(Bloomberg) — Archer-Daniels-Midland Co. placed its chief financial officer on leave and cut its earnings outlook pending an investigation into the agricultural trading giant’s accounting practices.
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CFO Vikram Luthar has been put on administrative leave, effective immediately, and Ismael Roig will serve as interim CFO, the company said in a statement on Sunday.
The shares were down as much as 16% in premarket trading on Monday. If the decline holds, the stock will be set for its biggest drop since April 2005, wiping out almost $6 billion of market value.
The probe, which is in response to a voluntary document request by the Securities and Exchange Commission, surrounds certain practices and procedures with respect to the company’s nutrition reporting segment, ADM said. It is cooperating with the SEC.
ADM has spent billions expanding its nutrition business since 2014, when it made its biggest-ever acquisition — the $3 billion buyout of European natural ingredient maker Wild Flavors — in a bid to diversify into value-added products. Profits have failed to live up to initial expectations, however, due to weakening demand, including for plant-based food.
The segment’s operating income is forecast to drop more than 18% in 2023 to the lowest since 2020, according to analyst estimates compiled by Bloomberg. In November, ADM chose long-time executive Ian Pinner to lead the embattled business.
The Chicago-based company — one of the world’s biggest agricultural traders — is withdrawing its outlook for the nutrition unit and expects to delay its fourth-quarter and full-year earnings release, it said. ADM expects to deliver above $6.90 in adjusted earnings per share for the year ended Dec. 31, after having predicted in October full-year profits in excess of $7.
Read More: Crop Trader ADM Slumps After Deal to Grow Nutrition Business
This isn’t the first scandal involving ADM. Back in the 1990s, it was implicated in a price-fixing conspiracy that later became the basis of the 2009 film The Informant!, starring Matt Damon. ADM pleaded guilty to the price-fixing charges in 1996. The company is also responding to a lawsuit over allegations of price manipulation involving its trading of ethanol.
“The board takes these matters very seriously,” Terry Crews, lead director at ADM, said in the statement. “The board will continue to work in close coordination with ADM’s advisers to identify the best path forward and ensure ADM’s processes align with financial governance best practices.”
–With assistance from Subrat Patnaik and Matt Turner.
(Corrects penultimate paragraph to remove innacurate lawsuit reference.)
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