(Recasts; adds CEO’s comment and analyst comment)
By P.J. Huffstutter and Shanti S Nair
CHICAGO/BENGALURU, April 29 (Reuters) - Global grains trader Archer Daniels Midland Co reported a drop in first-quarter revenues on Wednesday but topped Wall Street profit estimates, helped by growth in its nutritional businesses and as its agricultural services group got a boost from robust Brazilian farmer selling.
ADM’s results offer the first look at how the pandemic is impacting the world’s largest grain traders, as global food supply chains are breaking, U.S. meat plants are shuttering, farmers are forced to destroy crops and animals, and thousands of U.S. meat and food-processing workers have been infected with the coronavirus.
“There are many unknowns, and ADM isn’t immune from some of the negative effects of this pandemic,” the company’s chief executive, Juan Luciano, said. He said the company is “operating around the globe with very minimal disruptions.”
Analysts said that lower-than-expected tax expenses, thanks in part to U.S. tax credits that were passed into law late last year, also drove the profit beat.
The company’s biggest segment in terms of revenue, Ag Services and Oilseeds, reported a rise in operating profit of 1.2%, to $422 million, in the first quarter. Profit in the nutrition unit jumped 75.3% to $142 million.
ADM’s revenue fell 2.2% to about $15 billion.
As South American farmers sold off more of their grain, ADM said it was able to tap into that volume to generate better profit margins in the buying, selling and processing of the crops - a business notorious for thin profits and high market volatility.
That was offset somewhat by farmers in North America, who have been storing their corn and soybeans - rather than selling them - as commodity prices have plummeted due to the spreading coronavirus and unsteady export demand.
While the first quarter covered the time when the coronavirus pandemic was rapidly spreading across the United States, it does not reflect the more recent plunge of oil futures into negative territory and the shuttering of ethanol plants.
The company, once a biofuel pioneer that now is looking to curtail its ethanol operations, has had to temporarily idle ethanol production at two of its corn dry mill facilities due to lower gasoline demand as the pandemic has kept people at home.
ADM’s Vantage Corn Processors, the wholly-owned subsidiary that holds some of its dry ethanol mills, reported a $31 million quarterly loss, compared to a $39 million loss for the same period a year earlier. The sector continued to face tough industry margins “caused by significantly decreased demand,” the company said. (Reporting by Shanti S Nair in Bengaluru and P.J. Huffstutter in Chicago; Editing by Leslie Adler)