Trade tensions between the U.S. and China, the largest crop importer, have negatively affected ADM, leading to eroded profits due to ample global crop supplies and thinning margins.
Additionally, ADM is dealing with the aftermath of an accounting scandal that triggered federal investigations and caused a nearly 30% drop in its stock price since January last year.
In response to these challenges, ADM has initiated a cost-cutting and consolidation strategy. In February, the company announced plans to reduce costs by $500 million to $750 million over the next three to five years, including job cuts and downsizing operations.
ADM reaffirmed its full year adjusted earnings forecast of $4 to $4.75 per share but expects profits at the lower end of this range. This guidance, while indicating the weakest performance since 2020, was not as severe as some investors had anticipated.
“Investors had generally expected much weaker guidance, given the sharp deterioration in the macroeconomic environment in recent months,” said Arun Sundaram, senior equity analyst at CFRA Research.
ADM’s ag services and oilseeds segment saw a 52% drop in operating profit in the first quarter, while the carbohydrate solutions division experienced a 3% decline in earnings.
However, improved ethanol biofuel results helped offset lower margins in starches and sweeteners. A 13% increase in operating profit in the smaller nutrition segment and lower costs contributed positively to ADM’s first-quarter results.
The Chicago-based company reported an adjusted profit of 70 cents per share for the three months ending March 31, down from $1.46 per share in the same period last year but above analysts’ average estimate of 67 cents, according to LSEG data.