Chicago-based Archer Daniels Midland board decided on Friday to place CFO and senior vice president Vikram Luthar on administrative leave, effective immediately, pending an ongoing investigation by outside counsel and the board’s audit committee of certain accounting practices and procedures related to the company’s nutrition reporting group, and “certain intersegment transactions,” according to a Monday Securities and Exchange Commission filing.
ADM veteran Ismael Roig, 56, who has most recently served as president of EMEA (Europe, the Middle East and Africa) at the company and as president of Animal Nutrition, was named interim CFO, also effective immediately, the company announced Sunday. “The Board takes these matters very seriously. Pending the outcome of the investigation, the Board determined that it was advisable to place Mr. Luthar on administrative leave. The Board will continue to work in close coordination with ADM’s advisors to identify the best path forward and ensure ADM’s processes align with financial governance best practices,” Terry Crews, lead director of ADM’s board, said in the company release.
The company’s shares fell about 24% to close at $51.49 Monday. The agricultural trading giant’s investigation was sparked by a “voluntary document request” from the SEC, and ADM said it is cooperating with the SEC, according to a company release. In response to a question from CFO Dive, an SEC spokesperson said the agency does not comment on “the existence or nonexistence of a possible investigation.”
A spokesperson for ADM declined to comment beyond the release on the SEC request or any other matter. The exact nature of an SEC “voluntary” document request can vary, according to an article titled “’An Offer You can’t Refuse’: Responding to SEC ‘Voluntary’ Requests,” written by attorneys from the law firm of BakerHostetler led by partner Jonathan Barr.
The SEC staff may use the voluntary request tool to assess a matter’s merits in a matter’s earliest stages or at any point, the article states. The request’s informal nature “is not an indication of the seriousness of its investigation. While a request for a voluntary production does not have the same force and effect as a subpoena, a failure to comply with the request may nevertheless result in various consequences. Accordingly, the use of the word ‘voluntary’ is a misnomer in the traditional sense of the term. ”
Looking ahead, ADM said it will delay its earnings release and conference call related to its Q4 and full year 2023 results as well as the filing of its 10K for the period ended Dec. 31. The company said it will provide an update on the timing of its earnings release “as soon as practicable.”
The company also said it withdraws all its “forward-looking outlook for the Nutrition reporting segment” but expects to report operating profit for its AS&O and Carbohydrate Solutions segments in line with previous guidance provided in the company’s Q3 earnings call on Oct. 24.
Due to the investigation, the company also updated its outlook for the year ended Dec. 31 to above $6.90 in adjusted earnings per share. During the Q3 call, Luthar said the company was raising its 2023 earnings outlook and anticipating a full year EPS “in excess of $7 per share” even with “softness in nutrition,” noting that the company’s “fortress” balance sheet gives it flexibility, particularly in a “higher for longer interest rate environment,” according to a call transcript.
In the Q3 period ended Sept. 30., ADM’s net earnings fell to $821 million from $1.03 billion in the year earlier quarter.
In the last decade ADM has sought to expand its nutrition business, which designs and sells ingredients for products such as protein drinks, plant-based meat alternatives and animal feed, but profits for the business have fallen short of analysts expectations, in part due to the drop in demand for plant-based food products, according to a Sunday report from The Wall Street Journal.
In a statement in the Sunday release, ADM CEO Juan Luciano said the company was “fortunate to have a leader of Ismael’s caliber step into the Chief Financial Officer role on an interim basis. Having served in various leadership positions at ADM over the past 20 years, as a member of the Executive Council for ten years, and with his global financial and operating experience, Ismael is the right choice to lead the Finance organization.”
Prior to joining the company in 2004, Roig spent 11 years at General Motors in various treasury, finance and controller positions. Roig shares the tie to the automaker with Luthar.
In a 2022 sit-down interview with CFO Dive after he took ADM’s finance chief reins earlier that year, Luthar, then 55, said he was in part drawn to the company because, having been born and raised in India, he was keenly aware of the social and economic importance of “good nutrition at an affordable price.” He also described the strategy shift that was tilting the more than a century-old ag company better known for corn and grains toward newly developed food products and ingredients that are closer to the consumer.
“The population of the world is going to keep growing,” he told CFO Dive in 2022. “But the supply of grain and arable land is limited so there has to be other ways to meet the food needs of the global population.”
Luthar did not immediately respond to a request for comment via LinkedIn.