ADM Postpones Annual Report Due to Internal Controls Concerns

ADM Stock

Archer-Daniels-Midland Co. (NYSE:ADM) has delayed the release of its annual report and disclosed a “material weakness” in its internal controls, though it reassured investors that this issue would not significantly affect its financial metrics.

The Chicago-based agricultural commodity trading giant revealed in a regulatory filing on Friday that the internal controls problem pertains to the reporting of sales between segments. However, ADM stated that it does not anticipate any impact on its balance sheets, earnings statements, income, or cash flow as a result of this issue.

This announcement follows ADM’s earlier decision to place its Chief Financial Officer Vikram Luthar on administrative leave pending an internal investigation. Last month, it was reported that the US Attorney’s Office in Manhattan had initiated an investigation into ADM’s reporting of inter-segment transactions.

The ongoing accounting probe is primarily focused on ADM’s nutrition unit, which specializes in producing high-value products such as flavorings and pet food ingredients.

According to analysts, the latest filing suggests that the outcome of ADM’s investigation could result in minimal financial adjustments, with uncertainties remaining regarding potential earnings shifts between business segments.

While ADM’s shares experienced a brief uptick of up to 3.1% following the announcement, they remain down nearly 25% for the year.

The internal investigation has drawn attention to ADM’s efforts, spearheaded by CEO Juan Luciano, to diversify its revenue streams away from its traditional agricultural commodities trading business. However, despite significant investments, particularly in the nutrition sector through acquisitions like Wild Flavors and Neovia, profits have not met initial expectations due to weak demand.

ADM aims to file its Form 10-K by March 15, within the extended timeframe permitted under US regulations. The company also affirmed its commitment to remediate the identified material weakness in its internal controls, with further details to be provided in its forthcoming annual report.

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