LONDON/HAMBRUG May 4 U.S. agribusiness Archer
Daniels Midland Co, reeling from the impact of a global
grain glut, is now preparing to scale back its operations in
Europe in a bid to boost profits, two sources with knowledge of
the matter said.
The Chicago-based agribusiness warned on Tuesday that
worsening market conditions were making it difficult to turn a
profit trading grain internationally, leading to the biggest
daily share loss in eight years.
ADM's shares fell about 10 percent over the previous two
days before recouping some losses on Thursday, rising about 2
percent from those lows to $42.00 by 1646 GMT.
Record global stocks of commodities such as corn, soybeans
and wheat have thinned margins and limited trading opportunities
for ADM and rivals such as Bunge Ltd, which reported a
sharply lower first-quarter profit this week.
Together with Cargill Inc and Louis Dreyfus
Company, the firms are collectively known as the
ABCD and dominate global grain trading.
Sources said ADM is actively looking at cuts to a number of
its European operations including the United Kingdom, Spain,
Ireland and back-office operations in Germany.
The measures could also include merging or cutting
operations related to former German trading house Alfred C.
"There are moves for more rationalisation in Europe to cut
costs. The final overlaps between Toepfer and ADM will be ironed
out," one European source with knowledge of the situation said.
"Steamlining is being prepared in some operations in
Britain, Spain and elsewhere. Transport is also being looked at
for more savings."
A separate European source familiar with ADM's business
said: "The idea is a slimming down. Rationalisation is coming."
When contacted, an ADM spokeswoman said she could not
confirm such plans, adding that the group’s strategy included
growth through acquisitions and operational improvements such as
inventory control and office usage.
ADM has already exited energy trading and shed key personnel
in recent months. Last month it said would close its South
African trading operations, whilst also restructuring its
operations in Argentina in a further shake-up.
ADM Chief Executive Officer Juan Luciano said on Tuesday the
firm would continue to analyse other offices for possible
consolidation. "At this point of time I think that probably most
of our restructuring has been done, so we wouldn’t expect
anything further," he added.
ADM first took an 80 percent stake in Toepfer in 2002 and
bought the rest of the company in 2014.
The sources said some of the remaining rump of Toepfer in
Germany could also be consolidated.
The sources said there were other areas that could be cut or
merged in Europe - with operations that could be moved to ADM's
European headquarters and international trading desk in Rolle,
Switzerland or its major German hub in Hamburg.
"There will probably be more concentration of operations in
Rolle or in Hamburg if an EU presence is needed," the first
"The group is facing a lot of intense competition from
smaller companies which have an aggressive presence in their
markets, especially the Black Sea."
It was unclear how many jobs could be cut. The sources added
that ADM could also look to make further savings by not
replacing jobs when people left or migrating them to their
ADM, one of the world's top grain traders, reported a higher
first-quarter profit this week but said the outlook for its
agricultural services segment appeared weaker than it did at the
beginning of the year.
That segment's global trading desk suffered its third
quarterly loss in the past five quarters.
The agricultural services segment, ADM's largest in terms of
revenue, is tasked with buying, selling, storing, shipping and
trading grains and oilseeds.
ADM opened a global trading desk in Switzerland in 2015 to
oversee its supply network. The desk is now trying to reduce the
cost per tonne of materials traded because of lower margins, ADM
said this week.
(Additional reporting by Nigel Hunt; editing by Veronica Brown
and Philippa Fletcher)