By Jonathan Saul and Michael Hogan | LONDON/HAMBURG REUTERS
LONDON/HAMBURG U.S. agribusiness Archer Daniels Midland Co (ADM.N) said on Thursday that its operations would expand overall in Europe this year, even as the company restructures parts of its global trading operation.
The Chicago-based agribusiness had said 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.
In the global shake up, ADM has revamped its Argentina operation and closed its South Africa trading desk.
Trade sources told Reuters earlier on Thursday that the company was preparing to reduce operations in Europe in a bid to boost profits, but spokeswoman Jackie Anderson said the company would expand in Europe in 2017 through acquisitions.
“We have no current plans to scale back our European operations,” Anderson said. “Our strategic plan encompasses growth through acquisition and expansions.”
The growth included the acquisition of French sweetener and starch producer Chamtor, Anderson said.
Anderson said there were no plans to cut operations in the United Kingdom, Spain, Ireland and back-office operations in Germany. Trade sources had earlier said those could be cut and that measures could also include merging or reducing operations related to former German trading house Alfred C. Toepfer International.
The firm has completed most of its planned consolidation but would analyze other offices where cuts made sense, Chief Executive Officer Juan Luciano said in a conference call on Tuesday.
Trade 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,” one of the sources said.
“The group is facing a lot of intense competition from smaller companies which have an aggressive presence in their markets, especially the Black Sea.”
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.
The firm has exited energy trading and shed personnel in recent months.
The agricultural services segment’s global trading desk suffered its third quarterly loss in the past five quarters.
The segment, ADM’s largest in terms of revenue, is responsible for 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.
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 (BG.N), 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.
ADM’s shares fell about 10 percent over the previous two days before recouping some losses on Thursday, rising over 2.6 percent to $42.40.
(Additional reporting by Nigel Hunt; editing by Veronica Brown, Philippa Fletcher and Grant McCool)