Archer-Daniels-Midland (ADM) is the largest publicly traded farm products corporation with a market cap of $34 billion. The company is nearly 3 times larger than its closest rival, Bunge Limited (BG) which has a market cap of $13 billion. When I last analyzed Archer-Daniels-Midland, I was impressed with the management’s ROIC improvements and strong third quarter results.
Archer-Daniels-Midland has a long history of success. The company has increased its dividend payments for 39 consecutive years, making it a Dividend Aristocrat. Archer-Daniels-Midland’s business operations and competitive advantage are analyzed in part 50 of the 54 part Dividend Aristocrats In Focus series.
Business Overview
Archer-Daniels-Midland operations are divided into 3 segments: Oilseeds Processing, Corn Processing, and Agricultural Services. The percentage of total operating profit each segment has generated for Archer-Daniels-Midland over the first 9 months of fiscal 2014 is shown below to illustrate the comparative size of each segment:
Careful readers will notice this only sums to 98% of total operating profits. Archer-Daniels-Midland has a small “Other Operating Income” segment that is a catch-all for smaller operations. It was responsible for the remaining 2% of operation income.
Each of Archer-Daniels-Midlands primary segments are home to several smaller divisions. The operations of each segment are examined in the following three sections.
Oilseeds Processing
Archer-Daniels-Midland’s Oilseeds Processing segment has generated the most operating income for the company through the first 9 months of fiscal 2014. The Oilseed processing segment originates, crushes, processes, and merchandises oilseeds which include soybeans, conttonseed, sunflower seeds, canola, rapeseed, and flaxseed into vegetable oil and protein meal. The Oilseed Processing segment further breaks down into four divisions. Each divisions percentage of total operating income generated for the Oilseeds Processing segment is shown below.
