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ADM second-quarter profit beats estimates on strong corn margins

CHICAGO (Reuters) – U.S. agricultural trader Archer Daniels Midland Co’s (ADM.N) second-quarter earnings topped expectations on Tuesday, helped by higher North American grain trading and handling profits and improved margins in sweeteners, starches and ethanol.

The company’s global trading desk, which lost money in three of the past six quarters, posted stronger results as stronger margins offset lower volumes, ADM said.

Chicago-based ADM, however, reported a drop in quarterly profit for its oilseeds processing segment as weak ample global supplies of high-protein feed grains weighed on soybean processing margins.

“Under some tough conditions, we were able to deliver strong growth in earnings and returns,” CEO Juan Luciano said on a conference call with analysts.

Plentiful global stocks of commodities such as corn, soybeans and wheat have squeezed profits over the past several quarters for ADM and rivals Bunge Ltd (BG.N), Cargill Inc [CARG.UL] and Louis Dreyfus Co [LOUDR.UL], collectively known as the ABCD quartet of global grain trading giants.

The companies make money buying, selling, storing and shipping grain and oilseeds around the world.

The global grains glut has raised expectations for a wave of consolidation within the grain trading industry, with Bunge already having been targeted for takeover by rival commodity trader Glencore in May.

ADM’s agricultural services unit, typically its largest in terms of revenue, saw profit jump 91 percent to $109 million in the second quarter. Revenue, however, fell to $5.85 billion, from $6.39 billion, a year earlier.

Corn processing, which includes Archer Daniels’ ethanol production plants, saw a near 37 percent rise in second-quarter profit, while its oilseeds processing segment, usually the company’s second-largest revenue generator, reported a 12.3 percent fall in quarterly profit.

Net profit attributable to the company fell to $276 million, or 48 cents a share, in the quarter ended June 30, from $284 million, or 48 cents a share, a year earlier.

Excluding items, the company earned 57 cents per share, beating analysts’ estimate of 52 cents, according to Thomson Reuters I/B/E/S.

Revenue fell 4.4 percent to $14.94 billion, missing estimates of $16.17 billion.

ADM shares were down about 0.4 percent in premarket trading at $42.00 after closing about 1 percent higher on Monday.

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