Archer-Daniels-Midland Company (NYSE: $ADM) is a leading animal and human nutrition company. It is a major player in the US agricultural supply chain. ADM buys, transports, and processes farm produce, connecting farmers to the market. The company operates through three main segments: Nutrition, Carbohydrate Solutions, and Ag Services and Oilseeds.
ADM Suspends Chief Finance Officer
On Sunday, January 21, 2024, ADM announced that it had placed its CFO and Senior Vice President Vikram Luthar on administrative leave. According to the press release, Luthar’s suspension is due to an ongoing accounting investigation.
The Board’s Audit Committee and outside counsel for ADM are handling the investigation. It pertains to various accounting practices and procedures relating to the Nutrition segment reporting, including particular intersegment transactions. ADM stated that the investigation began after it received a voluntary document request from the SEC. They are cooperating with the SEC in its investigation.
Commenting on the investigation, Terry Crews, Lead Director at ADM, stated that they took these matters very seriously. He said that, pending the investigation’s outcome, they deemed it appropriate to suspend the CFO. Crews added, “The Board will continue to work in close coordination with ADM’s advisors to identify the best path forward and ensure ADM’s processes align with financial governance best practices.”
ADM stated that it was working with its advisors on expediting the investigation. It will make a statement regarding the matter when the board approves any action for which further disclosure is needed.
Interim CFO Appointed
Following Luthar’s suspension, the board announced the appointment of Ismael Roig as Interim CFO. They stated that Roig had been with ADM since 2004 and was deeply familiar with the business. Roig had served in various financial leadership roles at the firm since joining.
Commenting on Roig’s appointment, CEO and board chair Juan Luciano stated they were fortunate to have a leader of Roig’s caliber step into the role. He added that Roig had served in various leadership positions at the company in the past two decades.
CEO Luciano said that Roig had been a member of the Executive Council for the past ten years. He added, “With his global financial and operating experience, Ismael is the right choice to lead the Finance organization. We appreciate Ismael’s willingness to take on the Interim CFO role at this juncture.”
Commenting on his appointment, Ismael Roig said he looked forward to working closely with all concerned parties as they resolve the matter and “continue to drive value for our stockholders and customers.”
Updates Earnings Report Date and Outlook
Following the new development, the company said it expected to delay the release of its Q4 and full-year 2023 earnings report, initially scheduled for Wednesday, January 24, 2024. Additionally, it would delay filing its Annual Report on Form 10-K for the FY23 ending December 31, 2023. The company said it would provide the updated schedule as soon as possible.
ADM also updated its FY23 outlook. The new outlook calls for adjusted earnings per share of $6.90 from over $7. It also expects to report Q423 and FY23 operating profit for the Ag Services and Oilseeds, and Carbohydrates Solutions segments in line with the outlook issued in the Q3 earnings report. However, due to the ongoing investigation, the company has withdrawn all outlook statements for the Nutrition segment.
ADM Stock Tumbles
Following the CFO’s suspension announcement, ADM stock tumbled 19.18%% in early morning at 10:07AM in New York on Monday, January 22, 2024. The stock is now valued at around $55.00 per share. In the past 12 months, the stock has lost 34.93% of its value. It has fallen significantly from its 52-week high of $87.30. The company has a market cap of $36.37 billion.
ADM Stock Forecast
Soon after the CFO’s suspension was announced, Goldman Sachs downgraded the stock’s rating from buy to neutral. It cited the recent suspension as clouding the medium-term outlook for ADM until investors properly assess any impact on profit or growth. Goldman Sachs also cut its price target from $90 to $67, while BMO cut its target from $80 to $60. Baird also downgraded their rating for ADM to neutral.
Is ADM Stock a Buy?
According to analysts, besides the issues with reporting in the Nutrition segment, cyclical indicators, particularly soybean crush margins, had been moderating in the past 1-2 months. Consequently, core business fundamentals at the company were softer than the previous outlook. These factors combined suggest the medium-term performance of the company could falter.
Based on this assessment, the downgraded rating for the stock to ‘hold’ by several analysts is appropriate and an accurate representation of the stock’s future.
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