In a March 12^th release, Archer-Daniels-Midland Corp. (ADM) posted financial results for the 4^th quarter and FY 2023. The Company can be regarded as a bellwether for ‘Mega-Ag’ and the commodities trading and processing sector. Along with competitors Bunge, Cargill, Cofco and Dreyfus, all are subject to the risks of currency fluctuation, geopolitical events, climatic extremes, and increased cost of ingredients, labor and transport in a competitive world environment influenced by inflation, conflict and disparity in the quality of life between industrialized and developing nations.

For the 4^th Quarter of FY 2023 ending December 31^st, net income was $565 million on total revenue of $22,978 million. Comparable figures for the 4^th quarter of fiscal 2022 ending December 31^st 2022 were net income of $1,019 million on total revenue of $25,939 million. Diluted EPS fell from $1.84 for the 4^th quarter of fiscal 2022 to $1.06 for the most recent quarter.

Comparing the 4^th quarters Revenue was down 11.4 percent in FY 2023. Gross margin was up from 6.8 percent in Q4 2022 to 7.6 percent for Q4 2023 and operating margin up from 3.3 percent to 3.6 percent.

For the FY 2023 net income was $3,483 million on total revenue of $93,935 million with a diluted EPS of $6.43. Comparable figures for the 4^th quarter of fiscal 2022 were net income of $4,340 million on total revenue of $101,556 million with a diluted EPS of $7.74.

Segment operating profits combined totaled $1,399 million with respective contributions:-

• Ag Services and oilseeds           $954 million. (Crushing, $389m; Ag. Services, $214m)
• Carbohydrate solutions              $309 million.
• Nutrition                                    $ (10) million. (Human, $(25m); Animal, $15m)
• Other businesses                        $146 million

Juan Luciano Board Chair and CEO commented, “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.”

The Company release included a comment on the Nutrition Segment: “Operating profit was negative $10 million during the fourth quarter of 2023, down 110 percent compared to the prior year period. The Human Nutrition segment operating profit was negative $25 million, approximately $112 million lower versus the prior year period, as operational challenges led to lower volumes and increased manufacturing costs. The quarter also included negative impacts of $64 million related to deconsolidation and write-down of a joint venture, and an investment valuation loss. Unplanned downtime at Decatur East was also a negative impact. Animal Nutrition operating profit of $15 million was 17 percent lower versus the prior year, driven largely by lower amino acid margins and lower sub-segment volumes overall”.

“For the full year, Nutrition segment operating profit was $427 million, 36 percent lower versus the prior year. Human Nutrition results of $417 million were 25 percent lower than the prior year, as higher pricing was more than offset by weaker volumes and increased costs. The full year also included negative impacts of $64 million related to deconsolidation and write-down of a joint venture, and an investment valuation loss. Unplanned downtime at Decatur East was also a negative impact. Animal Nutrition results of $10 million were 91 percent lower compared to the prior year primarily driven by the normalization of amino acid margins and lower volumes”.

Guidance for FY 2024 included an adjusted EPS of $5.25 to $6.25

ADM, has apparently “identified and corrected” recording of sales between the Ag. Services and Oil Seeds Segment and the Nutrition Segment.  The adjustments will have no ultimate effect on the balance sheet and statements of earnings reflecting the period January 2018 through September 2023.

ADM noted “material weakness” in internal controls over financial reporting and accounting practices relating to intersegment sales.

Juan Luciano, Chairman and CEO, stated, “We have developed a remediation plan with respect to the identified material weaknesses to enhance reliability of our financial statements with respect to the pricing and reporting of sales.”  He added, “We remain committed to strong internal controls and we look to continue our focus on execution.”

ADM experienced a 24 percent drop in share price from $68.02 following the Friday January 19^th disclosure that Vikram Luthar, the CFO, had been placed under administrative leave.

On December 31^st 2023, ADM posted assets of $36,075 million of which $6,341 million comprised goodwill and intangibles, against long-term debt of $8,260 million. The Company had an intraday market capitalization of $30,800 million on March 19^th. ADM trades with a forward P/E of 11.3 and has ranged over a 52-week period from $50.72 to $87.30 with a 50-day moving average of $57.32.  Twelve-month trailing operating margin was 3.3 percent and profit margin 3.7 percent.  Return on assets over the past twelve months was 4.3 percent and the return on equity 14.1 percent.