ADM ©
ADM ©

Global agribusiness giant ADM’s 2023 profits dropped by 20% due to a decline in volumes, higher manufacturing costs and increased corporate costs related to higher interest rates, World Grain wrote.

Net income in the year ended 31 December 2023, totalled US$3.48bn, down 20% from US$4.34bn the previous year, the 13 March report said. Adjusted segment operating profit was US$6.24bn in fiscal 2023, down 6% from the previous year.

Operating profit within ADM’s Ag Services and Oilseeds division fell to US$4.07bn in 2023 from US$4.4bn the previous year. Profit was down 21% in Crushing and down 15% in Ag Services, while profit in Refined Products and Other increased 56% year-over-year.

ADM said the lower year-over-year total in Ag Services reflected reduced export volume and margins in North America origination, which were only partially offset by record South American export volumes.

Meanwhile, the crushing division’s lower results reflected improved processed volumes that were more than offset by lower crush margins and higher manufacturing costs.

“To put our 2023 results into perspective, at the end of 2021, we provided the road map to create value and growth returns by getting closer to customers and highlighted where we expected to perform on several important strategic metrics by 2025,” ADM chairman and CEO Juan Luciano said during a March 12 conference call with analysts.

“As I look at our two-year track record over these 2025 objectives, we have delivered adjusted earnings per share at the top end of our US$6 to US$7/share objective. We have also continued to deliver ROIC above our 10% target. Through our strong performance, we have been able to fund the strategic investments in our businesses while returning cash to shareholders.”

Alongside the announcement of its financial results, ADM said it had identified and corrected certain intersegment sales that were not recorded at amounts approximating market value as part of an ongoing investigation of its accounting practices, World Grain reported on 12 March.

The company said it had made the corrections in certain intersegment sales that occurred between the Nutrition reporting segment and the Ag Services and Oilseeds and Carbohydrate Solutions reporting segments.

The adjustments had no impact on the company’s consolidated balance sheets and statements of earnings as intersegment sales occurred between the reporting segments, ADM was quoted as saying.

ADM’s investigation covered the period from January 2018 to September 2023.

As part of its international investigation, ADM said it had identified a “material weakness” in its internal control over financial reporting related to its accounting practices and procedures for intersegment sales.

“Looking ahead, we have developed a remediation plan with respect to the identified material weakness to enhance the reliability of our financial statements with respect to the pricing and reporting of such sales,” Luciano said.

“We remain committed to strong internal controls.”

ADM said it continued to cooperate with the Securities and Exchange Commission (SEC) and the Department of Justice (DOJ) in this matter.

In late January, ADM placed Vikram Luthar, its chief financial officer, under administrative leave in connection with the investigation.

Against this backdrop, ADM also outlined its priorities for this year, World Grain wrote on 15 March.

With expectations that 2024 would be a more challenging year than the previous two years, Luciano said the company had three key priorities for 2024: managing the cycle, nutritional recovery and enhanced return of cash to shareholders.

“In 2023, we added three new offices across Asia and the Middle East, and in 2024, we plan to add two to four more. Through this ongoing expansion, we expect to achieve 6% growth in our destination marketing volumes,” he said.

“Direct farmer buying has been steadily increasing over the past several years and provides ADM an opportunity to maximise value for both sides by creating efficiencies through working directly together.”