Executive Summary / Key Takeaways

• Archer-Daniels-Midland (ADM) is executing a comprehensive strategic transformation, focusing on operational excellence, cost management, and portfolio simplification to enhance long-term value despite current market headwinds.
• The company's investment thesis hinges on its integrated global supply chain, innovation in nutrition and bio-solutions, and disciplined capital allocation, which are critical to bridging the gap until external market conditions, particularly U.S. biofuel policy clarity, improve.
• Recent financial performance reflects challenges in Ag Services and Oilseeds (AS&O) and Carbohydrate Solutions due to biofuel policy uncertainty and softer demand, but strong sequential improvements in Nutrition, driven by Flavors and Animal Nutrition, offer a positive counter-narrative.
• ADM has revised its full-year 2025 adjusted EPS guidance to $3.25-$3.50, anticipating continued softness in crush margins and delayed biofuel demand, while projecting $200 million-$300 million in cost savings for the year.
• The long-term outlook for 2026 and beyond remains optimistic, with expected clarity on U.S. biofuel policy and global trade dynamics poised to create a more constructive environment for ADM's core businesses.

The Global Agribusiness Powerhouse: A Foundation for Future Growth

Archer-Daniels-Midland Company, founded in 1902, stands as a global titan in agricultural supply chain management, processing, and nutrition. Its nearly 125-year history is a testament to continuous adaptation, evolving from a commodity trader to a diversified provider of food, feed, energy, and industrial solutions. This journey has shaped ADM into a vertically integrated powerhouse, capable of connecting local agricultural needs with global capabilities, a foundational strength that underpins its current strategic responses to dynamic market forces.

ADM's overarching strategy for 2025 is anchored in four key priorities: execution and cost management, strategic simplification, targeted growth investment, and disciplined capital deployment. These internal levers are crucial as the company navigates a complex external environment marked by policy shifts, trade uncertainties, and evolving consumer demands. The company's integrated business model, spanning origination, processing, and value-added solutions, provides a unique competitive advantage, allowing it to reposition co-products into new solutions, expand decarbonization capabilities, and leverage existing plant capacity for new product lines.

Technological Edge and Innovation Driving Value

ADM's strategic vision is deeply intertwined with its commitment to technological differentiation and innovation, which serves as a critical competitive moat. The company is not merely a processor but a cutting-edge innovator, guiding the way to new bio-based consumer and industrial solutions.

A prime example of this is ADM's decarbonization strategy. The company recently achieved a key milestone by connecting its Columbus, Nebraska dry corn mill plant into Tallgrass's Trailblazer CO2 pipeline, commencing CO2 injections. This marks the second ADM facility actively reducing its carbon footprint through CO2 sequestration, demonstrating a tangible commitment to sustainability and positioning ADM at the forefront of the growing carbon economy. This initiative not only reduces environmental impact but also opens new value opportunities in low-carbon solutions, enhancing ADM's appeal to environmentally conscious customers and investors.

In the Nutrition segment, ADM is developing the next generation of flavor systems for its rapidly expanding energy drinks portfolio. Its cutting-edge energy emulsion technology offers enhanced product stability, consistent quality, and a simplified supply chain. This innovation directly translates into improved product performance for customers and operational efficiencies for ADM, strengthening its competitive position in the high-growth beverage market.

Another area of significant investment and differentiation is postbiotics. ADM is actively investing in innovation in this space, recently receiving an innovation award for its proprietary postbiotic formulation designed to support human immunity and digestive wellness. The company also launched its second pet-focused postbiotic. These developments highlight ADM's diverse in-house research and development expertise in the biotics space, enabling it to capture growth in high-value health and wellness markets by offering scientifically backed, differentiated ingredients.

Furthermore, ADM is advancing ethanol production performance improvements through close collaboration between R&D and operations, delivering improved yield gains. The rollout of these advancements to additional plants is in progress, with further enhancements in testing. These operational innovations directly contribute to cost efficiencies and improved profitability within the Carbohydrate Solutions segment. The company is also focused on side stream valorization, optimizing production processes to add value to byproducts, further enhancing resource efficiency and profitability.

While ADM has refined its digital strategy, pivoting away from large global implementations to more agile, regional projects, this transition led to a $173 million impairment charge related to previously capitalized internal-use software in the third quarter of 2025. This move, however, is intended to accelerate its data journey and enhance cybersecurity and network resilience, ultimately supporting smarter operations and cost savings. These technological advancements, from decarbonization to advanced flavor systems and biotics, are crucial for ADM to maintain its competitive edge, drive higher-margin product sales, reduce operational costs, and secure its long-term growth trajectory.

Competitive Landscape and Strategic Positioning

ADM operates within a highly competitive global agribusiness and food ingredients market, facing direct competition from industry giants like Bunge Limited (BG), Ingredion Incorporated (INGR), and Corteva Agriscience (CTVA). Each competitor presents unique strengths and challenges to ADM's market position.

Bunge Limited primarily focuses on global agribusiness and food, with a strong emphasis on commodity trading and oilseed processing. While Bunge may exhibit greater agility in pure commodity trading, ADM differentiates itself through a more vertically integrated and diversified portfolio, encompassing extensive transportation and storage networks, and a robust Nutrition segment. ADM's end-to-end supply chain solutions offer a comprehensive value proposition that Bunge's trading-centric model may not fully replicate. ADM's operational execution in complex processing, particularly in its Nutrition segment, often provides a qualitative edge, though Bunge's trading efficiencies can lead to strong cash flow generation in dynamic commodity markets.

Ingredion Incorporated specializes in ingredient solutions derived from starches, focusing on value-added food and beverage applications. In the carbohydrate solutions space, ADM's offerings are broader, utilizing a wider array of agricultural inputs, which provides greater operational flexibility. Ingredion, however, may hold an advantage in the speed of innovation for highly specialized ingredients, potentially impacting ADM's growth rates in niche markets. ADM's scale and supply chain capabilities, offering bundled services, stand out against Ingredion's more focused ingredient approach.

Corteva Agriscience is a leader in seeds, crop protection, and digital farming. Its competitive advantage lies in technology-driven upstream agricultural solutions. ADM's business, while also involved in agriculture, is more focused on downstream processing and nutrition. While Corteva excels in R&D-driven revenue growth through proprietary technologies, ADM's strength lies in its extensive logistics network and operational scale for commodity handling. ADM's strategy to expand its BioSolutions business and regenerative agriculture partnerships aims to bridge this gap by integrating technology into sustainable farming practices, enhancing farmer resiliency and creating new high-value avenues for differentiated crops.

ADM's overall market positioning is characterized by its unparalleled asset network and diversified revenue streams, providing resilience against market volatility. The company's strategic simplification initiatives, including the closure of less competitive facilities and the formation of joint ventures (like the North American animal feed JV with Alltech), are designed to optimize its portfolio and enhance focus on core, higher-margin competencies. These actions, coupled with its technological advancements in decarbonization and biotics, aim to counter competitors' specialized strengths and solidify ADM's leadership in the evolving global food and agriculture system.

Financial Performance and Liquidity: Navigating Headwinds with Strategic Discipline

ADM's recent financial performance reflects a period of strategic adjustment amidst challenging external conditions. For the three months ended September 30, 2025, revenues increased by 3% year-over-year to $20.37 billion, driven by higher sales prices of corn and oils, partially offset by lower prices for meal and soybeans. However, gross profit for the quarter decreased by 7% to $1.27 billion, primarily due to compressed margins in the Ag Services and Oilseeds (AS&O) and Carbohydrate Solutions segments. Net earnings attributable to ADM for the quarter saw a significant increase to $108 million from $18 million in the prior year, largely due to a decrease in impairment charges, despite lower execution margins.

For the nine months ended September 30, 2025, revenues decreased by 4% year-over-year to $61.71 billion, while net earnings attributable to ADM were $622 million, down from $1.23 billion in the prior year period. This decline was primarily driven by lower pricing and execution margins, as well as significant specified items, including a $173 million impairment charge related to internal-use software and a $163 million penalty charge related to the company's investment in Wilmar International Limited.

Segment-Specific Performance:

• Ag Services and Oilseeds (AS&O): Segment operating profit decreased by 21% in Q3 2025 and 35% for the nine months ended September 30, 2025. This was largely due to compressed margins from increased global supplies, biofuel policy deferrals, and competitive meal exports. Despite these headwinds, the Ag Services subsegment saw improved operating profit in Q3 due to strong corn exports and lower logistics costs in South America, with robust export volumes in September 2025 marking the best since 2016. The Crushing subsegment, however, faced significantly lower soybean and canola crush margins.

• Carbohydrate Solutions: Segment operating profit decreased by 26% in Q3 2025 and 14% for the nine months ended September 30, 2025. This was primarily driven by softer demand for sweeteners and starches in North America (due to less consumption of packaged goods and corrugated paper) and persistent high corn costs in EMEA. Conversely, the Vantage Corn Processors subsegment showed improved operating profit, benefiting from strong ethanol export activity and industry downtime. Ethanol EBITDA margins per gallon approximately doubled in Q3 2025 compared to the prior year, despite roughly flat volumes.
• Nutrition: This segment demonstrated resilience, with operating profit increasing by 24% in Q3 2025 and 14% for the nine months ended September 30, 2025. Human Nutrition saw strong growth in Flavors, achieving record quarterly revenue in North America, and an uptick in biotic demand. Animal Nutrition's operating profit surged by 79% in Q3 2025, driven by a focus on higher-margin product mix, cost optimization, and portfolio streamlining initiatives. The return of the Decatur East plant to planned utilization rates is expected to further benefit Specialty Ingredients.
• Other Business: Operating profit significantly improved from a loss of $17 million in Q3 2024 to a profit of $55 million in Q3 2025, primarily due to better Captive Insurance results from lower claim settlements.

Liquidity and Capital Allocation:

ADM maintains a strong financial position, with $11 billion in total available liquidity as of September 30, 2025. Cash provided by operating activities for the nine months ended September 30, 2025, increased substantially to $5.80 billion from $2.50 billion in the prior year, primarily due to effective working capital management. Notably, inventories decreased by $3.20 billion year-to-date, reflecting sharpened inventory management practices. The company's net leverage ratio stood at a healthy 1.8x as of September 30, 2025, in line with its year-end target of approximately 2x. Capital expenditures for the nine months ended September 30, 2025, were $892 million, with full-year 2025 CapEx expected to be in the range of $1.3 billion to $1.5 billion. ADM remains committed to returning value to shareholders, having declared its 375th consecutive quarterly dividend in Q3 2025.

Outlook and Guidance: Awaiting Policy Clarity for a Stronger 2026

ADM has revised its full-year 2025 adjusted EPS expectations to a range of $3.25 to $3.50, down from the approximately $4 per share previously guided. This adjustment primarily reflects the continued softness in global soybean crush margins, which are expected to be lower than earlier projections of $60-$70 per metric ton, and a weaker outlook for the Ag Services subsegment due to trade dynamics. The deferral of U.S. biofuel policy and other global movements make it challenging to predict the exact timing of a structural increase in biofuel demand.

Despite these near-term challenges, ADM's management expresses optimism for a more constructive environment in 2026. The company anticipates that clarity on U.S. biofuel policy, including the finalization of Renewable Volume Obligations (RVOs) and the 45Z biofuel producer tax credit, will drive significant biofuel and renewable diesel demand. This is expected to lead to elevated pricing, volumes, and margins across its key operating areas, particularly in AS&O. Management believes that RINs will likely increase first, pulling demand for soybean oil, which in turn will boost crush margins as ADM's assets run harder. The expectation is that oil could eventually account for approximately 50% of the crush share, a scenario historically associated with margin expansion.

The company is on track to deliver $200 million to $300 million in cost savings in 2025, part of a larger $500 million to $750 million target over the next three to five years. These savings, coupled with operational improvements and portfolio optimization, are crucial self-help initiatives to mitigate external pressures. For Carbohydrate Solutions, continued softness in sweeteners and starches demand and high corn costs in EMEA are expected, with Q4 2025 ethanol EBITDA margins projected to be roughly 10% lower than Q4 2024. The Nutrition segment is expected to experience seasonal softness in Flavors in Q4, but this will be partially offset by improvements in Specialty Ingredients as the Decatur East plant returns to planned utilization. The Animal Nutrition joint venture with Alltech, expected to commence operations in 2026, aims to further pivot this business towards higher-margin specialty ingredients.

Risks and Challenges

ADM faces several significant risks that could impact its investment thesis. The ongoing U.S. biofuel policy uncertainty, particularly regarding RVOs and the 45Z tax credit, remains a primary concern. Delays or unfavorable outcomes could continue to depress crush and biodiesel margins, directly impacting the AS&O segment. Global trade dynamics, including potential trade deals with China and tariffs, introduce volatility and unpredictability in commodity flows and pricing. The company's exposure to commodity price volatility is inherent in its business model, and adverse movements can significantly affect revenues and profitability.

Furthermore, ADM is subject to government investigations by the SEC and DOJ related to intersegment sales, the outcome of which is uncertain and could lead to material financial or reputational impacts. Related shareholder litigation also adds to legal and financial risks. Operational risks, such as equipment failure, natural disasters, and cybersecurity incidents, could disrupt production and supply chains. The competitive landscape, with increased crush capacity in North America and aggressive competition in food oils, also poses a challenge to maintaining margins. Finally, a higher effective tax rate is anticipated in 2025 (21%-23%) due to the sunset of the biodiesel tax credit, shifts in geographic earnings mix, and global minimum tax expansion.

Conclusion

Archer-Daniels-Midland is navigating a period of profound change, characterized by external market volatility and a determined internal drive for transformation. The company's strategic pivot, emphasizing operational excellence, aggressive cost management, and a disciplined portfolio optimization, is designed to fortify its resilience and unlock long-term value. While the deferral of U.S. biofuel policy and broader trade uncertainties have created near-term headwinds, particularly impacting crush margins and overall earnings in 2025, ADM's foundational strengths—its integrated global supply chain, robust asset network, and a growing portfolio of innovative nutrition and bio-solutions—position it for a strong rebound.

The company's technological leadership in areas like decarbonization, advanced flavor systems, and postbiotics, coupled with ongoing R&D in ethanol production, provides a critical competitive edge. These innovations are not merely incremental improvements but strategic differentiators that enhance margins, reduce costs, and open new high-growth markets. As policy clarity emerges in the biofuel sector and global trade flows stabilize, ADM's prepared operational footprint and strategic initiatives are poised to capitalize on increased demand for agricultural products and value-added ingredients. For discerning investors, ADM represents a compelling opportunity to invest in a resilient agribusiness leader actively shaping its future through strategic self-help and technological advancement, poised for a more constructive environment in 2026 and beyond.