CHICAGO, Ill. (Reuters) — Global grains trader Archer Daniels Midland Co. is consolidating five business units into four, the company’s second reorganization in slightly more than a year as adverse weather and a U.S.-China trade dispute threaten profits.
ADM will combine its grain trading and oilseeds segments into a new business unit called Ag Services & Oilseeds, effective July 1, in a move analysts say could better streamline its North American operations and cut costs.
The new unit will be led by Greg Morris, former president of ADM’s oilseeds unit.
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The revamp comes during a particularly challenging period for grain merchants ADM and rivals Bunge Ltd., Cargill Inc. and Louis Dreyfus Co., known as the ABCD quartet that dominates global agricultural commodities trade.
The companies have shifted operations and reorganized management teams as profits are squeezed by a global grain glut, low crop prices and a prolonged United States-China trade war that has stifled global commodities flows.
Severe weather in North America has heaped further pressure on the sector, including exceptionally harsh cold this winter and record-breaking spring floods in the U.S. that combined to cut ADM’s first quarter operating profit by US$50-$60 million.
“They may be getting more aggressive at looking at aspects of the business for cost efficiencies because of those headwinds,” said Bill Densmore, senior director of corporate ratings at Fitch Ratings.
ADM last restructured its business groups in March 2018. The company said in April that it is seeking voluntary early retirements in North America and may eliminate individual jobs as part of a restructuring of specific areas.
Cargill has been overhauling its corporate structure in recent years following a string of disappointing quarterly results. Bunge revamped its operations last month for the second time in 18 months.
ADM said the new Ag Services & Oilseeds division, which will combine ADM’s global trading, transportation and oilseeds-processing businesses, is “a natural evolution.”
“This helps us better integrate the supply and value chains to deliver significant simplification and efficiency to the day-to-day business,” chief executive officer Juan Luciano said in a statement.
