Shares of Archer-Daniels-Midland Company (NYSE: ADM) nosedived over 24% on Monday following the suspension of its chief financial officer, Vikram Luther, and a downward revision of its earnings outlook. This move comes as the U.S. agricultural trading giant initiates an investigation into its accounting practices.
Archer-Daniels-Midland Company (ADM) has announced that its CFO, Vikram Luthar, who has been in the position since 2022, has been placed on administrative leave. Ismael Roig will be taking over as the interim CFO. ADM has also decided to postpone the release of its fourth-quarter earnings and the submission of its annual report and Form 10-K for the year 2023.
ADM initiated the investigation in response to a voluntary document request from the U.S. Securities and Exchange Commission. It specifically centers around what ADM has termed “intersegment transactions” related to its nutrition unit. This unit is responsible for producing ingredients for human and animal foods. ADM has confirmed its cooperation with the SEC in this matter.
Archer-Daniels-Midland Company (NYSE: ADM) invested billions in growing its nutrition sector since 2014, marked by its largest-ever acquisition—the $3 billion buyout of European natural ingredient maker Wild Flavors. The plan behind this move was to diversify into value-added products. However, profits have fallen short of initial expectations, attributed to weakening demand, including a decline in the market for plant-based foods.
Analyst estimates compiled by Bloomberg project that the operating income of the nutrition segment will decrease by over 18% in 2023, reaching its lowest level since 2020.
Archer-Daniels-Midland Company (NYSE: ADM) has revised its outlook, anticipating adjusted earnings of over $6.90 per share for the fiscal year ending on December 31. This adjustment follows the October forecast, which projected profits exceeding $7 per share.
ADM has a history of controversies, with a notable incident in the 1990s when it was involved in a scandal of manipulating prices. This scandal served as the inspiration for the 2009 film The Informant!, featuring Matt Damon. In 1996, ADM pleaded guilty to the price-fixing charges. The company is currently addressing various lawsuits related to allegations of price manipulation in its trading of cotton and ethanol.
Terry Crews, lead director at ADM, said in the statement,
“The board takes these matters very seriously.”
He added,
“The board will continue to work in close coordination with ADM’s advisers to identify the best path forward and ensure ADM’s processes align with financial governance best practices.”
As of Monday’s close, ADM stock experienced a 24.20% decline, with a trading volume of 47,394,172 (47.39 million) shares, surpassing the company’s daily average trading volume of 4.09 million.
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