KANSAS CITY (B)--Archer Daniels Midland's quarterly operating profits fell short of Wall Street projections Oct. 19, but the agribusiness giant said conditions in business segments including ethanol and soy crushing are showing signs of improvement.

The Decatur, IL, company Oct. 19 reported fiscal first quarter profits of $109.4 million, or 17c per share. The figures compare with $36.4 million, or 6c per share a year ago. Sales of $4.6 billion were flat with the company's year-ago performance.

Excluding all one-time items, ADM's operating earnings of $30 million, or 5c per share, fell short of the 10c-per-share consensus earnings estimate of analysts polled by First Call/Thomson Financial. Last year, the company reported profits of $33 million, or 6c per share, on a like basis.

However, during a quarterly conference call, company officials noted signs of improvement from some key segments.

ADM's ethanol profits were "up sharply," senior vice president of corporate affairs Larry Cunningham told analysts.

He said the business continues to fare well despite ethanol spot prices of as much as $1.50 per gallon compared with about $1 a year ago.

The company claims 40% of the nation's ethanol capacity, and Cunningham said amid continuing strong national demand related to high petroleum prices, ADM expects to produce 775 million to 800 million gallons of the product this year.

Additionally, he said the company could transfer some of its other corn-processing operations into ethanol production if market conditions warrant such a move.

In addition to ethanol, the self-proclaimed "supermarket to the world" is benefiting from increasing soybean crush margins in the U.S. Cunningham said margins currently average about 60c per bushel, or about twice what they were at some points last year. The company attributes the performance improvement to capacity reductions across the industry.

Among its numerous other agricultural and commodity businesses, ADM noted its corn sweetener business continues to generate lower profits and sales volumes.

The company, like its competitors, said its high-fructose corn syrup business has been hampered by reduced demand from the soft drink industry, which faced its own volume issues related largely to a relatively cool, damp summer in the northeastern U.S.

In response to an analyst question, Cunningham said ADM would likely see some short-term costs related to the current recall of StarLink corn.

The corn variety, grown from genetically modified seeds sold by Aventis Corp., has been discovered in taco shells but has not been approved for human consumption. Aventis currently is buying all StarLink, but the issue has forced grain elevators and processors to test corn deliveries.

When asked if ADM would seek reimbursement from Aventis for any tests or other StarLink-related expenses, Cunningham said ADM is keeping track of all of its costs.

"We feel we're a victim of what's happened here," he said.

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