Consumer Staples
Farm Products
$23.95B
41.8K
Archer-Daniels-Midland Company (ADM) is a global agricultural supply chain manager and processor, as well as a premier human and animal nutrition provider. ADM's core business involves the origination, merchandising, transportation, and processing of agricultural raw materials into ingredients for food, feed, fuel, and industrial products. The company leverages its global network and logistical expertise to meet the demands of food security, health and well-being, and sustainability.
Key insights and themes extracted from this filing
Revenue decreased from $101.556 billion to $93.935 billion. This is primarily due to lower sales prices ($10.3 billion), partially offset by higher sales volumes ($2.7 billion).
Net earnings attributable to controlling interests decreased 20% or $0.9 billion, to $3.5 billion. Segment operating profit decreased 10% or $0.6 billion, to $5.9 billion.
Gross profit decreased $0.1 billion or 1%, to $7.5 billion due to lower results in Crushing ($273 million), Nutrition ($232 million) and Ag Services ($68 million), partially offset by higher results in Refined Products and Other ($431 million) and Carbohydrate Solutions ($46 million).
The Company continues to expand the size and global reach of its business through the development of new products. Acquisitions expand the Company's ability to unlock the potential of nature and serve customers' evolving and expanding needs through its offerings of natural flavor and ingredient products.
In 2023, the Company expanded its regenerative agriculture program to cover two million acres across 18 U.S. states and Canada and also extended the program into new geographies, launching regenerative agriculture projects in Europe and South America, with a goal to enroll four million acres globally by 2025.
The Company's significant portfolio actions and announcements during 2023 include: the opening in February 2023 of a new production facility in Valencia, Spain; the announcement in March 2023 of the signing of a joint venture agreement with Marel; the announcement in May 2023 of a Strategic Development Agreement with Air Protein; the announcement in June 2023 of the opening of a new Customer Creation and Innovation Center in Manchester, England; the launch in July 2023 of a growth initiative of its re:generationsT™ regenerative agriculture program; the announcement in October 2023 of a strategic partnership with Solugen; the opening in November 2023 of Green Bison Soy Processing; the announcement in November 2023 of an expansion of the Company's global regenerative agriculture efforts with the launch of the Brazil program; the announcement in November 2023 to expand crush capacity in Brazil and the acquisition of a controlling stake in Buckminster Química; and the acquisition in December 2023 of D.C.A. Finance B.V.
In connection with the Investigation, the Company identified a material weakness in the Company's internal control over financial reporting related to its accounting practices and procedures for intersegment sales. The material weakness resulted from inadequate controls that allowed for certain intersegment sales to be reported at amounts not approximating market.
While the Company has developed a remediation plan, the Company will not be able to conclude whether the steps the Company is taking will remediate the material weakness until a sustained period of time has passed to allow management to test the design and operational effectiveness of the new controls.
Following the Company's January 21, 2024 announcement of the Investigation, the Company received voluntary document requests from the DOJ focused primarily on the same subject matter, and the DOJ directed grand jury subpoenas to certain current and former Company employees. The Company is cooperating with the DOJ.
The Company is facing securities litigation and could face additional litigation under federal and state securities laws or other claims arising from the Investigation, such litigation can be costly to defend, and if decided against the Company, such litigation could require the Company to pay substantial judgments or settlements.
The Company cannot predict when these investigations will be completed, nor can it predict the results of these investigations. Expenses incurred in connection with these investigations could adversely affect the Company's liquidity position.
Negative publicity and unfavorable perception of the Company could have caused and could cause significant declines in the price of the Company's common stock. Negative publicity could also impact the terms under which some customers and suppliers are willing to continue to do business with the Company and could affect the Company's financial performance or financial condition.
The Company faces significant competition in each of its businesses and has numerous competitors, who can be different depending upon each of the business segments in which it participates. The Company competes for the acquisition of inputs such as raw materials, transportation services, and other materials and supplies, as well as for workforce and talent.
The Company is subject to industry-specific risks which include, but are not limited to: launch of new products by other industries that can replace the functionalities of the Company's production; shifting consumer preferences; and product safety and quality.
The Company conducts its business and has substantial assets located in many countries and geographic areas. Both developed and emerging market areas are subject to impacts of economic downturns, including decreased demand for the Company's products, and reduced availability of credit, or declining credit quality of the Company's suppliers, customers, and other counterparties.
The Company's operating costs and the selling prices of certain finished products are sensitive to changes in energy prices, inflationary pressures, and certain logistic constraints.
The Company's operations rely on dependable and efficient transportation services, the disruption of which could result in difficulties supplying materials to the Company's facilities and impair the Company's ability to deliver products to its customers in a timely manner.
ADM's global operations function with trained individuals necessary for the processing, warehousing, and shipping of raw materials for products used in other areas of manufacturing or sold as inputs or products to third-party customers.
The Company is committed to global health and sustainable products, recognizing the interconnectedness of human, animal, and environmental health. ADM's R&D efforts focus on creating science-based products, solutions, and technologies aligned with macro trends in food security, sustainable processes, health, and personalized nutrition.
The Company strategically invests in R&D across the entire nutrition value chain by leveraging its access to innovative processes and product optimization. The R&D team is also engaged in BioSolutions initiatives which is a key part of ADM's commitment to utilize its value chain to reduce its carbon footprint, redesign core products with sustainable alternatives, and explore new markets.
The Company's internal R&D network, consisting of approximately 1,600 talented employees, is dedicated to transforming aspirations into solutions and brand innovation. The integration of interdisciplinary experts in biology, chemistry, physiology, nutrition, agronomy, and product development provides a competitive edge.
The Company anticipates spending between $360 million and $490 million on capital projects to achieve the Strive 35 targets. ADM has spent $158 million on projects in support of these goals since inception, of which $71 million was spent in 2023, including three projects in Ag Services and Oilseeds designed to fully transition away from coal usage.
In 2024, the Company expects capital expenditures of $1.3 billion and additional cash outlays of approximately $1.0 billion in dividends and up to $2.3 billion in share repurchases, subject to other strategic uses of capital and the evolution of operating cash flows and the working capital position throughout the year.
The Programs provide the Company with up to $3.0 billion in funding against accounts receivable transferred into the Programs and expand the Company's access to liquidity through efficient use of its balance sheet assets. As of December 31, 2023, the Company utilized $1.6 billion of its facility under the Programs.
The Company aims to mitigate climate change and protect biodiversity through renewable product and process innovations, supply chain efforts including a commitment to no-deforestation or native vegetation conversion and regenerative agriculture, and a strategic approach to operational excellence with a focus on enhancing the efficiency of ADM's production plants throughout its global operations.
In 2020, ADM announced its environmental stewardship goals, collectively called "Strive 35" an ambitious plan to, by 2035, reduce absolute Scope 1 and 2 GHG emissions by 25% from a 2019 baseline, reduce energy intensity by 15%, reduce water intensity by 10%, and achieve a 90% landfill diversion rate.
ADM is committed to eliminating deforestation from all of the Company's supply chains by 2025. In 2023, after a strategic investigation of the impact of conversion of native habitats in its key supply chains, the Company announced its commitment to eliminate conversion of native habitats in high risk areas in South America for direct suppliers of all commodities by 2025 and indirect suppliers by 2027, with a 2025 cutoff date for both direct and indirect suppliers.
The Company conducts its business and has substantial assets located in many countries and geographic areas. Both developed and emerging market areas are subject to impacts of economic downturns, including decreased demand for the Company's products, and reduced availability of credit, or declining credit quality of the Company's suppliers, customers, and other counterparties.
The Company's operating results could be affected by political instability and by changes in monetary, fiscal, trade, and environmental policies, laws, regulations, and acquisition approvals.
The production of the Company's products uses materials that can create emissions of certain regulated substances, including GHG emissions. Such regulated emissions also include indirect emissions that occur in the value chain as the result of activities from assets now owned or controlled by the Company.