Tighter focus will benefit Archer Daniels

Article Excerpt

ARCHER DANIELS MIDLAND CO. $41 (New York symbol ADM; Aggressive Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 559.2 million; Market cap: $22.9 billion; Price-to-sales ratio: 0.4; Divd. yield: 3.4%; TSINetwork Rating: Above Average; www.adm.com) processes corn, wheat, soybeans, flaxseed, peanuts and other crops to make a variety of ingredients such as flour, oils and sweeteners. From corn, the company also makes ethanol from corn. Refineries add ethanol to gasoline to cut vehicle emissions. Ethanol spinoff would unlock value Archer is now considering spinning off or selling its ethanol business. That’s because its profitability has suffered after China hiked import taxes on the biofuel in 2017, and then twice in 2018. As well, China is increasing its domestic capacity, which has hurt demand and prices for U.S. ethanol. Rising corn prices have also squeezed its profit margins. A spinoff would let the parent company focus on its more-profitable operations, many of them added through acquisitions. For example, in late 2014, Archer paid $3.1 billion for…

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