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ADM Posts Q1, 2024 Financial Results

05/02/2024

In an April 30th release, Archer-Daniels-Midland Corp. (ADM) posted financial results for the 1st quarter, FY 2024. The Company can be regarded as a bellwether for ‘Mega-Ag’ and the commodities trading and processing sector. Along with competitors Bunge, Cargill, Cofco and Dreyfus, all are subject to the risks of currency fluctuation, geopolitical events, climatic extremes, and increased cost of ingredients, labor and transport in a competitive world environment influenced by inflation, conflict and disparity in the quality of life between industrialized and developing nations.

 

For the 1st Quarter of FY 2024 ending March 31st, net income was $729 million on total revenue of $21,847 million. Comparable figures for the 1st quarter of fiscal 2023 ending March 31st 2022 were net income of $1,170 million on total revenue of $24,072 million. Diluted EPS fell from $2.12 for the 1st quarter of fiscal 2023 to $1.42 for the most recent quarter.

Comparing the 1st quarters of 2023 with 2024, revenue was down 9.2 percent. Gross margin was down from 8.6 percent to 7.6 percent and operating margin down from 5.0 percent to 3.2 percent.

 

Segment operating profits combined totaled $1,399 million with respective contributions:-

  • Ag Services and oilseeds           $864 million. (Crushing, $313 m; Ag. Services, $232m)
  • Carbohydrate solutions              $248 million. (Starches, $261m; Refined products, $170m)    
  • Nutrition                                    $  84 million. (Human, $76m; Animal, $8m)
  • Other businesses                        $121 million

 

Juan Luciano Board Chair and CEO commented, “To manage through the cycle, we are driving key strategic initiatives across the business, including the ramp-up of production at our Green Bison JV and the scaling of our regenerative agriculture and BioSolutions efforts. Our productivity initiative pipeline is also expanding and we are already seeing the results of our actions to reduce supply chain complexity and better serve our customers in Nutrition as the segment delivered sequential quarterly improvement in operating profit. Our capital deployment actions such as our accelerated share repurchase program also continue to contribute to enhanced shareholder returns. Driving these priorities forward, we remain confident in our guidance for the year.”

Guidance for FY 2024 was not updated from an adjusted EPS of $5.25 to $6.25

 

The Company release included a comment on the Nutrition Segment: “Operating profit was $84 million during the first quarter of 2024, down 39 percent compared to the prior year period. Human Nutrition sub-segment operating profit was $76 million, approximately $62 million lower versus the prior year period, as impacts related to unplanned downtime at Decatur East and a normalizing restaurants market negatively impacted margins. In the Animal Nutrition sub-segment, operating profit of $8 million was higher year-over-year as cost optimization efforts and lower input costs bolstered margins.

 

ADM, has apparently “identified and corrected” recording of sales between the Ag. Services and Oil Seeds Segment and the Nutrition Segment.  The adjustments will have no ultimate effect on the balance sheet and statements of earnings reflecting the period January 2018 through September 2023.

 

ADM noted “material weakness” in internal controls over financial reporting and accounting practices relating to intersegment sales. Juan Luciano, Chairman and CEO, previously stated, “We have developed a remediation plan with respect to the identified material weaknesses to enhance reliability of our financial statements with respect to the pricing and reporting of sales.”  He added, “We remain committed to strong internal controls and we look to continue our focus on execution.”

 

ADM experienced a 24 percent drop in share price from $68.02 following the Friday January 19th disclosure that Vikram Luthar, the CFO, had been placed under administrative leave. He  recently resigned.

 

On March 31st 2023, ADM posted assets of $36,836 million of which $7,051 million comprised goodwill and intangibles, against long-term debt of $8,246 million. The Company had an intraday market capitalization of $28,860 million on May 2nd. ADM trades with a forward P/E of 10.8 and has ranged over a 52-week period from $50.72 to $87.30 with a 50-day moving average of $59.23.  Twelve-month trailing operating margin was 3.2 percent and profit margin 3.3 percent.  Return on assets over the past twelve months was 3.9 percent and the return on equity 12.4 percent.