Archer-Daniels-Midland Company (ADM) announced on Monday that it canceled its earnings call scheduled for Tuesday morning, lowered its full-year earnings guidance, and said it would restate its fiscal 2023 10-K annual report and its first- and second-quarter 10-Q reports for 2024. The company said the restatement would include "corrections of newly identified errors" related to inter-segment sales, according to its announcement released on Monday.

The Chicago-based global grain trader said the restatement stems from "ongoing discussions" between ADM and staff of the U.S. Securities and Exchange Commission (SEC), and it does not expect the restatement to have a "material impact" on its consolidated statements of earnings, consolidated balance sheets, and consolidated statements of cash flows for the relevant periods.

Accounting issues have continued to plague the company and its financial leadership since January, when it announced an internal accounting investigation and placed then-Chief Financial Officer Vikram Luthar on administrative leave. In March, the company disclosed a remediation plan to address "material weaknesses" in its internal controls over financial reporting related to inter-segment sales reporting. By July, ADM hired 3M CFO Monish Patolawala from outside the company to replace Luthar, who announced his resignation in April, a move seen as the company seeking a "fresh start."

Morningstar strategist Seth Goldstein believes this latest restatement is a continuation of the same issue—how the company accounts for inter-segment sales—which had already led to a previous round of restatements, but he expects it to have "minimal impact" on the company's outlook. Although it is unclear why the new errors were discovered, Goldstein said the new CFO has been in the role for too short a time to be damaged by this matter, and noted the development may stem from Patolawala's desire to conduct a thorough review of the financial statements to ensure the company will not need to restate any reports in the future.

Nevertheless, investors were unsettled by ADM's news: the company's shares fell about 6% on Tuesday, closing at $51.99. Goldstein noted that restatements are often viewed as a "red flag" that weighs on share prices, and the cancellation of the earnings call was another driver of Tuesday's decline. But he also emphasized that the drop could reflect investors lowering their valuations of the company based on the new earnings guidance in the announcement.

"Canceling an earnings call is never a good sign, especially when it's done the night before, so the market reaction is understandable," Goldstein said. "At the same time, I think continued weakness in ag services and oilseeds and rapidly declining profits are also significant reasons for the sharp drop in the stock."

Goldstein noted that in 2022, the Russia-Ukraine war boosted markets for crops such as corn and soybeans, benefiting companies like ADM because farmers were more willing to accept lower prices to make deals, and corporate crop trading divisions also profited from volatility. But this year, markets have returned to a more "normal" mid-cycle state. Prices received by soybean and corn growers fell sharply in July, and producers are facing record declines in income, according to Agriculture Dive, a sister publication of CFO Dive.

The company reported unaudited adjusted net earnings of $530 million for the third quarter ended September 30, compared with $880 million in the same period last year, which the company called "preliminary" results. At the same time, the company lowered its previously provided full-year earnings per share guidance and now expects adjusted earnings per share of $4.50 to $5.00 for 2024.

"While our Carbohydrate Solutions business delivered strong results, our Ag Services and Oilseeds and Nutrition businesses underperformed, impacted by weaker-than-expected market conditions and the pace of planned improvements. We are taking the necessary actions to improve performance and drive sustained value creation," ADM CEO Juan Luciano said in a statement in the announcement, adding that the "integrity" of its internal controls and financial reporting is of utmost importance and the company is committed to continuing to strengthen its internal controls.

ADM declined to comment further.