Archer-Daniels-Midland Considers Asset Sales, Job Cuts in Cost-Cutting Push
In an effort to mitigate declining profits, Archer-Daniels-Midland Co. (ADM) is exploring asset divestments. The Chicago-based giant is assessing businesses with declining demand and excess capacity for potential closures and transactions, as stated by CEO Juan Luciano during an earnings call with analysts.
ADM has identified "portfolio opportunities" worth approximately $2 billion. As part of a plan to achieve cost savings of up to $750 million over the next three to five years, ADM will also reduce 600-700 jobs globally this year. The target for 2025 is $300 million in savings.
This move follows job cuts at industry rival Cargill Inc. and comes after two consecutive years of profit declines. Factors such as rising grain inventories and policy uncertainty have weighed on prices and reduced traders' bargaining power.
ADM has also faced challenges of its own, including an accounting investigation that has significantly reduced its market value.
Following an initial decline of up to 5.1% in New York, ADM shares recovered some losses. The cost-saving initiatives are being implemented in anticipation of further profit declines this year. ADM projects adjusted earnings per share (EPS) for 2025 to be between $4 and $4.75. This guidance falls short of the $4.66 EPS average analyst projection and the 2024 EPS of $4.74.
ADM expects soybean and canola crushing profits to remain under pressure in the first half of the year due to uncertainties surrounding US biofuel and trade policies affecting vegetable oil demand. Additionally, increased supplies of meal from Argentina have impacted prices for chicken feed ingredients.
"The external environment continues to pose uncertainties and challenges," said Luciano. Adjusted earnings for the three months ending December were $1.14 per share, a 16% decrease year-over-year. While this figure aligns with analysts' estimates (according to Bloomberg), it represents ADM's lowest fourth-quarter earnings since 2018.