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UPDATE 2-ADM profit plunges more than 40% on U.S. weather, trade war woes

P.J. Huffstutter

(Adds details, company comments)

CHICAGO, Aug 1 (Reuters) - U.S. grains merchant and food processor Archer Daniels Midland Co on Thursday reported a 41.3% drop in second-quarter adjusted profit and missed Wall Street expectations, after being battered by the U.S.-China trade war and severe U.S. weather this spring that caused it significant supply-chain woes.

The company also pointed out future trouble: ripple effects from the outbreak of African swine fever, a fatal hog disease that has killed millions of pigs in China.

"We are also seeing early signs of how African swine fever might impact global animal protein markets and eventually support incremental soybean meal demand in key meat-producing regions outside of China," company Chairman and Chief Executive Juan Luciano said without elaborating.

The Chicago-based company's performance this year so far represents a sharp reversal of fortunes from last year, when ADM's profits surged after a drought in Argentina and the U.S.-China trade dispute boosted its trading and oilseed processing businesses.

For the second quarter ended June 30, all but one of ADM's business units reported a lower profit.

Its adjusted net earnings for the quarter fell to $340 million, or 60 cents per share, from $579 million, or $1.02 per share, a year earlier.

Revenue dropped 4.5% to $16.3 billion.

ADM had been expected to earn 61 cents per share, according to the mean Refinitiv estimate from 11 analysts.

The biggest drop was in the company's origination business. ADM said it struggled, in part, because corn and other U.S. crops struggled to compete for sales in export markets.

ADM executives had been banking on the trade war to have eased by the second quarter and had based a rebound of the company's operating performance in the second-half of this year on broad grain purchases from China this summer. Such big purchases have not materialized.


Beyond the trade war, heavy rains and flooding battered ADM during the quarter with "unfavorable weather impacts" of about $65 million to its operating profits.

ADM also cited poor U.S. weather for a nearly $60 million drop in operating profit in its first quarter and warned in April that lingering impacts would cut second-quarter earnings by $20 million to $30 million.

ADM and Bunge Ltd, as well as peers Cargill Inc and Louis Dreyfus Co, known as the ABCDs of global grain trading giants, all have wrestled with weather issues this year.

But ADM was particularly vulnerable to the flooding, analysts say, because unlike its rivals, the concentration of its assets are in the United States.

The company said it faced processing-plant downtime and barge shipping delays this spring as historic floods ravaged the central United States.

High water conditions were more severe than originally anticipated at the beginning of the quarter, ADM said in its earning statement, "causing a negative impact of approximately $40 million."

Meanwhile, its oilseeds' business North American crush volumes dropped and flooding caused production outages at its Quincy, Illinois, facility, "which had a negative impact of approximately $10 million," the company said.

ADM South American crushing and origination margins also were down because of higher soybean prices and lower China demand during the quarter.

Severe weather issues impacted ADM's carbohydrate solutions business and reduced segment results by $15 million, in part because of flood-related issues at its Columbus, Nebraska, facility, the company said.

The company, which has been pushing to cut its workforce and streamline operations to curb costs, said Thursday the results also include non-cash early retirement charges and global workforce restructuring charges of $101 million.

In April, ADM said it was seeking voluntary early retirements by some North American employees and may eliminate individual jobs as part of a restructuring effort. (Additional reporting by Taru Jain in Bengaluru; Editing by Steve Orlofsky and Bill Trott)