Archer Daniels Midland (ADM -0.06%), a global leader in agricultural processing and commodities trading, faced a challenging third quarter. On Nov. 5, it released a set of preliminary results for the period that showed significant gaps between actual results and the market's expectations. It also postponed its earnings conference call.
ADM's adjusted earnings per share (EPS) stood at $1.09, missing the analysts' consensus forecast of $1.24. The company recorded net earnings of $18 million, but that figure was deeply affected by a $461 million strategic impairment charge to its Wilmar investment. Overall, the quarter revealed ADM's struggles, particularly within its agricultural services & oilseeds division, which saw operating profits decline by 43% to $480 million.
| Metric | Q3 2024 Result | Q3 2024 Analyst Estimate | Q3 2023 Result | % Change YOY |
|---|---|---|---|---|
| Adjusted EPS | $1.09 | $1.24 | $1.63 | (33%) |
| Net earnings | $18 million | N/A | $821 million | (98%) |
| Adjusted net earnings | $530 million | N/A | $880 million | (40%) |
| Ag services & oilseeds operating profit | $480 million | N/A | $842 million | (43%) |
Source: Analyst estimates for the quarter provided by FactSet
Business Overview and Focus Areas
Archer Daniels Midland specializes in transforming crops into products for food, animal feed, industrial, and energy uses. As a key player in the global agricultural market, it manages a vast network for sourcing, transporting, and processing various agricultural commodities. Due to the nature of its operations, ADM faces the challenges of managing complex supply chains while responding to diverse market demands.
Recently, ADM has emphasized several strategic areas. A major focus is on global agricultural supply chain management. It also aims to innovate within its nutrition segment, emphasizing health and wellness products, aligning with rising consumer demands. Commitment to sustainability practices is another key area in an increasingly eco-conscious world.
Quarterly Performance Highlights
During the third quarter, ADM's financial performance was marked by significant discrepancies across its segments. The agriculture services & oilseeds segment saw a striking 43% decline in operating profit to $480 million. The drop was primarily due to unfavorable conditions in South America and higher canola seed prices affecting its crushing sub-segment. Similarly, the refined products & other sub-segment experienced a 63% profit reduction.
Carbohydrate solutions, however, demonstrated relative stability with a small 3% decrease in operating profit to $452 million, thanks to robust performance in starches and sweeteners that cushioned losses elsewhere. The nutrition segment also struggled, with operating profit down 19% to $105 million, driven largely by declines in human nutrition profitability, which fell 27% due to reduced margins and weaker demand.
ADM faced internal challenges as well, notably delaying its Q3 earnings call and announcing plans to restate its financial reports for 2023 and the first two quarters of 2024. This action follows the discovery of segment accounting discrepancies, which, although not affecting overall consolidated financials, highlight shortcomings in its internal controls.
A $461 million non-cash impairment charge related to its investment in Wilmar International significantly reduced ADM's reported earnings.
Outlook and Future Guidance
ADM has cut its full-year adjusted EPS guidance to between $4.50 and $5.00, in anticipation of continued challenges in the marketplace. Management expects ongoing pressures from slower demand and operational hurdles will impact earnings growth.
Management has emphasized its commitment to maintaining strategic momentum in sustainability and nutrition, aiming to leverage these initiatives for future growth. Investors should watch how ADM handles global agricultural market dynamics and adapts its strategies, as this will significantly influence its trajectory in the coming quarters.
