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Archer Daniels (ADM) Acquires Sojaprotein to Meet High Demand

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·5-min read
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  • ADM
  • TSN
  • HELE
  • ACI

Archer Daniels Midland Company ADM acquired one of the leading European providers of non-GMO soy ingredients, namely Sojaprotein. The move is part of the company’s efforts to expand in the alternative protein space to meet the growing demand for plant-based foods and beverages across Europe. The acquisition is likely to be accretive to ADM’s nutrition segment.

Other notable investments include opening a soy protein complex in Brazil, a pea protein plant in North Dakota, a joint venture with PlantPlus Foods and partnerships with startups like Air Protein. The global alternative protein industry is likely to reach $30 billion in the next decade.

Here’s What Else You Should Know

ADM has long been benefiting from the favorable demand, continued growth in the Nutrition segment and other strategic endeavors. It is also progressing well with its Readiness program, which is focused on accelerating and enhancing competitiveness.

Speaking of Archer Daniels’ nutrition segment, third-quarter 2021 revenues rose 17%, with year-over-year adjusted operating profit growth of 19.7%, owing to significant gains in the Human and Animal Nutrition units.

The Human Nutrition unit gained from better volume and favorable product mix and beverage strength, which drove Flavors’ results in the EMEA and North America. Solid demand for alternative proteins contributed to the Specialty Ingredients category. The Health & Wellness unit also witnessed robust quarterly growth, particularly in bioactives and fiber.

The company has been investing in bolt-on acquisitions to build a one-stop shop with top-notch ingredients and solutions for the Human Nutrition unit. It also ventured into the flavors space with the acquisition of WILD.

The Animal Nutrition unit grew more than two-fold year over year in the third quarter, driven by strength in amino acids as well as feed additives and ingredients, which somewhat offset elevated costs in LATAM and slower demand recovery in the APAC region.

The nutrition segment is likely to sustain momentum, with year-over-year earnings growth in the fourth quarter and operating profit growth of 20% in 2021. The segment is on its way to attaining $1-billion operating profit in the years ahead.

As a result, the company posted impressive third-quarter 2021 results, wherein both top and bottom lines advanced year over year. This marked the eighth straight quarter of adjusted operating profit growth. Revenues grew 34.5% year over year, driven by solid sales across the majority of the segments. Management remains optimistic about the fourth quarter and 2022 performance, driven by healthy global demand. The company also envisions another year of solid earnings growth.

In the past three months, shares of this Zacks Rank #3 (Hold) company have risen 8.6% compared with the industry’s growth of 4.4%.

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The company has been expanding its solutions portfolio, which forms part of its Carbohydrate Solutions unit. Archer Daniels collaborated with LG Chem to produce lactic and polylactic acids for bioplastics, a plant-based product.

Earlier, the company launched Biosolutions to expand its portfolio of sustainable higher-margin solutions, particularly for pharmaceuticals and personal care markets. Such endeavors are likely to help attain 10% revenue growth on an annual basis.

In a recent development, Archer Daniels entered a joint venture with Gevo to help meet the demand for low carbon sustainable aviation fuel. It also decided to shut down its ethanol facility in Peoria by the end of October. The company is also utilizing innovative technologies to develop products and boost operating capabilities.

However, ADM continues to witness higher SG&A expenses due to elevated performance-related compensation, project-related costs and shifting of costs from business segments to the centralized centers of excellence in supply chain and operations. For the fourth quarter of 2021, higher manufacturing costs also remain concerning for the Carbohydrates Solutions and Ag Services & Oilseeds segments.

Stocks to Consider

We have highlighted some better-ranked stocks from the broader Consumer Staples space, namely Albertsons Companies ACI, Helen of Troy HELE, and Tyson Foods TSN.

Albertsons Companies currently sports a Zacks Rank #1 (Strong Buy). ACI has a trailing four-quarter earnings surprise of 37.6%, on average. Shares of Albertsons Companies have gained 17.1% in the past three months. You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for sales for ACI’s current financial year suggests year-over-year growth of 3.6%, while the same for earnings per share indicates a decline of 16.7% from the year-ago period’s reported figure. ACI has an expected long-term earnings growth rate of 12%.

Helen of Troy presently carries a Zacks Rank #2 (Buy). HELE has a trailing four-quarter earnings surprise of 19.8%, on average. Shares of the company have gained 2.9% in the past three months.

The Zacks Consensus Estimate for Helen of Troy’s sales and earnings per share for the current financial year suggests a decline of 15.9% and 16.2%, respectively, from the year-ago period’s reported numbers. HELE has an expected long-term earnings growth rate of 8%.

Tyson Foods, a Zacks Rank #2 stock, has a trailing four-quarter earnings surprise of 25.2%, on average. Shares of TSN have gained 4.3% in the past three months.

The Zacks Consensus Estimate for Tyson Foods’ sales and earnings per share for the current financial year suggests growth of 14.6% and 3.6%, respectively, from the year-ago period’s reported figures. TSN has an expected long-term earnings growth rate of 7.5%.


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Helen of Troy Limited (HELE) : Free Stock Analysis Report

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