### ADM Faces Protracted Accounting Woes and Investor Skepticism

Archer-Daniels-Midland Co. (ADM), one of the leading commodity-trading firms, continues to grapple with its accounting issues nearly 10 months after a major scandal came to light. On Monday, ADM revealed additional errors in the reporting of inter-unit transactions, necessitating restatements of its financial results for last year and the first two quarters of 2024.

ADM's decision to revise its financial disclosures follows the detection of "material weakness" in its internal controls over the financial reporting of transactions between business units. These transactions amounted to roughly $4.4 billion last year. In light of the ongoing corrections, ADM canceled its scheduled quarterly earnings call with analysts just 14 hours before it was set to begin.

Despite the company's assurance that the corrected figures will not materially impact consolidated earnings, the ramifications have been severe in terms of investor trust and market value. Since January, when the accounting issues were first disclosed, ADM has seen its market value plummet by approximately $12 billion. On Tuesday, the stock dropped as much as 12%, reaching its lowest level since December 2020 and setting it on course for its most challenging year in almost a decade.

The scandal has spurred investigations by both the Department of Justice and the Securities & Exchange Commission (SEC), and resulted in the removal of Vikram Luthar from the position of Chief Financial Officer. ADM's decision to restate financial statements followed consultations with the SEC, although official representatives from both ADM and the SEC have declined to comment. According to SEC guidelines, even minor numerical errors can be significant if they affect loan covenants, earnings computations, or executive compensation.

The restatement particularly impacts ADM's nutrition unit, which the company has invested billions into since 2014. This includes the $3 billion acquisition of Wild Flavors GmbH and the $1.8 billion purchase of Neovia in 2019. Despite these investments, profits have not met expectations due to weakening demand, including that for plant-based foods.

This isn't the first controversy to involve ADM. In the 1990s, the company was embroiled in a price-fixing conspiracy that inspired the 2009 film "The Informant!" featuring Matt Damon. More recently, ADM faced a lawsuit over alleged price manipulation of ethanol trading.

The renewed accounting problems come at a difficult time for ADM, which is struggling with declining global crop prices and reduced profits from processing soybeans into meal and oil. Compounding these issues is a spike in imports of tallow and waste oil, diminishing the demand for soybean oil used in biofuel production. The company's ability to profit from processing has further decreased with the maintenance-related closure of its only soybean crushing facility in Iowa during a record US crop harvest.

In a preliminary report issued Monday, ADM noted a 33% drop in earnings per share compared to the previous year, falling to $1.09 and missing analysts' estimates. Additionally, ADM wrote down its investment in Wilmar International Ltd. by $461 million. The company has revised its full-year earnings outlook to a range of $4.50 to $5 per share, down from its previous estimate of $5.25 to $6.25, citing a combination of slower market demand, internal operational challenges, and uncertainties in legislative and regulatory policies.