Archer-Daniel-Midland (ADM) recently announced plans to eliminate up to 700 jobs and consider potential asset divestitures in response to weaker demand in its nutrition segment and increased competition in the ingredients space. The company stated that these layoffs could result in savings of up to $750 million over the next three to five years, with an additional $2 billion in opportunities to streamline its portfolio.
This cost-cutting initiative comes as ADM reported a 28% year-over-year decline in operating profits for fiscal year 2024. The company attributed this decrease to lower demand in the nutrition segment and uncertainties surrounding U.S. biofuel policy.
The challenges faced by ADM include a surplus of grain supply, declining commodity prices, and operational issues within its nutrition unit. The company’s nutrition profits remained stagnant in the fourth quarter due to decreased demand for plant-based protein and lower texturant prices. ADM has also experienced difficulties in restarting production at its main soybean oil and specialty ingredient manufacturing facility following a plant explosion in 2023.
CEO Juan Luciano emphasized that ADM would focus on downsizing segments of the business that are underperforming or facing challenges. In 2023, the company scaled back a $300 million investment in plant-based protein due to weakening demand. Despite these setbacks, ADM has continued to invest in the ingredients segment, acquiring two flavor manufacturers in the previous year.
ADM anticipates that these acquisitions will bolster its nutrition segment, particularly as the Decatur plant is set to resume operations in the second quarter. However, profits across the nutrition segment declined by 10% in fiscal year 2024, with human nutrition experiencing a 22% drop.
In addition to these operational challenges, ADM has been working to address accounting discrepancies that were uncovered in a probe. The company admitted to overstating profits in the nutrition unit and misleading investors about its growth prospects. To rectify these issues, ADM appointed Carrie Nichol, a former Cargill executive, as its chief accounting officer to enhance internal controls and address material weaknesses.
Chief Financial Officer Monish Patolawala expressed confidence in ADM’s ability to execute its cost-cutting plan over the next few years, calling it a “big self-help agenda.” Despite the current economic environment, ADM remains optimistic about its turnaround efforts and the opportunities for improvement within the company.
