ADM Shares Decline Amid Profit Warning and Accounting Issues
Shares of global grain trader Archer-Daniels-Midland (NASDAQ: ADM) dropped 8% in pre-market trading today after the company announced a reduction in its adjusted annual profit forecast. ADM also stated that it will restate previous financial statements due to newly discovered accounting errors.
If the pre-market losses continue throughout the trading day, the company is expected to experience a significant loss of approximately $2.3 billion in market value. The necessary adjustments will affect the fiscal year 2023 Form 10-K and the financial statements for the first and second quarters of the year.
This situation arises after ADM had previously restated six years of financial data. An internal investigation had revealed inaccuracies in recording sales between business units, which led to multiple government inquiries and the resignation of CEO Vikram Luthar in September.
CFRA analyst Arun Sundaram expressed concern that the recurrence of accounting issues may lead investors to doubt ADM’s ability to achieve its 2025 financial targets set three years ago.
In light of these developments, ADM has postponed its earnings call originally scheduled for today. The company plans to hold a web broadcast following the filing of the restated statements.
The revised filings will address newly discovered errors related to inter-segment sales across all three of ADM's main segments. These findings were announced to the public on Monday. Despite these issues, ADM does not anticipate significant impact from the restatements and is working to complete them as soon as possible.
However, the company has lowered its 2024 adjusted earnings forecast from the previously estimated range of $5.25 to $6.25 per share to a new range of $4.50 to $5. For the third quarter ending September 30, ADM reported adjusted earnings of $1.09 per share, below the average analyst estimate of $1.25 according to LSEG data.
Additionally, the operating profit of the Agriculture Services and Oilseeds segment, ADM's largest segment by revenue, fell 43% compared to the same period last year. The company also incurred expenses for settlement claims amounting to $96 million during the quarter.