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Archer Daniels Midland profits beat expectations

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Archer Daniels Midland’s profits fell less than expected in the first quarter, in its latest update since the global agricultural commodities merchant set out the details of a probe into its accounting practices last month.

ADM reported adjusted earnings of $1.46 per share for the first quarter of 2024, down 30 per cent year on year but higher than analysts’ expectations by about $0.10 per share. The Chicago-based company said lower energy prices helped reduce manufacturing costs, while its processing business also recorded higher volumes.

ADM said it processed 9.4mn metric tonnes of oilseeds in the first quarter, up 8.8 per cent from a year earlier, boosting its total processed volumes by 6 per cent to 13.8mn metric tonnes. That helped the company offset lower pricing and margins.

“ADM’s solid first-quarter results showcased our team’s ability to execute our strategy with agility in the face of anticipated challenging market conditions,” chief executive Juan Luciano said in a statement on Tuesday.

Crop traders and processors are facing a reversal of fortune this year after recording record profits in the wake of the coronavirus pandemic and Russia’s full-scale invasion of Ukraine, which disrupted global food supplies and sent agricultural markets into turmoil.

Adjusted operating profit from the company’s largest business, its trading-heavy agricultural services and oilseeds segment, fell to $864mn, from $1.2bn in the same period last year, as trade flows stabilised and volumes from South America declined.

In January, ADM’s shares plunged when the company revealed it had launched a probe into accounting practices and procedures in its nutrition business and placed its chief financial officer on leave following a request for documents from the US Securities and Exchange Commission.

Earlier this month, the company said Vikram Luthar had agreed to resign as CFO with effect from September 30 this year.

ADM is the A in the so-called ABCD of global food commodities traders, along with Bunge and Cargill from the US and Louis Dreyfus in Europe, which play a pivotal role in global food supplies. Established in 1902, ADM is one of the world’s largest traders and processors of grains and oilseeds, crops it transforms into food ingredients, animal feed and fuel.

Under Luciano, who took over in 2015, ADM has sought to diversify away from the volatility of commodity trading by expanding into nutrition and food ingredients, building a lower-volume but higher-margin business supplying flavours, probiotics and other ingredients to industries including plant-based meats and pet food.

But last month the global commodities trader admitted to overstating the profits of its nutrition business by up to 10 per cent.

The company had not recorded sales of products by ADM’s largest divisions — agricultural services and oilseeds, and carbohydrate solutions — to the nutrition business at market prices, it said.

Following the investigation by the audit committee of the company’s board, the nutrition business’s recorded profit for 2022, the most affected year, was cut from $736mn to $668mn, with the $68mn reattributed to the profits of the agricultural services and carbohydrates divisions.

The company’s overall reported profits and cash flows were not affected, ADM said.

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