Archer-Daniels-Midland Company: Fiscal 2021 Form 10-K Summary
Business context and reporting period
ADM is a global agricultural origination, processing, human and animal nutrition, renewable fuels, and bio-based products company. Operations are reported through Ag Services and Oilseeds, Carbohydrate Solutions, Nutrition, and Other Business. This filing covers the fiscal year ended December 31, 2021; it is not a standalone fourth-quarter filing.
Key financial metrics
| Metric | 2021 | 2020 | Change |
|---|---|---|---|
| Revenue | $85.249 billion | $64.355 billion | +$20.894 billion |
| Gross profit | $5.987 billion | $4.453 billion | +34% |
| Operating profit before corporate | $4.638 billion | $3.455 billion | +34% |
| Earnings before income taxes | $3.313 billion | $1.883 billion | +$1.430 billion |
| Net earnings attributable to controlling interests | $2.709 billion | $1.772 billion | +53% |
| Diluted EPS | $4.79 | $3.15 | +$1.64 |
| Adjusted diluted EPS | $5.19 | $3.59 | +$1.60 |
| Adjusted EBITDA | $4.907 billion | $3.660 billion | +34% |
| Cash provided by operating activities | $6.595 billion | $(2.386) billion | Improved by $8.981 billion |
Gross margin was approximately 7.0% of revenue in 2021 versus approximately 6.9% in 2020; however, ADM cautions that revenue-based margins are less informative in commodity businesses because selling prices and raw-material costs move together.
- Ag Services and Oilseeds revenue was $67.047 billion and segment operating profit was $2.775 billion, up from $2.105 billion.
- Carbohydrate Solutions revenue was $11.110 billion and segment operating profit was $1.283 billion, up from $717 million.
- Nutrition revenue was $6.712 billion and segment operating profit was $691 million, up from $574 million.
- Capital expenditures were $1.169 billion, compared with $823 million in 2020.
- Dividends paid were $834 million, or $1.48 per share for the year.
Liquidity, debt, and balance sheet
- Cash and cash equivalents were $943 million; cash, cash equivalents, and short-term marketable securities were approximately $0.9 billion.
- Total assets were $56.136 billion and shareholders’ equity was $22.508 billion.
- Long-term debt, including current maturities, was $8.581 billion; short-term debt was $958 million.
- Long-term debt to total capital declined to 26% from 28%; net debt to capital declined to 28% from 32%.
- Credit lines totaled $11.2 billion, of which $8.1 billion was unused. Accounts receivable securitization programs provided up to $2.3 billion, with $2.2 billion utilized at year-end.
- Commercial paper outstanding was $0.8 billion. ADM reported compliance with its debt covenants, and the major credit agencies maintained investment-grade ratings with stable outlooks.
Material changes versus 2020
- Results benefited from higher commodity prices, strong oilseed crushing margins, stronger demand for refined oils and starches, improved ethanol conditions late in the year, and broad strength in Human Nutrition.
- Carbohydrate Solutions improved materially as ethanol production resumed at two dry mills in April 2021 and Vantage Corn Processors benefited from improved fuel ethanol and alcohol margins.
- Operating cash flow recovered sharply from a 2020 use of cash, partly reflecting working-capital changes and the absence of the prior year’s deferred-consideration effect from receivables securitization.
- ADM acquired businesses in Nutrition for aggregate consideration of approximately $1.6 billion, including P4, Deerland, and Sojaprotein. The acquisitions were not significant to consolidated 2021 revenue or earnings because they closed late in the year.
- ADM issued $750 million of 2.700% notes due 2051 and €500 million of fixed-to-floating notes due 2022, while redeeming $500 million of 2.750% notes due 2025 and recording a $36 million debt-extinguishment loss.
- The company recorded a $83 million non-cash pension settlement charge after transferring approximately $0.7 billion of pension obligations through group annuity contracts.
- Asset impairment, exit, and restructuring costs increased to $164 million from $80 million.
Guidance, outlook, commentary, and risks
- For 2022, ADM expected capital expenditures of approximately $1.3 billion, dividends of approximately $0.9 billion, and up to $150 million of share repurchases, subject to strategic uses of capital, operating cash flow, and working-capital conditions.
- Management’s strategy centers on Productivity and Innovation, including the 1ADM transformation program, technology and automation, customer-focused innovation, sustainability-driven products, capacity expansion, and acquisitions.
- ADM expects to spend approximately $170 million to $300 million on capital projects supporting its Strive 35 environmental targets; $15 million was spent on such projects in 2021.
- Key exposures include agricultural commodity prices and availability, weather and climate change, energy and transportation costs, foreign exchange, interest rates, trade and agricultural policy, carbon regulation, food and feed safety, pandemics, labor availability, cyberattacks, and disruptions to logistics or water supplies.
- ADM’s commodity inventories and contracts include substantial fair-value and Level 3 estimates. At year-end, market-valued inventories were $9.769 billion, commodity derivative assets were $1.362 billion, and commodity derivative liabilities were $1.759 billion.
- ADM faces ongoing tax matters, including disputes in Argentina and the Netherlands. The Netherlands matter involved a tax assessment of $92 million plus $33 million of interest as of year-end; the company accrued its best estimate and expects further proceedings.
- Several ethanol-related putative class actions allege benchmark-price manipulation and related antitrust or state-law violations. ADM denies liability and states that it cannot predict the outcome, although it believes the matters will not materially affect financial condition, results, or cash flows.
- The company’s forward-looking statements are subject to customary uncertainties, and ADM assumes no obligation to update them.
Important facts for investors to verify
- Whether the 2021 earnings improvement is sustained after normalizing for commodity prices, tight spreads, ethanol conditions, foreign exchange, and specified items.
- The contribution, integration progress, purchase-price allocations, and potential earn-out or put exposure associated with the 2021 Nutrition acquisitions.
- Commodity inventory, derivative, basis, counterparty, and working-capital exposures, including the sensitivity of fair values to local market conditions.
- Debt maturities, particularly the $570 million of current long-term debt maturities and the €500 million notes due in 2022, together with commercial-paper and receivables-securitization availability.
- The timing and cost of planned capital projects, including the North Dakota soybean processing and refinery project and Strive 35 investments.
- The status and potential financial impact of tax assessments, ethanol litigation, environmental requirements, carbon-pricing regimes, and other legal proceedings.
- Internal-control scope: management and the auditor excluded P4, Deerland, and Sojaprotein from the 2021 internal-control assessment because they were acquired during the year, although the overall internal-control opinion was unqualified.