ADM surpasses Q1 2024 profit estimates despite challenges

Archer Daniels Midland Co. (ADM), a major global grain trader, reported a better-than-expected profit for the first quarter of 2024, overcoming challenges such as decreased soy crushing margins and ongoing issues in its Nutrition unit. The company, headquartered in Chicago, also confirmed its full-year guidance despite facing these headwinds.

ADM’s shares dropped about 4.6%, underperforming compared to main Wall Street indexes, following the announcement of its quarterly financial results. The company’s Ag Services and Oilseeds division reported an adjusted operating profit of $864 million, a decrease from $1.21 billion the previous year, affected by lower global crop prices and swelling supplies.

The company experienced higher soy crush volumes during the quarter, which helped mitigate some of the losses from reduced margins. However, ADM executives indicated that the operating profit for this unit is expected to be significantly lower in the second quarter compared to the same period last year.

The Carbohydrate Solutions division, which includes ADM’s ethanol and sweeteners operations, saw its adjusted operating profit decline to $248 million from $279 million a year earlier.

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In March, ADM addressed inaccuracies in its financial reporting, correcting six years of data after discovering errors in internal transactions among its business units. This correction showed that annual operating profit in the Nutrition segment had been overstated by as much as 9.2%. Following this, some ADM employees received subpoenas from the Department of Justice as part of an investigation into the company’s accounting practices.

Despite these challenges, the Nutrition unit, often highlighted by executives as a key growth area for ADM, reported an adjusted operating profit of $84 million, down from $138 million in the prior year. The decline was attributed to an explosion at ADM’s Decatur East processing plant and lower pricing for texturants.

Looking ahead, ADM expects the Nutrition division’s operating profit to continue to decrease next quarter. Nevertheless, CEO Juan Luciano remains optimistic about the long-term prospects of this segment, noting strong demand for flavors and potential improvements in Brazilian crush margins.

For the quarter ended March 31, ADM reported adjusted earnings of $1.46 per share, exceeding analysts’ average estimate of $1.36 per share, aided by lower energy and manufacturing costs which contributed an additional 15 cents per share compared to the previous year.