ADM, a prominent player in the grain trading industry, has acknowledged the need to correct specific intersegment sales in its consolidated financial statements due to discrepancies in recording values that align with market standards, according to an SEC filing released on Friday. The company’s proactive approach to address these errors comes amidst ongoing investigations into its accounting practices within the Nutrition segment.
The delay in filing the 2023 annual report follows a series of significant developments within ADM, including a revision of its 2023 profit forecast, the withdrawal of forward-looking guidance for the Nutrition segment, an internal inquiry announcement, and the placement of finance chief Vikram Luthar on administrative leave. These events triggered a notable decline in ADM’s stock value, marking the most substantial drop since 1929 for the 122-year-old grains merchant.
While the corrections to financial statements are not anticipated to impact consolidated financial metrics such as balance sheets, earnings statements, or cash flows, ADM has disclosed an expected identification of a “material weakness” in reporting intersegment sales. The company is actively devising a remediation plan to address this issue and intends to provide comprehensive details in the forthcoming annual report.
Despite the ongoing challenges and uncertainties stemming from the internal accounting probe triggered by an SEC inquiry, ADM’s shares demonstrated a 2.4% increase to $54.37 on Friday afternoon, reaching a one-month high but remaining significantly below pre-probe levels by approximately 20%.
The focus of the accounting scrutiny primarily revolves around ADM’s Nutrition segment, a high-margin unit supplying ingredients like plant-based proteins, natural flavors, and emulsifiers to various industries including food, beverage, and nutritional supplements.
In addition to the SEC investigation, the U.S. Justice Department is reportedly conducting its own probe into ADM’s accounting practices, adding further complexity to the situation. ADM has forecasted a decline in net earnings attributable to controlling interests for 2023 compared to the previous year, reflecting the ongoing challenges and adjustments faced by the company amidst regulatory inquiries and financial corrections.