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ADM to combine grain trading, oilseed businesses

Chicago | Reuters — Global grains trader Archer Daniels Midland said Wednesday it will consolidate five business units into four in the company’s second reorganization in just over a year as adverse weather and a U.S.-China trade dispute threaten profits.

ADM will combine its grain trading and oilseeds segments into a new business unit called Ag Services and Oilseeds, effective July 1, in a move that analysts say could better streamline its North American operations and cut costs.

The new unit will be led by Greg Morris, former president of ADM’s oilseeds unit.

The revamp comes during a particularly challenging period for grain merchants ADM and rivals Bunge, Cargill and Louis Dreyfus, known as the ABCD quartet that dominates global agricultural commodities trade.

The companies have shifted operations and reorganized management teams as profits have been squeezed by a global grains glut, low crop prices and a prolonged U.S.-China trade war that has stifled global commodities flows.

Severe weather in North America has heaped further pressure on the sector, including exceptionally harsh cold this winter and record-breaking spring floods that combined to cut ADM’s first quarter operating profit by US$50 million to $60 million.

“They may be getting more aggressive at looking at aspects of the business for cost efficiencies because of those headwinds,” said Bill Densmore, senior director of corporate ratings at Fitch Ratings.

ADM last restructured its business groups in March 2018. The company said in April that it is seeking voluntary early retirements in North America and may eliminate individual jobs as part of a restructuring of specific areas.

Cargill has been overhauling its corporate structure in recent years following a string of disappointing quarterly results. Bunge revamped its operations three weeks ago for the second time in 18 months.

ADM said the new Ag Services and Oilseeds division, which will combine ADM’s global trading, transportation and oilseeds-processing businesses, is “a natural evolution.”

“This helps us better integrate the supply and value chains to deliver significant simplification and efficiency to the day-to-day business,” CEO Juan Luciano said in a statement.

– Reporting for Reuters by Karl Plume and P.J. Huffstutter in Chicago and Arundhati Sarkar in Bangalore.

 

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