ADM discusses planned changes in the ethanol sector
ADM’s planned sale of its 135 MMgy dry ethanol grinder in Peoria, Ill., And the recent announcement that the company is considering a partnership with Gevo Inc. on the production of alcohol in hydrocarbons will help ADM to significantly reduce its exposure to the fuel ethanol market while allowing the expertise and strengths of the company to capitalize on new opportunities, according to Juan Luciano, president and CEO of ADM.
Luciano discussed the two announcements on a third quarter earnings conference call on October 26. ADM announced on October 21 an agreement to sell the Peoria plant to the BioUrja group. The planned sale relates to ADM’s strategic review of its dry-milled ethanol assets. The company said it plans to redeploy the resulting capital to other strategic growth investments.
Less than a week later, ADM announcement it signed a memorandum of understanding with Gevo to support the production of sustainable aviation fuel (SAF) and other low carbon fuels from the raw material of alcohol. The MOU contemplates the production of ethanol and isobutanol that would be transformed into SAF and other hydrocarbons using Gevo technology. ADM said approximately 900 million gallons of ethanol produced at its Columbus, Nebraska, and Cedar Rapids, Iowa, dry plants, as well as its Decatur, Ill. Complex, should be turned with alcohol into a hydrocarbon, resulting in approximately 500 million gallons of SAF and other renewable hydrocarbons.
During the call for results, Luciano explained the market opportunity presented by SAF. He said the United States and the European Union have already set targets that will support nearly 4 billion gallons of annual production of FAS by 2030, and more than 45 billion by 2050.
ADM is also working on the production of other high added value products, including high purity corn-based lactic acid, which can be used in human, animal and cosmetic food, as well as industrial products such as bio-based plastic. The company signed a memorandum of understanding with LG Chem in mid-August to explore lactic acid production in the United States to meet these market needs.
ADM’s Carbohydrate Solutions business segment reported lower third quarter results. Starches and sweeteners, including ethanol production from the company’s wet plants, were run under dynamic market conditions, the company said, optimizing between sweeteners and ethanol production during the quarter. Results were down from the third quarter last year primarily due to higher input costs.
Vantage Corn Processors, which includes ADM’s dry ethanol plants, announced improved results from the third quarter of 2020. The company said the improvement was supported by the resumption of production at its two plants. dry run and improved margins on fuel ethanol, particularly late in the quarter.
The Carbohydrate Solutions business segment reported operating income of $ 213 million, compared to $ 146 million in the third quarter of last year. Vantage Corn Processors reported segment operating profit of $ 35 million, compared to a loss of $ 11 million for the same period of 2020.
Overall, ADM reported segment operating profit of $ 1 billion for the third quarter, up from $ 904 million for the same period last year. Adjusted operating income was $ 1.002 billion, compared to $ 849 million. Earnings per share rose to 93 cents, from 40 cents, while adjusted earnings per share were 97 cents, from 89 cents.