Almost a year has passed since Archer-Daniels-Midland Co. (ADM), a global agricultural commodities trading giant, revealed an internal investigation into its accounting practices. This probe led to a significant $12 billion loss in market capitalization. The lack of transparency surrounding the investigation and the company’s subsequent actions has prompted a former executive and shareholder, Hartwig Fuchs, to publicly call for CEO Juan Luciano’s resignation.
Fuchs, former board chairman at Toepfer International (a company previously majority-owned by ADM) and former CEO of Nordzucker AG, criticized ADM’s handling of the situation in a social media post. He argued that the company hasn’t effectively addressed the share price decline and lacks clear communication with investors. Fuchs contends that a CEO of ADM’s stature should have resolved the scandal, communicated transparently, and restored investor confidence within a reasonable timeframe. His failure to do so, according to Fuchs, warrants his resignation. ADM declined to comment on Fuchs’s statement.
The initial investigation, disclosed in January, focused on accounting practices within ADM’s nutrition unit, a key growth area for the company. This led to the resignation of then-CFO Vikram Luthar. However, the accounting issues persisted. In November, ADM uncovered further errors related to inter-unit transactions, necessitating a restatement of some financial results. This revelation forced the company to abruptly cancel its quarterly earnings call, triggering a further 12% drop in share price. ADM’s stock has plummeted approximately 30% this year, marking its worst performance since the 2008 financial crisis.
In an attempt to regain trust, ADM has replaced its CFO, appointed AT&T’s former general counsel to its board, and implemented new internal controls. The company has acknowledged overestimating intersegment sales for 2023 by $1.28 billion due to mispriced or misclassified transactions. However, the market remains skeptical. Fuchs, who admitted to increasing his ADM holdings despite his concerns, expressed his disappointment with the company’s inability to reverse the negative trend in its stock price.
This is not ADM’s first encounter with controversy. In the 1990s, the company was involved in a price-fixing scandal, which served as the inspiration for the 2009 film “The Informant!” More recently, ADM faced a lawsuit alleging price manipulation in the ethanol market.
ADM’s significant investment in its nutrition business, including the $3 billion acquisition of Wild Flavors GmbH in 2014 and the $1.8 billion purchase of Neovia in 2019, has yet to yield the anticipated returns. Weakening demand, particularly in the plant-based food sector, has contributed to lower-than-expected profits.
Fuchs concluded his statement by emphasizing the need to protect ADM’s employees and reputation. He urged the company to take decisive action to restore its credibility and drive its share price back to a level that reflects its true earning potential. The ongoing uncertainty surrounding ADM’s accounting practices and the calls for leadership change raise serious questions about the company’s future direction.
