Archer Daniels Midland 2006 Annual Report Download - page 29

2006 Annual Report 27
primarily due to disruptions in North American grain origination
and export activities caused by the hurricanes in the gulf coast
region. Other sales decreased 3% to $4.4 billion primarily due to
decreased average selling prices of cocoa products and lower sales
volumes of formula feed products. These decreases were partially
offset by increased average selling prices of wheat flour products due
to higher commodity prices.
Cost of products sold increased $118 million to $33.6 billion due
primarily to higher average prices of agricultural commodities and
increased manufacturing costs, partially offset by currency exchange
rate decreases of $389 million. Manufacturing costs increased
$399 million primarily due to increased energy costs, a charge for
abandonment and write-down of long-lived assets, and increased
employee-related costs.
Selling, general, and administrative expenses increased
$112 million to $1.2 billion principally due to increased employee-
related costs, including a $31 million charge related to the adoption
of SFAS 123(R), $20 million of severance costs associated with
the closure of a citric acid plant, and increased provisions for
doubtful accounts.
Other income decreased $84 million due primarily to a
$73 million decrease in realized securities gains, a $55 million
decrease in equity in earnings of affiliates, and a $39 million
increase in interest expense, partially offset by a $69 million
increase in investment income. The decrease in realized securities
gains is primarily due to last year’s $114 million realized securities
gain from the sale of Tate & Lyle PLC shares, partially offset by
$40 million of realized securities gains during 2006. The decrease
in equity in earnings of affiliates is primarily due to last year’s CIP
Gain and lower valuations of the Company’s private equity fund
investments, partially offset by improved earnings of the Company’s
Asian oilseed crushing ventures. Interest expense increased primarily
due to higher average borrowing levels and interest rates. Investment
income increased primarily due to the reversal of $19 million of
Brazilian transactional taxes previously assessed on investment
income upon positive resolution in the Brazilian Supreme Court,
higher levels of invested funds, and higher interest rates.
Operating profit by segment is as follows:
2006 2005 Change
(In thousands)
Oilseeds Processing . . . . . . . . . . . . . . . . . . . $ 598,415 $ 344,654 $ 253,761
Corn Processing
Sweeteners and Starches . . . . . . . . . . . . 431,662 271,487 160,175
Bioproducts ...................... 445,696 258,746 186,950
Total Corn Processing . . . . . . . . . . . 877,358 530,233 347,125
Agricultural Services . . . . . . . . . . . . . . . . . . 275,469 261,659 13,810
Other
Food and Feed Ingredients . . . . . . . . . . 159,123 263,617 (104,494)
Financial ........................ 150,826 150,777 49
Total Other .................... 309,949 414,394 (104,445)
Total Segment Operating Profit . . . . . . 2,061,191 1,550,940 510,251
Corporate. . . . . . . . . . . . . . . . . . . . . . . . . . . (205,941) (34,565) (171,376)
Earnings Before Income Taxes . . . . . . . $1,855,250 $1,516,375 $ 338,875
Oilseeds Processing operating profits increased $254 million to
$598 million primarily due to improved market conditions in all
geographic regions. European processing results improved principally
due to strong demand for biodiesel and abundant rapeseed supplies
in Europe. This strong demand for biodiesel in Europe increased
European vegetable oil demand and resulted in improved oilseeds
processing results. Abundant rapeseed supplies in Europe resulted
in lower rapeseed price levels. North American processing results
improved principally due to abundant oilseed supplies in the United
States and good demand for soybean meal. Vegetable oil values were
solid as the markets anticipate new demand from the developing
U.S. biodiesel industry. South American operating results increased
primarily due to improved origination activities and a $27 million
credit for Brazilian transactional taxes. Operating results in Asia
increased due to improved soy crushing margins and improved
palm operations. Operating profits include a $14 million charge for
abandonment and write-down of long-lived assets and a $6 million
charge related to the adoption of FIN 47. Last year’s operating profits
include a charge of $13 million for abandonment and write-down of
long-lived assets.
Corn Processing operating profits increased $347 million to
$877 million primarily due to higher average selling prices, increased
sales volumes, and lower net corn costs, partially offset by increased
energy costs. Sweeteners and Starches operating profits increased
$160 million due primarily to decreased net corn costs and higher
average sales prices and sales volumes. Sales volumes and prices have
increased primarily due to good demand for sweetener and starch
products. These increases were partially offset by increased energy
costs. Sweeteners and Starches operating profits include a $5 million
charge related to the adoption of FIN 47. Bioproducts operating
profits increased $187 million primarily due to higher ethanol sales