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Archer-Daniels-Midland Scales Back Operations in China Amid Cost-Cutting Strategy
BEIJING/CHICAGO (Reuters) – Archer-Daniels-Midland Company (ADM), a prominent global grain trading firm, has initiated the closure of its domestic trading operations in China and is implementing staff layoffs as part of an extensive cost-reduction initiative. This decision was communicated by the company on Monday.
The rationale behind this significant move is to enable ADM to “remain agile in a challenging environment,” particularly in light of ongoing issues related to an accounting scandal that surfaced last year. This context underscores the company’s need to adapt to prevailing market pressures.
While specific numbers regarding the layoffs have not been revealed, sources familiar with the situation suggest that between 40 to 50 employees will be affected, with only about 10 remaining in Shanghai, a key financial hub for the company. One insider commented, “The entire Ag Services and Oilseeds team in China has essentially been let go,” indicating a substantial reduction in workforce within ADM’s largest operational segment.
A different source highlighted that approximately 30 roles would be eliminated at ADM’s Toepfer Shanghai subsidiary, effective immediately, as part of a broader global effort to economize, first disclosed earlier this year.
The necessity for such drastic measures has been driven by declining earnings, which are attributed to reduced crop prices, inflation-induced drops in consumer demand, and lower processing margins. Last year, the operating profit for ADM’s Agricultural Services and Oilseeds division plummeted by 40%.
Additionally, the firm is grappling with increasing trade tensions between the United States and China, which compound the existing challenges. As a business that heavily relies on the trade dynamics between these two nations—where the U.S. is the leading exporter of agricultural commodities while China stands as the primary importer—these geopolitical issues are particularly consequential.
According to ADM, the cessation of domestic trading at Toepfer Shanghai is anticipated to be finalized by the end of September, with assurances that other operations in Shanghai will remain unaffected.
In February, the company had signaled the start of layoffs as part of a wider strategy aimed at achieving cost savings of between $500 million and $700 million over the next three to five years. This commitment to financial prudence follows the announcement of its lowest adjusted profit in the fourth quarter for six years.
On a slightly positive note, ADM’s share price rose by 1.3% on Monday, closing at $46.43, following a recent drop that saw shares hit their lowest point in nearly five years.
Source
finance.yahoo.com