Executive Summary / Key Takeaways

• Archer-Daniels-Midland, a global leader in agricultural supply chains and nutrition, is navigating a challenging market cycle marked by ample commodity supply, lower margins, and regulatory uncertainty, particularly impacting its core Ag Services and Oilseeds segment.
• The company's strategy centers on aggressive "self-help" initiatives, including a restructuring program targeting over $500 million in cost savings by fiscal 2029 and a $2 billion pipeline of portfolio simplification opportunities aimed at enhancing operational efficiency and focusing on core competencies.
• Despite a weaker first quarter in 2025 with adjusted EPS of $0.70 and lower segment operating profit year-over-year, ADM affirmed its full-year adjusted EPS guidance of $4.00 to $4.75, though now expecting to land at the lower end of the range due to persistent market pressures.
• Key operational improvements, such as the expected full ramp-up of the Decatur East Nutrition facility by the end of Q2 2025 and ongoing automation/digitization efforts, are anticipated to contribute positively, particularly in the second half of the year.
• While facing risks from ongoing government investigations related to intersegment sales and associated litigation, ADM is committed to strengthening internal controls and leveraging its integrated global network and technological advancements in areas like BioSolutions and Nutrition to drive long-term value.

A Global Agribusiness Giant Adapts to a Shifting Landscape

Archer-Daniels-Midland Company stands as a cornerstone of the global agricultural supply chain, connecting farmers to consumers through its vast network of origination, processing, and distribution assets. With a history spanning nearly 125 years, marked by a remarkable record of over 93 years of uninterrupted dividends, ADM has evolved from a simple grain handler into a diversified agribusiness and nutrition powerhouse. Its strategic footprint spans the globe, positioning it as an essential provider of food security and a key player in the burgeoning bioeconomy.

The industry landscape ADM operates within is inherently cyclical, influenced by global crop production, weather patterns, trade policies, and energy prices. Recent years have seen a rebalancing from periods of tight supply to one of more ample commodity availability, leading to compressed margins across the sector. Geopolitical developments and significant regulatory uncertainty, particularly concerning biofuel mandates and trade tariffs, add layers of complexity, creating volatility and impacting trade flows. Amidst these dynamics, broader trends towards sustainability, health and wellness, and plant-based solutions present significant long-term growth opportunities.

ADM competes directly with global players like Bunge Limited (BG) in agricultural processing and trading, Ingredion Incorporated (INGR) in starches and sweeteners, and Corteva Agriscience (CTVA) in agricultural inputs. While competitors like Bunge often exhibit strong cost efficiency in commodity trading, ADM differentiates itself through its deeply integrated supply chain, broader portfolio spanning from raw commodities to high-value nutrition ingredients, and a strategic focus on innovation and sustainability. This integrated model provides ADM with greater flexibility to navigate market shifts and capture value across the chain, although increased industry capacity in processing segments from various players is currently intensifying competition and pressuring margins.

ADM's strategy is built on four pillars designed to enhance performance and create value: execution and cost management, strategic simplification, targeted growth investment, and disciplined capital deployment. These are not merely static objectives but active responses to the current challenging cycle. The company is aggressively pursuing internal "self-help" initiatives to mitigate external headwinds and position itself for future growth, leveraging its foundational strengths, including its technological capabilities.

Technological differentiation is increasingly central to ADM's strategy and competitive positioning. The company is investing in automation and digitization across its global manufacturing network to improve operational reliability, enhance efficiency, and drive cost savings. These efforts aim to boost plant uptime and reduce manufacturing costs, providing a tangible advantage in a competitive environment where operational excellence is paramount. Beyond process optimization, ADM is innovating in product technology, particularly within its Nutrition segment and BioSolutions platform. This includes developing advanced plant-based proteins, natural flavors, colors, and health and wellness ingredients like probiotics and postbiotics. The BioSolutions business leverages fermentation technology for various applications, creating high-value products from agricultural feedstocks. While specific, quantifiable performance metrics for all these technologies relative to competitors are not detailed, ADM highlights the strategic intent to create differentiated, sustainable solutions that command premium pricing and open new market avenues. The expansion of regenerative agriculture partnerships, recognized with a 2025 BIG Innovation Award, further underscores this commitment to technology-driven sustainability, aiming to improve farmer resiliency and create demand for differentiated crops. This technological focus, integrated across its value chain, helps ADM build a competitive moat beyond scale alone, appealing to customers seeking sustainable and specialized ingredients.

Performance Under Pressure: Navigating a Challenging Cycle

The impact of the current market cycle is evident in ADM's recent financial performance. For the first quarter of 2025, the company reported revenues of $20.18 billion, a decrease from $21.85 billion in the prior year quarter. Earnings Before Income Taxes fell significantly to $353 million from $885 million, resulting in adjusted earnings per share of $0.70, down from $1.46 in the comparable period of 2024. Total segment operating profit declined to $747 million from $1.2 billion.

This performance reflects lower pricing and execution margins across key segments. The Ag Services and Oilseeds segment saw operating profit decrease by 52% year-over-year, driven by compressed margins in Ag Services due to increased global supplies and trade uncertainty, and significantly lower Crushing margins stemming from increased industry capacity and competitive meal exports. The Refined Products and Other subsegment also faced pressure from lower biodiesel and refining margins. While the Carbohydrate Solutions segment's operating profit was only slightly lower (down 3%), it experienced headwinds from lower starch margins and increased competition in EMEA, partially offset by improved ethanol results in Vantage Corn Processors. The Nutrition segment, however, showed signs of recovery, with operating profit increasing by 13%, primarily driven by improved performance in Animal Nutrition and Flavors, which helped offset declines in Specialty Ingredients.

Operational challenges have compounded market pressures. Unplanned downtime at certain North America soy assets and, notably, the prolonged issues at the Decatur East Nutrition facility have been significant headwinds, impacting volumes and increasing costs. The Decatur East plant's expected return to full run rate by the end of the second quarter of 2025 is a critical operational milestone anticipated to alleviate approximately $25 million per quarter in associated costs for the Nutrition segment in the second half of the year.

Despite these headwinds, ADM maintains a solid liquidity position. As of March 31, 2025, the company had $8.4 billion in total available liquidity, comprising cash and cash equivalents and unused lines of credit. The current ratio stood at a healthy 1.40 to 1.00. While cash flow used in operating activities was $342 million in Q1 2025, compared to cash provided of $700 million in the prior year quarter, this was significantly influenced by changes in net working capital, including trade receivables and inventory timing related to South American sales and procurement. The company continues to utilize its accounts receivable securitization programs, providing up to $2.9 billion in funding, to manage working capital efficiently. Debt levels remain manageable, with a long-term debt to total capital ratio of 26% and a net debt to capital ratio of 31% as of March 31, 2025, providing financial flexibility for targeted investments and shareholder returns.

Strategic Response and Forward Outlook

In response to the challenging environment, ADM is doubling down on its self-help agenda. A restructuring program announced in February 2025 aims to deliver over $500 million in annual cost savings by fiscal 2029 through initiatives like targeted workforce reductions and operational optimizations, including the closure of the Kershaw crush facility and exit of certain trading operations. The company expects to realize $200 million to $300 million of these savings in 2025.

Strategic simplification is another key focus, with a pipeline of approximately $2 billion in portfolio opportunities identified to optimize assets and enhance focus on core, high-return businesses. This disciplined approach extends to capital allocation, with targeted investments in areas like plant modernization, automation, BioSolutions, and Nutrition innovation, while also returning cash to shareholders. ADM declared its 374th consecutive quarterly dividend in May 2025 and has 115 million shares remaining under its repurchase program, demonstrating a continued commitment to shareholder returns despite the cyclical downturn.

Looking ahead, ADM affirmed its full-year adjusted EPS guidance of $4.00 to $4.75 but now anticipates results at the lower end of this range. This cautious outlook reflects the persistent pressure on crush margins, which were trending lower in early Q2 2025 compared to Q1, and signs of weakening customer demand in certain Carbohydrate Solutions markets. Full-year directional guidance for AS&O is now expected to be lower than 2024, while Carbohydrate Solutions is expected to be slightly lower, and Nutrition is projected to be higher.

Management anticipates a recovery in crush and biodiesel margins in the second half of 2025, contingent on clarity regarding Renewable Volume Obligations (RVO) and continued growth in global biofuel demand. They also expect robust soybean meal demand to persist, supported by the livestock sector. The successful execution of cost savings initiatives and the operational recovery of the Decatur East facility are critical internal drivers expected to contribute to performance in the latter half of the year.

However, significant risks remain. Regulatory uncertainty surrounding biofuel policies (like RVO and 45Z) and trade policies could continue to impact margins and trade flows. The company is also subject to ongoing investigations by the SEC and DOJ related to intersegment sales practices, which contributed to the identification of a material weakness in internal controls related to segment disclosures. Associated shareholder litigation adds further uncertainty. While ADM is actively working to remediate the material weakness and is vigorously defending itself in legal proceedings, the outcomes of these matters are difficult to predict and could materially impact the company's financial condition and results.

Conclusion

Archer-Daniels-Midland is navigating a complex period defined by a challenging commodity cycle, operational hurdles, and regulatory uncertainty. While recent financial performance reflects these pressures, leading to an expectation for results at the lower end of its full-year guidance, the company is proactively implementing a comprehensive self-help strategy focused on aggressive cost reduction, portfolio simplification, and operational excellence. Leveraging its integrated global network and investing in technological advancements in BioSolutions and Nutrition are key components of its long-term strategy to enhance competitiveness and capture growth in evolving markets. For investors, the thesis hinges on ADM's ability to execute on its internal initiatives, the timing and clarity of regulatory environments, and the anticipated recovery in key market segments in the second half of the year, positioning the company for improved performance beyond the current cyclical headwinds.