According to Reuters, the U.S. Attorney’s Office for the Southern District of New York has initiated an investigation of accounting practices at ADM. CFO Vikram Luthar was placed on administrative leave and was replaced by Ismael Roig as the Interim CFO on January 21st. Luthar was previously responsible for the Nutrition Segment that appears to be the focus of investigations.
On January 22nd ADM closed at $68.41 but opened the following day at $53.79 following announcement of possible accounting irregularities and continues to languish at this level. ADM currently trades with a Zack’s rating of #5 corresponding to a “Strong Sell”
The focus of the investigation relates to transfer price of commodities to the nutrition business. The Nutrition Segment produces plant-based protein, flavors, food additives, animal and pet food ingredients. The apparent problem may relate to a 2020 change in executive compensation based on operating profit of each of the Company segments.
According to the most recent Company 10-Q filing for the Quarter ended September 30th. 2023, ADM earned $821 million on revenue of $221,695 million with a diluted EPS of $1.52. The Nutrition Segment posted revenue of $1,784 million or 8.2 percent of revenue generated by the Company for the quarter.
ADM has delayed bonuses for some senior executives until the problem is resolved, including an audit of source documents used to generate financial statements.