Company Overview
This MD&A should be read in conjunction with the accompanying unaudited consolidated financial statements.
The Company's operations are organized, managed, and classified into three reportable business segments: Ag Services and Oilseeds, Carbohydrate Solutions, and Nutrition. Each of these segments is organized based upon the nature of products and services offered. The Company's remaining operations are not reportable business segments, as defined by the applicable accounting standard, and are classified as Other Business. Financial information with respect to the Company's reportable business segments is set forth in Note 13 of "Notes to Consolidated Financial Statements" included in Item 1 herein, "Financial Statements".
The Company's recent significant portfolio actions and announcements include:
•the announcement inMarch 2021 of a newADM policy to protect forests, biodiversity and communities, furthering the Company's commitment to sustainable, ethical, and responsible production; •the announcement inApril 2021 of the resumption of dry mill ethanol production; •the announcement inMay 2021 ofADM's participation as a signatory to the German Charter for Diversity in the Workplace which aims to advance the recognition and inclusion of diversity in companies; •the announcement inMay 2021 of a plan to build a dedicated soybean crushing plant and refinery inNorth Dakota to meet fast-growing demand from food, feed, industrial and biofuel customers, including producers of renewable diesel, which is expected to be open in 2023; •the announcement inJune 2021 ofADM Ventures , the corporate venture capital arm ofADM , joining theGenesis Consortium , a global alliance of venture capital firms and corporations dedicated to supporting startups that leverage biology to promote human and planetary health; and •the announcement inJuly 2021 of an agreement to purchase, subject to regulatory approvals, Sojaprotein, a leading European provider of non-GMO soy ingredients.
The next phase of the Company's strategic transformation is focused on two strategic pillars: Productivity and Innovation.
The Productivity pillar includes (1) advancing the roles of the Company's Centers of Excellence in procurement, supply chain, and operations to deliver additional efficiencies across the enterprise; (2) continued roll out of the 1ADM business transformation program and implementation of improved standardized business processes; and (3) increased use of technology, analytics, and automation at production facilities, in offices, and with customers.
Innovation activities includes expansions and investments in (1) improving the customer experience, including leveraging producer relationships and enhancing the use of state-of-the-art digital technology to help customers grow; (2) sustainability-driven innovation, which encompasses the full range of products, solutions, capabilities, and commitments to serve customers' needs; and (3) growth initiatives, including organic growth to support additional capacity and meet growing demand, and mergers and acquisitions opportunities.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued) Environmental and Social Responsibility
The Company's new policy to protect forests, biodiversity, and communities
includes provisions that promote conservation of water resources and
biodiversity in agricultural landscapes, promote solutions to reduce climate
change and greenhouse gas emissions, and support agriculture as a means to
advance sustainable development by reducing poverty and increasing food
security. Additionally, the policy confirms
In 2020,
Operating Performance Indicators
The Company is exposed to certain risks inherent to an agricultural-based
commodity business. These risks are further described in Item 1A, "Risk Factors"
included in the Company's Annual Report on Form 10-K for the year ended
The Company's Ag Services and Oilseeds operations are principally agricultural commodity-based businesses where changes in selling prices move in relationship to changes in prices of the commodity-based agricultural raw materials. As a result, changes in agricultural commodity prices have relatively equal impacts on both revenues and cost of products sold. Therefore, changes in revenues of these businesses do not necessarily correspond to changes in margins or gross profit. Thus, gross margins per volume or metric ton are more meaningful than gross margins as percentage of revenues.
The Company's Carbohydrate Solutions operations and Nutrition businesses also utilize agricultural commodities (or products derived from agricultural commodities) as raw materials. However, in these operations, agricultural commodity market price changes do not necessarily correlate to changes in cost of products sold. Therefore, changes in revenues of these businesses may correspond to changes in margins or gross profit. Thus, gross margin rates are more meaningful as a performance indicator in these businesses.
The Company has consolidated subsidiaries in more than 70 countries. For the
majority of the Company's subsidiaries located outside
The Company measures its performance using key financial metrics including net earnings, gross margins, segment operating profit, return on invested capital, EBITDA, economic value added, manufacturing expenses, and selling, general, and administrative expenses. The Company's financial results can vary significantly due to changes in factors such as fluctuations in energy prices, weather conditions, crop plantings, government programs and policies, trade policies, changes in global demand, general global economic conditions, changes in standards of living, and global production of similar and competitive crops. Due to these unpredictable factors, the Company undertakes no responsibility for updating any forward-looking information contained within "Management's Discussion and Analysis of Financial Condition and Results of Operations."
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (Continued)
Market Factors Influencing Operations or Results in the Three Months Ended
The Company is subject to a variety of market factors which affect the Company's
operating results. In Ag Services and Oilseeds,
Three Months Ended
Net earnings attributable to controlling interests increased
Income tax expense increased
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