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ADM Beats Market Estimates for Q1 2024 Profit

By P.J. Huffstutter and Sourasis Bose

(Reuters) – Global grain trader Archer-Daniels-Midland beat market estimates for the first quarter of 2024 profit on Tuesday, citing lower energy and manufacturing costs. The company aims to move forward from accounting issues that triggered U.S. government probes into the grain merchant.

ADM reaffirmed its previous guidance for 2024, but executives warned of lower soy crushing margins and continued headwinds in the Nutrition unit, which has been the focus of government investigations.

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ADM shares were trading about 4.6% lower, below Wall Street’s main indexes.

Adjusted operating profit at ADM’s Ag Services and Oilseeds division, which includes soybean crushing and trading businesses, fell to $864 million, compared with $1.21 billion a year earlier.

ADM and its trading and processing rivals Bunge and Cargill Inc have seen their profits pressured as global crop supplies have swelled and prices slumped from recent historic highs. The agribusinesses make money by processing, trading, and shipping crops around the world.

ADM’s higher soy crush volumes during the quarter helped the company partially offset lower crush margins, company executives said during an analyst call.

But they said the unit’s second-quarter operating profit would be significantly lower than a year earlier, and that global soybean crush margins will hover in a lower range. Chief Executive Officer Juan Luciano expects Brazilian crush margins to improve going forward.

Carbohydrate Solutions, a division housing ADM’s ethanol and sweeteners operations, saw its adjusted operating profit drop to $248 million, compared with $279 million a year earlier.

In March, ADM corrected six years of financial data after an internal investigation found some sales between business units were not recorded properly. ADM said it had overstated annual operating profit in the Nutrition segment by as much as 9.2%.

ADM confirmed in March that some employees received grand jury subpoenas from the Department of Justice, which is investigating its accounting practices. Company executives did not discuss the investigation on Tuesday.

Touted as the future of ADM, the Nutrition division had seen explosive growth until profits began to erode in late 2022.

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On Tuesday, the Nutrition unit reported an adjusted operating profit of $84 million, down from $138 million for the prior year period.

Luciano said the unit faced headwinds from its specialty ingredients business and significant declines in operating profit due to specific challenges.

ADM said Nutrition’s operating profit would be lower next quarter compared to a year earlier, but Luciano remained optimistic about the segment’s future performance.

The Chicago-based company reported adjusted earnings of $1.46 per share for the three months ended March 31, surpassing analysts’ average estimate.

ADM attributed the increase in earnings to lower energy and manufacturing costs, resulting in a 15 cents per share rise in segment operating profit compared to the previous year.

(Reporting by P.J. Huffstutter in Chicago and Sourasis Bose in Bengaluru; Editing by Shinjini Ganguli and Chizu Nomiyama)

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