ADM Reorganizes for Second Time in 14 Months, Creates New Business Unit

Chicago-based Archer Daniels Midland (ADM) announced it has undertaken its second reorganization in 14 months in response to challenging market conditions, adverse weather, and an ongoing trade war with China.

The company will be consolidating two of its existing business units, creating a new unit - Ag Services & Oilseeds - which will combine the company’s Origination and Oilseed business operations, effective July 1. Prior to this move, the company’s Origination and Oilseed units accounted for $3.4 billion in profit before taxes last year.

At the same time, Stefano Rettore, president of ADM’s Origination unit will be leaving the company, and Greg Morris, the current president of the Oilseeds unit will assume leadership of the newly created Ag Services & Oilseeds division.

“ADM’s ability to provide value through the entire supply chain – from origination to processing to transportation to ingredients and solutions – is what sets us apart from others in the industry,” said Juan Luciano, chairman and CEO, ADM.

“Bringing the unparalleled strength of our global origination, global trade and destination marketing businesses and our transportation network together with our leadership in oilseeds processing and value-added product mix 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.”

Under Pressure

ADM is not alone in feeling the pressure from years of global bumper harvests, increasingly competitive and volatile markets, investor pressure, and an ongoing trade war with China that makes planning and decision making increasingly difficult.

“We continue to have no resolution -- we’ve got traditional trade flows interrupted,” Greg Heckman CEO of Bunge, told Bloomberg. “It’s very disruptive to the system.”

Each of the legacy ABCD global grain traders (ADM, Bunge, Cargill, and Louis Dreyfus) as well as other major global grain companies have undertaken reviews and re-examinations of their business models, reorganizations, and a shifting of their focus into more downstream or higher margin categories and activities.

With these changes have also come shifts to companies’ C-suite leadership teams. Bloomberg reports that Bunge, Dreyfus, and Gavilon have all replaced their top tier leaders. One month ago Gavilon Group named a new replacement CEO, and earlier this month Bunge announced the appointment of John Neppl, formerly with ethanol company Green Plains Inc., as its new CFO only months after announcing the departure of its CEO Soren Schroder, who was replaced with Greg Heckman.

We’ve seen an explosion in changes at the top lately," Stephen Nicholson, senior analyst for grains and oilseeds, Rabobank told Bloomberg. "Part of it is that the agriculture industry, when you look at the results in the past five years, they are not nearly as good as they used to be."

Meanwhile, Gavilon announced that its COO Steven Zehr was being appointed as its new CEO; Louis Dreyfus named hedge fund exec Ian McIntosh as its new CEO after the sudden departure of its CEO and head of finance in September of last year; Cargill announced a new head of agriculture in company veteran Joe Stone; Scoular Co. appointed Paul Maass as its new CEO in 2016; and just recently announced ADM exec Andy Kenny was joining the company as CFO.

Splitting the Business

ADM is not the only grain player examining and shifting its business structure as a way to weather challenging conditions.

Most recently in April of this year, Australia’s Grain Corp announced its plans to restructure and split its business, spinning off its malting unit, which accounted for more than half of the company’s earnings last year. At the same time, the company said that it will continue to engage with potential buyers for either all or parts of the company.

By splitting the company, Grain Corp believes the move will unlock significant value, resulting in separate units with discrete structures and the ability to better attract investors who have specific priorities.

The de-merger will create two independent companies: one will be MaltCo, a free standing maltster that will rank fourth in the world with malting operations in the U.S, Canada, Australia, and Britain, including Country Malt Group, the company’s North American craft malt distribution business, serving the whisky, specialty malt, and craft beer industries.

It also comes only weeks after GrainCorps made news in the first week of March when it agreed to sell its Australian Bulk Liquid Terminals (ABLT) business to ANZ Terminals Pty Ltd. in a deal valued at A$350 million (US$248 million).

For ADM, Morris is confident that the latest changes to its business will result in a healthier bottom line, saying, "I am personally committed to the strategic value that simplification can bring to our organization, and feel our ability to accelerate purposeful value creation within ADM has never been greater.”