ADM marries grain trading, oilseed units; second revamp in 14 months

CHICAGO (Reuters) - Global grains trader Archer Daniels Midland Co said on Wednesday it will consolidate five business units into four in the company’s second reorganization in just over a year as adverse weather and a U.S.-China trade dispute threaten profits.

FILE PHOTO: The Archer Daniels Midland Co. (ADM) logo is displayed on a screen on the floor of the New York Stock Exchange (NYSE) in New York, U.S., May 3, 2018. REUTERS/Brendan McDermid

ADM will combine its grain trading and oilseeds segments into a new business unit called Ag Services & Oilseeds, effective July 1, in a move that 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.

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 have been squeezed by a global grains glut, low crop prices and a prolonged U.S.-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 that combined to cut ADM’s first quarter operating profit by $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 three weeks ago 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,” CEO Juan Luciano said in a statement.

ADM shares were down slightly in early afternoon trading at $38.42 a share, a three-year low.

Reporting by Karl Plume and P.J. Huffstutter in Chicago and Arundhati Sarkar in Bengaluru; editing by Sriraj Kalluvila, Dan Grebler and Sonya Hepinstall