Accounting Issues Force ADM to Revise Financial Statements
Error Discovery Prompts Cancellation of Earnings Call
Archer-Daniels-Midland Co. (ADM) has announced that it will revise its previous financial statements due to uncovered accounting issues. This move comes just 14 hours before the company was set to hold its quarterly earnings call with analysts. The crop trader has identified additional errors in the way it reported sales between its business segments, including Ag Services, Oilseeds, Carbohydrate Solutions, and Nutrition.
Internal Controls Under Scrutiny
The discovery was made while testing new internal controls, and ADM has been in discussions with the Securities and Exchange Commission (SEC) regarding the matter. As a result, the company will amend its financial statements for 2023 and the first and second quarters of 2024. Fortunately, ADM does not expect the revisions to have a material impact on its financial performance.
Market Reaction
The news sent ADM shares tumbling, with a pre-market trading drop of as much as 10% on Tuesday. This development follows an earlier announcement in January that the company was investigating inter-segment transactions, which led to a significant decline in its market value and prompted probes by the US Department of Justice and SEC.
Leadership Under Pressure
The accounting issues have put ADM’s leadership under scrutiny, particularly CEO Juan Luciano’s strategy to diversify the company’s business beyond traditional crop trading and ethanol refining. Luciano’s efforts to transform ADM into a nutrition powerhouse through acquisitions, such as Wild Flavors GmbH and Neovia, have not yielded the expected results. The company has faced challenges including declining crop prices, lower profits from soybean processing, and increased competition in the US crushing market.
Disappointing Earnings Outlook
In a surprise preliminary report, ADM announced that its earnings, excluding certain items, fell 33% to $1.09 per share, missing analysts’ estimates. The company has also revised its full-year earnings outlook downward, citing slower market demand, operational challenges, and regulatory uncertainties. This revised outlook now stands at $4.50 to $5 per share, down from the previous projection of $5.25 to $6.25.
Leave a Reply