(Bloomberg) — Archer Daniels Midland Inc. fell sharply after the U.S. agricultural products trading giant suspended its chief financial officer pending an investigation into its accounting practices and cut its earnings outlook. Stock prices fell by the most on record.
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The Chicago-based company announced Sunday afternoon that Vikram Luthor, who has served as CFO since 2022, will be placed on administrative leave and Ismael Roig will assume the role on an interim basis. ADM is also postponing its fourth quarter financial results and filing of its 2023 annual report and Form 10-K.
The investigation was prompted by an unsolicited document request from the U.S. Securities and Exchange Commission and focused on what ADM described as “intersegment transactions” involving the nutrition sector, which produces ingredients for human and animal food. . ADM said it is cooperating with the SEC.
ADM has expanded its nutrition business several times since 2014, when it made its largest acquisition in history (the $3 billion acquisition of European natural ingredients maker Wild Flavors) in an effort to diversify into value-added products. We've spent billions of dollars. However, profits fell short of initial expectations due to weak demand, including for plant-based foods.
The segment's operating profit is already expected to fall more than 18% in 2023, to its lowest level since 2020, according to analyst estimates compiled by Bloomberg. In November, ADM selected long-time executive Ian Pinner to lead the troubled business.
Andrew Strelzyk, an analyst at BMO Capital Markets, said in a note that the study will likely reduce nutritional margins at a time when investors are already concerned about risks to earnings. . “As the new profitability becomes clearer, we expect ADM to reevaluate its strategic priorities in nutrition.
ADM, which had expected earnings of more than $7 in October, now expects adjusted earnings to be more than $6.90 per share for the year ending Dec. 31.
Shares fell 22% to $53.12 as of 11:51 a.m. in New York, wiping out more than $8 billion in market capitalization. Analysts from Robert W. Baird & Co., Barclays & Co., and Goldman Sachs Group Inc. were among those who downgraded ADM's stock ratings after the investigation was discovered.
Read more: Crops trader ADM slumps after deal to grow nutrition business
This is not the first scandal involving ADM. In the 1990s, he was implicated in a price-fixing conspiracy that later became the basis for his 2009 film The Informant!, starring Matt Damon. ADM pled guilty to price-fixing charges in 1996. The company is also dealing with various lawsuits over alleged price-fixing in the cotton and ethanol trade.
“The board takes these matters very seriously,” Terry Crews, ADM's principal director, said in a statement. “The Board will continue to work closely with ADM’s advisors to identify the best path forward and ensure that ADM’s processes are aligned with financial governance best practices.”
(Updated stock price movements in 1st and 8th paragraphs. Added stock chart.)
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