USA – Archer-Daniels-Midland Co. (ADM), a global grains merchant, has confirmed accounting discrepancies that led to the correction of certain transactions in its financial results spanning six years.
The company’s disclosure of these issues comes alongside its plan to rectify the situation, albeit acknowledging that the implementation of corrective measures will take time.
According to ADM’s recent statements, some transactions between business units within the company were not accurately recorded at amounts reflecting market value. This led to the correction of segment-specific financial information for previous financial statements covering the period from 2018 to 2023.
Notably, these adjustments included overstating the Nutrition segment’s annual operating profit by as much as 9.2% during that time frame.
Despite the accounting revelations, ADM clarified that the adjustments made to previous statements had no impact on its consolidated financial statements for any period, as they pertained to sales between business segments.
In response to these findings, ADM has initiated a remediation plan aimed at enhancing the reliability of its financial statements concerning the pricing and reporting of such intersegment sales.
“Looking ahead, we have developed a remediation plan concerning the identified material weakness to enhance the reliability of our financial statements with respect to the pricing and reporting of such sales,” Chairman and CEO Juan Luciano said in a statement.
The plan will involve the gradual implementation of internal control enhancements, along with increased transparency regarding the valuation of goods exchanged between different segments of the company.
Luciano expressed the company’s commitment to addressing the identified material weakness in its internal controls. He emphasized the importance of ensuring the accuracy and integrity of financial reporting processes, underlining ADM’s dedication to upholding strong internal controls.
Despite the accounting challenges, ADM’s shares surged by 4.9%, alleviating concerns among investors. Analysts, including those at CFRA Research, upgraded their rating for ADM, citing optimism regarding the company’s response to the accounting issues.
While ADM continues to cooperate with regulatory authorities, including the Department of Justice, in their investigations, the company remains focused on its operational performance.
ADM reported lower-than-expected fourth-quarter profits, attributed partly to challenges in its Nutrition unit, which has been under scrutiny due to the accounting investigation.
Looking ahead, ADM anticipates full-year earnings for 2024 to be between US$5.25 and US$6.25 per share, down 18% from the previous year.
Despite the accounting setbacks, the company remains optimistic about the growth prospects of its Nutrition segment, forecasting mid-single-digit revenue growth and higher operating income in the coming year.
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