the information is private.

Commitment to deal

ADM chief executive Patricia Woertz said first quarter results were mixed. “Oilseeds performance was strong. The ethanol industry experienced sustained negative margins and Agricultural Services managed well through a complicated quarter, challenged by the impacts of the drought.”

Asked why ADM bought 10 per cent of Graincorp before launching the takeover, Ms Woertz said it was “quite common in Australia to do a pre-bid stake, and I think it shows our commitment to wanting to do a deal with them”.

ADM and Graincorp were going through an engagement process and Ms Woertz would not comment on next steps.

“I think it’s premature … They’re evaluating our bid as they have said, and we’ll leave it there. The investment itself is, of course, in line with our strategy, as we’ve discussed before, investing globally in oilseeds and ag services. It’s part of our ongoing portfolio management, as I mentioned,” Ms Woertz said.

“And it will meet our financial hurdles as we continue to be disciplined, as we look at these kinds of opportunities. So I’m very proud of the work we did getting to this point. I think we have good capabilities to manage this kind of a deal, this kind of integration, and we look forward to hearing from them.”

Chief operating officer Juan Luciano batted away a question, on whether ADM would retain Graincorp’s malt business if its takeover bid succeeded.

“We like the fact that this is a global business with a lot of scale. We like that it has a good position with their customers. Other than that, without due diligence, very hard to tell. We did all this with public information without further due diligence, very hard to make an assessment.”

with Bloomberg

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