ADM Has ‘No Sacred Cows’ Amid CEO Luciano’s Review

Archer-Daniels-Midland Co., the world’s largest corn processor, said it will fix or sell underperforming businesses as Chief Executive Officer Juan Luciano tries to improve returns and reduce earnings volatility.

“There are no sacred cows here,” Luciano said Tuesday during a conference call with analysts. Everybody “needs to present a credible forecast for returns to be part of the integrated business.”

His comments came after Chicago-based ADM reported better-than-expected first-quarter earnings. Record crop volumes boosted the soybean-crushing business and ADM’s trading volumes. That offset lower profit from corn-processing.

Even before Luciano took over as CEO in January, ADM was focusing on more value-added, less cyclical businesses, notably with its $3.1 billion acquisition of Wild Flavors GmbH last year. ADM is selling its cocoa-processing unit to Olam International Ltd. and its chocolate operations to Cargill Inc., and in March divested its lactic-acid business.

In the past ADM mainly made acquisitions and rarely sold businesses, Luciano told investors in December. Now it’s analyzing execution and competitive advantage as part of a portfolio review. Farha Aslam, a New York-based analyst for Stephens Inc., said she anticipates more asset sales and that ADM may also take advantage of the strong U.S. dollar to make acquisitions.

“The large divestitures are largely complete,” Aslam said. “Future divestitures will likely be small in nature.”

ADM said Tuesday that it reached an agreement to acquire full ownership of facilities at a Romanian port on the Black Sea, a key grain-trading region. It also announced plans to construct feed plants in Minnesota and Zhangzhou in China’s Fujian province.

First-quarter earnings per share increased to 77 cents from 40 cents a year earlier, surpassing the 71-cent average of 14 analysts’ estimates compiled by Bloomberg. ADM said it identified more than $200 million of potential cost savings as it targets a total of $550 million of efficiencies over five years.

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