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UPDATE 1-ADM says GrainCorp deal delayed; adjusted profit misses view

Tom Polansek
Tuesday, 29 Oct 2013 | 12:26 PM ET

* Q3 revenue tops estimates

* Large harvests expected to boost results

* "Fundamentals should improve" - analyst

CHICAGO, Oct 29 (Reuters) - Archer Daniels Midland Co said on Tuesday its planned A$3.0 billion ($2.8 billion) acquisition of Australian grain handler GrainCorp Ltd will likely be delayed until early next year.

ADM, one of the world's top grain traders, also reported that adjusted third-quarter earnings fell, and missed estimates, as U.S. crop supplies remained tight following a historic U.S. drought last year.

ADM shares were up 2 percent at 40.61 as large harvests this year were expected to replenish inventories and boost results.

"ADM's fundamentals should improve, reflecting large global crop supplies and ongoing strong demand," said Ken Zaslow, an analyst for BMO Capital Markets.

The GrainCorp acquisition is part of ADM's strategy to expand globally and lead to increased exports to China and the Middle East. It is the latest move in the rapid consolidation of the global grains sector amid intense competition to feed fast-developing countries like China.

ADM had planned to complete the deal by the end of the year. It awaited approval from regulators in Australia and China, where GrainCorp has an edible oils facility.

Australian Treasurer Joe Hockey said this month the deadline for a regulatory decision was extended to Dec. 17 due to the size and "complex nature" of the transaction.

"We expect closing to be some time in the first quarter of 2014," ADM Chief Operating Officer Juan Luciano told analysts on a conference call.

ADM is among the four large players known as the "ABCD" companies that dominate the flow of agricultural goods around the world. The others are Bunge Ltd, Cargill Inc and Louis Dreyfus Corp.

Last year's U.S. drought hurt grain companies by slashing the volume of grain available for them to buy, sell, transport and process.

ADM's net earnings for the third quarter rose to $476 million, or 72 cents per share, from $182 million, or 28 cents, a year ago, as an accounting credit lifted results.

Adjusted earnings were 46 cents per share, down from 53 cents in the same period a year ago. Analysts expected 47 cents, according to Thomson Reuters I/B/E/S.

Profits in ADM's core agricultural services business dropped by $152 million to $102 million, after adjusting for special charges a year ago. Earnings from crop merchandising and handling declined by $104 million to $4 million as low U.S. crop supplies reduced export volumes and international merchandising was weak.

Revenue totaled $21.39 billion, down from $21.81 billion a year ago, but above expectations of $20.62 billion.

MASSIVE HARVESTS

The United States is set to harvest a record-large corn crop this year and the fourth largest soybean crop on record, according to the U.S. Department of Agriculture.

"Obviously a big crop will present to ADM and ag services an excellent opportunity to use all our assets," COO Luciano said on the conference call.

The USDA is set to update its 2013 crop production estimates in a monthly report on Nov. 8. Traders eagerly awaited the data after the department canceled October's crop report due to the partial U.S. government shutdown.

The U.S. corn harvest was 59 complete as of Sunday and the soybean harvest was 77 percent complete.

ADM also said it had no update for investors about a potential sale of its cocoa business. Cargill is in the final stages of a deal to buy the business, sources familiar with the discussions have said.