Thursday, February 22, 2024

Value dips as grain giant comes under scrutiny

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ADM suspends CFO pending probe into nutrition business.
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Archer-Daniels-Midland Co, one of the world’s biggest grain companies, has suspended its chief financial officer pending an investigation into accounting practices in its nutrition business.

The investigation at ADM followed a request from the United States Securities and Exchange Commission.

The share price lost 24% in value in one day, Monday, January 22, when it dropped from US$68.19 ($111.20) to US$51.69.

The share price on the New York Stock Exchange recovered to $55 in the following seven days as ADM claimed the issues in the nutrition business with intersperse sales would not materially affect its financial results.

Chair and chief executive Juan Luciano said the company is financially strong and is on track to declare its second-best results in its history, but they will be delayed by the investigation into inter-segment sales.

On January 25 the company’s directors declared a quarterly dividend of 50c, up 5c from the previous quarter, payable on more than 500 million shares on February 29.

At the highest point in the past year, $85, ADM market capitalisation was $46 billion and that has now fallen to $30bn.

ADM is one of the four biggest world agricultural traders, along with Bunge, Cargill and Louis Dreyfus.

It boasts of having grain silos from the Mississippi River to the Black Sea, along with dominant positions in corn and soybeans, animal feeds, biofuels and industrial products.

ADM was ranked 35 in the 2023 Fortune 500 list of the largest US corporations, before the loss of share value.

The nutrition segment is less than 10% of the total corporation but top ADM executives have part of their earnings packages tied to its performance.

Total company revenue is over $100bn annually and net incomes have been around $4bn.

ADM New Zealand is an animal feeds business using imported palm kernel, dried distillers’ grain and soy and corn meals. It is based in Mt Maunganui with service centres in New Plymouth, Timaru and Bluff.

It also sells food ingredients to bakeries and beverage, confectionery and dairy goods makers.

From 2008 Fonterra had a link with ADM through joint ownership of the Agrifeeds palm kernel importer, the other partner being Wilmar International, 20% part-owned by ADM.

In 2020 Fonterra sold out of Agrifeeds to Wilmar.

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