ADM profits tumble 24% as global grain supplies balloon

By Staff
3 Min Read

Dive Brief:

  • Archer-Daniels-Midland Co. on Tuesday reported profit and revenue declines in the first quarter as the global grain trader navigated headwinds from a challenging supply backdrop and pressures from an accounting scandal.

  • The company made a profit of $1.3 billion, a 24% drop from last year, weighed down by its ag services and oilseeds division, as well as its nutrition unit. Revenue dipped 9% to $21.8 billion as global supplies of corn and soybeans continue to mount, pressuring margins.

  • To weather the cycle, ADM is focusing on three key priorities and making progress on a number of cost savings and sustainability projects, including its biofuels joint venture Green Bison. It is also cooperating with the Department of Justice on an investigation into its accounting practices.

Dive Insight:

ADM faced a difficult quarter as overall market headwinds and an investigation into its nutrition unit hurt stock prices and shareholder confidence. 

Factoring in challenging global supply dynamics and operational setbacks, CEO and President Juan Luciano said in an earnings call that ADM is focused on navigating the market, nutrition division recovery and returning more cash to shareholders.

The nutrition division, responsible for ADM’s sweeteners and flavors, recently came into the spotlight after substantially missing revenue expectations and prompting internal, government and shareholder scrutiny. Suspended CFO Vikram Luthar agreed to resign at the end of September as a DOJ investigation continues. 

ADM expects headwinds in nutrition and specialty ingredients through the rest of the year, Luciano said, but sees an opportunity to potentially grow future revenue through a renewed focus on animal nutrition.  

“While we have room to go…we believe Q1 was an important first step,” he said.

With a robust global grain supply bringing down commodity prices, ADM is bracing for broader market challenges. The commodities giant is also looking to mitigate lower crop prices and margins by ramping up production of its biofuels joint venture Green Bison, which is expected to harvest at full capacity this fall.

“We’re focusing the organization on a combination of productivity and innovation to help offset increasingly challenging market conditions based on growing commodity supply,” Luciano said.

ADM shares closed Wednesday at $58.37 on the New York Stock Exchange, down nearly 20% since the start of the year.

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