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July 25, 2024

ADM Places CFO on Leave, Cuts Earnings Forecast Amid Accounting Investigation

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Jan 22, 2024

CFO Vijay Luthar Placed on Administrative Leave; Interim CFO Named

Archer Daniels Midland Company (ADM) announced Monday that it has placed Chief Financial Officer Vijay Luthar on administrative leave, effective immediately, amid an ongoing investigation into financial reporting matters. The company has appointed Ismael Roig, ADM’s Controller, as Interim CFO while the investigation continues.

The probe appears to center around accounting practices related to commingling trader profits on ADM’s balance sheet. The news sent ADM shares plunging over 7% in early trading Monday to a two-year low.

In connection with the investigation, ADM also announced it was lowering its adjusted earnings per share guidance for the 2023 fiscal year ending June 30 to between $5.70-$6.10 from the previous outlook of $6.00-$6.50 given just two months ago.

Investigation Focuses on Commingling of Trader Profits

While details remain limited at this time, the accounting investigation seems to involve commingling of profits from ADM’s trading operations with its balance sheet, rather than keeping them separate.

ADM’s trading division makes bets on crops and other commodities in an attempt to profit from price swings. Typically, trading revenues would be segregated from a company’s overall financials.

However, it appears ADM may have commingled these speculative trading profits with earnings from its core grain merchandising and processing operations. This could have potentially inflated bottom line profits in some periods.

Securities regulators at the SEC have begun looking into the matter alongside ADM’s audit committee review, which led to the administrative leave for CFO Luthar.

Fallout Continues with Lowered Guidance, Executive Change

Along with placing Luthar on leave and launching internal and external investigations, ADM also moved swiftly to install a new interim finance chief and slash its 2023 earnings forecast.

Ismael Roig, who previously served as ADM’s Controller, has taken over CFO duties on an interim basis amid the probe into the company’s accounting practices.

Additionally, ADM reduced its full-year adjusted EPS guidance by over 8% at the midpoint to $5.70-6.10 per share. This cut came just months after raising the prior outlook, indicating potential large impacts from any improper reporting.

The significant guidance reduction, executive leave, and accounting investigation news sent ADM shares tumbling Monday. The stock plunged as much as 9% to under $80 per share at one point – hitting its lowest level since December 2021.

Share Data
Current Price: $81.05
52-Week High: $98.75
Percent off High: 17.9%
Market Cap Change: -$3.4 billion

While the full impact remains uncertain until the investigation concludes, the developments clearly rattled Wall Street analysts and investors in the agricultural products company.

In addition to the stock drop, Baird Equity Research downgraded ADM Monday from Outperform to Neutral citing uncertainty surrounding the probe. Other analysts lowered price targets as well amid the volatile news.

Unclear Timeline for Conclusion of Investigation

In its announcement Monday, ADM did not provide details into what prompted the accounting investigation or give a timeline for when it may conclude. The company stated the audit committee review is still ongoing.

It is unclear at this time whether the commingling of trading and operating profits in financial reporting was intentional or inadvertent. Until complete details emerge, the full impacts also remain uncertain.

While ADM likely hopes for a swift resolution, accounting probes involving both internal audit committees and the SEC often stretch out over several quarters. For example, investigations into other companies like General Electric and Nikola each lasted half a year or more before settling.

So while ADM works to cooperate with the review processes, investors may face an extended stretch of uncertainty surrounding both the company’s profits and CFO leadership.

The coming quarters could bring further financial restatements, adjustments, or worse penalties if intentional wrongdoing is uncovered and proven. For now, Wall Street awaits the next update as analysts try to discern the probe’s magnitude.

About ADM, CFO Change, and Accounting Probes

  • Archer Daniels Midland Company (ADM) is one of the world’s largest agricultural processing companies. Headquartered in Chicago, ADM operates hundreds of crop procurement facilities and ~300 manufacturing plants globally. The company converts crops like corn, oilseeds, and wheat into staple food ingredients, feed products, biofuels and chemicals used worldwide.

  • Vijay S. Luthar has served as Executive Vice President & CFO of ADM since May 2022. He joined the company in 2006 and previously held various international management roles. Monday marked his first major instance of controversy or discipline as CFO amid the probe into ADM’s accounting and financial reporting practices.

  • Ismael Roig, the newly named Interim CFO, first joined ADM in 2000 and has held his most recent position as Controller since 2014. He brings extensive experience across ADM’s finance group. However, he lacks the public company CFO credentials of his predecessor Vijay Luthar.

  • Accounting investigations often involve internal audit committees, independent public accounting firms that review financial controls, as well as national securities regulators. In ADM’s case, the company has launched a review alongside the SEC. Evidence of fraud or intent could yield large fines, restatements, and leadership changes at the highest levels.

That concludes the key developments in ADM’s accounting investigation news. The coming months promise additional details as regulators and auditors work to uncover the practices and penalties in play. For now, uncertainty persists around both the scale of misreporting as well as permanent leadership changes in ADM’s C-suite.

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AiBot scans breaking news and distills multiple news articles into a concise, easy-to-understand summary which reads just like a news story, saving users time while keeping them well-informed.

To err is human, but AI does it too. Whilst factual data is used in the production of these articles, the content is written entirely by AI. Double check any facts you intend to rely on with another source.

By AiBot

AiBot scans breaking news and distills multiple news articles into a concise, easy-to-understand summary which reads just like a news story, saving users time while keeping them well-informed.

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