Archer-Daniels-Midland Company (ADM) is a global leader in the food processing and agricultural commodities industry, boasting a diverse portfolio spanning Ag Services & Oilseeds, Carbohydrate Solutions, and Nutrition. As one of the largest players in the $5 trillion food and agriculture sector, ADM has weathered significant changes over the past century, showcasing its resilience and adaptability in the face of evolving market dynamics.

Business Overview

Archer-Daniels-Midland was founded in 1902 in Minneapolis, Minnesota, originally operating as Archer Daniels Linseed Company, focused on linseed crushing and processing flaxseed into linseed oil and meal. In 1923, the company acquired the Midland Linseed Products Company, leading to its name change to Archer Daniels Midland Company and expanding its geographic reach and processing capabilities.

Throughout the 1930s and 1940s, ADM continued to grow through acquisitions and diversification, expanding into soybean processing. The 1970s marked a significant turning point for the company as it invested heavily in corn wet milling and began producing high fructose corn syrup to capitalize on the growing demand for processed foods and beverages. In 1972, ADM also entered the ethanol production market, further diversifying its product portfolio.

Despite facing challenges such as a price-fixing scandal in the 1990s involving its lysine and citric acid businesses, which resulted in significant fines and reputational damage, ADM has continued to invest in expanding its global footprint and product offerings. The company has made strategic acquisitions in the animal nutrition and human food ingredients sectors, cementing its position as a leading global agribusiness and food processing company.

ADM's core business segments include:

Ag Services & Oilseeds

This segment encompasses global activities related to the origination, merchandising, transportation, and storage of agricultural raw materials, as well as the crushing and further processing of oilseeds. Key products include vegetable oils, protein meals, and specialty ingredients. The segment generated $66.52 billion in revenue for the year ended December 31, 2024.

The Ag Services and Oilseeds segment is responsible for the global origination, merchandising, transportation, and storage of agricultural raw materials, as well as the crushing and further processing of oilseeds such as soybeans, cottonseed, sunflower seed, canola, rapeseed, and flaxseed.

Crushed oilseeds are processed into a variety of products, including vegetable oils, proteins, and meal. The crude vegetable oils are either sold as-is to manufacturers of renewable diesel and other customers, or are further refined, blended, bleached, and deodorized into salad oils. These salad oils are then sold as-is or hydrogenated and/or interesterified into margarine, shortening, and other food products. The partially refined oils are also used to produce biodiesel and glycols, or sold to other manufacturers for use in chemicals, paints, and other industrial products. The oilseed protein meals are primarily sold to third parties as ingredients in commercial livestock and poultry feeds.

This segment is also a major supplier of peanuts and peanut-derived ingredients to both the U.S. and export markets. The segment's cotton cellulose pulp is manufactured and sold to the chemical, paper, and other industrial markets in North America.

The Ag Services and Oilseeds segment also includes ADM's global grain sourcing, handling, and transportation network, which provides reliable and efficient services to the company's customers and processing operations. This network includes the use of barges, ocean-going vessels, trucks, rail, and container freight. Additionally, this segment encompasses ADM's agricultural commodity and feed product import, export, and global distribution activities, as well as its structured trade finance operations.

Carbohydrate Solutions

This segment focuses on the conversion of corn and wheat into products such as sweeteners, starches, and alcohol for industrial and food & beverage applications. The segment also includes ADM's leading position in carbon capture and sequestration. The Carbohydrate Solutions segment generated $11.23 billion in revenue for the year ended December 31, 2024.

The segment is engaged in the corn and wheat wet and dry milling processes, converting these grains into a variety of products and ingredients used in the food, beverage, and industrial markets. Key products include sweeteners, starches, syrups, glucose, wheat flour, and dextrose. The dextrose and starches are also used as feedstocks for further downstream processing, such as the production of alcohol and other food and animal feed ingredients.

The segment's alcohol production includes ethyl alcohol, which is used for industrial purposes as well as blended into gasoline to increase octane content and as an oxygenate. In addition, the Carbohydrate Solutions segment produces corn gluten feed and meal, as well as distillers grains, which are sold as animal feed ingredients.

Another product of the corn wet milling process is corn germ, which is further processed into vegetable oil and protein meal. The segment also manufactures citric acids, which are used in various food and industrial applications.

Nutrition

ADM's Nutrition segment serves end markets including food, beverages, nutritional supplements, livestock feed, and pet food. The company offers a wide array of specialty ingredients, solutions, and systems derived from agricultural commodities. The Nutrition segment generated $7.35 billion in revenue for the year ended December 31, 2024.

This segment serves a variety of end markets, including food, beverages, and nutritional supplements for humans, as well as complete feed, feed premix and additives, pet food and pet treats for livestock, aquaculture, and pets. The Nutrition segment engages in the creation, manufacturing, sale, and distribution of a wide array of ingredients and solutions, including plant-based proteins, natural flavors and colors derived from nature, flavor systems, emulsifiers, soluble fiber, polyols, hydrocolloids, probiotics, prebiotics, postbiotics, enzymes, botanical extracts, and other specialty food and feed ingredients and systems.

In addition to these ingredient and solutions offerings, the Nutrition segment also includes activities related to the procurement, processing, and distribution of edible beans, the processing and distribution of formula feeds and animal health and nutrition products, as well as the manufacture of contract and private label pet treats and foods.

Over the years, ADM has strategically expanded its global footprint and diversified its product portfolio through both organic growth and strategic acquisitions. The company now operates over 400 facilities worldwide, with a significant presence in key agricultural regions such as the United States, South America, and Europe.

Financials

In the fiscal year ended December 31, 2024, ADM reported total revenues of $85.53 billion, a decrease of 8.9% compared to the prior year. Net income for the period stood at $1.80 billion, with diluted earnings per share of $3.65. The company's trailing-twelve-month operating cash flow was $2.79 billion, while free cash flow amounted to $1.23 billion.

For the most recent quarter (Q4 2024), ADM reported revenue of $21.50 billion and net income of $567 million. Revenues decreased 8.4% year-over-year driven by lower sales prices, partially offset by higher sales volumes. Lower sales prices of soybeans, corn, meal, oils, wheat and alcohol were partially offset by higher sales volumes of soybeans, corn, oils, wheat, alcohol, and flavors.

ADM's financial performance has been impacted by various market factors in recent years, including volatility in commodity prices, shifting trade policies, and the COVID-19 pandemic. However, the company's diversified business model and global reach have helped mitigate some of these challenges, allowing ADM to maintain its position as a leading player in the agribusiness industry.

Segmental Performance

Ag Services & Oilseeds This segment, which accounts for the majority of ADM's revenues, reported operating profit of $2.45 billion in 2024, a 40% decrease compared to the prior year. The decline was primarily driven by lower margins in the Crushing and Refined Products & Other subsegments, as well as reduced origination volumes and margins in South America.

Carbohydrate Solutions

Segment operating profit for Carbohydrate Solutions was $1.38 billion, relatively flat compared to 2023. Strong performance in the Starches & Sweeteners subsegment was offset by lower results in Vantage Corn Processors, where higher industry production pressured margins.

Nutrition

The Nutrition segment reported operating profit of $386 million, a 9.4% decrease year-over-year. The decline was mainly attributable to challenges in the Human Nutrition subsegment, including unplanned downtime at the Decatur East facility and higher manufacturing costs, partially offset by improved performance in Animal Nutrition.

Outlook and Guidance

For the fiscal year 2025, ADM has provided the following guidance:

• Adjusted earnings per share expected to be in the range of $4.00 to $4.75

• Capital expenditures projected to be between $1.5 billion and $1.7 billion
• Effective tax rate anticipated to be 21% to 23%

The company's outlook reflects the expected headwinds in the Ag Services & Oilseeds and Carbohydrate Solutions segments, driven by factors such as lower margins, policy uncertainties, and increased global supplies. However, ADM remains focused on operational improvements, cost-saving initiatives, and strategic portfolio optimization to navigate these challenges and position the company for long-term success.

Segment-specific guidance for 2025 includes:

Ag Services and Oilseeds (AS&O):

• Q1 2025 segment operating profits expected to be down approximately 50% compared to the prior year period, driven by declines in crushing and refined products and other (RPO).
• Full-year 2025 AS&O segment operating profit expected to be below or similar to 2024 levels.
• Soybean crush execution margins expected to range from $45 to $55 per ton, down approximately $5 per ton at the midpoint versus the prior year.
• Canola crush execution margins expected to range from $50 to $70 per ton, down approximately $20 per ton at the midpoint compared to the prior year.
• RPO operating profit expected to be down significantly compared to the prior year.

Carbohydrate Solutions:

• Q1 2025 segment operating profit expected to be low by approximately 5% to 15% compared to the prior year period.

• Full-year 2025 expected to see lower Carbohydrate Solutions segment operating profit relative to the prior year.
• Ethanol EBITDA margins expected to be in the range of $0.05 to $0.10 per gallon, down approximately $0.10 at the midpoint compared to the prior year.

Nutrition:

• Q1 2025 operating profit expected to be down 50% compared to the prior year period.

• Full-year 2025 anticipated to have higher Nutrition operating profit compared to the prior year with low to mid-single-digit revenue growth led by the Flavors business.

Liquidity

ADM maintains a strong liquidity position to support its operations and strategic initiatives. The company's cash and cash equivalents, along with its available credit facilities, provide a robust financial foundation to weather market uncertainties and pursue growth opportunities. ADM's strong credit ratings and access to capital markets further enhance its financial flexibility.

As of December 31, 2024, ADM reported:

• Debt/Equity ratio: 0.45
• Cash and available credit lines: $611 million in cash, $13 billion in total lines of credit of which $9.1 billion was unused
• Current ratio: 1.4
• Quick ratio: 1.4

Risks and Challenges

As a global agribusiness, ADM faces a range of risks and challenges that could impact its operations and financial performance, including:

1. Commodity price volatility: Fluctuations in the prices of agricultural commodities can significantly affect the company's margins and profitability.

2. Regulatory and policy changes: Shifts in trade policies, biofuel mandates, and environmental regulations can create uncertainty and disrupt supply chains.

3. Weather and climate events: Adverse weather conditions and climate change can impact crop yields and agricultural production, affecting the availability and prices of raw materials.

4. Operational disruptions: Unplanned downtime, equipment failures, and other operational challenges can disrupt the company's manufacturing and processing capabilities.

5. Competitive landscape: ADM operates in a highly competitive industry, with other large players and regional competitors vying for market share.

6. Ongoing investigations: The company is currently under investigation by the SEC and DOJ related to certain accounting practices and procedures in the Nutrition segment, including intersegment sales. This has led to the identification of a material weakness in internal controls over financial reporting.

To mitigate these risks, ADM has implemented robust risk management strategies, diversified its global footprint, and invested in technological innovations to enhance operational efficiency and flexibility.

Industry Trends and Market Position

The global agricultural and food ingredients industry has seen moderate growth, with a compound annual growth rate (CAGR) of 4-6% over the past 5 years. Key drivers include population growth, rising middle class in emerging markets, and increasing demand for processed and specialty food ingredients.

ADM's global footprint spans operations in over 180 countries, positioning the company to capitalize on these industry trends. While the company does not provide a detailed breakdown of performance by geographic market, its diverse presence allows it to leverage regional strengths and mitigate risks associated with localized market fluctuations.

Human Capital and Culture

ADM has a global workforce of approximately 44,000 employees across 80 countries. The company is committed to fostering an inclusive culture and investing in the development of its workforce. This focus on human capital aligns with ADM's strategic goals and supports its ability to innovate and adapt in a rapidly changing industry landscape.

Environmental, Social, and Governance (ESG)

ADM has set ambitious sustainability goals, including reducing absolute Scope 1 and 2 GHG emissions by 25% and Scope 3 emissions by 25% by 2035. The company is also working to increase the use of low-carbon energy sources and reduce water withdrawal and waste to landfill. These initiatives demonstrate ADM's commitment to environmental stewardship and align with growing consumer and investor focus on sustainable business practices.

Conclusion

Archer-Daniels-Midland's long history of adapting to changing market conditions and its diversified business model have been key to its success as a leading global agribusiness. While the company faces various challenges, including commodity price volatility, regulatory uncertainties, and ongoing investigations, ADM's focus on operational improvements, cost optimization, and strategic portfolio management positions it well to navigate the evolving landscape and capitalize on emerging opportunities in the food and agriculture industry. The company's strong liquidity position, global reach, and commitment to sustainability further support its ability to drive long-term growth and shareholder value in an increasingly complex and competitive market environment.