On Tuesday, Archer-Daniels-Midland (ADM.N) shares tumbled 6%, erasing around $1.6 billion of market value and hitting the lowest level since January 2021. This came after the global grains merchant cut its 2024 profit outlook and announced it would amend previous financial statements due to the discovery of fresh accounting irregularities.
The accounting woes have been piling on the pressure for ADM’s leadership team led by CEO Juan Luciano. In March, the company was already forced to correct six years of financial data when an internal investigation revealed that sales between ADM’s nutrition business and other core units were not recorded properly.
In an internal memo to staff reviewed by Reuters, Luciano stated, “2024 has been a difficult year. We must take all action now to get ourselves ready for what may be an equally challenging year in 2025.”
Following discussions with the U.S. Securities and Exchange Commission (SEC), ADM will amend its fiscal year 2023 annual report and the results for the first and second quarters of this year. The company claims it does not expect any material impact on its consolidated results, though an SEC spokesperson declined to comment.
The latest accounting errors have rattled investor confidence in the 122-year-old agribusiness. With prices of staple crops like corn and soybeans sliding to near four-year lows, ADM has seen profits decline and margins erode.
Equity analyst Seth Goldstein of Morningstar said, “If ‘not material’ turns out to be ‘material’, then it certainly would be harder and might put more pressure on the board to consider a leadership change.”
Under Luciano, ADM has heavily invested in its nutrition business in recent years, aiming to strengthen its legacy grain trading and processing businesses and shield earnings from commodities market volatility. However, profits from the smaller nutrition segment have not met expectations.
Heather Jones, founder of Heather Jones Research LLC, noted, “Investor faith in the strategy is greatly shaken and there are concerns that greater capital may have to be deployed to get the legacy businesses back to prior relative performance standards.”
ADM’s accounting irregularities have sparked several government investigations and led to the departure of CFO Vikram Luthar in September. The company postponed its earnings call scheduled for Tuesday and now expects to hold a webcast after filing the amended statements.
CFRA analyst Arun Sundaram said, “Investors will undoubtedly be disappointed that this accounting overhang has returned.” CFRA cut its 12-month ADM share price target by $10 to $56 after lowering its earnings-per-share outlooks for 2024 and 2025.
The restated filings, which ADM said would be released as soon as “reasonably practicable”, will include some newly identified errors concerning intersegment sales for all three of its main units. Per SEC guidelines, ADM has until around Nov. 12 to report its results, but can file for an extension.
ADM cut its 2024 adjusted earnings forecast to $4.50 to $5 per share, from $5.25 to $6.25 it had estimated earlier, due to government policy uncertainty, slow market demand and “internal operational challenges.” The company reported adjusted profit per share of $1.09 for the third quarter ended Sept. 30 in a preliminary filing that the company said was subject to change. Analysts expected $1.25, according to data compiled by LSEG.
ADM’s operating profit from its Ag Services and Oilseeds segment, its largest by revenue, slumped 43% from a year earlier. The company also paid $96 million in partial settlement claims in the quarter tied to safety incidents at its Decatur East and West facilities.
ADM Plummets 6% as New Accounting Errors Surface and 2024 Profit Forecast Slashed