ADM provides update on audit committee led accounting investigation

(WAND) - Archer Daniels Midland is providing an update on an audit committee led investigation. This comes after the top financial executive at the agribusiness giant was placed on administrative leave in January.

>>Accounting investigation under way at ADM and its top financial executive has been placed on leave

ADM said that an investigation was initiated in response to a voluntary document request by the U.S. Securities and Exchange Commission.

The company initially postponed the release of its annual and quarterly financial reports that were scheduled for January 23, and shares of the Chicago company tumbled 24% on January 22.

Archer Daniels Midland Co. worked with outside counsel and the audit committee of the company board to complete an investigation of accounting practices within its nutrition business, and it pulled guidance for the unit.

“Our strong commitment to compliance and integrity in our financial reporting is evidenced by the diligence and breadth with which the Audit Committee has conducted its internal investigation. The adjustments related to the Company’s reporting segments do not impact our consolidated statement of earnings. Looking ahead, we have developed a remediation plan with respect to the identified material weakness to enhance the reliability of our financial statements with respect to the pricing and reporting of such sales,” said Chairman and CEO Juan Luciano. “We remain committed to strong internal controls. We look to continue our focus on execution and remain steadfast in delivering on our purpose of unlocking the power of nature to enrich the quality of life.”

ADM said in a statement that, in connection with the investigation, the company identified and corrected certain intersegment sales that occurred between the company’s Nutrition reporting segment and the company’s Ag Services and Oilseeds and Carbohydrate Solutions reporting segments that were not recorded at amounts approximating market.

"Because intersegment sales occur between the Company’s reporting segments, the adjustments have no impact on the Company’s consolidated balance sheets and statements of earnings, comprehensive income (loss), or cash flows. In addition, the Company determined that the adjustments are not material to the Company’s consolidated financial statements taken as a whole for any period," ADM said. 

ADM said it identified a "material weakness" in its internal control over financial reporting related to its accounting practices and procedures for intersegment sales. 

The company said it has developed a remediation plan to "enhance the reliability of its financial statements with respect to the pricing and reporting of such sales."

ADM said it continues to cooperate with the Securities and Exchange Commission (SEC) and the Department of Justice (DOJ). 

On Tuesday, ADM also reported financial results for the quarter and full year ended December 31, 2023.

Full-Year 2023 Highlights

• Segment operating profit of $5,900 million, adjusted segment operating profit¹ of $6,244 million
• Trailing four-quarter average adjusted return on invested capital (ROIC)¹ of 12.2%

Board Chair and CEO Juan Luciano said, “ADM’s results speak to the resiliency of our business. Supported by our unparalleled global footprint and capabilities, we delivered another solid year of execution. Our team continues to focus on delivering high-quality products and services for our customers and is driving our productivity and innovation agenda, while generating strong cash flows that allow us to accelerate the return of cash to our shareholders.”

Summary of Fourth Quarter and Full Year 2023

"For the fourth quarter ended December 31, 2023, earnings per share on a GAAP basis was $1.06. Segment operating profit on a GAAP basis was $1,235 million and included net charges of $171 million, or approximately $0.30 per share, related to impairments and restructuring, net of a contingent loss reversal, and a gain of $7 million related to the sale of certain assets.

Adjusted segment operating profit was $1,399 million for the fourth quarter, a 16% decrease versus the prior year period. Adjusted earnings per share were $1.36. Lower pricing and execution margins led to a decline of $0.21 per share versus the prior year period, largely reflecting the impact of lower crush and origination margins. Improved manufacturing costs, primarily related to lower input and energy costs, led to an increase of $0.18 per share versus the prior year. Lower equity earnings and cycling one-time legal recovery benefits led to a $0.34 per share decrease in the fourth quarter of 2023 versus the prior year period. Unplanned downtime at Decatur complex also negatively impacted fourth quarter EPS.

For the full year, earnings per share on a GAAP basis was $6.43. Segment operating profit on a GAAP basis was $5,900 million and included net charges of $361 million or approximately $0.56 per share related to impairments and restructuring, net of a contingent loss reversal, and a gain of $17 million or approximately $0.03 per share related to the sale of certain assets.

Adjusted segment operating profit was $6,244 million for the full year, a 6% decrease versus the prior year. Adjusted earnings per share were $6.98. Improved pricing and positive mark to market timing impacts were a $0.77 per share benefit. Overall volume declined, resulting in a $0.29 per share reduction versus the prior year. Higher manufacturing costs, partially related to unplanned downtime at the Decatur complex, led to a $0.41 per share decrease versus the prior year. Increased corporate costs related to higher interest rates and 1ADM implementation, partially offset by higher ADMIS, drove a decrease of $0.30 per share versus the prior year. Lower equity earnings, primarily related to Wilmar, attributed a $0.46 per share decrease versus the prior year. Benefits from share repurchases of $0.26 were more than offset by negative impacts of $0.20 related to a higher adjusted income tax rate, and cycling one-time benefits from the legal recovery and Biofuel Producer Recovery Program."

4Q 2023 Segment Overview

FY 2023 Segment Overview

4Q 2023 AS&O Overview

FY 2023 AS&O Overview

4Q 2023 Carbohydrate Solutions Overview

FY 2023 Carbohydrate Solutions Overview

4Q 2023 Nutrition Overview

FY 2023 Nutrition Overview

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