ADM Shares Fall as CEO Cites Transition From Boom Years
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Archer-Daniels-Midland Co.’s shares slumped as the agribusiness giant warned of pressured margins for the remainder of the year, even as quarterly earnings beat estimates.
A combination of headwinds including ample grain supplies, slower farmer selling and increased supplies of alternative ingredients for biofuel production in the U.S. are eroding profits for crop traders and processors, according to CEO Juan Luciano.
Shares of the Chicago-based trader fell as much as 5.5%, the most since January.
ADM ranks No. 74 on the Transport Topics Top 100 list of the largest private fleet operators in North America, and No. 9 on the agriculture sector list.
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“This is a transition period for the industry,” Luciano said in a conference call with analysts. “We are focusing the organization in a combination of productivity and innovation to help offset increasingly challenging market conditions based on growing commodity supply.”
ADM’s more bearish tone underscores how the cycle seems to be turning for the so-called ABCD group of companies that dominate the trading of agricultural commodities. After several years marked by record profits amid wild price fluctuations caused by crop losses and the war in Ukraine, supplies have rebounded. Prices for crops including corn, soybeans and wheat have eased, giving buyers confidence to operate with lower inventories.
ADM reported adjusted per-share earnings in the three months ended March 31 dropped 30% from a year earlier to $1.46, beating the $1.37 average of analyst estimates compiled by Bloomberg, the company said in a statement April 30.
Profits at its Ag Services and Oilseeds business, the company’s largest, were hurt by more stability in trade flows and slower farmer selling in South America. Meanwhile, soybean crush margins in North America were slammed by increased imports of used cooking oil — an alternative ingredient to soybean oil for the production of renewable diesel — and the anticipation of large supplies from Brazil and Argentina.
That impact was mitigated by lower manufacturing costs, primarily related to energy, and increased volumes. ADM said it processed 9.39 million metric tons of oilseeds in the first quarter, up 8.8% from a year earlier and more than anticipated by analysts.
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ADM has been under the spotlight since an accounting scandal in January wiped out more than $8 billion in market value in a single day. While a $137 million impairment charge disclosed last month was seen by analysts as mostly immaterial, prompting shares to bounce back, the company is still being investigated, including by the Department of Justice.
Last week, the company said former Chief Financial Officer Vikram Luthar, who had been placed on leave amid the scandal, agreed to resign effective Sept. 30.
ADM’s nutrition unit, which is at the center of the accounting investigations, saw operating profit decline 39% from a year earlier as margins were hurt by unplanned downtime at its Decatur East plant and a “normalizing texturants market.” Operating profit at the Carbohydrate Solutions segment slid 11%, as lower domestic ethanol margins due to “strong industry production and elevated stocks” weighed on results.
