Volume, Volatility trends impact Ardent Mills financial performance

USA- Ardent Mills LLC, the largest flour milling company in the United States, faced significant challenges in its financial performance during the first quarter of fiscal 2025, which concluded on August 25.

The results were disclosed in a Form 10-Q filed by Conagra Brands, Inc., which owns a 44% stake in Ardent Mills, on October 2.

The report revealed that diminished market volatility and softer volume trends adversely affected Ardent Mills’ profitability.

Equity method earnings for Conagra from its investment in Ardent Mills fell to US$29.1 million, marking an 18% decline from US$35.5 million during the same period last year.

Conagra’s filing noted, “Ardent Mills’ earnings for the first quarter of fiscal 2025 continued to reflect slightly lower volume trends as seen throughout the industry.”

This decline is part of a broader trend that has seen Ardent Mills’ profits erode from their peak levels in recent years.

For instance, first-quarter profits were US$49.2 million in fiscal 2023 and US$22 million in fiscal 2022.

During an analyst call on October 2, David S. Marberger, Conagra’s executive vice president and chief financial officer, emphasized that the lack of market volatility was a key factor in the reduced earnings.

“Our Ardent Mills joint venture continued to perform well in its core flour business but delivered lower commodity revenue in Q1 compared to last year due to lower market volatility,” he stated.

This sentiment reflects a broader industry trend where consumption patterns have shifted, contributing to decreased volume.

Ardent Mills has set an ambitious target of US$150 million in equity earnings for the full fiscal year.

However, Marberger acknowledged that achieving this goal will depend on increased market volatility.

He explained, “Ardent’s results can fluctuate based on volatility with the wheat market… So we’re holding our forecast for the year with Ardent.”

He also noted that while the core milling business remains strong, the commodity revenue segment is more susceptible to fluctuations.

In addition to these financial challenges, Conagra reported paying US$16.9 million in withholding taxes during the first quarter related to its restructuring of ownership interests in Ardent Mills.

This restructuring occurred in fiscal 2021, resulting in a non-cash tax benefit of US$115.6 million.

Ardent Mills operates alongside other significant stakeholders such as Cargill and CHS, each holding a 44% and 12% share, respectively.

The company has proactively addressed market dynamics and has previously highlighted investments to enhance its operational efficiency and product offerings.

Despite these challenges, Sean Connolly, president and chief executive officer of Conagra Brands, expressed confidence in Ardent Mills’ potential for recovery.

He remarked, “I am proud of our team for delivering another quarter of strong margin recovery and EPS growth despite facing industry-wide macro dynamics.”

This optimism is rooted in the belief that strategic investments and a focus on customer service will enable Ardent Mills to navigate through a period marked by lower volumes and profitability.

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