ADM to restructure divisions a second time

20.03.2018

Please use the sharing tools found via the email icon at the top of articles. Copying articles to share with others is a breach of FT.com T&Cs and Copyright Policy. Email licensing@ft.com to buy additional rights. Subscribers may share up to 10 or 20 articles per month using the gift article service. More information can be found at https://www.ft.com/tour.
    https://www.ft.com/content/206a3b66-2b78-11e8-9b4b-bc4b9f08f381

    Archer Daniels Midland plans to restructure its operating divisions for the second time in three years as it battles falling profit margins in the grain industry.

The Chicago-based company is a top global agricultural merchant, shipping bulk foods such as corn, wheat and soyabeans or processing them into ingredients.

Ample grain supplies and flat prices have weighed on profits for parts of ADM’s business, impelling it to cut costs and streamline operations over the past few years.

On Monday, the company said it would reshuffle divisions into four new ones, reflecting internal changes to how it operates. The change will also give investors more transparency, said Juan Luciano, chief executive.

“It’s very important that investors can see through our segmentation,” Mr Luciano said in an interview.

The new divisions are called origination, carbohydrate solutions, oilseeds and nutrition. They replace four existing divisions: agricultural services, corn processing, oilseeds processing and wild flavours and speciality ingredients (WFSI).

ADM last restructured its operating divisions in the first quarter of 2015, when it assembled the WFSI segment from its €2.3bn acquisition of Wild Flavors and other businesses. While the unit has been profitable, it contributes a relatively small share of earnings.

The grains trading and processing industry has suffered from a series of large harvests that led farmers to hold back crops in search of better prices and prompted consumer food groups to become tougher negotiators when buying supplies.

Bunge, an ADM rival, is slashing costs and capital spending by $450m in an effort to boost profit margins. Cargill, the biggest agricultural merchant, in 2015 revamped its leadership structure.

ADM has been investing in businesses that are closer to final customers. Last summer it disclosed Project Readiness, a combination of cutting costs and finding efficiencies such as standardising business processes around the world.

Mr Luciano said the new segments were part of a “natural evolution” of changes under way at the company, and a “reflection of how we think about those businesses”.

ADM’s new structure focuses most of its grains trading — the business furthest from final customers — inside the new origination division. Stefano Rettore, ADM’s chief risk officer, will lead the group.

The company’s wheat milling business, housed until now inside agricultural services, will sit in the carbohydrate solutions division alongside ADM’s corn processing plants, which make products such as corn syrup and fuel ethanol. Chris Cuddy, head of corn processing, will be in charge.

The nutrition segment will encompass WFSI as well as ADM’s enzymes, “bioactives” and animal nutrition businesses, which partly reflects ADM’s expansion into the pet treat market. Vince Macciocchi will lead the unit.

Oilseeds is a simpler name for the oilseeds processing division, which will otherwise remain unchanged under management of Greg Morris. This division also handles soyabean origination from Brazil and will continue to do so, the company said.

ADM approached Bunge about a merger, people familiar with the matter said early this year. Mr Luciano declined to comment on the status of any talks.




ft.com

Readers choice: TOP-5 articles of the month by UkrAgroConsult