ADM, LG Chem Announce That Lactic Acid, Polylactic Acid Projects Will Not Move Forward
ADM (NYSE: ADM) and LG Chem announced the termination of their joint ventures to produce lactic and polylactic acid due to escalating construction costs. Established in 2022, these projects have been reevaluated, and it was determined they no longer align with ADM's investment return objectives. Despite this, ADM remains focused on decarbonization and expanding its biosolutions portfolio. The company continues to support innovation, job creation, and economic growth in Decatur, where its North American headquarters are located. For more info, visit www.adm.com/Decatur.
- ADM is committed to leading in decarbonization and expanding biosolutions portfolio.
- ADM continues to advance multiple projects and facilities in Decatur, supporting innovation, job creation, and economic growth.
- Termination of joint ventures with LG Chem due to skyrocketing construction costs.
- Investment in lactic and polylactic acid projects no longer deemed prudent use of capital.
Insights
The decision by ADM and LG Chem to halt their lactic acid and polylactic acid projects reflects a significant shift in their investment strategy. The skyrocketing construction costs were evidently a decisive factor. From an investor’s perspective, this move indicates a strong commitment to capital discipline and a focus on maintaining target return objectives. While this might disappoint those looking for a quick expansion in the bio-solutions market, it underscores the company's prudence in resource allocation.
ADM's emphasis on decarbonization remains intact, which is reassuring for investors favoring sustainable investments. However, it is important to note the potential short-term impact. Projects aimed at innovation and job creation in the Decatur region may experience delays, potentially affecting local economic growth projections.
In the broader context, this decision aligns with industry norms where firms reassess investment decisions based on dynamic economic conditions. Cost management is critical in maintaining long-term profitability and ADM’s pivot to other projects suggests strategic agility. Investors should monitor how ADM reallocates these funds and the performance of their alternative investments in biosolutions.
The cancellation of the joint ventures between ADM and LG Chem reflects broader market trends where companies are increasingly sensitive to escalating production costs. The construction sector has been particularly volatile, with costs inflating due to various global economic pressures. This scenario presents a cautionary tale for other investors and companies planning large-scale projects.
For ADM and LG Chem, this decision might delay their entry or expansion in the biodegradable plastics market, where polylactic acid is a key component. While this could be seen as a setback, the companies’ proactive approach to re-evaluate their investments can be viewed positively. It suggests a readiness to pivot and adapt based on market conditions, which is a hallmark of sound management.
Overall, this news may temper short-term enthusiasm for ADM's biosolutions portfolio but does not fundamentally alter the company's long-term strategy. Retail investors should keep an eye on how this decision impacts ADM's market positioning in sustainable solutions and whether alternative projects can fill the gap effectively.
“Since we originally announced our two joint ventures with LG Chem for lactic and polylactic acid in 2022, construction costs have skyrocketed,” said Chris Cuddy, president of ADM’s Carbohydrate Solutions business. “We looked at a variety of options, but when the time came to make final investment decisions, it had become clear that these projects no longer represented a prudent use of our investors’ capital that would meet our returns objectives. ADM remains committed to leading in the decarbonization of the industries in which we participate, and we continue to expand our biosolutions portfolio to meet growing demand for sustainably sourced solutions. We also are continuing to advance multiple projects and facilities in support of innovation, jobs and economic growth for the
The two joint ventures include GreenWise Lactic, of which ADM is a majority owner, and LG Chem Illinois Biochem, which is majority-owned by LG Chem.
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About ADM
ADM unlocks the power of nature to enrich the quality of life. We’re an essential global agricultural supply chain manager and processor, providing food security by connecting local needs with global capabilities. We’re a premier human and animal nutrition provider, offering one of the industry’s broadest portfolios of ingredients and solutions from nature. We’re a trailblazer in health and well-being, with an industry-leading range of products for consumers looking for new ways to live healthier lives. We’re a cutting-edge innovator, guiding the way to a future of new consumer and industrial solutions. And we're a leader in sustainability, scaling across entire value chains to help decarbonize the multiple industries we serve. Around the globe, our innovation and expertise are meeting critical needs while nourishing quality of life and supporting a healthier planet. Learn more at www.adm.com.
Source: Corporate Release
Source: ADM
View source version on businesswire.com: https://www.businesswire.com/news/home/20240711778793/en/
ADM Media Relations
Jackie Anderson
media@adm.com
312-634-8484
Source: ADM
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