Reuters — Shares of Archer-Daniels-Midland ADM.N slid 16 per cent in early morning trade on Monday after CFO Vikram Luthar was placed on administrative leave as the company investigates certain accounting practices at its Nutrition segment.
The global grains merchant cut its 2023 profit forecast and said its fourth-quarter results would be delayed due to the investigation related to certain inter-segment transactions flagged by the U.S. Securities and Exchange Commission (SEC).
The SEC did not respond immediately to a Reuters request for comment.
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ADM’s stock was last down at $55.86, its lowest level since March 2021.
The probe brings uncertainty to ADM’s high-margin Nutrition segment, which is already grappling with weak demand for meat alternatives.
The segment supplies a range of ingredients including plant-based proteins, natural flavors, emulsifiers to food, beverage and nutritional supplements industries, among others.
At least four brokerages downgraded ADM’s stock after the SEC request, and the company cut its adjusted earnings forecast to $6.90 per share for the fiscal year ended December, 2023 from an “excess of $7 a share” earlier.
“First and foremost, understanding the true scope of potential accounting irregularities and their impact on Nutrition segment revenues/margins will be critical,” said Goldman Sachs analyst Adam Samuelson.
“If (the) issue is just transfer pricing (tax avoidance), it shouldn’t change 2024 EPS outlook. ADM likely can continue buybacks and close recent acquisitions despite investigation,” said analysts at BMO.
ADM has been diversifying into the flavors and nutrition food business through takeovers. It first acquired WILD Flavors in 2014 for $3 billion and most recently, towards the end of 2023, said it would buy UK-based flavor and ingredient firm FDL.
Until investors have more clarity as to what exactly went wrong with ADM’s nutrition segment accounting, UBS analysts said traders could turn to shares of Darling Ingredients DAR.N and Bunge Global BG.N.
ADM appointed Ismael Roig on Monday as its interim CFO.
–Reporting for Reuters by Medha Singh and Seher Dareen in Bengaluru.
