Archer-Daniels-Midland (ADM) experienced a significant setback as its shares plummeted by 24%, marking the largest one-day drop since 1929. The sharp decline followed the placement of CFO Vikram Luthar on administrative leave amid an investigation into accounting practices in the company's Nutrition segment. ADM, a global grains merchant, cut its 2023 profit forecast and announced a delay in fourth-quarter results due to the probe related to certain inter-segment transactions, prompted by a voluntary document request from the U.S. Securities and Exchange Commission (SEC).
The investigation introduces further uncertainty to ADM's Nutrition segment, already under pressure due to weak demand for meat alternatives and operational challenges at a major soy processing facility. The stock closed at $51.69, its lowest since February 2021. The SEC has not commented, but ADM stated its cooperation with the investigation.
Luthar, with nearly two decades at ADM, was appointed CFO in 2022. Despite ADM's overall success, with record earnings from crop processing and strong demand for food, animal feed, and biofuel, the Nutrition segment has faced recent struggles. Analysts noted disappointments in recent investments in animal feed and pet nutrition.
Following the SEC request, at least four brokerages downgraded ADM's stock. The company reduced its adjusted earnings forecast for fiscal year 2023 to $6.90 per share from an earlier expectation "in excess of $7 a share." The investigation's scope and impact on Nutrition segment revenues and margins remain crucial for understanding the situation. ADM has been actively expanding its flavors and nutrition business to mitigate commodity price volatility, including recent acquisitions like UK-based FDL. Ismael Roig has been appointed as interim CFO. Until clarity emerges on the Nutrition segment's accounting issues, traders may turn to shares of companies like Darling Ingredients and rival Bunge Global.
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