Archer Daniels Midland 2007 Annual Report Download - page 35

27
Item 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (Continued)
Oilseeds Processing sales increased $64 million to $11.9 billion principally due to higher average selling prices of
South American oilseed exports and of vegetable oil. These increases were partially offset by lower average selling
prices of protein meal. Corn Processing sales increased 11% to $4.9 billion due to sales increases in both
Sweeteners and Starches and Bioproducts. Sweeteners and Starches sales increased due to higher average selling
prices and sales volumes. Sales volumes and prices have increased primarily due to solid demand for sweetener
and starch products. Bioproducts sales increased primarily due to increased sales volumes and average selling
prices of ethanol, partially offset by lower average selling prices of lysine. The increases in ethanol sales volumes
and sales prices were principally due to increased demand from gasoline refiners as refiners used ethanol to replace
MTBE as a gasoline additive and to increased gasoline prices. Agricultural Services sales increased 2% to $15.4
billion primarily due to increased commodity prices in North America and, to a lesser extent, increased barge
freight rates as the gulf coast hurricanes reduced barge capacities and created strong demand for North American
river transportation. These increases were partially offset by decreased commodity sales volumes in North
America. The decreased sales volumes were 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, an $86 million
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 the $114
million realized securities gain in 2005 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 the CIP
Gain in 2005 and lower valuations of the Company’s private equity fund investments in 2006, 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.