Megan Britt:

Thank you, Eliot. Hello and welcome to the Second Quarter Earnings Webcast for ADM. Starring to tomorrow a replay of this webcast will be available on our Investor Relations website. Please turn to slide 2. Some of our comments and materials may constitute forward-looking statements that reflect management's current views and estimates of future economic circumstances, industry conditions, company performance, and financial results. These statements and materials are based on many assumptions and factors that are subject to risk and uncertainties. ADM has provided additional information in its reports on filed with the SEC concerning assumptions and factors that could cause actual results to differ materially from those in this presentation. To the extent permitted under applicable law, ADM assumes no obligation to update any forward-looking statements as a result of new information or future events. On today’s webcast, our Chairman and Chief Executive Officer, Juan Luciano will discuss our second quarter results and share recent accomplishment on our strategic priority. Our Chief Financial Officer, Ismael Roig will review segment level performance and provide an update on our cash generation and capital allocation action. Juan will have some closing remarks and then he and Ismael will take your questions. Please turn to slide 4. I'll now turn the call over to Juan.

Ismael Roig :

Thank you, Juan. Let me begin by sharing my own thanks and congratulations for what our finance team has accomplished over the first six months of this year. As a 20-plus year employee of the company, I have seen amazing things our colleagues can accomplish when we work collectively to achieve them. And this was, again, the reality as I stepped in as Interim CFO. I'm proud to have served the company in this capacity over the last several months, and I'm excited to welcome and support Monish as he joins the team. For the second quarter ended June 30th, 2024, earnings per share on a GAAP basis were $0.98. Segment operating profit on a GAAP basis was $1 billion and included charges of $7 million, or approximately $0.01 per share related to impairments. Adjusted segment operating profit was $1 billion for the second quarter, a 37% decrease versus the prior year period. Adjusted earnings per share were $1.03. Lower pricing and execution margins led to a decline of $1.03 per share versus the prior year period, largely reflecting the impact of lower crush and origination margins. Volume improvement represented a $0.19 per share increase versus the prior year period, primarily reflecting higher volumes in AS&O and Carbohydrate Solutions. Higher costs of $0.07 per share were primarily related to $0.06 per share of unplanned downtime at Decatur East. Share repurchases represented a $0.10 per share increase versus the prior year. During the quarter, there was approximately a $0.02 per share negative impact from mark-to-market timing in the AS&O segment. Please turn to slide 7. For the second quarter, the Ag Services & Oilseeds Team delivered $459 million in operating profit, reflecting on a challenging operating environment compared to the prior year. On a year-over-year basis, mark-to-market timing for the segment was relatively muted. As Juan mentioned, strong supplies out of South America have led to a rebalancing of the supply and demand environment, while also shifting export market competitiveness from North America to South America. These ample supplies have also pressured commodity prices compared to the past two years, resulting in slower-than-expected farmer selling relative to last year and the five year averages. From the demand side, inclusion rates for meal continue to be robust, supporting domestic and export demand. Oil values were pressured during the quarter as imports of used cooking oil as a feedstock for renewable diesel continue to grow. Ag Services results were lower than the prior year, primarily driven by lower results in South American origination, as lower farmers selling due to a smaller-than-expected crop in Mato Grosso and higher logistic costs related to industry take or pay contracts led to lower margins. North America origination saw lower volumes and margins as strong crop yields out of both Brazil and Argentina led to a shift in export competitiveness to South America, as well as limited carries and trading opportunities. As we began the quarter, global demand for both meal and oil remained strong. However, the return of Argentinian crush combined with the increased imports of used cooking oil also weighed on crush margins. As we progress later in the quarter, slower farmers selling in Argentina brought tighter S&D dynamics, driving an improvement in both crush. The team performed well in this environment, leading to an executed soy crush margin of approximately $45 per metric ton for the quarter. While fundamentals supported improving crush margins as we expected, the more balanced S&D environment led to lower margins versus the prior year, translating to lower results. During the quarter, there were approximately $15 million of negative timing impacts versus negative timing impacts of approximately $195 million in the comparable period. In refined products and other, results were lowered due primarily to the reversal of prior positive mark-to-market timing impacts. In North America, increased pretreatment capacity at renewable diesel plants and higher imports of used cooking oil caused refining margins to ease relative to the record levels of last year. The biodiesel margin structure has also come off of record levels versus the prior year as a result of lower LCFS credits and RIN values. During the quarter, there were approximately $90 million of negative timing impacts versus positive timing impacts of approximately $90 million in the comparable period. Equity earnings from Wilmar of $60 million were lower compared to the prior year quarter. Moving to slide 8, the Carbohydrate Solutions team executed well, delivering $357 million in operating profit for the second quarter, which was higher versus the prior year. Industry fundamentals in the Starches & Sweeteners space continue to be supported by strong sweetener demand and an improving starch market. Within ethanol, markets became more constructive as we advanced later in the quarter and stocks moved lower, firming up both domestic and export margins. Demand for ethanol remained robust, supported by summer driving season in the U.S., solid domestic blending rates and export demand. The Starches & Sweeteners subsegment results were higher year-over-year as strong margins and volumes in North America were partially upset by lower margins in the EMEA region as they came off historically high levels. And our operational excellence efforts have helped streamline our processes and overall efficiencies, leading to improved cost positions. In the Vantage Corn Processing subsegment, strong export demand for ethanol supported solid ethanol margins, leading to higher year-over-year results. Moving to slide 9. Nutrition revenues were $1.9 billion for the second quarter, up 3% on a year-over-year basis and sequentially improved from the first quarter. Our Human Nutrition subsegment grew 10% year-over-year, as strong M&A revenue contributions as well as improved volumes and mix and flavors, combined with strong growth in our health and wellness business, more than upset headwinds from lower pricing in the texturants market and lower plant-based protein demand. Our Animal Nutrition subsegment had lower revenues versus the prior year, as lower pricing and mix was partially upset by improved volumes in the base business. Please turn to slide 10. The second quarter marked another quarter of progress with sequential improvement in operating profit for the Nutrition business, when comparing to the prior year quarter, Human Nutrition results were lower, primarily driven by unplanned downtime at Decatur East and lower texturants pricing in the specialty ingredients business. Within Flavors, we have continued to improve operations, which has led to higher shipments sequentially. In Animal Nutrition, results were higher versus the prior year, as improved execution in the base business has led to higher volumes, and cost-optimization actions and lower commodity prices helped support margins, partially upset by lower pet solutions performance in North America and Brazil. Turning to slide 11. For the second quarter, Other segment operating profit was $96 million, up 12% compared to the prior year period, supported by higher captive insurance results due to lower claim activity. ADM investor services results decreased on lower interest income. In corporate for the second quarter, an allocated corporate cost increased on higher global technology investments to support digital transformation efforts, increased legal fees, and increased securitization fees. Turning to our balance sheet and cash flows on slide 12, through the second quarter, the company has continued to generate healthy cash flows with $1.7 billion of operating cash flow before working capital. Our current leverage ratio is now within our targeted range, reflecting our disciplined approach to balance sheet management and robust cash flow generation. With robust financial flexibility, we have been able to support both strategic initiatives to support long-term growth and also leverage excess cash for enhanced shareholder returns. During the quarter, we repurchased over 16 million shares through our open market repurchase program, returning approximately $1 billion of capital, thus making the completion of our targeted $2.3 billion of share repurchases for the year. In total, we have returned $2.8 billion of capital to shareholders through repurchases and dividends so far in 2024. We also continue to invest in the business with an enhanced focus on the reliability of our asset performance, allocating $700 million to capital expenditures. Now breaking down our expectations for the third quarter by segment on slide 13, in AS&O we anticipate the third quarter to be lower versus the prior year, but improved from the cyclical low margin environment from the second quarter. We anticipate demand for both meal and oil to remain robust and support crush margins, however, likely lower than the levels in the prior year. We anticipate improved process volumes in the third quarter as we enhance our focus on operational excellence across our network, and as our Green Bison JV achieves full run rates. It is also important to note the prior year period also included a $48 million insurance recovery related to damages from Hurricane Ida. In Carbohydrate Solutions, we anticipate a strong third quarter, but lower than the prior year as wheat milling margins moderate off elevated levels. Network optimization and operational excellence will continue to support strong earnings in the second half. We anticipate solid demand for ethanol both domestically and in the export markets, and upside opportunities could be presented if fundamentals hold. In Nutrition, we expect the third quarter to be higher than the prior year period. The team is systematically optimizing the organizational and operational structure across both Human and Animal Nutrition, which are expected to continue to yield cost benefits throughout the year. Coupling this with our efforts to convert pipeline opportunities and drive improved volumes, we anticipate to see continued sequential improvement in the Nutrition business throughout the year. Turning to slide 14 to discuss our full year guidance assumptions. We anticipated increased crop production in South America would lead to lower margins across the AS&O segment in 2024. And the global soybean crush margins would likely be in the range of $35 per metric ton to $60 per metric ton for the year, with performance around the midpoint determined by the strength of soybean meal and oil demand. Though the larger crop production in South America did materialize, we experienced slower than average farmers selling in that region, as well as fewer merchandising opportunities in North America through the first half, which weighed negatively on margins in act services. We expect these dynamics to continue to pressure margins in our third quarter. On soybean crush margins, we continue to see robust soybean meal demand based on solid livestock margins and some supply tightness among competing feedstuffs. From the soybean oil side, we expect that as renewable diesel production continues to grow in the second half, the demand for vegetable oil will remain well supported. And with the prospects of a large crop in North America, we perceive increased opportunities for our interior elevator network and processing plants within Oilseeds and Carbohydrates Solutions in the second half. Taking this all together, our expected crush margin remains unchanged from $35 per metric ton to $60 per metric ton, with recent fundamentals supporting margins above the midpoint. With the first half results largely in line and balancing an improving crush environment with less opportunities and merchandising in the second half, our 2024 earnings per share range remains unchanged. Looking at the other metrics included in our total consolidated guidance, our full year 2024 indications remain unchanged. Back to you, Juan.

Operator:

[Operator Instructions] Our first question comes from Andrew Strelzik with BMO.

Juan Luciano :

Yes, thank you, Andrew. Listen, as you know, we have three businesses. Ag Services, I know it is in this, what we call a transition year, if you will, a rebalancing year from tight supplies to more comfortable S&D. So we expected to have a Q2 that was facing challenging conditions, which we did. And I think we navigated well. As we look at the rest of the year and the improvements we have over the quarter in terms of crush margins, we are executing at this point in time, even outside the range of $35 to $60 per metric ton that we gave so. But of course, when you think about our forecast for Ag Services & Oilseeds was heavily weighted on Q4. So to a certain degree, until we can put more businesses into Q4, it's probably that we have the same kind of visibility we had before. That's where we decided not to touch the range. On the other hand, Carb Solutions continue to be improving. And I think that as Ismael said in his remarks, if current ethanol margins that have improved over the quarter continue to stay that way, we could have an upside there. And certainly Nutrition continues to make significant improvements year-over-year now versus just being sequential before. So we're optimistic about the second half. We just didn't want to change the guidance at this point in time since it's heavily loaded towards Q4.

Tom Palmer:

Good morning, and thanks for the question. I wanted to ask on the Nutrition side, you reiterated the outlook for a second profit to increase year-over-year for the full year. I first just wanted to confirm that this is after adding back the write-down in the fourth quarter, so off I think kind of a $495 billion base. And then second, I wondered if you could elaborate a bit on the key drivers of these improvements over the next couple of quarters. The implication would seem to be that 3Q is up year-over-year. And sorry, the implication of 3Q being up year-over-year, would it seem to imply like a pretty meaningful increase between 2Q and 3Q. I think historically we've seen the opposite where 2Q is a bit more reasonably strong. So just any help on that sequential improvement and then off just the base that we're looking to grow as we look at this year. Thank you.

Operator:

Our next question comes from Heather Jones with Heather Jones Research.

Juan Luciano :

Yes. Thank you, Heather. As you said, yes, Spiritwood is performing very well, so is coming up in volumes. Traditionally, I would say in North America, when we have our low part of the cycle in North America, where South America has all the capacity, we take shutdowns in anticipation of demand not being very strong and we want to have our plants ready for the harvest. So, I think that's a traditional seasonal slowdown that we do. So, nothing unusual in that regard.

Adam Samuelson:

Yes, thank you. Good morning, everyone. I was hoping to maybe drill in on some of the cost and productivity initiatives that you have underway right now. And I think, one, there's a target of $500 million savings by the end of 2025, kind of split between the two years. Can you maybe provide an update on what you've realized to date in 2024, what the 2024 savings kind of are expected to be on a net basis and maybe any additional color in terms of where within the portfolio those are actually hitting the P&L? I really appreciate it. Thank you.

Operator:

Our next question comes from Ben Theurer with Barclays.

Ismael Roig :

Yes, thank you for the question. From the point of view of plant protein, we do expect the plants to come online again in Q4, so we will see some of that recovery coming in. I think as we look at the second half, we significantly pulled quite a bit of volume out in 2023 as a result, obviously, of the Decatur East facility, but also, we had in demand fulfillment. So I did report -- we did report a 3% revenue growth, as we look into the second half, we are seeing an acceleration of that, and we expect to grow, to be on track to deliver roughly in the mid-single digit growth when we bring back some of these facilities and demand fulfillment capabilities that we had lost in the second half of ‘23.

Operator:

Our next question comes from Manav Gupta with UBS.

Juan Luciano :

Yes, thank you, Manav, for the question. We have been seeing for a while that exports have been increasing year-over-year, so ethanol continues to be one of the cheapest alkoxylates out there, and it's very competitive with gasoline in many parts of the world. So we have seen a strong domestic demand because of miles driven in the U.S., especially now with the summer. We have been seeing good blending in the U.S. I think the price of ethanol is very competitive to encourage blending. And we have seen exports at levels that we've never seen before, probably north of 1.7, maybe even 1.9 billion gallons per year. So I think that was a very logical kind of when you see that the strong demand was very logical, that prices will rebound. And, again, we don't see any change for now. It will depend on how much the U.S. produces, of course, of ethanol. But at this point in time, margins are holding, and we think that it bodes well for a strong Q3. In terms of Sweeteners and Starches, that business continues to have very robust volumes and very good margins. If anything, you can see a little bit of a pullback of the energy complex, if you will. That bodes well for manufacturing costs, because these are big facilities that consume a lot of energy. So natural gas prices being close to $2 is a little bit of a tailwind for us. So, Carb Solution is having a very good year so, and we expect that to continue.

Operator:

We now turn to Salvator Tiano with Bank of America.

Juan Luciano :

Sure. Let me clarify for you. First of all, the $45 per ton is the $45 per ton we made this year. So we can work offline to walk you through the arithmetic, if you will, but there's nothing strange on that. If I go around the world, if you will, on crush margins, at this point between $60 to $70 in the US, that's where we are making businesses, about similar margins for soy in Europe, Brazil may be something between $10 and $50 depending on their domestic plants or export plants, China, $20 to $25, that kind of the margin environment. I would say when we started the quarter, we were doing margins in the low end of our range and as maybe Argentine farmers did not sell, as maybe the industry was expecting, we saw more demand for soybean milk coming into North America that make an improvement in our crush margins, so we finished the quarter a little bit better than maybe we thought, about the $45 per ton. We are selling, we said before that we were relatively open going out. We have some of the Q3 sold, what we don't have sold, we are selling at about $60 to $70 per ton. So that's the crush realities at this point in time. So I think that then we're going to leap into Q4 where we have hopefully a very large crop here in the US. Crops look terrific so far in the US, so we expect to have plenty of raw materials in that. And demand for soybean milk continues to be strong around the world and I think low prices have incentivated demand. Demand is driven a lot by poultry, as you know, and soybean milk has been increasing in the Russians. And then on the oil side, we continue to see a little bit more RGG plants coming on the stream on the second half, so that will bode well as well. So we are positive about crush margins for the rest of the year for North America.

Dushyant Ailani:

Hi. Can you hear me? Yes. Thank you for taking my question. I just want to talk on the CapEx guide. I think it's improved or it’s increased by about $300 million. I just wanted to see what's driving that.

Operator:

Our next question comes from Steven Haynes with Morgan Stanley.

Juan Luciano :

Yes. So what happened in Argentina, there was a big expectation for the unification of the exchange rate. And of course that hasn't happened so far. On the contrary, the GAAP has increased to about 50% or 55%. So at this point in time, when you combine low commodity prices because of all the abundant production and then the exchange rate, it's not very favorable for the farmer to sell. So the farmer in Argentina is selling a little bit more corn but trying to hold the beans. Will the government, so the question is, will the government be able to unify the exchange rate? I think the government's priorities right now is to fight inflation. And that was the whole plan. So they don't have a lot of room to maneuver to change something because the moment you divide, you change the exchange rate, everything is translated into prices. And the priority right now is to control prices. So I think this is for the good of Argentina long-term as a country, but I think short term will present a problem for the farmer to sell. So I think the farmer will hold as much as possible unless there is a special program that the government rolls out that they don't seem to have a lot of latitude to do so at this point in time. So I think we need to be cautious about the thinking that a lot of the crop will come as a glut to Argentina. It hasn't happened so far.

Heather Jones:

Thanks for taking the follow up. I wanted to ask about the Chinese UCO into the U .S. situation. So our understanding is those are slow some and then there is an expectation that with Europe imposing anti-dumping duties on Chinese biodiesel that China may shift more of their UCO to that market and not as much as the U.S. And just wondering what you all are seeing there and how you are expecting that to evolve throughout the year?

Operator:

We have another follow-up from Salvator Tiano with Bank of America.

Juan Luciano :

Yes, there are several factors, Salvator, here in place. So first of all, the ethanol margins are the ethanol margins, and they are better right now. They are probably twice as big as they were at the beginning of the quarter. There are some particular export markets where we can export as a premium, and we're taking advantage on that. I don't have top of my head where we export those from in terms of plants. But at this point in time, I would say the challenge, not the challenge, but maybe the activity has been on the logistics side to make sure that we can fulfill all the exports and we can get the materials to the ports, because, as you said, and I said before, demand has been very strong, and margins are very good, so we need to take advantage on that. Plants are running well. As I said, costs are coming a little bit lower, so this all bodes well for the forecast. And there's no reason for demand to change significantly outside of the world. We have a basket of countries where we are exporting is very well balanced. So at this point in time, we're looking at Q3 with optimism.

Andrew Strelzik:

Great. Thank you. I wanted to just get your perspective on broader biofuels policy. As we get deeper into the back part of the year here, we're getting close to some upcoming upcoming changes obviously the PTC maybe decisions around the RBO import export dynamic so just was curious for some updated thoughts about how those policy shifts will impact your business and whether you think there's risk on the timing of some of those things getting done. It feels like some of the timing around biofuels policy has been a moving target in a number of different ways. So just curious for how you're thinking about that progressing and impacting your business from here? Thanks.

Operator:

We have no further questions, so I'll now hand back to Megan Britt for closing remarks.

Operator:

Ladies and gentlemen, today's call is now concluded. We'd like to thank you for your participation. You may now disconnect your lines.

Juan Luciano:

Thank you, Megan. Today, ADM reported first quarter adjusted earnings per share of $1.46, adjusted segment operated profits of $1.3 billion, and a trailing fourth quarter average adjusted ROIC of 11.2%. Our first quarter operating cash flow before working capital was $900 million. In a year where the buildup of grain and oil seeds supply is expected to create pressure on margins, our teams are proactively taking action to manage through the cycle, driving structural earnings, ROIC, and cash flow generation. Our strong performance and disciplined management of our balance sheet continue to allow us to invest in our business and return cash to shareholders. Next slide, please. Last month, we laid out three priorities for value creation in 2024. One, managing through the cycle. Two, nutrition recovery. And three, enhanced return of cash to shareholders. We made progress on each of these priorities in the first quarter. Our efforts to manage through the cycle highlight ADM's ability to mitigate challenging headwinds while building structurally on enduring global trends, such as sustainability. To share a few examples of progress in the first quarter, we have been ramping up production at our Green Bison joint venture with Marathon, with increased volumes and utilization in [indiscernible]. And we're expecting to be at sustained full run rates for harvest this fall. We're continuing to evolve the carbohydrate solutions business through decarbonization, driving nearly 10% volume growth in bio solutions in Q1, while managing solid demand across the core business. Driven by increasing demand for sustainable resource feedstocks and solutions, we are announcing today that we're not only exceeded our 2023 goal of 2 million acres in our regenerative ag programs, we have also increased our 2025 acreage goal from 4 million to 5 million acres. This growth highlights the leadership role ADM is playing across the regenerative ag landscape, which is built upon the longstanding relationships we have with our more than 200,000 farmers partners. The Drive for Excellence program is focused on uncovering efficiency and effectiveness opportunities across ADM, taking action to improve outcomes and deliver cost savings. To-date, we have generated a pipeline of nearly 1,200 validated proposals. Many of these are already delivering results. For example, colleagues in Thailand had developed Chatbot to automate processing of thousands of logistic transactions previously done with a manual process, reducing errors and dramatically improving operating performance. Colleagues in Spain have released capacity in our Valencia extract facility by more than 35% by adjusting the extraction time. These projects and more like this will support us in achieving our aggressive cost savings objective of $500 million over the next two years. Moving to nutrition, the team is focused on actions across all areas of planned recovery, and we've seen expected sequential improvement coming out of the fourth quarter. The impact of these actions will accelerate in the back half of the year, consistent with what we mentioned in the last earnings call. Let me provide a few examples of progress we're making across the targeted areas. Our focus on operations and supply chain has helped us debottleneck some of our demand fulfillment challenges, particularly in EMEA Flavors, where the team has rallied to adjust our fulfillment processes following the go-live of 1ADM and improved volumes delivered sequentially. We're leveraging our improved M&A playbook to support the integration of our most recent Flavor acquisitions and now forecast better results than the initial deal model estimates. To increase speed, agility, and responsiveness to customer needs while delivering more wins across each market segment, we have fine-tuned our go-to-market and COE organizations to best align to demand. Looking to our capital allocation efforts, we have maintained our balanced capital allocation approach while leveraging excess cash flow for enhanced returns to shareholders. We returned a significant amount of cash to shareholders to date as we repurchased more than 20 million shares. As mentioned last month, our focus for excess capital deployment will remain centered on the shareholders. In summary, we are making measurable progress across each of our three major priority areas in 2024, which is setting us up well to navigate the market headwinds we are facing this year and delivering in line with our expectations. I would now like to turn the call over to Ismael for more detail on the first quarter financial results. Ismael?

Juan Luciano:

Thank you, Ismael. Please turn to Slide 15. As you can see, our team is continuing to improve execution excellence across our strategic and operational priorities, which requires a level of agility that is a hallmark of ADM's workforce. We're focusing the organization on a combination of productivity and innovation to help offset increasingly challenging market conditions based on growing commodity supply. Our teams are looking for every opportunity to manage what we can control, remaining nimble to adjust quickly to external circumstances while advancing our strategy. When we look ahead to the rest of the year, our business priorities in 2024 put us in a position to manage through this cycle. Through the differentiation and evolution of our business models in ag services and oil seeds and carb solutions, our drive for excellence program, the recovery of our nutrition business, and continued focus on shareholder returns, we have confidence in our outlook for the full year. Thanks for your time today. We look forward to taking your questions. Operator, please open the line for questions.

Andrew Strelzik:

I guess I wanted to ask about the interplay. I wanted to ask about the interplay between US and South America crops and timing and farmer selling in terms of the implications for crush margins and how you're thinking about that. It seems like we've got some delayed farmer selling out of South America that could push out the timing to which that crop comes to market. And so I guess I'm just curious how you're thinking about the balance there and ultimately kind of the confidence that you have as we get into the back part of the year that you see crush margins consistent with your expectations. Thanks.

Operator:

Thank you. Our next question comes from Ben Bienvenu of Stephens Inc. Your line is now open. Please go ahead.

Juan Luciano:

Yes. I would say we've seen strong demand, I would say, I don't know, strong or solid demand across all our segments. Margins have been good. We continue to get a lift on margins by the reduction in chemicals, the reduction in energy prices, a little bit better operations of our facilities. And I would say the main difference maybe versus last year was the last year we have exceptional margins in international milling and also in the corn business in Europe. Those have moderated a little bit, but still the business remained very strong. So I would say all the sweeteners and starches contracted for the year, we're pleased with it. And we expect strong exports to Mexico, other countries pulling well. So I would say, we feel strongly about having a Q2 that's going to be better than last year. So all in all, the uncertainty continues to stay on the ethanol side in which we are cautiously optimistic that, the maintenance systems will balance inventories, if you will, and lift a little bit of margins there. But for the rest of the business, rest of the business is operating very solidly.

Tom Palmer:

I wanted to maybe dive in a little more on refined products. You noted lower biodiesel margin expectations for the year and then in prepared remarks and pressure from imported used cooking oil. I guess, what do you see on more of a regional basis when we think about those refined spreads and more pressured U.S. and other places? And then you did have some timing gains a year ago. We saw a bit of an unwind in 1Q. Just any help on the expected progression of those as we move through 2024? Thanks.

Tom Palmer:

Thanks. And just any help on the timing, Juan?

Operator:

Thank you. Our next question comes from Manav Gupta of UBS. Your line is now open. Please go ahead.

Juan Luciano:

Yes, Manav. Good morning. Listen, there's a lot of activity going on there. But we have said, I think this is something we've got nutrition is going to carry as a headwind during the whole year. We expect that plant reasonably to be operating in Q4. I cannot provide any more details or granularity on that as we're going through all the projects, but I would say as soon as we have more specifics, we will be updating all you guys on that. But at this point in time, I think you need to think that the headwinds for nutrition in specialty ingredients and a lot of that driven by this will carry through the year.

Heather Jones:

I was just hoping you could help me. I just want to discuss the crush margin outlook a little more specifically on the soy side. So thank you for the cadence information you provided earlier. But I just wanted to dig in a little bit more. So at present, the curve for the U.S. has margins below the range. And then on a cash basis, in certain regions, they're materially below that 35. So when I think about the rest of the year, are y'all assuming that regions like Brazil and Europe are going to provide a material uplift to offset the U.S.? Or is it you think the increased soybean oil demand, et cetera., will make U.S. margins materially better than the curve is indicating at present? So just trying to think about how you all are thinking about that.

Operator:

Thank you. Our next question comes from Salvator Tiano from Bank of America. Your line is now open. Please go ahead.

Juan Luciano:

Yes. The reference we made to that is because VCP results were helped by stronger export demand for sustainably certified ethanol, and we get a premium for sustainably certified ethanol. So that supported volumes and margins. In general, Salvator, ethanol is a very cheap oxygenate, so it's getting a lot of demand from the rest of the world. So exports are expected to be north of 1.5 billion gallons. And blending demand inside the U.S. domestically has been good. It's just that this is the time of the year in which the plants have produced a lot. I always said the plants are exothermic. So in a time of cold temperature, they produce a lot, and that's a time where we drive the least. So now we're going into more the maintenance period of those plants. And I think that inventories for the industry, we hope will come a little bit more into balance, and we expect that to higher driving miles during the summer to balance margins a little bit better. But we expect for the whole year for exports to remain very healthy.

Ben Theurer:

Just wanted to follow up on some of the initiatives you're doing within the Nutrition business. And Juan, you talked about it at the beginning as it relates to like just simplification, portfolio optimization. So as you've looked through the assets and obviously, it's been volatile here and somewhat soft, obviously impacted by some of the onetime items. But as you think about Nutrition going forward and past some of the issues with the plant downtime, et cetera. How do you want to structure this business? Where do you want to take it to? What do you think is going to be the Nutrition, call it, maybe 2.0 version in 2 to 3 years time? What's the contribution, animal, human? How should we think about this?

Ismael Roig:

Can I offer a complementary view? I just wanted to offer you a complementary view on Juan's comments with regard to Animal Nutrition, but I think it also applies to the broader portfolio, which is I fully agree with Juan in the sense that the base business in Animal Nutrition is now experiencing the benefits of the cost improvement programs that we put in place, and we've seen that evolution quarter-on-quarter. But to Juan's observations on a going-forward basis, you will see a business that is looking to become more focused on the specialty side of its portfolio. As Juan alluded to at the beginning, part of the revenue calculation for the platform is partly impacted by the fact that there is a soy mill commodity component to some of the products that are produced. Over time, it's a business that will evolve to become more specialty focused, more higher margin focused. I think it bodes well for the growth and margin structure of that business as we look forward into 2025.

Steven Haynes:

Maybe just two quick follow-ups on Nutrition. So I think your income was down slightly and based on your kind of prior comments about there being some price component, were your volumes, I guess, organic volumes, positive in the quarter? That would be the first one. And then the second question is on the full year, you mentioned that the recent M&A is kind of coming in ahead of your kind of deal model expectations. How much operating profit contribution are you baking into the full year guide from M&A? Thank you.

Ismael Roig:

Yes. So in terms of overall volume, volume was a complementary question. Overall, we've seen volume hold up well. The exception to that would be, obviously, the Specialty Ingredients business and specifically, the impacts of the Decatur East plant. But all of the other elements of our business have generally performed well volume-wise. So you've seen a bit of a deterioration of the volume on a revenue basis, but you have seen a general improvement except for the SI business when it came to volume.

Adam Samuelson:

So I guess I got two questions. Maybe first, as we think about the outlook for the year where you talked about improvement in soy meal demand and inclusion ratios later in the year. Can you maybe help us be a bit more specific? Just that doesn't seem to you as implied by the curves. Most forecasts on poultry supply in different parts of the world don't really project a sizable uptick in production. So could you just help us a little bit on the areas where you're actually seeing that or getting that signal from your feed customers? And then an unrelated question, as I think about some of the cost actions and productivity savings that you've targeted for this year and next. Would love if you could maybe a bit more specificity to the areas where the $500 million are really coming from, both in terms of the category of spend, but also whether they're in the operating segments or in corporate unallocated as we think about the outlook for the next couple of years. Thank you.

Ismael Roig:

Yes. Adam, on the drive for excellence, we're actually quite encouraged by the progress. As Juan mentioned during the remarks, we have more than 1,200 initiatives, but they can be grouped into substantial areas or themes of effort and focus, working on plant process optimization, working on business process optimization, also very important on supply chain and demand fulfillment , which is part of the challenges that we've had in Nutrition. So these would be the large buckets that we're working on. And we've seen the platform progress very well. And we have at least about 1/3rd line of sight of the $500 million already for 2024. So we're very encouraged about the ability of this drive for excellence impacting 2024 already in the measures that I've just outlined.

Ben Kallo:

Just how do we think about or you think about the dynamic of the blenders tax credit changing over to a producers tax credit and the carbon intensity being a factor for overall soy oil demand in the U.S. next year?

Ben Kallo:

Just a follow-up there. What are you seeing with the renewable diesel refiners, producers in terms of them transitioning to using waste fats or other materials?

Operator:

Thank you. Our next question comes from Salvator Tiano of Bank of America. Your line is now open. Please go ahead.

Juan Luciano:

Yes. Salvator, maybe I give you what I have at the top of my mind. But we were very pleased with the increase in volumes in oilseeds or in crush during the first quarter. It was 9% increase. Part of that was Spiritwood coming online, part of that were our plants improvements in general across the footprint. Part of that was Paraguay and Ukraine also coming to crush. So that all happened at different points in the quarter. So I don't have a full recollection of what happened to what volume at any part of the quarter. The Green Bison joint venture will be a contributor to profit during 2024. So it's ramping up. It's going to get to full capacity very soon. So it will be a meaningful contributor. I don't have top of my head what was the contribution on first quarter, to be honest.

Heather Jones:

Just wanted to ask really quickly what exactly you're doing for the dry mills as far as sustainability sourcing? And the doubling of your region acreage, is that related to like proactively getting ahead of this EU deforestation regime or more stringent carb requirements? Just wondering what's driving that?

Heather Jones:

I was just wondering about the region.

Heather Jones:

Yes, on the region acreage, just wondering, is that doubling in anticipation of like the EU deforestation regime or more stringent carb standards? Just wondering what's driving that. Or is it all voluntary market-driven growth?

Operator:

Thank you. At this time, we currently have no further questions. So I'll hand back to Juan Luciano for any further remarks.

Ismael Roig:

Thank you.

Megan Britt:

Hello, and welcome to ADM's fourth quarter and full year 2023 earnings conference call. Our prepared remarks today will be led by Juan Luciano our Board Chair and Chief Executive Officer and Ismael Roig, our Interim Chief Financial Officer. We've prepared presentation slides to supplement our remarks on the call today which are posted on the Investor Relations section of the ADM website and through the link to our webcast. Some of our comments and materials may constitute forward-looking statements that reflect management's current views and estimates of future economic circumstances, industry conditions, company performance, and financial results. These statements and materials are based on many assumptions and factors that are subject to risk and uncertainties. ADM has provided additional information in its reports on file with the SEC concerning assumptions and factors that could cause actual results to differ materially from those in this presentation. To the extent permitted under applicable law, ADM assumes no obligation to update any forward-looking statements as a result of new information or future events. I'll now turn the call over to Juan.

Green Bison:

Let's turn to Slide 6, which I summarize our priorities for value creation in 2024. We continue building a stronger company for the future and to support this, we have identified three key priorities for 2024. One, managing the cycle; two, nutrition recovery; and three, enhanced return of cash to shareholders. Let's take a closer look at each of these areas of focus. We know that 2024 will be a more challenging year that we faced in 2022 and 2023. We see tailwinds that supported a portion of our performance over the past few years changing direction, making our continued progress on our strategic metrics more reliant than ever on our productivity and innovation agenda. In 2024, we will continue to focus on those strategic initiatives that provide strong growth prospects. Our destination marketing efforts continue to bring us closer to our customers and enable us to serve them in a differentiated capacity and we continue to expand. In 2023, we added three new offices across Asia and the Middle East, and in 2024 we plan to add two to four more. Through this ongoing expansion, we expect to achieve 6% growth in our destination market in volumes. Direct farmer buying has been steadily increasing over the past several years and provides ADM an opportunity to maximize value for both sides by creating efficiencies through working directly together. We plan to take this even further in 2024, leveraging our network of more than 200,000 farmer relationships to grow direct origination volumes year-over-year by about 10%. And as our customers strive to decarbonize their own products and services, we are seeing a steady increase in the financial returns generated by our own decarbonization efforts from Regen Ag partnerships to lowering the carbon footprint of our operations. The pace of this is accelerating as we move into 2024. Tied to these strategic initiatives, we continue to build capacity to serve growing customer demand. I mentioned earlier the opening of our Green Bison soy processing facility as well as the expansion of our Marshall, Minnesota starch facility. These capacity additions support growing demand for a wide variety of sustainable products and solutions, from renewable fuels to industrial products. And connected to our productivity efforts, we have formally launched a 2024 program we call the Drive for Execution Excellence within the organization. Over the years, we have consistently encouraged our ADM colleagues to identify and execute both cost saving and cash generation ideas. We've developed processes and systems through our prior transformation programs and now those are ramping up for another cycle. As part of this, we have already commissioned more than 300 projects and plan to see $500 million in traceable cost savings over the next two years across all aspects of our enterprise, from operations to supply chain to corporate costs. Now let's discuss our plans within the Nutrition business. We're calling this section, of course, nutrition recovery for a reason. Nutrition had a very difficult year with results well below our expectations, and we have been working aggressively to change this and return to growth. For Nutrition, 2023 representing a combination of challenging market forces, some specific non-recurring events and some misses on demand fulfillment. And while market forces such as customer destocking as well as softer demand for plant-based proteins are not within our control, we're already taking action on the areas we can improve. Many of the supply issues are the result of the complexity built into the Nutrition business over time. In our zeal to meet our customers' needs, we have created one of the strongest pantries in the industry. This added complexity in our operations and supply chain that at times impacted our ability to efficiently fulfill demand. To address this, we have made important changes to drive simplification across the Nutrition business that will ease the pressure on our overall supply chain and dramatically improve our demand fulfillment performance. First, we have created a stronger division of duty across operations leadership and added new leaders with a strong expertise in supply chain management. We have also taken steps to build our COE expertise back into the core business, helping make our overall supply chain capabilities more agile and responsive to commercial demand signals. We have also engaged third party experts to help identify further opportunities for operational excellence improvements across our largest facilities. We have also greatly simplified the product and production line landscape to further achieve operational and supply efficiency, reducing the brands we are presenting to customers by two thirds and downsizing about 17% of our SKUs alongside the strategic production line simplification. A recent example of this is the closure of more than 20 Animal Nutrition production lines in 2023, now better serving the product mix and supply chain efficiency of the business. We're also optimizing our Nutrition business portfolio, leveraging our experience in both large scale and bolt-on acquisitions. We have enhanced our approach to M&A integration to increase value creation as we focus more on the integration of recent acquisitions than new targets. We continue to assess our portfolio for a strategic fit, making surgical decisions to achieve the returns targets we expect. For example, during Q4, we took action on two JVs that were not expected to meet our returns criteria. We're proud to see how the team with new leadership has rallied around this recovery plan, which is already showing signs of improvement as we move through the first quarter of the year. Recent trends suggest that destocking impacts in beverages are subsiding and we are well positioned to capture recovering demand in 2024 as evidenced by the strong demand we are seeing in flavors. After heightening our operational efficiency, we've seen steady increases in shipping volumes and productions throughout the course of the last month. And in Animal Nutrition, we have seen another quarter of sequential improvement in the base of the business, which excludes amino acids and pet solutions and early indications in the first quarter of 2024 suggest that this will continue. Importantly, our nutrition value proposition continues to be well received by customers as evidenced by our robust opportunity pipeline and industry leading win rates across key categories like flavors, dietary supplements and pep. ADM's customer centricity and agile innovation capabilities, supported through our creation, design and development expertise, differentiates us. We continue to believe that Nutrition has an important role in ADM's integrated business model. Beyond adding value to the ingredients produced by our AS&O and carbohydrate solution businesses, Nutrition is innovating to address evolving consumer needs and is connecting us more closely with a growing customer base. Finally, I'll turn attention to the capital allocation strategy that continues to guide our strategic cash deployment decisions. As noted, we announced today that the Board has authorized the repurchase of up to an additional $2 billion in shares through the remainder of the year, including $1 billion in shares to be executed through an accelerated share repurchase program as soon as practical. This will total $6.4 billion in repurchases executed since 2022 and coupled with the already announced 11% dividend growth, this is aligned with our commitment to a balanced capital allocation approach. So, combined, we believe these three areas of focus set ADM to perform well in a challenging external operating environment in 2024. I would now like to turn the call over to Ismael for more detail on the results of the operations. Ishmael?

SAVAN:

Lastly, we also had our own operation struggles that impacted our ability to deliver on the strong demand that we have created. The implementation of ERP systems over the course of the year led to complications in shipping and producing products, negatively impacting both volumes and manufacturing costs. Over the past month, we have seen a steady improvement in operations and are confident that we will see volumes lost in 2023 come back in 2024. Now please turn to Slide 12. For the full year Other segment operating profit was $375 million, up 125% compared to the prior year. ADM Investor Services results improved on higher net interest income. Higher Captive Insurance results on new program premiums were partially offset by higher claim losses. In corporate for the full year, net interest expense increased year-over-year on higher short-term interest rates. Unallocated corporate cost increased versus the prior year on higher global technology spend to support digital transformation efforts. Other corporate was unfavorable compared to the prior year due to one-time investment valuation losses of approximately $57 million. Please turn to Slide 13. Over the last two years the company has generated significant cash flow that have bolstered our balance sheet and provided us with financial flexibility to drive long-term growth. In 2023 we again had strong cash flow of $4.7 billion which were actualized in line with our balanced capital allocation framework. 30% or approximately $1.5 billion of cash flows were reinvested in the business to support growth and modernize our assets, including investments in new capacity and the digitization of our existing asset footprint. Our cash flows also supported significant capital return in 2023 with nearly 30% earnings going to dividends and nearly 60% of cash flows or about $2.7 billion going to shareholders via share repurchases. In 2024 we expect to hold capital expenditures to a level aligned with depreciation and amortization with focus spend around the safety and reliability of assets. We also intend to manage working capital needs prudently limiting M&A beyond previously announced transactions and focusing our team on cost savings and cash generation initiatives through the drive for Execution Excellence. As Juan mentioned earlier, our priorities for cash deployment in 2024 will remain focused around the shareholder. We finished the year with strong momentum in terms of returning cash, repurchasing nearly 1.6 billion of shares in Q4 and nearly 330 million of shares so far in Q1. Over the course of the year, we intend to actualize 2 billion of additional share repurchases, with 1 billion being executed through an accelerated share repurchase program as soon as practical. Now, let's transition to a discussion of guidance for 2024 on Slide 14 please. In 2024, global grain and oil seed supply is expected to increase as anticipated improvements in weather should support larger production levels in key South American countries. Assuming commodity prices ease for recent highs and trade flows adjust to the dislocations created over the past two years, we anticipate global soybean crush margins will moderate in 2024, likely moving into a range of $35 per metric ton to $60 per metric ton. From the demand side, we continue to expect vegetable oil demand growth from renewable diesel and low single digit soybean mill demand growth to support structural margin improvement. We expect adjusted earnings per share to be in the range of $5.25 per share to $6.25 per share, representing an 18% decline from prior year at the midpoint. Now breaking down our expectations by segment for 2024, let's turn to Slide 15. In AS&O, we anticipate the first quarter to be lower and the full year to also be lower versus comparable prior periods as increased global commodity supply and normalization of margins will weigh on the segment. We anticipate global soy crush margins within the range of $35 per metric ton to $60 per metric ton as the market balances better soybean availability against increased crush and renewable diesel capacity. Our Operational Excellence efforts and the ramp up of our Green Bison facility should lead to mid-to-high single digit improvement in our process volumes. We expect significantly lower biodiesel margins in 2023, timing gains to reverse as contracts are executed. In Carbohydrate Solutions, we anticipate the first quarter to be lower versus the prior year. For the full year, we anticipate another strong year, but slightly lower than 2023 as the improved volumes and margins in Sweeteners and Starches could be offset by weaker ethanol. For nutrition, the first quarter is expected to be lower versus the prior year as we face headwinds from a normalizing texturants market, fixed costs associated with operational challenges related to the Decatur East and protein volumes. However, for the full year we expect Nutrition to begin its path to recovery. We anticipate conversion of our significant pipeline opportunities in Human and Animal Nutrition to yield mid-single-digit revenue growth. We assume market normalization in texturants to be a headwind in 2024. We do not anticipate the significant one-time events of 2023 to recur. Back to you, Juan.

Operator:

Thank you. [Operator Instructions] Our first question comes from Adam Samuelson of Goldman Sachs. Adam, the line is yours.

Juan Luciano:

Good morning, Adam. How are you?

Juan Luciano:

Yes. Thank you, Adam. So let's take each of the businesses in the portfolio. So when we think about Ag Services and Oilseeds, as you said, we had a spectacular performance over the last couple of years, taking full advantage of the opportunities in the market. But we forecasted in 2021 that margins were going to moderate, although they were going to stay higher than historical averages and we are seeing that. We see the moderation and we see even crush margins, 35 to 60, that we are forecasting are higher than average. We have not stayed quiet waiting for the cycle to reverse. We have been adjusting our business model. You heard me saying about destination marketing, something we didn't have a few years ago, and we continue to grow that. That gives us extra margins and now we are forecasting that we continue to expand and we're going to grow those volumes 6% this year and that programs continue as we expand into new geographies in the Middle East and Southeast Asia. When you think also about the Regen program, Regen AG program that we have with our customers, we are helping our CPG customers with their Scope 3 emissions and we are working together with the farmers and that program is the leading program in the industry and continues to grow. We are also doing everything in the value chain. We're looking at farmer direct. That's an ability for us to get efficiencies between us and the producer, the way we buy grain. So of course, we get an advantage with that as the producer as well. And we're planning to increase our volumes 10%, leveraging on the 200,000 farmer relationships we have around the world. Of course, we have expanded capacity. We are expanding crush in Latin America. We are expanding crush in North America with Spiritwood. So I would say when you take that, plus our operational improvements, if you will, what we call the push for excellence, that was going to be the productivity and innovation agenda that were going to help us navigate through this. We see 2024 still as a strong year for Ag Services and Oilseeds, it's going to be lower, but it's still going to be a strong year. Of course, the market has priced a lot of the extra capacity and the higher argentine crop into the crush margins. But we still see the ability of the market to absorb all that capacity with a strong mill growth and with a strong demand for oils. So that on the Ag Services and Oilseeds side. On the Carb Solutions side, this business has been very stable over the last few years. It has had a very good 2022 and 2023. We are expecting a very good 2024, maybe slightly lower, but still very, very good. We had a good program for good contract renewals in 2024. We are happy with the margins. We have maintained margins for the most part, and we have gained some volumes, so volumes are strong. The milling business has been going, had a record year last year, and it continues to drive very strong. I think both businesses have a little bit of a lower contribution from feed products, where margins have decreased a little bit, but BioSolutions, as Ismael mentioned, continues to grow, is growing beyond 15% per year. And all their decarbonization things that we're saying, we see more and more demand for everything that carb solutions can bring to the table in that area. So we feel very good about that. Always the question mark in the year maybe is ethanol, but we're seeing right now, Adam, ethanol, the arbitrage to export from the U.S. is open to everywhere in the world. So it's just a matter of adjusting our capacity and the U.S. capacity to get more dehydrated ethanol, if you will, to be able to export, to adjust the humidity content, if you will. So, I think we'd export well north of maybe 1.5, 1.6 billion gallons for this year. That should bode well for recovery of margins as we go into the year. And then you take nutrition. Nutrition has been a growth story for many years, and we certainly stumbled in 2023. I mentioned some of the reasons. Some of the reasons were, there was a big destocking after all the COVID and all the supply chain issues that the industry have, the industry stopped. And now we went through lower inflation and this talking about that. So we had to go that in beverages, which drives flavors, which is our biggest engine for growth, if you will. Of course, we knew into the year that plant-based proteins, we have moderated our expectations for growth on that will still grow, but it's not going to be beyond 10%. So it's still going to be an attractive mid-single-digit growth, if you will. But we knew that, and then we had continued growth in continued good demand in pet and health and wellness and Animal Nutrition has been improving their P&L, doing a lot of self-help from the June P&L. It's been improving all the year. So unfortunately we get to the Q4 and we had several events in Q4. We have several one offs. We needed to take action on a couple of joint ventures and we addressed that. We needed to take a revaluation of an investment because of the end evaluation and we took that in the Q4. And then we have some issues on our own performance that we needed to implement 1ADM as much as we prepared for that. We had some problems with some of the modules. It was a successful implementation, but some of the modules that were about shipping products gave us trouble during the last quarter of the year. So when you have all that combination, it gave us a very bad quarter. We continue to see 2024 a year of growth or recovery, if you will, from the 2023 value. And from there, we should continue to march on our commitment to nutrition. Our ability to fulfill or to deliver a value proposition that resonates with customers continue to be evidenced by our growing pipeline, both in Animal and Human Nutrition, and our conversion rate we have benchmarked this is industry leading conversion rate. So we know we are winning. We need to adjust our own internal processes to make sure we deliver that. And we have done that heavily in the last -- second half of last year, and we have seen that during January and February that we are delivering much better than we did last year. So with that, I still look confident at the numbers, at the overall number for the company that we gave you for 2025. As I said on the onset, we are ahead on what we scheduled. From an EPS perspective, we are above 10% in ROIC and we have purchased already more than the $5 billion of share that we have estimated for 2025. So it's never going to be a straight line from here to 2025. But we have a resilient portfolio that can help us see that those numbers for the overall portfolio are still possible, as it was in December 2021. Sorry for the long answer. It's a large company.

Tom Palmer:

Good morning. Thanks for the question. I wanted to dig in a bit more on crush margins and your $35 to $60 global soybean crush outlook. Maybe just to frame it, where were global crush margins last year? Where are crush margins currently? When we consider different regions of the world, and then as we think about the items that could drive to the upper or lower end of this year's range, what are kind of the key items you're looking at? Thank you.

Operator:

Thank you. Our next question comes from Andrew Strelzik of BMO. Andrew, please go ahead.

Juan Luciano:

Yes. Andrew, first of all, my comment before to Tom's question was the overall number that we gave for the company for 2025 in 2021. We still believe that number is there. I think that that number was never going to be a destination for ADM, was a milestone, if you will. And as we are reviewing our five-year plan that we do every year we see us breaking through that number. So in that sense, I expect 2024 to be a down year versus 2023 hopefully 2025 will be a positive year versus 2024. There is a cycle here that needs to happen, Andrew, that I described below, soybean mill will get cheaper. All the oil activities related to B-14 or RGD needs to grow. All that needs to happen and how long that adjustment takes, how long it takes for meal to be low enough to increase demand and for flat prices to be low enough to maybe make the farmer correct a little bit. They are planting all that process we know historically happens, when exactly it's going to happen. Does it happen in a calendar year? Doesn't happen in six months. Does it happen in a year is hard to say. But we continue to build a company that has more optionality, that's more resilience for the future. So as the cycle moderates, we continue to have more ability to bring more to the P&L. So we think with that, I'm optimistic about 2025 being better than 2024.

Ben Bienvenu:

Good morning.

Ben Bienvenu:

Juan, I want to ask, as we think about the morning, I want to ask as we think about 2024 for the nutrition segment, you note that you expect mid-single digit revenue growth, operating profit to be higher over year. I think the natural inference would be that the operating profit growth is up by less than 5% or mid-single digit revenue growth. Is that true? And then as you referenced in kind of the cadence and your expectations for the first quarter, this is a trajectory of recovery that will build throughout the year in 2024. You talk about pipeline conversion. Are there residual headwinds, discontinuities from the Decatur complex still in the first quarter? Help us think through the sequencing of the development of return to growth and nutrition.

Operator:

Our next question comes from Ben Theurer of Barclays. Ben, please go ahead.

Juan Luciano:

Yes, Ben, I'm glad you're highlighting carb solution. They had a spectacular year. They deserve recognition and they've done a fantastic job of transforming their business into a very resilient and stable business. The assets let me take it by pieces. The milling business. Milling is an old business that has some old assets. And over the last few years, we have been doing -- the team has been doing a terrific job of shutting down some assets and consolidating those in new facilities like Mendota that we launched last year. That is the best and the newest wheat milling plant in the world. So we are happy with the way they have done that. They continue to do so. So that business is in good shape. When we look at the wet mills, we continue to invest in part of the wet mills. Unlikely that we're going to build a new wet mill, as you can understand, but that business continue to be reinvested in. It's a business that is a large business has a large asset footprint. And at the moment there is a lot of capital being associated with the path to decarbonize all these assets. So as you heard, we have a lot of efforts in trying to get pipelines to try to monetize some of our CO2 that come from the biogenic CO2 that come from the ethanol plants. So and I would say we have expanded Marshall because BioSolutions is growing at north of 15% per year. So we needed capacity. So the Marshall expansion is about 50% expansion to the final starch capacity that we have there. And that will help a lot with that. I would say the year is exciting as it is developing. It has solid margins. It has so far solid volumes. It had a little bit of a rough January because of the bad weather. We have ice in the plants and freezing weather. But February, March, things look good. And we think that that business has the opportunity to get some tailwinds from lower energy cost and maybe chemicals cost as the year go by. And that's a big energy hog, that business. So that could be an advantage and a tailwind coming later in the year.

Manav Gupta:

Thank you. I just had a quick question. When we look at the carb, recent proposals and then we look at the 45g, it looks both at the federal level and at certain state levels there is a desire to lower the amount of renewable diesel being produced from vegetable oil. And I'm just trying to understand, do you see that as some kind of a headwind whereby eventually the demand for soybean oil from the renewable diesel or biodiesel industry could actually decline versus what we are seeing or you think this is just passing and the demand eventually will rise again as we move along?

Operator:

Our next question comes from Salvator Tiano of Bank of America. Salvator, please go ahead.

Ismael Roig:

Yes, Salvator listen, a little bit of what I explained early on Adam's question. I think that we will see how the cycle plays in ASNO. As I said, I think that lower prices have this ability to incentivate demand. At this point in time If you think about soybean meal demand, we are forecasting a very strong soybean meal demand, maybe higher than USDA levels, higher than GDP. When you think about Southeast Asian economies recovering and with inflation moderating, purchasing power is improving, tourism is improving in all those areas, you have at the moment very high prices of beef that's favoring pork and chicken. You have protein margins for chicken being better at that. So we think that soybean meal will gain in the Russian. So when we look at all that, we see the soy oil demand very strong in domestic consumption, but also for biofuels, and then we see the meal demand very strong. We think that this correction should be probably short term for crash and that should come back again. I cannot make a prediction on the timing of that, but we know how the cycle plays. So whether it's calendar year this or six months later or a quarter earlier, it's not for me to venture into those guesses. I think that carb solutions between the exceptional job they are doing on managing their mature businesses and the growth that they are getting through decarbonization and BioSolutions, you will see that ahead of us. Again, we just bring in the Marshall expansion. That's not something that it was in our forecast last year. So we're going to have it more in the next three quarters, if you will, of the year, Spiritwood again, and some of the crash capacity we brought in Brazil, and then you see nutrition. That nutrition was not a contributor, certainly a big contributor to growth in 2023, but we expect it to be back to growth in 2024 and 2025. So those are kind of the buckets, if you will, that I see at the moment.

Steven Haynes:

Hey, good morning. Thanks for taking my question. Maybe just to come back to nutrition, I think in your prepared remarks you talked about some portfolio refreshment going on there and was wondering if you could maybe size, the scope of that. Are you thinking more kind of product line oriented here, or is this kind of more at the business level where you might be looking to monetize something? Thank you.

Ismael Roig:

Just a couple of complimentary comments, because not only have we had some experience historically, as Juan correctly mentions, with [indiscernible] and fertilizer, but certainly the Animal Nutrition was a good precursor to some of the thinking that we have now in mind for the whole of our nutrition business. In the sense that usually when you acquire these businesses, they come with footprint allocations, labs, farms, in our cases, and warehouses, that when you aggregate them, start aggregate them across a number of different acquisitions, you realize that there are overlaps. And what we noticed is that there was a significant opportunity in Animal Nutrition to significantly simplify the portfolio by reducing the number of labs, reducing the number of SKUs of plants. And we've seen those benefits. They've been occurring since the second half of 2023. And I think that some of that thinking, as we have built this organization via a multiplicity of acquisitions, lends itself now to a pause and reflection, in light of the successes that we've had with this, to apply it more broadly to all of the portfolio. So that's where our capital prudence is going to come in, by focusing on ensuring that we improve our asset base while returning cash to our shareholders.

Operator:

Thank you. Our next question comes from Dushyant Ailani of Jefferies. Dushyant, please go ahead.

Juan Luciano:

Yes. Thank you, Dushyant. Well, all useful biofuel production is, as I said, is expected to grow in Brazil. We're going to go to B14, so there are many countries that are increasing their mandates, whether it's Indonesia and all that. When you look at the overall balances around the world, you see plantations in Southeast Asia getting older, the trees getting older, so maybe less production of palm oil. So you're going to see biodiesel mandates increasing around the world and less competitive pressure, if you will, for palm oil. So you're going to see the pressure on vegetable oil. So we think that that will continue to be a strong leg of the crash, biodiesel in particular. Biodiesel margins are better right now for us in Europe. They have moderated significantly in the U.S., and we expect them to be good, but not as good as they used to be in the U.S. So that will be a little bit of a headwind for us in 2024. But margins are better in Brazil and in Europe. Thank you.

Megan Britt:

Thank you for joining us today. Please feel free to follow up with me, if you have any other questions. Have a good day and thanks for your time and interest in ADM.

Megan Britt:

Thank you, Alex. Hello, and welcome to the third quarter earnings webcast for ADM. Starting tomorrow, a replay of this webcast will be available on our Investor Relations website. Please turn to Slide 2. Some of our comments and materials may constitute forward-looking statements that reflect management's current views and estimates of future economic circumstances, industry conditions, company performance and financial results. These statements and materials are based on many assumptions and factors that are subject to risks and uncertainties. ADM has provided additional information in its reports on file with the SEC concerning assumptions and factors that could cause actual results to differ materially from those in this presentation. To the extent permitted under applicable law, ADM assumes no obligation to update any forward-looking statements as a result of new information or future events. On today's webcast, our Chairman and Chief Executive Officer, Juan Luciano will discuss our third quarter results and share some recent accomplishments on our strategic priorities. Our Chief Financial Officer, Vikram Luthar will review segment level performance and provide an update on our cash generation and capital allocation actions. Juan will have some closing remarks, and then, he and Vikram will take your questions. Please turn to Slide 3. I'll now turn the call over to Juan.

Vikram Luthar:

Thank you, Juan. Please turn to Slide 5. The Ag Services and Oilseeds team once again delivered solid results in an increasingly dynamic environment by leveraging our experience, scale and integrated global footprint. Ag Services results were lower than the strong third quarter of 2022. South American origination results were higher year-over-year as our team delivered significantly higher volumes and margins on strong export demand. Prior investments in port capabilities have enabled us to structurally grow our earnings while capitalizing on a stronger margin environment across the region. North American results were lower year-over-year as a result of the shift of export demand to Brazil, due to the large crop there as well as low water levels in the U.S. river system, limiting volume and barge capacity. Effective risk management, combined with higher volumes and margins in Global trade led to strong results. However, much lower than the record quarter last year. The current quarter also included a $48 million insurance settlement related to damages from Hurricane Ida. In Crushing, we delivered another strong quarter, but lower than the prior year as global crush margins remained healthy, but lower than the very strong levels of a year ago. Our strong results were led by North America, as the crush margin environment remains well supported by structurally higher demand for vegetable oils. We officially opened our new crush facility in Spiritwood, North Dakota to meet growing demand. We are currently in the commissioning process and expected to be running at full rates in early November, adding an additional 1.5 million metric tons of crush capacity per year. In EMEA, we continue to optimize our flex capacity to prioritize crush of higher margin softseed, in line with market opportunities. In the quarter, there were large net positive mark-to-market timing effects which were lower than the net positive impacts in the prior year quarter. Refined Products and other posted another strong quarter, higher than the prior year period, results were led by solid volumes and margins in North America. In EMEA, robust export demand for biodiesel and domestic demand for food oil drove higher results versus the prior year. In the quarter, there were large net positive mark-to-market timing effects, which are expected to reverse as contracts execute in future periods. Equity earnings from Wilmar was significantly lower versus the third quarter of 2022. Looking ahead, for the fourth quarter in Ag Services and Oilseeds, we anticipate strong results that are slightly lower than last year, excluding the $110 million legal settlement in the ag services subsegment from the fourth quarter of 2022. We expect Ag Services results to be in line with the prior year, excluding the legal settlement. We anticipate similar year-over-year North American export volumes, a competitive South American export program and continued strong performance from global trade. We forecast our crushing subsegment will deliver strong results similar to the prior year. We expect robust soy and canola crush margins and with the ramping of our Spiritwood operations higher volumes. We expect RPO to perform well, but be significantly below last year as positive timing impacts from prior quarters are expected to reverse. Slide 6, please. Carbohydrate Solutions delivered an outstanding quarter that was significantly higher than the prior year, enabled by the ongoing optimization of our production and supply chain network. The starches and sweeteners subsegment were higher year-over-year on a healthy demand and strong margin environment across starches, sweeteners, wheat flour and ethanol. Our team generated new customer wins and delivered double-digit growth year-to-date in our BioSolutions platform. As Juan touched on earlier, we also signed a formal agreement with Broadwing Energy to provide lower emissions power to Decatur facility, extending our ability to provide low carbon solutions across the value chain. In the Vantage Corn Processors subsegment, our team executed well in a strong ethanol demand and margin environment, leading to significantly higher year-over-year results. Looking ahead for the fourth quarter, we expect steady demand and margins for our starches, sweeteners and wheat flower products. We remain constructive on ethanol margins driven by solid domestic demand and healthy U.S. exports, supported by lower competing exports from Brazil due to higher sugar prices. We anticipate results to be similar to the prior year period, but with upside potential if the current ethanol margin structure holds. On Slide 7. In Nutrition, strong results in Flavors, health and wellness and recovery in the base Animal Nutrition business were more than offset by continued lower demand for plant-based proteins and persistent demand fulfillment challenges in pet solutions. Flavors reported impressive results in a complex operating environment, delivering a 29% growth in operating profit on a constant currency basis. Results were led by pricing actions in EMEA and strong win rates in North America. During the quarter, we also implemented a successful go-live of our One ADM project in the EMEA region across 18 locations in 12 countries. This represents a significant milestone as we continue to harness digital across the enterprise to drive productivity gains. In Specialty Ingredients, weak market demand, particularly in the alternate meat category, inventory adjustments and unplanned downtime resulting from the recent Decatur incident led to significantly lower year-over-year results. The plant-based protein market has been experiencing destocking and consumer demand softness over the course of the year that will likely persist into next year. Given these recent market dynamics, we have re-scoped our Decatur protein modernization investment project to better match the expected lower growth demand environment. Also, we are leveraging our expertise in creation, design and development to differentiate our product offerings to serve evolving consumer needs. These adjustments will enable a faster pivot to higher growth and more resilient categories such as specialized nutrition, which have synergies across the nutrition portfolio, and we are rapidly building this revenue pipeline. Health & Wellness results were higher year-over-year due to double-digit bioactives sales and a favorable impact related to the revised commercial agreement with Spiber. During the quarter, we realized a significant expansion in our revenue pipeline, reinforcing the demand for evidence-based solutions. In Animal Nutrition, we are beginning to see the cost optimization actions and the expansion of offerings in the specialty feed and ingredient space from earlier this year, driving improved performance. However, the recovery in the base business was more than offset by normalized year-over-year amino acids margins as well as lower profit contribution from the Pet Solutions business. Looking forward, we anticipate flavors to finish the year strong, driven by growth in EMEA and North America. Health & wellness operating profit is expected to finish similar to last year. Animal Nutrition operating profit is expected to continue to recover sequentially quarter-over-quarter. Specialty Ingredients operating profit is expected to be down significantly, impacted by the recent Decatur East incident and demand softness. All in, we now expect full year 2023 operating profit for Nutrition to be around $600 million. While our results in 2023 have been below our expectations, we expect nutrition to return to growth in 2024. We will continue to build on the Flavors momentum from 2023. Health & wellness should maintain its steady performance. The cost actions in the shopper pivot to higher-margin products will enable Animal Nutrition to drive growth, further reinforced by improved go-to-market capabilities. Lastly, for SI, we will work aggressively to restart operational capabilities at Decatur East to minimize the impact in 2024. Slide 8, please. Other business results were significantly higher than the prior year quarter due to improved ADM investor services earnings on higher net interest income. Captive insurance results were slightly lower on higher claim settlements partially offset by premiums from new programs. In corporate results, net interest expense for the quarter increased year-over-year, primarily on higher short-term interest rates. Unallocated corporate costs of $298 million were higher versus the prior year on higher global technology spend to support our digital transformation efforts. Other corporate was favorable versus the prior year, primarily due to foreign currency hedges. We still forecast corporate cost to be approximately $1.5 billion for the year. The effective tax rate for the third quarter of 2023 was approximately 20% higher than the prior year primarily due to a change in the geographic mix of earnings. For the full year, we still expect our effective tax rate to be between 16% and 19%. Next slide, please. Through the third quarter, we had strong operating cash flows before working capital of $3.8 billion. We continue to invest in the business, allocating $1.1 billion to capital expenditures and have returned $1.9 billion to shareholders through share repurchases and dividends. We have ample liquidity with over $13 billion of cash and available credit, and our balance sheet is very strong, with an adjusted net debt-to-EBITDA leverage ratio of 0.9. Our fortress balance sheet gives us the financial flexibility to drive our long-term strategic agenda while also returning capital to shareholders and is also a competitive advantage, particularly in a higher for longer interest rate environment. We have completed $1.1 billion of share repurchases through Q3 and expect to increase the pace of repurchases in Q4. Even with the softness in nutrition, and lower-than-expected profit contributions from Wilmar. We are raising our 2023 earnings outlook again and now anticipate full year EPS in excess of $7 per share. Juan?

Operator:

Thank you. [Operator Instructions] Our first question for today comes from Andrew Strelzik of BMO Capital Markets. Andrew, your line is now open. Please go ahead.

Juan Luciano:

Yeah. Thank you, Andrew. Listen, our perspective have not changed. If anything, the perspective that we have for the market has been confirmed by what we're saying. Of course, it's a very dynamic environment with the market trying to balance a lot of issues, whether it's more availability of products, more demand, the Argentine situation. We have seen board crush explode back to near the highs recently. And this is just only a reflection of the incredible demand that is coming for soybean meal into the U.S. This drives the board crush has -- it was mill driven maybe before it was oil driven, this was mill driven. You see Argentina situation, they are getting to the end of their inventory. There are probably enough beans at this point for crushers to run until November. So what we see the export book of the U.S. for soybean meal is a record export book from the U.S., something that is higher than over the last 10 years. So I think that, that will continue well into Q1 of 2024. And fundamentally, what has changed, and you have that, if you were island of strong crush margins in the U.S. is this demand for oil. We see crush margins have been a little bit lower for soybean, certainly in Brazil or in Europe, and it’s because some of the oil prices have declined. But in the U.S. with the new demand for renewable green diesel and the new – all the new capacity coming, we expect that to remain strong for years to come. So we will continue to be very constructive at our crush margins in the U.S.

Juan Luciano:

You’re welcome.

Ben Theurer:

Yeah. Good morning. Juan, Vikram, thanks for taking my question. Wanted to follow up on Nutrition and the updated guidance calling that roughly $600 million op income for the year. Help us understand if you can, putting that into context to what just a while ago, we've talked about the path to make this business a $1 billion operating income business. What has gone into the wrong direction and what do you still need to correct to bring this business back on track to make it a $1 billion contributor? Thank you.

Ben Theurer:

Thank you.

Tom Palmer:

Good morning and thanks for the question. The details on the crush moves, I think Andrew's question was helpful. But maybe we could dig a little bit more into what's happening on the oil side. I mean we have seen soybean oil prices come down over the past couple of months. The futures curve does suggest some continued pressure as we move into '24. It sounds like you have plenty of visibility that demand is very strong on this side, but maybe just some color on what might have caused this downward price move and whether it's more temporary in nature in your view?

Tom Palmer:

Right. Thank you.

Adam Samuelson:

Yes. Thank you. Good morning, everyone. I was hoping to -- maybe dig in on the Carb Solutions outlook and maybe if you could just parse the non-ethanol pieces a little bit more. And I think in the prepared remarks, you alluded to kind of a favorable start to contracting in North America sweeteners and starches and maybe elaborate on what you are actually seeing there, maybe better frame kind of the incremental capital investments to come in that business. Obviously, there's a lot of transformation work happening in that business. That's not all much kind of come to fruition in the near term, but better contextualize kind of what the actual level of investment that you've already committed to there, there is? And if I could just ask a clarifying question on the last point on RPO. How much was the timing benefit in the third quarter?

Adam Samuelson:

Thank you.

Adam Samuelson:

Thank you.

Ben Bienvenu:

Thanks so much. Good morning, everybody. I have kind of a two-pronged question. One is -- one, you've kind of hit bits and pieces and Vikram as well with the nutrition commentary of the overall business outlook into 2024. The kind of implicit takeaway is, we should still expect kind of very strong and above what, I guess, we would think of as mid-cycle earnings power in 2024, albeit it's early to make that call in 2024. So correct me if I'm wrong there. But two, when you think about allocating capital at this point in the cycle, how does that change, if at all, with what you've been doing over the last several years, and you've been picking up your buyback activity, how should we be thinking about that as we move through this period of time as well? Thank you.

Vikram Luthar:

Yeah. I think also in terms of buybacks, good to remind everyone that if you remember in our 2021 Investor Day, we talked about $5 billion of buybacks over the next four years through 2025. If you combine what we've done last year and this year, we've done almost about $2.6 billion of buyback, so we are ahead of that pace. And as I mentioned in my comments and as Juan said, if we don't see compelling valuations and given our discipline, we probably at these trading levels, price levels, we probably are going to buy back a little more aggressively, and you probably will see a stronger pace of buybacks in Q4 as a consequence of some of those factors.

Vikram Luthar:

Thank you, Ben.

Salvator Tiano:

Thank you very much. I want to ask a little bit about the carbonization and the work you're trying to do Decatur. And I think when we -- you were talking about the 7 million tons of you're trying to sequester per year, the idea is that some of these will come from other facilities where you probably need to build pipelines. I'm just wondering, we're seeing a lot of issues with permitting and other issues with CO2 pipelines in other regions. Could this -- could you face similar issues and could this affect the total amount you will be able to request your indicator or on the other hand, could this actually be an opportunity and people that were relying on some other pipelines like Navigator 1 (ph) may come to you and use your indicator wells for sequestration?

Salvator Tiano:

Thank you very much.

Davis Sunderland:

Hey. Good morning, team. Thank you for the time and thank you for taking my question.

Davis Sunderland:

Juan you already talked about it a little bit, but I just wanted to ask if you could expand a little bit more on the ethanol and renewable diesel supply and demand environment, maybe what you're seeing for '24 and beyond? And if you anticipate any incremental changes in consumer behavior over that time? Thank you very much.

Davis Sunderland:

Thank you very much.

Operator:

Thank you. Our next question comes from Steven Haynes of Morgan Stanley. Steven, your line is now open. Please go ahead.

Vikram Luthar:

Well, so I think the first thing to note is, when in Q2, we said around $7 for potential -- with potential for more upside. And what we have seen saying right now is that potential upside is coming through, and that's why we're raising our guidance in excess of $7. But if you step back, Steven, think about what's happened between Q2 and Q3. One is, clearly, nutrition has been softer. We had guided to it similar in Q2. Now we are guiding to around $600 million. So you know, by definition, there's a compensation in other parts of the business. And when you think about the compensation relative to our Q2, that's probably going to come partially from AS&O and partially from CS. And we gave some guidance on AS&O for Q4 and also some guidance for CS. CS to be rough relatively flat versus Q4, barring any continued expansion in ethanol margins, so that could be upside in CS. And in AS&O, we have some puts and takes in RPO in particular, and one went through this. We expect that to be weaker than Q4 of last year just because we expect these mark-to-market timing gains we realized in Q3 to be rolling off. And then in Ag Services, it’s going to be generally flat, excluding the legal settlement that was a onetime thing in Q4 of last year. And then in crush, it’s going to be strong. And I think Juan talked about that we are continuing to be constructive about the cross outlook particularly in the U.S. going forward, given some of the structural demand changes related to renewable green diesel in particular.

Operator:

Thank you. At this time, we currently have no further questions. So I'll hand back to Ms. Britt for any further remarks.

Operator:

Thank you for joining today's call. You may now disconnect your lines.

Megan Britt:

Thank you, Alex. Hello, and welcome to the second quarter earnings webcast for ADM. Starting tomorrow, a replay of this webcast will be available on our Investor Relations website. Please turn to Slide 2. Some of our comments and materials may constitute forward-looking statements that reflect management’s current views and estimates of future economic circumstances, industry conditions, company performance and financial results. These statements and materials are based on many assumptions and factors that are subject to risk and uncertainties. ADM has provided additional information in its reports on file with the SEC concerning assumptions and factors that could cause actual results to differ materially from those in this presentation. To the extent permitted, under applicable law, ADM assumes no obligation to update any forward-looking statements as a result of new information or future events. On today’s webcast, our Chairman and Chief Executive Officer, Juan Luciano, will discuss our second quarter results, share progress highlights on our first half accomplishment and provide perspective on our outlook for the second half. Our Chief Financial Officer, Vikram Luthar, will review segment level performance for the quarter and first half and provide an update on our cash generation and capital allocation actions. Juan will have some closing remarks, and then he and Vikram will take your questions. Please turn to Slide 3. I'll now turn the call over to Juan.

Vikram Luthar:

Thank you, Juan. Please turn to Slide 6. The Ag Services & Oilseeds team continues to deliver exceptional results in a dynamic environment, leading to an extremely strong performance in the first half of 2023, surpassing the outstanding first half of the prior year. Q2 results were strong, but slightly below the prior year period. Ag Services results were in line with the strong second quarter of 2022. South American origination results were higher year-over-year as the team delivered record volumes and higher margins on strong export demand, leveraging our strategic investments to expand port capacity to capitalize on the record Brazilian soybean crop. Results for North America origination was slightly lower year-over-year, driven by lower export volumes due to large South America suppliers. Our execution in destination marketing as well as effective risk management continue to deliver strong global trade results, though lower than the record quarter last year. In our crushing subsegment, results were much lower than the record result from the second quarter last year. Global soy crush margins remained strong but were lower year-over-year in all regions due to softer demand for both meal and oil and a tight U.S. soybean carryout. This was partially offset by strong softseed margins and higher volumes supported by a strong Canadian canola crop and use of our flex capacity in EMEA. Additionally, there were approximately $195 million of negative mark-to-market timing effects in the current quarter that are expected to reverse as the contracts execute in future periods. Refined products and other results were significantly higher than the prior year period, achieving a record second quarter. North America results were higher, driven by strong food oil demand and improved biodiesel volumes. In EMEA, strong export demand for biodiesel and domestic food oil demand supported stronger margins. Additionally, there were approximately $90 million of positive mark-to-market timing effects in the current quarter that are expected to reverse as the contracts execute in future periods. Equity earnings from Wilmar were lower versus the second quarter of 2022. Looking ahead for the third quarter, we anticipate solid results in Ag Services & Oilseeds. We expect strong demand for grain exports to be heavily weighted towards South America and our Brazilian origination footprint. We anticipate strong volumes and margins for soy and canola crush based on the tight Argentine crop and improving demand outlook for meal and oil. We expect RPO to perform well but have significant reversals of timing impacts from the second quarter, leading to lower net execution margins. Slide 7, please. Carbohydrate Solutions delivered strong results in Q2, but lower than the record second quarter of last year. The Starches and Sweeteners subsegment, including ethanol production from our wet mills, capitalized on a solid demand environment during the quarter. North America Starches and Sweeteners delivered volumes and margins similar to the prior years, and ethanol margins were solid as industry stocks moderated but lower relative to the prior year. Q2 results were negatively impacted due to unplanned downtime at one of our corn germ plants. In EMEA, the team effectively managed margins to deliver improved results. The global wheat milling business posted higher margins, supported by steady customer demand. BioSolutions continued on its excellent growth trajectory with 22% revenue growth year-over-year. Vantage Corn Processors results were lower due to lower year-over-year ethanol margins. The prior year period also includes a onetime $50 million benefit from the USDA biofuel producer recovery program. We continue to make progress on our initiatives to decarbonize the Carbohydrate Solutions footprint including our definitive agreement with Tallgrass to sequester carbon from our Columbus, Nebraska facility and continued progress on decarbonizing our decade complex through additional carbon capture and sequestration wells, as well as ultra-low-carbon intensity, electricity and steam generation. These are key steps in enabling us to produce low CI feedstocks for use in many applications for our major CPG customers and underpinning our growth opportunities, such as SAS, BioSolutions and our lactic acid polylactic acid joint venture with LG Chem. Looking ahead for the third quarter, we expect continued steady demand in margins for our starches, sweeteners and wheat flour products. Ethanol margins are also expected to remain solid. On Slide 8, Nutrition results were significantly lower than the prior year's record quarter. Human Nutrition results were slightly up year-over-year on a constant currency basis. Our Flavors business posted record results in Q2, growing revenues and EBITDA margins due to improved mix and pricing in EMEA, as well as improving demand in North America. Flavors will be a significant growth engine for Human Nutrition for the remainder of the year and will act as a pace setter for the rest of our portfolio. Customer innovation in beverage is beginning to accelerate, and our value proposition is driving our sales pipeline to its largest ever. Growth in Flavors was offset by lower year-over-year results in Specialty Ingredients. While there has been softening of demand for plant-based proteins, particularly for the alternative meat space, other categories like alternative dairy snacks and baked goods as well as specialized nutrition are providing growth opportunities. Although still a small OP contributor, Health and Wellness is seeing demand recovery in probiotics and is benefiting from geographic expansion opportunities offered through ADM's global footprint and customer relationships. Our largest challenge in 2023 has been in the Animal Nutrition business were significantly lower amino acid margins and softer global feed demand has affected volumes driving much lower results. Over the past several months, we have made important adjustments to align the business to this environment, including simplifying our brands and go-to-market strategy, consolidating facilities and optimizing our footprint, rightsizing the workforce in association with these changes and aligning the reporting structure to enhance synergies. We are also refocusing our efforts to increase offerings in the higher-margin specialty feed and ingredients areas. We believe these actions will lead to improved commercial and operational performance, supporting profitable growth when market fundamentals improve. When looking at Nutrition as a whole, we now expect 2023 results to be similar to the prior years, as we expect growth in Human Nutrition to be offset by lower results in Animal Nutrition. However, given the increase in customer innovation we've seen in our Flavors business and our recent wins in pipeline growth across Human Nutrition, as well as the actions we are taking in Animal Nutrition, we remain confident about the future outlook and growth prospects for Nutrition. Slide 9, please. Other business results were significantly higher than the prior year quarter due to improved ADM investor services earnings on higher net interest income. Captive insurance improved on premiums from new programs, partially offset by increased claim settlements. In corporate results, net interest expense for the quarter increased year-over-year, primarily on higher short-term interest rates. Unallocated corporate costs of $262 million was similar versus the prior year as lower health insurance costs were offset by increased global technology spend. Other corporate was unfavorable versus the prior year, primarily due to foreign currency hedges. We still project corporate costs to be approximately $1.5 billion for the year. The effective tax rate for the second quarter was -- of 2023 was approximately 18%, in line with the prior year. For the full year, we still expect our effective tax rate to be between 16% and 19%. Next slide, please. Through the second quarter, we had strong operating cash flows before working capital of $2.5 billion. We allocated $600 million to capital expenditures as well as returned $1.5 billion to shareholders through share repurchases and dividends. We continue to have ample liquidity with nearly $13 billion of cash and available credit, and our leverage ratio are low with an adjusted net debt-to-EBITDA ratio at 1.0. Our strong balance sheet and credit ratings provide a stable financial footing for ADM to pursue our strategic growth initiatives while also returning capital to shareholders. We still anticipate $1.3 billion of capital expenditures in 2023. As Juan mentioned, we have already completed the $1 billion of share repurchases that we announced in January this year. We intend to continue our share repurchase program, subject to other strategic uses of capital. Based on our very strong first half, we are raising our full year earnings outlook to around $7 per share with potential for even more upside. Juan?

Operator:

Thank you. [Operator Instructions] Our first question for today comes from Ben Theurer from Barclays. Ben, your line is now open. Please go ahead.

Juan Luciano:

Good morning.

Ben Theurer:

So I'd like to -- just a general question on obviously, like the puts and takes. You're raising your guidance at the higher end of what 6% to 7% was now around 7%. And obviously, you had a very strong first half, but then at the same time, you're looking for a little more softness in Nutrition. So maybe help us understand how you feel about just macro picture in general demand? What are the geopolitical assumptions that you have behind your outlook and how you feel about second half and then also beyond maybe into 2024, as it relates to general demand in an environment where we're in right now. Thank you.

Ben Theurer:

Perfect. Thank you, very much.

Ben Bienvenu:

Hi, good morning, everybody. Thanks for taking my question.

Ben Bienvenu:

I want to just follow-up just on the -- good morning, on the Nutrition business and maybe to the extent that you can talk a little bit about the cadence as we move through the back half of the year. I appreciate the updated comments on overall results being flat year-over-year. But there's -- with Animal Nutrition expected to be down year-over-year, there's a pretty substantial ramp in the human side of things. Maybe if you could talk a little bit about the visibility that you have into that? And then to the extent you can parse between 3Q and 4Q as you see it today, that would be helpful.

Juan Luciano:

Listen, Ben, as Vikram said, we continue to be very positive. We look at this -- remember, when we started the Nutrition business, which we're still trying to build into the best nutrition company in the world, we ask our team that we're going to measure them by two factors. One was growing faster than market and in markets where the customers are still moving and innovation is coming, like in Flavors, we've seen that we're growing faster than market, and you can see it by the double-digit growth that we have so far. And then the other thing that we said was EBITDA margin on sales growing, and we grew EBITDA marginal sales in Flavors. So I think that in the others, I think Vikram has -- this industry is going through a difficult destocking year and there has been some self-inflicted things like the integration of this small facility in Pet. So I think we're working through some of our growing pains as we build the portfolio. But I think the important thing is our innovation system, our value proposition to bring new recipes to customers faster than anybody else continues to outperform the industry and that we're seeing in the results. When customers have projects like in beverage and all that, we excel. When customers are flat or destocking, it takes a little longer. We still expect the trajectory to be similar in that regard.

Vikram Luthar:

Sure. So Ben, let's talk about the germ crush facility outage. In April, we had an incident at one of our grain elevators at the West plant within ADM's processing complex indicator. This negatively impacted the Carbohydrate Solutions Q2 results by a significant amount. Germ was actually sold into feed markets as our wet mills were slow to reduce the overall exposure to germ, lowering also ethanol production volumes at a time when ethanol margins were strong. We anticipate this to come back in Q4. So yes, Q2 was impacted. I won't get into the specifics but the fact that it was significant enough for us to call it out means it was a meaningful number. But it is going to come back in Q4. So therefore, based on that, you can expect some seasonality, some shift from Q2 to Q4 as a consequence of that. But for the full year, we still remain very -- the outlook for the full year still remains very strong. The sweeteners and starch and actually also the growth of milling volumes have been very resilient. We've seen some softening in the specialty side of the portfolio, but that's been more than offset by mix and margins. So I'd say, overall, the outlook is solid. And yes, we did have a material impact, a significant impact due to the corn germ in Q2.

Vikram Luthar:

Thank you.

Tom Palmer:

Good morning, and thanks for the question.

Tom Palmer:

Perhaps we could just talk through the moving pieces as we migrate to the North America harvest. We've seen crush margins in the U.S. strengthen, especially in the past month or so. Looks like we've seen maybe just a little bit of a beginning in other regions of the world. I think often, when you see our weaker-than-expected supply coming out of the country, other regions of the world often benefit. And at least up to this point, and I know we're ahead of the harvest, we haven't seen that necessarily in margins. I mean, how do you guys think about as we think about the balance of the year, kind of regional expectations for crush progressing?

Operator:

Thank you. Our next question comes from Manav Gupta of UBS. Your line is now open. Please go ahead.

Juan Luciano:

Yes, I think that we have all these plants that are coming that have been announced. And of course, we're looking all the time at the probability of those plants coming. Sometimes when you build in an industry, not everything comes at the right time. But as you said before, there are two or three large plants coming now in the second half, and that will continue to increase the demand. Of course, our plant in - from our partner comes with our crush capacity as well that we're building, this 1.5 million tons per year. So -- but Manav, when we look at these we believe that, at the end of the day, that demand will come through. At the end of the day, we will have enough crush for soybean oil to participate being maybe 60% of the overall pool of feedstock needed. And we think that the industry will continue to grow, but we continue to need to attract other feedstocks for us to fulfill this potential. So the industry is going to get tight. You're going to need capacity, technology and capabilities, if you will, in order to deliver that, but that's the way you make progress, building a new industry and going through an energy transition. But that's very favorable for ADM. And I think that we're very pleased to bring in Spiritwood on time for the harvest, on budget. So we are very pleased the way the team has managed that implementation.

Adam Samuelson:

Yes. Thank you. Good morning, everyone.

Vikram Luthar:

Hi.

Juan Luciano:

Yes. So when we put the 2025 goals, let me go back on the comments I made before. When we look at our plans, we look at how do we grow faster than market and how do we implement projects and target applications to continue to grow EBITDA margin on sales. The two businesses, Animal Nutrition and Human Nutrition had different profiles and different goals in that regard, so when you see the final number is a combination of all those plans roll out. In the Human Nutrition, margins are much higher and is continue to make it better and more stickier to customers as we develop better solutions. In Animal Nutrition was a margin up story since they were coming from lower margins. So when you think about our numbers are a combination of applying our growing faster than market and our EBITDA margin on sales to a market number. Of course, this industry, as you can see by ourselves and our competitors is having through tough times, whether it is because customers are either not innovating fast enough or destocking at this point in time and making sure they have their supply chains in order. So to the extent that those projections are going to be reduced, our percentages of applied to those numbers will be a smaller number. So we haven't gone through that because, to be honest, we are looking at how do we address our current challenges. So we're not that worried about 2025 right now, we want to make sure we make all the adjustments that we need to make. And maybe as we talk about the adjustment, let me talk about the adjustment, let me talk a little bit about Animal Nutrition. Animal Nutrition, as we become more into the business, if you will. We know there is a commodity part, and there is a specialty part. The specialty part matches very well with the -- what the playbook that we have in the human side. And that part is growing and we will continue to accelerate. And Vikram said before, we are repurposing resources to add more of that. There is a commodity part of that, that at the beginning, when we put the two businesses together, we thought it was going to be a good way to open doors, if you will, for the innovation but they have different dynamics. And so we are looking at those different dynamics and how do we need to readjust either the capacities or some of the people associated with that and the intensity of resources in that part as the specialty part is not coming as fast as we thought. So we need to deal with the volatility of the commodity part while the specialty part is a little bit slower. So as those things balance, we are adding productivity to the commodity part of animal, and we are adding more resources to the specialty part in animal and I think that we believe that, that will take us to, again, a growth rate into 2024 for those business. We're going through that. We will cover all that also, Adam in Investor Day as we will have developed more plants. But rest assured, we're very active in our interventions, and we're testing different options in order for us to manage this better. This is also sometimes difficult to characterize on something specific and apply it globally because we have operations in Southeast Asia. We have operations in Brazil. We have operations in Mexico and Europe, in the U.S. And all those things have to be put together and not all the dynamics in all those markets go perfectly aligned and synchronized. So that's why I think we need a little bit more granularity in December to be able to articulate that, which is a little bit more difficult to portray in a call without any numbers or slides.

Andrew Strelzik:

Hi, good morning. Thanks for taking the question. I wanted to ask about your view on the Ag Services strength durability. It seems like we've got tighter global grain supplies than we maybe thought we were going to Refined oils premiums that are out record. Crush margins, obviously, in the U.S. that are very strong. I know maybe Argentina comes back next year. But it doesn't feel like these are things that even though you guide for just 2023 things that would end just because of the calendar flips. And so how long do you think the strength in Ag services can continue for? What I guess, maybe are the risks because it seems like the setup should extend. So curious for your perspective there. Thanks.

Operator:

Thank you. Our next question comes from Salvator Tiano from Bank of America. Your line is now open. Please go ahead.

Juan Luciano:

Okay. Yes, Salvator. So as you said, crush margins have weakened maybe in recent weeks to maybe $20 to $30 in Europe, especially this is a good transition through all to new crop in the U.S. and global oil basis maybe have weakened a little bit with firmer U.S. oil. We continue to bring biodiesel from there. So that continues to add value to the European businesses. But maybe the protein industry is a little bit weaker in Europe. In Brazil, I think Brazil, if I have to say something, maybe Brazil is trying to figure out how to accommodate all the production of soybean and corn, that they have. So there are a lot of logistics challenges in Brazil. And I think that has made -- has pressure the beans basis country side. And soybean oil, I would say, is pressure in Brazil because of lack of domestic demand. Brazil is one of those places where you have export market, but you also have a domestic market. And I would say right now, domestic market, maybe for soybean oil is a little bit weak. And without the huge benefit that we have with the biofuels policies here in the U.S. and Brazil may be a little bit weaker. But I would say, realistically, those are the two places that will pick up the slack that Argentina or the gap that Argentina left. So those are where the beans are. So we expect high crushing rates for both Brazil and the U.S.

Steve Haynes:

Hi. Thanks for taking my question. Just maybe two quick ones on Nutrition. First, are you able to maybe put a dollar amount to the cost savings the various kind of actions you're taking on the animal side of things in regards to kind of what's baked into the 2023 guide. And then secondly, could you just -- maybe just a quick -- a little bit more detail on what some of the inventory losses were on the Pet Solutions? Thank you.

Operator:

Thank you. At this time, we currently have no further questions. So I'll hand back to Megan Britt for any further remarks.

Operator:

Thank you for joining today's call. You may now disconnect your lines.

Megan Britt:

Thank you, Bailey. Hello, and welcome to the first quarter earnings webcast for ADM. Starting tomorrow, a replay of this webcast will be available on our Investor Relations website. Please turn to Slide 2. Some of our comments and materials may constitute forward-looking statements that reflect management’s current views and estimates of future economic circumstances, industry conditions, company performance and financial results. These statements and materials are based on many assumptions and factors that are subject to risks and uncertainties. ADM has provided additional information in its reports on file with the SEC concerning assumptions and factors that could cause actual results to differ materially from those in this presentation. To the extent permitted under applicable law, ADM assumes no obligation to update any forward-looking statements as a result of new information or future events. On today’s webcast, our Chairman and Chief Executive Officer, Juan Luciano, will discuss our first quarter results, provide ADM’s perspective on the current market backdrop and share progress highlights on our strategic priorities for the year. Our Chief Financial Officer, Vikram Luthar, will review the drivers of our financial performance at the segment level and review our cash generation and capital allocation results. Juan will have some closing remarks, and then he and Vikram will take your questions. Please turn to Slide 3. I’ll now turn the call over to Juan.

Vikram Luthar:

Thank you, Juan. Please turn to Slide 6. The Ag Services & Oilseeds team had an outstanding start to 2023, with significantly higher year-over-year results in Q1. Ag Services results were much higher than the first quarter of 2022. In South American origination, excellent risk management and higher export demand due to the record Brazilian soybean crop drove significantly higher year-over-year results. In North America, origination results were also higher, driven by stronger soybean exports. In global trade, solid margins and efficient execution led to strong results. Crushing results were in line with the first quarter last year. In North America, the team executed well, capitalizing on historically strong soybean and softseed crush margins that were supported by robust demand for renewable fuels. In EMEA, crush margins were lower year-over-year as trade flows adjusted from the dislocations caused last year by the war in Ukraine. Additionally, there were approximately $240 million of positive timing effects during the quarter, which included both expected reversals of prior timing losses as we executed the business as well as a positive impact of about $100 million pulled forward from future periods as crush margins declined at the end of the quarter. Refined products and other results were substantially higher than the prior year period. North America biodiesel results were higher with record volumes and strong margins, supported by favorable blend economics and tight diesel stocks. In EMEA, domestic demand for food, oil and export demand for biodiesel drove strong margins. Equity earnings from Wilmar were lower versus the first quarter of 2022. Looking ahead for the second quarter, we expect RPO to continue its strong performance. Crushing is expected to be strong, but lower than the prior year based on current crush margins. We do not expect last year’s significant volatility that impacted energy and grain trade flows to reoccur in Ag Services. Slide 7, please. Carbohydrate Solutions delivered solid results in Q1, though lower than the very strong first quarter of the prior year. The Starches and Sweeteners subsegment capitalized on solid demand in the quarter. North America Starches and Sweeteners delivered strong volumes and margins. Ethanol margins, pressured by high industry stock levels, were down relative to the same quarter last year. In EMEA, the team effectively managed margins in a dynamic operating environment to deliver improved results. The global wheat milling business posted much higher margins driven by robust customer demand. BioSolutions continued on its strong growth trajectory with revenues increasing by over 20% year-over-year. Vantage Corn Processors’ results were significantly lower due to weaker ethanol margins. Looking ahead, for the second quarter, we expect resilient demand and strong margins for our Starches and Sweeteners products. Ethanol margins, while improving, are expected to remain below last year. Of note, we also recognized a $50 million benefit from a biofuel producer tax credit in the prior year quarter that will not repeat. On Slide 8, Nutrition results were significantly lower year-over-year versus the record prior year quarter. Human Nutrition results were in line with the first quarter of 2022 as the business continued to manage demand fulfillment challenges and destocking in certain categories. Flavors results were slightly lower than the prior year as strong results in EMEA were offset by lower results in North America. Specialty Ingredients results were higher year-over-year, driven by healthy margins. Health and Wellness was lower year-over-year. In Animal Nutrition, results were significantly lower compared to the same quarter last year, primarily due to much lower margins in amino acids. The Animal Nutrition business, excluding PET, is expected to face challenging demand conditions over the course of the year, and we are taking actions to mitigate the impact. These actions include targeted cost reductions, refining our go-to-market strategy with a more customer-centric approach, optimizing our production footprint, particularly in EMEA and refocusing resources on our strongest growth categories. Looking ahead for the second quarter, we expect year-over-year profit growth at Human Nutrition, while Animal Nutrition will still be lapping the higher amino acid margins from the prior year. For the full year, we expect to achieve 10% plus constant currency operating profit growth in Nutrition, led by Human Nutrition. And with continued recovery in demand fulfillment and reduced destocking effects, we remain optimistic about our Human Nutrition sales pipeline and growth opportunities. As we noted before, operating profit growth will be heavily weighted to the second half of the year. Slide 9, please. Other business results were significantly higher than the prior year quarter due to improved ADM investor services earnings on higher interest income. Captive insurance results were in line with the prior year. In Corporate, unallocated corporate costs of $248 million were higher year-over-year due primarily to higher financing and centers of excellence costs. Other corporate was unfavorable versus the prior year due to the absence of an ADM Ventures, investment revaluation gain, partially offset by higher contribution from foreign currency hedges. We still project corporate costs to be approximately $1.5 billion for the year. Net interest expense for the quarter increased $27 million year-over-year due primarily to higher short-term interest rates. The effective tax rate for the first quarter of 2023 was approximately 16%, in line with the prior year. For the full year, we still expect our effective tax rate to be between 16% and 19%. Next slide, please. In the first quarter, we had strong operating cash flows before working capital of $1.3 billion. We allocated $325 million to capital expenditures as well as returned $600 million to shareholders through share repurchases and dividends. We continue to have ample liquidity with nearly $10 billion of cash and available credit. And our adjusted net debt-to-EBITDA leverage ratio of 1.2 is well below our 2.5x threshold. Our strong balance sheet and single A credit rating provide a stable financial footing for ADM to pursue our strategic growth initiatives, while also returning capital to shareholders. In 2023, we still anticipate $1.3 billion of capital expenditures and $1 billion of opportunistic buybacks subject to other strategic uses of capital. Juan?

Operator:

Thank you. [Operator Instructions] Our first question today comes from the line of Tom Palmer from JP Morgan. Please go ahead, Tom. Your line is now open.

Juan Luciano:

Good morning, Tom.

Juan Luciano:

I think you're right in your assessment that maybe second quarter will come a little bit lower and then right, crush margins will raise for the second part of the year. In the coming quarter, crush is expected to remain strong, but lower than the prior year period, as you said, based on covering crush margins as well as impact from mark-to-market that pull profits into Q1. Remember those $100 million that Vikram mentioned before. So margins will remain solid, but again, lower probably than the prior year while canola crush margins look to be improved in the upside. If you think about the whole year, crush is position for another extremely strong year in 2023, the fundamentals of the business remain strong and the structural changes are driving increased demand for both vegetable oil and meal. In 2022, remember, Tom, we have significant dislocations around the world. Likewise, 2023 will be influenced by any new dislocations which may or may not happen. Remember that while Argentina and South America is crushing hard now, Argentina will probably run out of beans given their small crop, later in the year. And at that point in time, certainly the market will have to cover for that lack of meal being exported from Argentina. We think that's where the U.S. crush margins will pick up, and that's what the curves are showing. So I think with record world soybean production, we expect soybean meal will gain in the inclusions in global – Russians and we are going to have also on our own side, we're going to have a Spiritwood coming in at the end of Q3. And also we are going to have Paraguay coming back online at that point and Ukraine also. So when you think about this operational improvements and higher refining volumes and strong refining margins we are due for a very, very strong year in ag services and oilseeds in 2023. Bailey, any other questions?

Adam Samuelson:

Yes, thank you. Good morning, everyone.

Adam Samuelson:

Hi. I was hoping to talk a little bit more on nutrition and maybe get a little bit more color on kind of the confidence of the recovery and profits as you see it through the year. Sounds like that's pretty heavily skewed towards the human side and I guess, I'm just trying to make sure I understand kind of how much of that is a function of the comps getting easy and flapping some of the price costs and supply chain challenges late last year. Actual market growth beneficial from some of the new capacity and the volume that you can bring to bear and then as well help us think about on the animal side, kind of the growth in pet versus the pressures you're seeing on amino acids and some of the legacy in your businesses?

Operator:

The next question today comes from the line of Ben Theurer from Barclays. Please go ahead, Ben. Your line is now open.

Juan Luciano:

Thank you, Ben.

Juan Luciano:

Yes, thank you, Ben. A full question there. So listen, ag service has delivered another very, very strong quarter this year. It was strong in South America, it was strong in North America. It was strong at the global trade through all our destination marketing facilities. So when you look at the Q2, of course, in Q1 we were able to export a little bit more than maybe Brazil couldn't do it because of some of the rains and the delays. We think that in Q2 and Brazil will probably take over being the large crop that they have and the cheapest origin. Destination marketing was still holding margins there. It is an important activity around the world. You describe the risks associated. When we think about the year, the year hinges a lot in the recovery of demand in China lockdowns, the ups and downs of the crops around the world. We still have to deal with an Argentine disaster in terms of crops, and with the Brazil that has very strong crop. That is creating changes in the trade flows. So all of a sudden, we are sending beans from the U.S. to Europe to transform into biodiesel and bringing the biodiesel back, but also Brazil is sending beans to Argentina; Brazil, maybe sending a little bit of both or beans here. So there is a lot of changes in that, and that's ADM normally takes advantage of our huge footprint and normally our footprint and our ability to execute on those trade flows become an advantage. So you're going to see that in ag services around the year. I said there are two pivoting things this year. One is, again China demand coming out of lockdown. The second is the ability of Ukraine to continue to export as we have been doing during since August last year. Of course, the corridor has been renewed as ADM, we will always do our best to make sure that that continuous and export source for the Ukrainians, remember that that part of the world owns 25% of all the black rich soil in the world. So it's a very important condition – very important production area. So the corridor has been renewed, but of course, there are differences between Ukrainians view and Russian views at this point in time. And unfortunately, we have seen over the last week at the inspection of vessels being reduced to maybe a few days per week. So we remain hopeful and we remain ready to help to do this. I think that what we need to think fundamentally, the corridor is all about the availability of bringing that production. What I worry or the accessibility better said, what I worry is about the availability of the crop. This prolonged conflict is hurting the Ukrainian farmers and is hurting the Russian farmers. Both are dealing with issues, and I think that the expectation should be the conflict not resolved for production out of this area to come lower over the coming years, regardless of the export corridor. So I think, again, short-term and accessibility issue, long-term or medium-term, I worry more about availability and creating the pockets of tension again.

Andrew Strelzik:

Hey, good morning. Thanks for taking the questions. My first one is on the refined products segment, which came in much, much stronger than we anticipated. And when I look at the dynamics that you called out on biodiesel and some of the other things, it seems like a lot of those are still very much in place. Is it possible that that is a more sustainable, I guess not run rate, but more achievable again in the second quarter? Are there things that have changed that would prevent that from happening?

Operator:

Thank you. The next question today comes from the line of Ben Bienvenu from Stephens. Please go ahead, Ben. Your line is now open.

Juan Luciano:

Good morning, Ben,

Vikram Luthar:

Well, so on starches and sweeteners, you're right. Let's break it down. The liquid sweetener part of the portfolio, we see resilient demand and strong margins given the good contracting we had last year, and we also see increased volumes from Mexico, which helps the business. The other thing that should help over the course of the year is higher sugar prices. While, you know, we don't have a lot of spot business, but to the extent we do that should be supportive of margins and the liquid sweetener side of the portfolio. The specialty side, we are seeing strong margins, but some softness in the volumes. That's also part of sweeteners and starches. In the biosolutions, when you think about the mix of the portfolio, we are moving more and more towards the BioSolutions business. And that had very strong performance consistently over the last few years and again in Q1 with 20-plus percent growth in revenue and anticipated to continue at that clip for the course of this year. So at a high level Sweeteners and Starches, good volumes and robust margins, so it should give us confidence that we'll have a very good year again in 2023. Now with respect to ethanol, that remains the most volatile part of our portfolio, Q1 was soft. We think Q2 is going to be a little better, although lower than Q2 of last year. We had the biofuel tax credit, which we referenced, which will not repeat. But we also see some green shoots on the ethanol side. We are more constructive about the outlook of ethanol for the rest of the year. Why, for a few reasons. One is, we see ethanol stock levels coming off their peaks from earlier in Q1. Two, we continue to see good export demand. Think about what's happening even in Japan and India. So our export demand should be in the 1.2 billion, 1.4 billion gallons, which is consistent with what we saw last year. We also see higher blending rates. I think blend rates have trended slightly up. Gasoline demand continues to be strong given the strong blend economics. So in short, while we think ethanol will likely be low from an absolute margin perspective versus last year, we're still constructive generally for the rest of the year. So overall, we see a pretty strong year for Carbohydrate Solutions business.

Eric Larson:

Yes. Good morning everybody, and congratulations on a good quarter.

Eric Larson:

So this probably comes – I can't remember the last time I actually asked an ethanol question, but my – one of my questions today is on ethanol. So the outlook going into 2024, actually looks better because we now have – we now have a year potentially, hopefully, year-end or year-round E15 blending, which I know it's a disappointment, it's in 2024, not '20 – starting in 2023, but that could consume another 1.5 billion or 2 billion bushels of corn. So the outlook for ethanol, this year I appreciate Vikram's comments. But wouldn't you expect maybe that your demand would be better starting in 2024? And now you'll have some confidence that the retailers can put infrastructure in and put the pumps in for E15. So is that too optimistic on my part?

Operator:

Thank you. The next question today comes from the line of Manav Gupta from UBS. Please go ahead, Manav. Your line is now open.

Vikram Luthar:

Yes. So on the crush margins, as Juan noted, clearly, as you can also see in the curve right now, Q2 looks soft. And the reason is because of the expectation of a certain delay in renewable green diesel capacity. Just to be clear, we remain confident that renewable green diesel capacity is going to increase by about 1 billion gallons in 2023. The time line has just been pushed back to the second half of this year. So therefore, you see a little bit of softness in the nearby as a consequence of that. The other aspect is also related to what's happening in Argentina. In Argentina, there given – there's more beans given what's happened with the soy dollar for at least part of Q2, there's more crush capacity, if you may, that's coming online, and that's also helping reduce a little bit of the nearby crush. What's going to happen in Argentina by May or June time frame, they're going to run out of beans. So that export is not going to be available. So that should be supportive of crush margins beyond Q2. And that's why you see the slight inverse in the curve in the nearby and then recovering in the back half of the year. So that's really all that happened. It was transitory, nothing that is more than that is the delay in renewable green diesel capacity as well as what's happening in Argentina – in Argentina.

Steven Haynes:

Hey. Thanks for taking my question. I wanted to ask on the carbon capture discussion earlier in the call and the plans to kind of triple the well capacity. Do you know kind of a time line for when that might be completed? And how much capital you're going to be putting behind that initiative?

Operator:

Thank you. The next question today comes from the line of Ben Kallo from Baird. Please go ahead, Ben. Your line is now open.

Juan Luciano:

Thank you, Ben. Thank you for the question. Yes, as you said, coming along with the development of the industry, ADM wants to be pressed bringing crush capacity. We're doing that, as you know in a partnership with an oil company. So they have the ability to move that product to make it into the fuel market. We have the responsibility to move, of course, the meal for which we've been working on. The plant is coming thankfully on time and on schedule to be with us by the harvest. So about the Q3, as I said in my remarks, the 150,000 tons bushels per day of crush capacity. We look at the industry. I always mentioned or I mentioned before that we look at this plant and project for two years to make sure that capacity was coming on stream prudently. We see now the industry. We see all the capacity that is coming, is all needed to be able to supply this I think the renewal diesel industry is still going to have an issue how to get feedstock for that. So that will be the issue for a while. I think that will make meal – U.S. meal very competitive in the world markets and the U.S. is planning to take share, we are part of that plan as well. So we feel comfortable about the cadence at which the plants are coming. Maybe some of our renewable diesel plants are coming a little bit slower than expected. Every project has its issues. Thankfully, ours is not delayed. But if others are, I think it's going to facilitate a little bit the digestion of all this capacity that is coming because we need to get the fit for that. I think Vikram will cover the second part of your question on RVOs.

Operator:

Thank you. Your final question today comes from the line of Salvator Tiano from Bank of America. Please go ahead, Salvator. Your line is now open.

Juan Luciano:

Thank you, Salvator, for the question. So as you said, Ag Services has a very, very good first quarter. This team continues to deliver and outperform sometimes on our own expectations. If you think about global trade and all the issues around the world sometimes are difficult to estimate, if you will but our team with their ability to connect, if you will origins with destinations and especially with the investments that we have made over the years on destination markets and allow us to capture more volume at higher margins than maybe in the past. They have had also a very disciplined risk management and very effective one, which we expect from them, but sometimes it's not that easy to deliver in this volatile world. Great execution in Australia, great execution on the Black Sea, origination program and again a solid margins at destination. South America were probably another bright point for us. They capture higher volumes and margins. We were very well positioned on a crop that was very large and on a farmer that was undersold. So we position ourselves properly, and we get the rewards from that. And North America benefited from a strong risk management and a strong bean export programs. Again, Brazil was a little bit delay with some of the rains and all that in terms of their harvest. So the U.S. extended the window a little bit more. Now Brazil, we think – if you think about second quarter and what we're predicting it to be a little bit lower is we're not going to have – if you think about second quarter last year, the same volatility that we have because of Ukraine at that point in time. And the world was starting and the world was a little bit stunned on what we do now. Now we know what do we do? We have channels to export; the product is flowing for the most part. As I warned in my previous question, I think we're more worried about the productivity of the farmers of Ukraine and Russia eventually later on. But I think for this year, we have the ability to export that. We expect robust North American corn exports until Brazil second con crop is available. And then I think that North America will lap until Brazil run out of core. So we have lower North American soy exports expected in the second quarter because Brazil will take that place. So it's a little bit the shift if you will. And the decrease of that shift to be honest, Salvator sometimes are marked by the logistics issues. Brazil has a large corn crop and soybean crop, and it needs to be able to move that to the ports and being able to ship it. And then you have the Ukraine issue we discussed before. So those are the puts and takes. In general, as I said, the unit is performing very well, performed exceptionally well in the first quarter. We expect them to perform stronger in the second quarter, but maybe not as strong as second quarter last year. Thank you.

Megan Britt:

Thank you for joining us today. Please feel free to follow-up with me if you have any additional questions. Have a good day, and thanks for your time and interest in ADM.

Megan Britt:

Thank you. Hello and welcome to the fourth quarter earnings webcast for ADM. Starting tomorrow, a replay of this webcast will be available on our Investor Relations website. Please turn to Slide 2, which says that some of our comments and materials constitute forward-looking statements that reflect management’s current views and estimates of future economic circumstances, industry conditions, company performance and financial results. These statements and materials are based on many assumptions and factors that are subject to risks and uncertainties. ADM has provided additional information in its reports on file with the SEC concerning assumptions and factors that could cause actual results to differ materially from those in the presentation. To the extent permitted, under applicable law, ADM assumes no obligation to update any forward-looking statements as a result of new information or future events. On today’s webcast, our Chairman and Chief Executive Officer, Juan Luciano, will discuss our full year accomplishments and share detail on our priorities for 2023. Our Chief Financial Officer, Vikram Luthar, will review the drivers of our financial performance at the segment level and review our cash generation and capital allocation results. Juan will have closing remarks regarding our planning framework for 2023 and then he and Vikram will take your questions. Please turn to Slide 3. I will now turn the call over to Juan.

Vikram Luthar:

Thank you, Juan. Please turn to Slide 7. The Ag Services and Oilseeds team capped off an outstanding year with substantially higher year-over-year results in Q4. Ag Services results were higher than the fourth quarter of 2021. Low water conditions reduced North American export volumes, partially offset by the South American team, which executed well to deliver higher margins and volumes. Global trade results were lower than the strong fourth quarter of 2021 with lower ocean freight results partially offset by higher results in EMEA origination and destination marketing. The business benefited from a $110 million legal recovery related to the 2019 and 2020 closure of the Reserve Louisiana Export facility. Crushing results were more than double those of the prior year period. In North America, strong export volumes for soybean meal and growing domestic demand for renewable diesel contributed to strong margins. In EMEA, oil demand powered strong rapeseed margins more than offsetting higher energy costs compared to the prior year. Expanding margins drove negative timing impacts in the quarter of approximately $40 million. RPO results were significantly higher year-over-year as the business continued to execute well to meet demand for food oil, renewable diesel in the U.S. and biodiesel globally. Equity earnings from Wilmar were much higher versus the fourth quarter of 2021. Looking ahead, we expect AS&O results for Q1 to remain strong, similar to last year’s very strong quarter led by continued strength in crush margins and RPO. Ag Services is likely to be lower year-over-year, particularly in light of very strong global trade results in the prior year quarter. Slide 8, please. Carbohydrate Solutions had a strong 2022, with full year results higher than 2021. For the quarter, results were substantially lower than the fourth quarter of 2021 due to pressured industry ethanol margins. The starches and sweeteners sub-segment, which includes ethanol production from our wet mills, delivered much higher year-over-year results. The North America business delivered solid volumes and strong margins in both starches and sweeteners, partially offsetting lower ethanol margins. The EMEA team effectively managed risk and delivered improved results on better margins in a continued dynamic environment. The global wheat milling business delivered higher margins driven by solid customer demand. Vantage Corn Processors results were substantially lower as higher ethanol inventory levels pressured margins especially compared to the very strong margin environment in the fourth quarter of 2021. Looking at the first quarter for Carbohydrate Solutions, we expect continued solid demand and strong margins for starches, sweeteners and wheat flour. Ethanol margins are currently pressured due to high industry inventory levels. If industry stocks come back down, results for the quarter could be similar to Q1 of 2022. If margins remain pressured, results would likely be lower. On Slide 9, the Nutrition business continued its strong growth trajectory in 2022. ADM demonstrated that it remains the provider of choice in Nutrition for systems as our growing pipeline and continued strong win rates delivered full year revenue growth of 18% on a constant currency basis. The business continued to outperform industry growth levels and delivered 11% higher profits for the full year on a constant currency basis. For the fourth quarter, revenues grew 11% on a constant currency basis. Q4 operating profits were significantly lower than the prior year quarters. Human Nutrition results were lower than those of the fourth quarter of 2021. Flavors results were similar to the prior year as strong revenue growth helped offset demand fulfillment challenges. Specialty Ingredients continued to see strong demand for its product portfolio, including plant-based proteins, offset by inventory adjustments. Health & Wellness was higher year-over-year, driven primarily by the bioactives portfolio, including the results from the Deerland acquisition. Animal results were substantially lower than the prior year quarter, primarily due to the lower margins in amino acids, driven by recovery in the global supply of lysine. Pet Nutrition volumes were lower in Latin America, partially driven by demand fulfillment challenges. Feed results were stronger driven by APAC and Latin America partially offset by the impact of softer demand in EMEA. As we look ahead, we expect overall Nutrition results in Q1 to be lower than the prior year’s record first quarter, with Human Nutrition delivering similar year-over-year results on strong flavors and SI growth and lower Animal Nutrition results primarily due to weaker margins in amino acids. I want to take a moment to expand on our view of Nutrition in 2023. Nutrition is expected to continue on a positive growth trajectory for full year 2023, including 10% plus profit growth and a similar level of revenue growth. The growth is likely to be led by Human Nutrition and to be weighted in the back half of the year as the first half will see headwinds in Animal Nutrition due to the continued impacts of weaker margins in amino acids and because we will see increasing recovery in demand fulfillment as we move through the year. Slide 10, please. Other business results for Q4 was significantly higher than the prior year’s fourth quarter. Higher short-term interest rates drove improved earnings in ADM investor services, and captive insurance experienced favorable underwriting results and lower claim settlements versus the prior year. In the corporate lines, unallocated corporate costs of $299 million were higher year-over-year due primarily to higher IT operating and project-related costs and higher costs in the company’s centers of excellence related to growth initiatives. Other corporate was favorable versus the prior year primarily due to higher contributions from foreign currency-related hedge activity and lower railroad maintenance expense. Corporate results also included losses related to the mark-to-market adjustment on the Wilmar exchangeable bond and severance totaling $6 million. Net interest expense for the quarter increased year-over-year on higher interest rates. We expect corporate cost for 2023 to be around $1.5 billion, driven primarily by inflation and higher interest expense. Other business performance should be higher than 2022, offsetting a significant portion of the increased corporate costs as higher interest rates positively impact our ADM IS business. The effective tax rate for the fourth quarter of 2022 was approximately 16% compared to 21% in the prior year. The decreased rate was driven primarily by changes in the geographic mix of pretax earnings in addition to lower discrete tax expense versus the prior year. Our full year adjusted tax rate was 17%. For 2023, we expect our adjusted tax rate to be between 16% and 19%. Next slide, please. Year-to-date operating cash flows before working capital of $5.3 billion are up significantly versus $3.9 billion over the same period last year. Our net debt to total capital ratio is about 25%, and we continue to have ample available liquidity. Our strong cash flows and balance sheet have enabled continued investment in the business, with $1.3 billion in capital expenditures for the full year. We currently plan to maintain capital expenditures at about $1.3 billion in 2023 and continue to have significant financial capacity to pursue strategic growth objectives. We have been continuing to return capital to shareholders. We distributed $900 million in dividends and repurchased almost $1.5 billion of shares in 2022. We are planning $1 billion in opportunistic buybacks for 2023, subject to other strategic uses of capital. Juan?

Operator:

Thank you. [Operator Instructions] Our first question today comes from the line of Ben Bienvenu from Stephens. Please go ahead. Your line is now open.

Juan Luciano:

Good morning, Ben.

Juan Luciano:

Yes. Thank you, Ben. Listen, that business has been a very successful story at the customer level for many, many years. We continue to drive higher growth rates than the industry we participate in. So that has not changed, the robust pipeline growth there, and we have achieved all that then through a very disciplined strategy of bolt-on acquisitions and organic growth. So we did 4 bolt-ons in 2021. We took the time in 2022 to integrate them and digest them. At the same time, in 2022, we started many projects that I highlighted in my initial comments on organic growth. So I would say that will be the pattern that you should expect to us. I mean we have stated many years in our balanced capital allocation, and in this nutrition pace, if you will, of bolt-on and M&A and taking some time to digest some of those things. Very pleased to report that the four acquisitions we made in 2021 are executing or delivering ahead of their business model. So we’re not planning to change the pace or the strategy that we have had so far. The projects that we are making selective expansions on or bringing to life soon are all going well even despite the long time – long lead time equipment and sometimes you face in the industry. We’ve done that in anticipation of all that. So we feel very good about being able to support, with capacity, the growth in demand that we see in the marketplace from our participations.

Vikram Luthar:

Yes. So effectively, Ben, we don’t assume a lot of change in currency for 2023. Yes, you’ve seen some weakness in the U.S. dollar, but you can assume that, even on a reported basis right now, we assume similar growth rates in OP.

Juan Luciano:

Go ahead, Ben.

Vikram Luthar:

So based on the customer contracting we’ve seen in the Sweeteners and Starches portfolio, Ben, we do see strong volumes and margins. And with the improved mix, we talked about BioSolutions expansion, we actually have 26% year-on-year growth, and BioSolution margin remained very robust. And with the improved mix we actually see a potential, in the Sweeteners and Starches business, to have higher volumes and margins in 2023. Clearly, ethanol remains uncertain and we’ve seen recently inventory levels remain high, and that’s actually pretty similar to January of last year as well. But we’re still constructive in terms of outlook for ethanol, given what’s happening with the RVO framework, the fact that gasoline demand is expected to be roughly flat versus 2022, blending economics remain very favorable. And frankly, export volume should be similar to last year, around 1.4 billion gallons. So that’s a quick snapshot of our outlook for 2023.

Adam Samuelson:

Hi, yes, thank you. Good morning, everyone.

Adam Samuelson:

So I wanted to hopefully tie together some of the forward comments that you made and see just to help calibrate kind of us on the net impact of that at the earnings level. So Nutrition is going to have kind of 10% constant currency profit growth, not much FX right now. Other – and other and corporate and interest kind of basically seemingly netting out to roughly flat year-over-year. Tax rate, flat to maybe up slightly year-over-year. So I guess the two pieces of the puzzle that are missing from their Ag Services and Oilseeds profit in Carbohydrate Solutions. I think ethanol remains somewhat of a wildcard on carbohydrates, although the rest of Starches and Sweeteners, you sound generally constructive. So can you help us, Juan, Vikram, just thinking about kind of a range of outcomes on Ag Services and Oilseeds based on where crush margins are today kind of assuming, let’s say, an average U.S. crop, no enormous supply dislocation coming out of the U.S. in the second half of the year? Just how kind of the profit outlook would be tracking in Ag Services and Oilseeds, and if there is anything else on a year-on-year basis, you want us to be considering, that would be really helpful.

Operator:

The next question today comes from the line of Ben Theurer from Barclays. Please go ahead. Your line is now open.

Juan Luciano:

Hi, Ben.

Ben Theurer:

Just wanted to quickly follow-up on the Nutrition dynamics you seen in the fourth quarter and how that translated into 1Q and somehow if you could frame it for that medium-term growth algorithm you’ve laid out a little over a year ago during your Capital Markets update. So fair to assume that there was obviously a lot of specific issues around fulfillment, some very specific demand items that kind of impacted in the fourth quarter, and you expect this, obviously, to continue into the first half and then recover into the second half. Now clearly, the 10% you’ve laid out and what you’ve talked about of growth in 2023 is kind of below the algorithm. So can you help us frame how ‘23 kind of fits within your ‘25 strategy and where you want to go? Is that just a small dip can then be recovered? Or would you need some M&A to get back on track to the target of 1.2 at least by 2025, so that we understand how to think about the specific headwinds that can potentially be offset versus what might be more of a structural challenge within Nutrition?

Juan Luciano:

Yes. Thank you, Vikram. Ben, listen, I think we have been – you have been witnessing how we built this nutrition business over the years. This is a business that, if I take over the last 3 years, it has been growing OP by 20%, CAGR if you will. So, it’s a business that we continue to add layers of capabilities so we can continue to win at the customer front, whether it is we go from individual ingredients to systems, where we bring functionality to those systems through bioactives, whether we bring sustainability benefits to that through our decarbonization or regen Ag. So, we continue to add layers to continue to help customers excel at the consumer level. And we see that in our win rates, and we see that in our pipeline. So, we have visibility into that. As Vikram said, maybe some of the categories soften a little bit, but our ability to gain share, to win faster than those categories, has been demonstrated. I think this year, we grew revenue significantly higher than the market. So, when we look forward, as I said in my – I think one of the earlier answers, we continue to expect bolt-on and M&A – bolt-on M&A and organic growth. We had four companies in 2021. We are building capabilities and new capacity in 2022 that we are going to see on the stream in ‘23, and we are going to continue to grow that. So, we haven’t deviated from our 2025 plan. And I don’t think it will require massive M&A to achieve there. It will – you will see this steady state. But this is a business that we are building in the middle of a lot of volatility in the market. This is of course, versus the legacy ADM business, it’s more complex in the number of SKUs that we have, in the number of customers that we have, in the number of plants and categories that we manage. So, when supply chain issues happen or market volatility happen, it’s a little bit more complex to fix in this business. And that’s why we expect a first half that’s going to be a little bit subdued when you add the demand fulfillment issues and some of the capability building, with the fact that also lysine is coming down, if you will, in prices, at least for the moment. So, I would say nothing that deviated. Certainly, if you ask me personally, and I think the management team, are we happy with Q4, I mean of course, Q4 underperformed our own expectations. I mean that’s nothing new for a business that, again, has been growing 20% per year CAGR. And – but we think that this is just a trajectory in the business that continued to win faster than what the market gives us at this point in time. We don’t expect a deviation to our long-term plan at this point.

Manav Gupta:

Congrats on the beat and the dividend hike, shareholder returns matter and you have continuously rewarded your shareholders. My quick question here is, and you have kind of alluded to it also is we are seeing a lot of new capacity start up on the renewable diesel side. I think major projects starting up even last quarter. And then your outlook for both soybean oil and soybean meal, it seems pretty strong right now, any risks to that? And how do you see the year progressing from the perspective of both soybean oil and soybean meal?

Operator:

Thank you. The next question comes from the line of Steve Byrne from Bank of America. Please go ahead. Your line is now open.

Juan Luciano:

Yes. Thank you. Good questions. So, on the short-term part of the question, we see China will continue to increase imports. If you look at domestic grain prices are at historically high levels, especially now that we are – that they are reopening. Of course, a reopening of China could be a game changer for a variety of commodities, not just grains. We look at domestic vegetable oil stocks have been at relatively low levels. And we have seen, during the second half of 2022, an increase in domestic pork prices since, I would say, last spring. So, that prompted farmers to increase their herd. So, we see that demand in the short-term. But again, I think the variability here may be on the upside on how much of the reopening is bringing people to consumption. Of course, people have been in lockdown almost for 2 years in China. And there is a – you are going to find the same pent-up demand that we saw ourselves maybe since last year when everybody came out of COVID. So, I think at this point in time, short-term, China will be probably a positive upside, if anything, to our forecast. When you look at the long-term and the demographics of China that you described, probably about 50% of the Chinese population is middle class or what you will consider middle class, and they are in this process of increasing their protein consumption. But still historically, if you look at what the U.S., we consume about 270 pounds per year of proteins. China is at the 170 pounds per year level. So, they are still far from our level of consumption. And again, if you look at our lifestyles are converging slowly. So, you will expect their protein per capita consumption to grow significantly during this period. The other thing you need to remember is that we are still going to be 10 billion people in the planet by 2050, which is one of the issues that serves our – or drives our purpose, which is trying to increase the carrying capacity of the planet, trying to feed all that. And whether it’s in China or whether it’s in Africa or whether it’s in Southeast Asia, we are a global company, we have a global footprint, and you have seen us continue to expand our destination marketing footprint to serve customers around the world. So, we will serve – we will serve the feeding of growing population of the world, whether it’s in China or somewhere else. But as I said, I don’t expect China to have a decline in the next probably two decades in terms of their demand for protein consumption.

Robert Moskow:

Hi. Thank you. I was hoping to get a little more detail on your forward outlook for ASO. In the slides in the pack, you indicated that the front month board crush is at $75 a ton, and that’s lower than where it was on your third quarter growth [ph]. Does that influence your outlook for forward crush and the fact that it’s come down a bit? And how can I relate that to what happened in calendar ‘22?

Operator:

The next question today comes from the line of Eric Larson from Seaport Global Securities. Please go ahead. Your line is now open.

Juan Luciano:

Thank you.

Juan Luciano:

Yes. I think you called it well. I think that when we had the low water levels in the Q4 that hurt us, of course, we lost some bean business. But the corn business basically is going to be with us until the crop in Brazil – the harvest in Brazil comes, so it’s like middle of the year. So, we see that as a very strong business in Ag services for North America. We also have, unfortunately, I think Ukraine Grain Association has come up with a statement that they don’t believe corn for ‘23 will exceed 18 million tons, which is a far cry from the 29 million tons or 30 million tons that they used to produce or we expected. So, demand continues to be solid out there. And we still – as a world, we need Brazil to have a good crop. Of course, if there are rains and delay a little bit the harvest of soybeans, that may delay a little bit the planting of the next crop. But we hope that in your farm and everybody’s farm, corn is growing strongly because we need it. And again, the U.S. will be exporting a lot of that from here until probably July.

Steve Byrne:

Yes. Thanks. Just wanted to ask about the press release that was out a couple of days ago about the new biostimulant of ADM released, the data for rating sold. And I know that you do have a business where you work with farmers to provide them fertilizers, etcetera. But I think this seems to be the first time that you are actually rolling out one of your own proprietary products. So, I am just trying to understand a little bit about your strategy here. Will you invest more in products for nutrition and crop protection, especially biologicals? And what do you think is the potential market and actually the earnings potential for ADM?

Megan Britt:

So, with that, I think that was the last question for the call today. I would like to thank you for joining us. Please feel free to following up with me if you have any other questions. Have a good day and thanks for your time and interest in ADM.

Megan Britt:

Thank you, Alex. Good morning, and welcome to ADM’s third quarter earnings webcast. Starting tomorrow, a replay of today’s webcast will be available at adm.com. Please turn to slide 2, the Company’s safe harbor statement, which says that some of our comments and materials constitute forward-looking statement that reflects management’s current views and estimates of future economic circumstances, industry conditions, company performance and financial results. These statements and materials are based on many assumptions and factors that are subject to risks and uncertainties. ADM has provided additional information in its reports on file with the SEC concerning assumptions and factors that could cause actual results to differ materially from those in this presentation. To the extent permitted under applicable law, ADM assumes no to update any forward-looking statements as a result of new information or future events. On today’s webcast, our Chairman and Chief Executive Officer, Juan Luciano, will provide an overview of the quarter and how we’re continuing to advance our strategy. Our Chief Financial Officer, Vikram Luthar, will review the drivers of our performance as well as corporate results and financial highlights. Then Juan will make some final comments, and he and Vikram will take your questions. Please turn to slide 3. I’ll now turn the call over to Juan.

Vikram Luthar:

Thanks, Juan. Slide 7, please. The Ag Services and Oilseeds team delivered substantially higher year-over-year results. Ag Services results were significantly higher than the third quarter of 2021. The short crops in South America supported U.S. exports, driving improved volumes and margins in North American origination, which had significant negative impacts from Hurricane Ida in the prior year. Better margins in global ocean freight, driven by good execution amid dynamic global trade flows, powered better results in global trade. South American origination saw improved volumes and margins driven by increased farmer selling in addition to higher volumes through our export facilities. Crushing results were significantly higher with margins driven by resilient global demand for both meal and oil. Strong rapeseed margins in EMEA, driven by robust oil demand and continued market dislocations along with positive impacts from an insurance settlement helped drive improved results. North American soy crush margins continued to benefit from renewable diesel demand. Also, net positive timing effects in the quarter were about $175 million as compared to the approximately $70 million in the prior year quarter. Positive results were partially offset by lower crush volumes, including impacts from idle facilities in Ukraine and Paraguay. Refined products and other results were higher year-over-year in a strong margin environment for both refined oil and biodiesel. Robust performance in global refined oils was driven by healthy demand and elevated refined oil margins amid supply chain disruptions. Equity earnings from Wilmar were much higher versus the third quarter of 2021. Looking ahead to Q4, we expect AS&O to deliver much better results in the fourth quarter of 2021. We expect continued strength in crush margins to more than offset the adverse impact of low water conditions on U.S. export volumes. Slide 8, please. The Carbohydrate Solutions team delivered significantly higher results versus the prior year quarter. The Starches and Sweeteners subsegment, which includes ethanol production from our wet mills, delivered much improved year-over-year results amid steady global demand for sweeteners and starches. Corn co-products, including continued robust demand for corn oil as well as effective risk management drove higher execution margins in North America. Wheat milling had a strong performance, delivering improved volumes and margins to meet healthy demand for flower. In EMEA, the business delivered solid volumes and margins and managed through a dynamic energy environment to drive stronger results. Our BioSolutions platform continued its upward trajectory with 29% year-over-year revenue growth year-to-date. Vantage Corn Processors results were substantially lower. Ethanol margins were pressured by higher industry inventories, lower domestic demand and elevated corn costs. In addition, the prior year’s results included contributions from the now sold Peoria facility. Looking ahead, we expect the fourth quarter of this year for Carbohydrate Solutions to be significantly lower than the fourth quarter of last year. Demand and margins for sweeteners, starches and flower should remain healthy, but ethanol margins are expected to be substantially lower than last year’s historic highs. On slide 9, the Nutrition business continued to outpace the industry with Q3 revenue growth of 10% on a reported basis and 16% on a constant currency basis. Third quarter adjusted operating profit was similar to last year and 7% higher on a constant currency basis. Profit was impacted in the quarter by the significant strengthening of the U.S. dollar and demand fulfillment challenges as the rapid growth in customer demand exceeded our operational capacity. We are prioritizing unlocking capacity in the face of some persistent supply chain bottlenecks. Our year-to-date performance remains very strong, including 20% revenue and 19% OP growth on a constant currency basis. And our portfolio of acquisitions from 2021 continues to deliver OP above our acquisition models. In this quarter, Human Nutrition results were higher than the third quarter of 2021. We strong demand for plant-based proteins as well as solid performance in texturants drove continued growth in specialty ingredients. Flavors results were impacted by adverse currency translation effects in EMEA, partially offset by continued strong demand growth in the region. Demand fulfillment challenges in North America and lower demand in APAC, driven partly by the lockdowns in China also negatively impacted results. Health and Wellness was lower versus the prior year, which included higher income from the fiber fermentation agreement. Animal Nutrition results were down versus the prior year quarter. Pet results were lower in Latin America on lower volumes, partially offset by strong volumes and margins in North America. Softer animal protein demand affected feed volumes. Looking ahead, we expect the fourth quarter for Nutrition this year to be higher than the fourth quarter of 2021 with continued strong demand in human nutrition more than offsetting adverse currency effects. We expect Nutrition’s full year OP growth to be between 15% and 20% on a constant currency basis. Slide 10, please. Other business results increased from the prior year quarter. Higher short-term interest rates drove improved earnings in ADM Investor Services, partially offset by increased claim settlements in captive insurance. In the corporate lines, unallocated corporate costs of $251 million were higher year-over-year due primarily to performance-related compensation accruals, higher IT operating and project-related costs and higher costs in the Company’s centers of excellence. Other Corporate was favorable versus the prior year, primarily due to higher results from foreign currency-related hedge activity. Net interest expense for the quarter increased year-over-year on higher interest rates. The effective tax rate for the third quarter of 2022 was approximately 16%. We still project full year corporate costs to be about $1.3 billion, and we still expect our adjusted tax rate to remain in the range of 16% to 19%. Next slide, please. Year-to-date, operating cash flows, before working capital of $4.7 billion, are up significantly versus $3.1 billion over the same period last year. Our net debt to total capital ratio is about 24%, and we have available liquidity of about $11.2 billion. We are continuing to invest in the business with $841 million in capital expenditures and have returned capital to shareholders with $677 million in dividends and $1.2 billion in share repurchases through the third quarter, which reflects the completion of the $1 billion stock buyback announced last quarter. And with enhanced financial flexibility and in line with our balanced capital allocation framework, we plan to repurchase an additional $1 billion of shares by the end of 2023, subject to other strategic uses of capital. Juan?

Operator:

Thank you. [Operator Instructions] Our first question for today comes from Ben Bienvenu from Stephens Inc.

Juan Luciano:

Yes. Thank you, Ben. Yes, as you noted, we had lower volumes, and part of that were coming from Europe in soil and rape. We had some adverse weather and some logistical constraints in Europe in terms of navigation, some of the rivers. We also have a reduction in South America, in soy crush because of Paraguay shutdown, mostly because of lack of beans. We had also some reductions in North America due to canola seed availability. And certainly, we have our Ukraine sun crush facility down, as you know, since last March. So, we have 850 facilities around the world, as you know. And we deal with logistics, with adverse weather with manpower issues like every company out there. So, that what was the decline in volumes at this point in time. As some of those one-off issues subside, I mean, we will see those volumes coming back to normal rates.

Ben Theurer:

Juan, Vikram, congrats on the results. I wanted to follow up on Nutrition. As you’ve talked about some of the logistics bottlenecks that you plan to overcome, could you elaborate a little more in detail those issues are and what you may have to do in terms of investments to get this right. And then also aligned with that, what is actually your kind of FX assumption because you stretched the constant currency terms commentary on the outlook for the fourth quarter. So, just to understand a little bit the regional breakdown as well and what FX headwinds we should expect into the short-term period, just given the euro weakness. Thank you.

Vikram Luthar:

Yes. And Ben, on the FX side, just a reminder for everyone, right. In 2020, we grew operating profit 37%, in 2021 nutrition profit was 20%. If you look at the FX over that two-year period, it was almost flat, went up one year, went down the other year. But the European part of our business, EMEA, and we referenced this in our Global Investor Day, the revenue contribution from Europe is about 40% of the Human Nutrition side and about 20% on the Animal Nutrition side, and that’s getting bigger because of the event. So consequently, given the profitability there and the significant move in the dollar this year, we thought it was appropriate to highlight the growth on a like-for-like basis, which basically means on a constant currency basis. So, it’s a significant strengthening of the dollar. That basically called this out and the underlying growth in the European region.

Juan Luciano:

Alex, maybe we skip to the next question. Maybe, Alan, come back later.

Tom Palmer:

I wanted to ask on the barge delays on the Mississippi River. Does this have much effect on your business as we look towards the fourth quarter? Is it -- if there is impact, should we mainly think about it being in Ag Services, or just given the diversity of your business, are there offsets to consider?

Operator:

Our next question comes from Ken Zaslow from Bank of Montreal.

Juan Luciano:

Thank you, Ken. Yes, let me address maybe the outlook of Ag Services and Oilseeds, Q4. So, first of all, very dynamic environment, but very positive environment. The teams continue to manage exceptionally well. And demand continues to be very robust. So, as we go forward, Q4 again in Ag Services, I was mentioning, maybe a little bit lower for North American exports, but that will be offset for other things that I explained in the question before. So, we still expect significantly better results in the Q4, barring any big mark-to-market, that’s our expectation at this point in time. Crush margins continue to strengthen. That’s on the strength of feeding animals around the world, but also on the extra demand for oil from all the renewable green diesel or biodiesel around the world. We expect continued strength in global trade and destination market. And as I explained before, I would say the business at this point in time is hitting in all cylinders. So, I would say, the 3 parts of the business will be very robust into bigger than last year, certainly. Maybe Vikram can give a little bit of an update on the other two.

Operator:

Our next question comes from Steven Haynes of Morgan Stanley.

Juan Luciano:

Yes. Good morning. So first thing you need to understand is we are living in a very tight global corn environment. So, if you put yourself in the foot of China, China finds itself with lower production, lower domestic production of corn with certainly higher feed demand lower barley and sorghum imports. So naturally, it will have to import more corn. So in my mind, they are just building origin optionality. Again, you have still the La Niña effect in Argentina. So they are planting less corn there. Certainly, our last check up here, yields for corn in North America were going to be lower. And of course, there’s always the uncertainty of Ukraine ability to export. So I think that from a Chinese perspective, this is nothing more than just risk management and expanding open up another optionality. Of course, we are a large exporter from South America as well. We have a very robust Ag Services business in Brazil. And I remind you, we are the largest exporter of corn from Argentina. So, as always, we will offer Black Sea, we will offer North America, we will offer Brazil, and we will offer Argentine origins to China. So, as long as demand remains tight, we will see a lot of activity within the trade flow because naturally people want optionality, so.

Rob Dickerson:

I guess, just first question, kind of a broad question. There are a number of times you said in the commentary upfront that should be ongoing momentum kind of going into 2023, and it sounds like more specifically kind of in Q1. If we think about just kind of the general macro backdrop, right, all the tailwinds that are benefiting the business, and maybe this is a little dumb down for some, but not for me. Maybe you could just kind of touch on what could be some drivers that could loosen the overall tightness in the supply chain as we get through next year? Then I have a follow-up.

Operator:

Thank you. Our next question comes from Steve Byrne of Bank of America.

Juan Luciano:

Yes. Thank you. Very good question and something that is very close to our heart and tied to our strategy. The Regen Ag programs and acres are certainly in high demand. We have made public one announcement, but we have been working on what we call the differentiated bushel, if you will, for like three or four years already. And ADM naturally sits in a unique place in the value chain, and we have the global scale to drive improvements in agriculture, and we have the ability to tie both the farmer with the CPG companies, and so this is a privileged position. We are working very hard to simplify the process for the farmer. And as you described, there are many ways to potentially create value here. When we thought about the differentiated bushel, one is as you described, eventually, and we’re seeing more evidence of that, there’s going to be a premium price for bushels that are grown or metric tons that are grown in a certain way. And I think that the whole society is looking for that. It’s looking for agriculture to actually do their part in creating a more sustainable world. One is that. The second, and that’s where we’re working with FBN, with Gradable and all that, is to simplify the collection of data and all that in the preparation, we’re working with the government on that, on the protocols to be able to have carbon offsets or carbon credits based on that. So, it’s a little bit of both. The economics that you described are not as simple as $10 per ton or whatever. But to a certain degree, that they are also not that much more complicated than that. We just have a portfolio of different accounts and different contracts, and they’re all slightly different, but it is conceptually aligned to what you described is converting more acres, it’s signing more acres. That’s where we leverage the relationship we have with farmers globally. ADM has 220,000 farmers portfolio in the world that we are engaged in discussing this. Of course, the customer -- the farmers will embrace these as they see more demand for this. That’s why it’s important to have the CPG companies aligned to this. And that’s why we make these agreements because, of course, the farmer will generate the production in order to satisfy the demand. So, both lines need to grow together. So again, I think we are just leveraging our incredible farmer network and the desire of CPG companies and consumer in general, to see bushels or metric tons grown in a differentiated way. So, we’re very excited about the future of this.

Eric Larson:

Congratulations on a good quarter, everyone. So, the question I have is -- and thank you for all your regen comments, Juan, it’s pretty dear to our heart to result. I’m looking forward to even having more discussions on that. The question I would have this morning is, could you give us a little more detail on the situation in Ukraine? What you folks are seeing? We’re hearing that there are only plant -- only able to plant enough winter wheat this year to even meet kind of their own domestic needs for next year? It seems that maybe Ukraine is going to be an even smaller contributor to global exports, both on the oil season and grains next year. I guess, it’s just hard to get all the information put together. Could you just share some thoughts on what you see developing in that region of the world?

Operator:

Next question comes from Robert Moskow of Credit Suisse.

Juan Luciano:

Yes. So, it was a great performance, as you described, very proud of the team. Traditionally, our Q3s have lower volumes because we are getting out of the end of the season and waiting for the next harvest. What happened this time is I think given the short South American crop, we’ve been able to move more volumes, especially exports in North America. Exports were down Q3 to Q2, but not down as much as maybe you see in other years. The same has been a little bit for origination volumes. And when exports go, we have benefits in our transportation businesses, our barges and all that. Also, do not forget, it’s not just North America, but it’s also the global nature. The global trades have done a spectacular performance. And I think we have benefits in ocean freight. It was a very good quarter from that perspective, and also destination market. In destination market that we started four or five years ago, I don’t remember exactly, has continued to grow volumes and expanding margins. So that, I would say, is what created this great Ag Services in Q3. So, great performance by the team.

Adam Samuelson:

So, a lot of ground has been covered today. I wanted to maybe come to capital allocation on the balance sheet. And first, just to clarify on repurchase because you did a very sizable amount of buybacks in the third quarter. The incremental $1 billion was over the next five quarters. Did I understand that right from the earlier comments? And then just more broadly, Juan, Vikram, any way to frame CapEx over the -- into 2023 kind of -- you got a lot of capacity actions underway. Just help frame kind of the internal investments. And relatedly, help us think about maybe the M&A optionality in the current marketplace, especially with rising interest rates that might put some more working capital strain on smaller players in the market? Thank you.

Operator:

Thank you. We have no further questions for today. So, I’ll hand back to Megan Britt for any further remarks.

Operator:

Thank you for joining today’s call. You may now disconnect.

Michael Cross:

Thank you, Alex. Good morning and welcome to ADM's second quarter earnings webcast. Starting tomorrow, a replay of today's webcast will be available at adm.com. Please turn to Slide 2, the company's safe harbor statement, which says that some of our comments and materials constitute forward-looking statements that reflect management's current views and estimates of future economic circumstances, industry conditions, company performance and financial results. These statements and materials are based on many assumptions and factors that are subject to risks and uncertainties. ADM has provided additional information in its reports on file with the SEC concerning assumptions and factors that could cause actual results to differ materially from those in the presentation. To the extent permitted under applicable law, ADM assumes no obligations to update any forward-looking statements as a result of new information or future events. On today's webcast, our Chairman and Chief Executive Officer, Juan Luciano, will provide an overview of the quarter and highlight some of our accomplishments. Our Chief Financial Officer, Vikram Luthar, will review the drivers of our performance as well as corporate results and financial highlights. Then Juan will make some final comments, and he and Vikram will take your questions. Please turn to Slide 3. I will now turn the call over to Juan.

Vikram Luthar:

Thanks, Juan. Slide 6, please. The Ag Services and Oilseeds team delivered exceptional results in a dynamic market. Ag Services results more than doubled versus the year ago quarter. Global trade had an outstanding quarter. The destination marketing team's ability to meet customer demand around the globe helped drive strong volumes and margins. And good execution in global freight as well as net timing gains of about $65 million for the quarter contributed to significantly higher year-over-year profits. North America had a solid performance as export volumes remained strong in a good global demand environment, though year-over-year results were lower due to the prior year's insurance settlement and strong positioning gains. South America results were higher based on stronger origination volumes and better margins driven by strong global grain demand. Crushing delivered substantially higher results. Strong soy crush margins drove improved performance in all 3 regions as meal and oil demand remained robust. Positive net timing effects of approximately $90 million for the quarter versus the $70 million of negative timing in the year ago period helped drive year-over-year results. Refined products and other results were similar to the prior year period as strong demand for biofuels and food oils drove refining premiums and biodiesel margins, offset by approximately $150 million of negative timing effects versus negative $30 million in the prior year quarter. Equity earnings from Wilmar were significantly higher versus the second quarter of 2021. Looking ahead for AS&O. We expect Q3, the seasonal transition quarter from the South American to the North American harvest, to deliver results significantly higher than the prior year period driven by continued strong global demand for grains and strong cash -- crush margins. Slide 7, please. The Carbohydrate Solutions team delivered a second quarter of extremely strong results. The Starches and Sweeteners subsegment, including ethanol production from our wet mills, delivered much better results due to solid demand as food service volumes reached close to pre-pandemic levels. Corn coproducts, including strong demand for corn oil and effective risk management, drove higher ethanol and sweetener margins. BioSolutions continued its strong growth with $81 million in year-over-year revenue growth in Q2 and $136 million year-to-date. Vantage Corn Processors results was slightly higher in an environment of good gasoline demand and strong ethanol blending economics. A $50 million recovery from the USDA Biofuel Producer Recovery Program helped offset the prior year's strong industrial alcohol results from the now sold Peoria facility as well as valuation losses on ethanol inventory as prices fell late in the quarter. Looking ahead to the third quarter. We expect results significantly higher versus the third quarter of 2021 driven by steady demand for our products and favorable ethanol blending economics. On Slide 8, the Nutrition business continued on its strong growth trajectory with 19% year-over-year profit growth. Revenues increased by 20% on a constant currency basis and 13% like-for-like, and the team did a good job protecting margins. Human Nutrition delivered higher year-over-year results. Flavors grew revenue in North America, EMEA and South America, though profits were lower due to negative currency effects in EMEA as well as weaker results in APAC. Healthy demand for alternative proteins resulted in strong soy protein volumes and margins as contributions from the Sojaprotein acquisition as well as good demand for texturants drove higher results in Specialty Ingredients. Strength across probiotics, including in the recently acquired Deerland business as well as robust demand for fibers, contributed to a stronger quarter in Health & Wellness. Across the Human Nutrition business, we continue to see low price elasticity and good demand for our diverse portfolio of ingredients and systems as we continue to support our customers with new product and cost-out innovation and drive industry-leading win rates. Animal Nutrition profits were up substantially year-over-year driven by continued strong volumes and margins in amino acids. Looking ahead, we expect third quarter results for Nutrition to be higher year-over-year as the business remains on a trajectory to deliver 20% OP growth for the full year. Slide 9, please. Other business results increased from the prior year quarter driven primarily by higher ADM investor services earnings due to higher short-term interest rates. In the corporate lines, unallocated corporate costs of $267 million was slightly higher year-over-year due primarily to higher IT operating and project-related costs and higher costs in the company's centers of excellence. Net interest expense for the quarter increased year-over-year on higher rates and higher short-term borrowings to support working capital needs as well as higher expense for long-term debt. The effective tax rate for the second quarter of 2022 was approximately 18%. Based upon our current outlook, we expect full year corporate costs to trend towards $1.3 billion versus our previous outlook of about $1.2 billion, largely due to higher year-over-year interest rates. We still expect our adjusted tax rate to be in the range of 16% to 19%. Next slide, please. Year-to-date operating cash flows before working capital of $3.2 billion are up significantly versus $2.2 billion at the same time last year. Our balance sheet remains solid with a net debt-to-total capital ratio of about 30% and available liquidity of about $11.5 billion. Driven by our strong cash flows and robust earnings, we expect to accelerate our share repurchase program adding to the $200 million we repurchased in the second quarter of the year with an additional $1 billion in the back half. And of course, the strong cash flows and balance sheet also preserve our flexibility to continue reinvesting in the business and advancing upside growth opportunities. Our CapEx outlook is unchanged at approximately $1.3 billion for the year. Juan?

Operator:

Our first question for today comes from Ben Bienvenu from Stephens.

Juan Luciano :

Yes. Thank you, Ben. Good question. We are maintaining our balanced capital allocation that we put together some years back. We always said that we're going to take about 30% to 40% of our free cash flow to reinvest in the business, and that's what our strategy of bolt-on and organic growth normally takes. And that will be the priority. We have exciting opportunities ahead of us. So we're going to prioritize our investment plan. But of course, we've been paying dividends for 90 years. We've been growing dividends for more than 40 years, and we will continue that. We increased dividends 8% this year. And when we're looking at our distribution, again, this 60% to 70%, whether there are strategic opportunities to do M&A or giving back to shareholders, as we said before, at this point in time, when valuations may be correcting and all that, we don't have any significant targets in front of us. Our team continue to look for bolt-ons. And given the significant strength of our cash flows, we have decided to honor that return of shareholder -- of funds to shareholders. So I would say we will maintain that balanced allocation. We are not -- in the plan when we presented in December, we were looking at the later part of the plan as we were approaching $6 to $7 per share that we will have ability to repurchase about $5 billion of that. Certainly, we will be, as I said in my initial remarks, north of $6.50 today. So some of those buybacks are accelerated to the scenario. So I would say it continues to be consistent in that regard. Is there a later part of the question I'm missing or forgetting? Oh, the capacity to increase, yes, organic capacity. Listen, we are -- as you can -- Vikram mentioned it, we are increasing our CapEx into $1.3 billion. And we've been accelerating some long lead equipment this year to make sure that our capacity expansions remain on schedule. So if we look at the big ones that we have right now, whether it's Spiritwood, it's still expected to be online by the harvest of 2023. We are expanding capacity in bioactives in Valencia. That's expected to come in the first quarter of 2023. That's also on schedule. So I would say, in general, across the globe, since we have the ability and the funds, we've been making sure that we eliminated that risk or we minimized that risk. Of course, there is always a risk of labor and labor is tight, especially in North America. But I think at this point in time, we don't have any major deviation to our plans.

Juan Luciano :

Yes. Ben, listen, we're watching the demand, of course. We go -- we work very closely with our customers and our farmers on this. I would say we have seen demand substitution, demand shifting here or there. And you see it in retail, maybe to private label. We've seen a little bit to people looking into smaller packaging to make things more affordable. So I would say, if I think of the big categories for ADM, food tends to be, despite all these comments, much more reliable, much more stable in that -- just the essential nature of that. I think our fuels business, our biofuels business in general, are more tied to programs that are long term and to initiatives to reduce emissions and improve climate over the long term. So they also tend to be relatively firm, if you will. And we see that with RGD bringing new demand for oil. So if we have any issue in edible oils, it's certainly been more than offset by the new demand on renewables. And I will say the area where maybe we keep a closer look to all that is animal feed. Animal feed has been impacted by this. We estimate something in the range of maybe 10 million to 15 million tons on a global basis that maybe we took out of our SMBs from the globe perspective, not just from our own revenue, from the globe SMBs. I think we have seen less of an impact on an OP perspective because as people like to trade down, if you will, or if they were to trade down from beef, chicken is a cheaper protein. It's a more affordable protein. And chicken is where we get all the soybean meal mostly sourced. If you think about what's happening with soybean meal, is -- it has a cost advantage to corn. So it continues to have a high proportion in the Russians on things that are, if you will, more demanded right now like poultry. When we go to Nutrition, I think you said it in your -- in the question is we are well positioned in some of the applications that are growing the fastest, and of course, not completely insulated. To a certain degree, we haven't seen significant drops at this point in time. So our expansions and -- continue forward. And you saw in our remarks, our -- the acquisitions we made last year are actually performing from an OP perspective better than in the economic model we put together.

Benjamin Theurer :

Good morning, Juan, Vikram. So my first question is also related a little bit to, the picture you draw and you laid out just about 7, 8 months ago during the Capital Markets Day back in December and you talked about the path to get to the $6 to $7. Now you're just at $6.50 for this year. But the one thing that kind of pops out is the significant strength and the up we've been seeing on the return on invested capital. And you still say your long-term objective is 10%, but now we've been consistently gone higher. So if we put it like into the context and your comments of the margin structure to remain higher, how should we think conceptually over the medium to long term? Where is your real ROIC objective given that you've been consistently above that 10% level? And what does that mean for your potential to return cash to shareholders via dividends, buybacks versus then ultimately the CapEx needs?

Benjamin Theurer :

Got it. That sounds very promising, Vikram. And then just coming back on the growth and what's being delivered within the Nutrition segment, just to kind of frame it and understand it well what you're seeing into the back half here because clearly, you kind of reconfirmed the 20-ish percent growth in op income. We've had a very strong first half. You expect next quarter to be better. Is there anything where you think there could be a little bit of a headwind in the more short term just because of people maybe down-trading on the consumption side? You mentioned a little bit maybe the packaging side going to smaller sizes, et cetera, but to understand a little bit the risks versus the opportunities within Nutrition.

Operator:

Our next question comes from Adam Samuelson from Goldman Sachs.

Juan Luciano :

Yes. Adam, listen, we continue to see a strong demand for meal and oil. North America has many advantages. North America has the beans, and North America has a robust domestic consumption. North America has the new demand for oil. So that makes, of course, soybean meal more competitive in the world. We continue to see good margins and good volumes in poultry as -- again, as the consumer favors that meat. We continue to see soybean meal advantage to corn. As I said before, in the Russian, that continues to have high inclusion rates. We see China recovering from COVID, so activity coming back. And we see Argentina pretty much given the current financial issues outside of the markets in terms of their aggressiveness. So I would say the scenario that we've been seeing, it continues with strength going forward. I think that's kind of what we see at the moment. So Q3 is strong. I would say maybe if I go to canola, canola has been -- margins have popped. So maybe we had -- we didn't have that in the past. Now we have, very strong. So we see a strong demand for biodiesel. I'm just trying to go mentally through all the businesses. And as we said before, Wilmar has been doing very good. So we don't see any significant clouds in the horizon right now. We have good expectations. We think that for the second half, the U.S. will become the place to export for corn and soybeans. So I think that exports should come to the U.S. from the period of September to maybe February or maybe even March. So we will have to watch logistics and whether logistics can allow us to execute a strong export season. But that's probably the only thing out there that I will be thinking, Adam, in terms of puts and takes.

Vikram Luthar :

Yes. Sure. So Adam, just breaking it down into volume margin and mix. In Sweeteners and Starches, from a volume perspective, actually, we saw volumes in North America higher year-over-year in the first half. And that is different from what you may have heard generally in the marketplace. We clearly benefit from an integrated network that enables us to deliver to our customers effectively and efficiently. And in some cases, we've actually also imported tapioca starch, for example, from Europe to meet that demand. So volume has been strong. In terms of margin, clearly, we benefited from higher coproduct values, including corn oil in particular. So that's also helped in terms of the net corn and effective margins for Sweeteners and Starches. And from a mix perspective, we talked about BioSolutions driving more and more growth, higher than what we had anticipated. So on all 3 fronts, in terms of volume, margin and mix, S&S looks brighter than what we had anticipated at the beginning of the year. In terms of ethanol also, if you think about similar way of thinking about volumes, volumes have been strong in terms of gasoline demand locally. Strong exports expected. We've had strong exports outlook for exports about 1.6 billion gallons for the year. In terms of margins, we've also again benefited from the fact that we've had good coproduct values particularly, again, in DCO. And that has helped us maintain margins. The other aspect is the RVOs have been finalized. So that puts -- removes the cloud from the regulatory landscape, at least for 2022. And gasoline -- and ethanol blending economics remain fantastic. If you include RIN values, that's above $2 relative to our BOB today. So I think based on all those facts, we think Q3 is going to be stronger quarter-over-quarter. And our outlook for the year is also very constructive.

Vikram Luthar :

No. My comments were specifically quarter-over-quarter, significantly higher quarter-over-quarter for Q3. And what I just emphasized as well, we are constructive for the outlook for the full year.

Kenneth Zaslow :

Just a couple of questions. One is, how much dollar amount do you expect to increase in 2023 from your cost your harvesting of your growth investments? How do we kind of think about that for 2023 in terms of the dollar amount that's going to be coming out from both your cost savings and your investments in growth?

Juan Luciano :

Yes. Ken, what I would like to add to what Vikram said is that if I think back to December, there are 2 things that are different. A lot of the productivity efforts this year have been used to offset inflation, and I think the team has done a terrific job of protecting margins in that sense. Those productivity efforts continue. And as inflation may be received next year, we might see that -- more of that coming to actually improve our productivity versus just offsetting inflation. The second thing that I noticed and I tried to make a point in my prepared remarks is that we probably see innovation -- a little bit more activity in innovation. I think that as customers are trying to fight inflation, I think that bringing newness, bringing new categories, new innovation, we've seen that in Nutrition and other pieces of the portfolio. So I think there is an opportunity there. And some of the things that were not included in our 5-year estimate, whether it was some of the growth on Health and Wellness or some of the BioSolutions opportunities and all that, are coming stronger and faster than maybe we anticipated. So Vikram said it, we normally start the planning season maybe late September or October. So we're going to be looking at '23 there. But I think we're going to have a lot of puts and takes on a scenario that is very dynamic. But we feel good about the initiatives we can control, let's say.

Vikram Luthar :

Yes. So Ken, just to be clear, we did not say an ASR. We did not say accelerated share repurchase, right? I want to make sure that we clarify that comment. We did say that we are going to do $1 billion in the back half of the year. And as you well know is EPS impact of that given the averaging is pretty minimized for this calendar year. So the impact, whether you consider a share repurchase in the $6.50 number or not is frankly insignificant for 2022.

Juan Luciano :

Ken, the way I think about it, let me share that, is we need to have in ADM certain ambidexterity. On one side, we have a team that executed on opportunities presented by the market. And the team is executing on great opportunities this year. We don't control that all the time. We control our execution, but we don't control the opportunities that pop based on the macro environment. On the other hand, we are committed to keep improving the company. So -- and that's what we committed in December over the 5-year plan. So to the extent that those forces, whether favorable or negative, offset our productivity and innovation, at times, we're going to see more of that effect and at times, we're going to see less. So we know we're going to grow earnings over the next 5 years based on all that. We have not gotten to 2023 at this point in time. So I want to make sure that people don't hear that what we're going to do is a promise to grow earnings every year. We cannot control all the environment in the world, but we can control that we get better and we can control that we can maximize our execution on the opportunities provided. Will 2023 provide the same opportunities of 2022? Unclear at this point in time, and we need to go through our scenarios. But I think we're going to feel -- we feel very good, as I said, on the team's ability to execute. Some of the macro that we're seeing in terms of demand, demand for food has been growing over the last 15 years at 1.8% per year. You can argue that at times, we are getting to the peak of arable land being brought into production; that at times, we are hitting the peak of maybe even yield in the area. So we think that although margins may not stay at this level, if they're going to stabilize, they're going to stabilize at higher level than in the past. And that's where we based our forecast in December, and we are maintaining that. So we feel good about continue to grow earnings. We haven't gotten to the specific 2023 number yet.

Steve Byrne :

Vikram, you had some constructive comments about third quarter for Ag Solutions and Oilseeds. And I wanted to specifically ask you about which of those 2 big businesses is primarily driving that favorable outlook. And in Ag Services, what is it? What regions of the world? Where do you see that strength coming from? And then one more for you on that. And if there is less crop production in the world in 2022 just from significantly less fertilizer applications, is that positive or net negative for you? You could have tighter supplies but less volume.

Steve Byrne :

And you made a comment on one of the slides about investing in this sustainable agriculture initiative of FBN. My question for you on that is, how meaningful of an opportunity do you think this is for you? Are your food company customers willing to pay a premium to you, and thus the farmer, for grains and oilseeds that are produced in various sustainable ways? Is this a niche? Or is this a potentially meaningful portion of your origination business?

Operator:

Our next question comes from Tom Palmer of JPMorgan.

Juan Luciano :

Yes. I think, Tom, what we saw -- of course, base has become -- became a little bit tighter in the U.S. and so, and we saw a little bit of palm oil correction that maybe impacted some of the oil. So you get board compress a little bit. In reality, the cash markets have never moved, and they remain very constructive and very strong. And now you have seen how Board Crush have bounced back. I think that what we need to remember is like before all this volatility, whether it's the war or this or that, we were coming into very strong markets. Again, demand continues to grow for meal. And now we have another leg of that, that has a new demand. And mature markets like this, when they get new demand in a significant quantity like RGD, you get a significant change in margin. When you think about the structural changes that have happened over time, whether it's the different way in which China feeds porks now or Argentina with an exchange rate delta that makes the farmer really have no desire to sell and the farmer, to a certain degree, curtailing crush in Argentina. And then we see China coming back from the lockdowns and soybean meal being better than corn into the Russian, we continue to see this strong. Now we have also canola helping onto this on the strength in biofuels, in biodiesel per se. So I think from our perspective, we were always looking at cash margins. And so we -- it didn't make a significant shift in our operating profit as we were saying in the last earnings call, to be honest. So it has moved and at times some of these moves, to be honest, in commodities has been driven more by financial flows than fundamentals. I would say the fundamentals were strong before the war. They continue to be strong. Some prices have spiked because of the war, then they came back, but they came back to the high levels that we had before the war because it was just supply-demand fundamentals. And as much as people talk about rising interest rates and all that, rising interest rates do not produce grain. So we have not seen any change in our supply-demand fundamentals that were in place before the war, before the tightening by the Fed. So to a certain degree, we need to keep our eyes on the fundamentals. That's what matters.

Juan Luciano :

Yes. Listen, I think we're building new industries. So there are so many players here and so many things in motion. It's a very dynamic environment that we continue to watch. I think with -- we see the demand coming as expected. I think you may have, like in every capital project these days, some projects that may be a little bit delayed. But we don't see any significant change to our medium-term forecast. So we see the strength. We see the recovery on even potentially edible oils based on China coming back into the markets and coming back from lockdowns. So none of our forecast has changed in the oil side. And if you look at the contribution of meal and oil to crush from the last quarter to this quarter, it has maintained. So it looks like both legs continue to have the same strength at this point than we expected.

Eric Larson :

Good morning, everyone, and congratulations on a great quarter. So this maybe some kind of like a little bit of a corny question Juan in this very 30,000-foot kind of speaking level. In the past, there's no promise that aren't long enough. When you have global recession, it does change the fundamentals for grain demand. And I get the question all the time. My sense is so that there are enough structural changes, particularly in the U.S. market, where even if we did have a global recession is that the fundamentals have a reasonable chance of remaining fairly strong. Is that an off-base thought? Or how would you look at that?

Eric Larson :

Yes. No, I would agree with that. So I'll ask one more quick question, and it's more technical in nature. So in the quarter, you put over $3 billion on top of your inventories. And I'm just curious when you look at where grain prices were on March 31 versus June 30, June 30 you were down across the board, corn, beans, meal, oil, wheat, all the prices were down. So does that mean that you've just taken on -- you've been able to buy more grain, taken on bigger positions so your volume inventory is larger? Does that explain that $3 billion-plus of inventory increase?

Operator:

Our next question comes from Steven Haynes of Morgan Stanley.

Juan Luciano :

Yes. We think -- we are in close contact with our China team, of course. And I think demand there has, of course, suffered an impact. You saw their quarterly growth rate for the whole country. But we get encouraging reports of how activity is coming back. I think that at the beginning, even if they relieved on some of the restrictions, people were still a little bit shy to come out. But I think that now we're seeing people coming back to the office, were a 100% back into the office. That brings traffic and that brings external breakfast and external lunches and things like that. So we see that with a recovery, if you will, coming from our perspective. If you think about the 4 main meats for China, China has produced about 5% more of the combined 4 meats in the first half of the year. So you could see there that, of course, the mouths are still there to be fed. And certainly, food security continues to be a high priority of, of course, the very responsible Chinese government. So nothing significant to report other than the ease of the COVID situation that is happening in multiple cities.

Robert Moskow:

Hi, Juan and Vikram. Juan, forgive me if you've addressed this already, but there's a lot of grain still trapped in Ukraine. And I want to know if you have a view on what's going to happen to it and how it will affect your business.

Operator:

Our final question for today comes from Michael Piken of Cleveland Research.

Vikram Luthar :

On the Human Nutrition side, it was a balanced growth across new customers as well as existing customers. And we think about our revenue growth in terms of volume, pricing and mix, right? So I think we had balanced growth across the 3. We drove early action on pricing to ensure that we maintain margins and kept a strong focus on driving mix. Price elasticity for some of the products -- or most of the products, frankly, we participate in Human Nutrition has tended to be pretty low as Juan noted. So I think that's helped benefit protecting margins as well as driving revenue growth. On the Animal Nutrition side, as I highlighted in my prepared comments, most of that growth has come from amino acids, and amino acids has benefited from, a, the relative protein demand as well as supply chain challenges out of China. And the third aspect that's benefited us is our conscious effort to switch from liquid lysine to dry lysine and that's -- sorry, so from dry lysine to liquid lysine, yes. And that's actually helped us drive improved profitability and improved margins as well as increase stickiness with our customers. So most of that volume growth in Animal Nutrition has been driven by amino acids.

Michael Cross:

Thank you for joining us today. Slide 12 notes upcoming investor events in which we will be participating. As always, please feel free to follow up with me if you have any other questions. Have a good day, and thanks for your time and interest in ADM.

Michael Cross:

Thank you, Emily. Good morning and welcome to ADM's first quarter earnings webcast. Starting tomorrow, a replay of today's webcast will be available at adm.com. Please turn to Slide 2, the company's Safe Harbor statement, which says that some of our comments and materials constitute forward-looking statements that reflect management's current views and estimates of future economic circumstances, industry conditions, company performance and financial results. These statements and materials are based on many assumptions and factors that are subject to risks and uncertainties. ADM has provided additional information in its reports on file with the SEC concerning assumptions and factors that could cause actual results to differ materially from those in this presentation. To the extent permitted under applicable law, ADM assumes no obligation to update any forward-looking statements as a result of new information or future events. On today's webcast, our Chairman and Chief Executive Officer, Juan Luciano, will provide an overview of the quarter and highlight some of our accomplishments; our Chief Financial Officer, Vikram Luthar, will review the drivers of our performance as well as corporate results and financial highlights. Then Juan will make some final comments, and our Vice Chairman, Ray Young, will join us for questions. Please turn to Slide 3. I will now turn the call over to Juan.

Vikram Luthar:

Thanks, Juan. Slide 7 please. The Ag Services and Oilseeds team effectively manage risk and executed exceptionally well in a dynamic environment of robust global demand and tight supply, driven primarily by the short South American crop. Ag Services results were significantly higher versus the first quarter of 2021. Global Trade results were higher, driven by strong performances in destination marketing and global ocean freight. North American origination margins and volumes were lower year-over-year, including approximately $75 million in negative timing effects, which will reverse in the coming quarters. Crushing was higher year-over-year in a strong global margin environment, driven by robust protein and vegetable oil demand. Improving margins in the quarter resulted in approximately $60 million in negative timing effects, which will reverse in the coming quarters versus approximately $50 million in positive timing in the prior year quarter. Refined products and other results were much higher than the prior year period, driven by healthy refining premiums and good refined oils demand in North America, as well as strong biodiesel margins in EMEA. Equity earnings from Wilmar were significantly higher versus the first quarter of 2021. Looking ahead, we expect substantially higher Q2 AS&O results than the second quarter of 2021. Slide 8 please. Carbohydrate Solutions delivered substantially higher year-over-year results. The Starches and Sweeteners subsegment including ethanol production from our wet mills delivered much higher results versus the prior year quarter, driven by higher corn co-product revenues, improved citric acid profits and excellent risk management in North America, higher volumes and margins in EMEA and higher volumes and margins in wheat milling. Sales volumes for starches and sweeteners continued their recovery toward pre-pandemic levels. And as Juan mentioned, our biosolutions platform continue to deliver impressive growth with $55 million in new sales as demand for plant-based products expands into more diverse applications. Vantage corn processes delivered solid execution margins, but position losses on ethanol inventory as prices fell early in the quarter, drove lower results versus the prior year. The prior year quarter’s results also benefited from demand for USP-grade industrial alcohol from the Peoria facility, which was divested in Q4 2021. Looking ahead to the second quarter, we expect the current market dynamics to continue delivering carbohydrate solutions results similar to the very strong second quarter of 2021. On Slide 9, the nutrition business delivered continued strong profit growth. Revenues increased by a very impressive 23%, even when adjusting for currency effects and removing the impacts of recent acquisitions revenue was up by 17%. And while margins have softened somewhat they remain healthy. Human Nutrition delivered higher year-over-year results. Flavors continued to deliver solid revenue growth, offset by some higher costs. Strong sales growth in alternative proteins, including contributions from our Sojaprotein acquisition, and positive currency timing effects in South America, offset some higher operating costs to help deliver better year-over-year results in Specialty Ingredients. Health and wellness results were was also higher year-over-year, powered by continued growth in probiotics, including our late-2021 Deerland Probiotics acquisition, and robust demand for fiber. Animal nutrition profits were nearly double the year-ago period, due primarily to strength in amino acids, driven by a combination of product mix changes, improved North American demand and global supply chain disruptions. Looking ahead, we expect nutrition to deliver as second quarter significantly higher than the prior year period. And with our recent acquisitions delivering ahead of our expectations, we are raising a profit growth outlook for the full year from 15% plus to 20%. Slide 10, please. Let me finish up with a few observations from the Other segment, as well as some of the corporate line items. Other business results were substantially higher driven primarily by better performance in captive insurance, including reduced claims settlements versus the prior year. Some of the claims settlements that we expected to negatively impact Q1 results are now expected in the second quarter. Net interest expense for the quarter was higher year-over-year on higher expense for long-term debt, higher short-term borrowings to support working capital needs and interest-related to a tax item. In the corporate lines, unallocated corporate costs of $209 million were due primarily to higher IT operating and project related costs and higher costs in the company’s centers of excellence, partially offset by incentive compensation, accrual adjustments. The effective tax rate for the first quarter of 2022 was approximately 16%. For the full year, we are now anticipating an effective tax rate at the higher end of our previously guided range of 16% to 19%. Cash flow generation remained strong $1.6 billion before working capital changes versus $1.2 billion in the prior year period. Our balance sheet remained solid with a net debt to total capital ratio of about 34% and available liquidity of about $9.3 billion, even with almost $3 billion in higher working capital needs since December. With that, I’ll turn it back to Juan.

Operator:

Thank you very much. We will now begin the question-and-answer session. In the interest of time please limit yourself to one question and rejoin the queue for additional follow ups. Our first question today comes from the line of Adam Samuelson with Goldman Sachs. Adam, your line is open.

Juan Luciano:

Good morning, Adam.

Vikram Luthar:

Yes, Adam, thanks for the question. Yes, in terms of energy costs, clearly, we are not immune to that and we've seen an elevation in energy costs. As you well know, we have a program to actively hedge our program. So I think to a large degree, we've been successful in doing that. Nevertheless, in places like Europe, where energy costs have been significantly elevated, yes, that's had an impact on net margins. But as you look at the broader dynamics, we continue to see very strong outlook in terms of vegetable demand as well as protein demand. And as you see, most of the grain flows, given what's happening around the world particularly in the Black Sea region and the short South American crop moving to North America that should actually support us in terms of our footprint. So the structural changes associated with RGD remain very much in intact. So we think longer term, we feel very confident about the move higher that we cited in the Global Investor Day in terms of crush margins. And for 2022, in particular, we see even farther – even more strength, given some of the near-term dynamics I just referenced.

Vikram Luthar:

Yes, Adam, we clearly view our balance sheet as a competitive advantage. And in terms of capital allocation, we've talked about this before. Our capital allocation is inextricably linked to our strategy. In terms of the guidelines, in terms of the framework, we've articulated about 30% to 40% of our cash flow as we'll direct towards capital expenditures and the remaining 60% to 70% for strategic growth investments. And given our balance sheet flexibility, we are clearly in a position to undertake some of those growth investments, including M&A, if that becomes attractive, but also shareholder distributions, including 30% to 40% towards dividends. As we cited in Global Investor Day, we expect dividend payouts to be actually at the higher end of that 30% to 40% range in the near to medium term. But at the end of the day, if you step back, think about the operating cash flow we generated, $1.6 billion in Q1. So we should be in a position to conduct meaningful buybacks as well in the medium term, as we noted in the Global Investor Day. In the near term, we will repurchase shares to at least offset dilution.

Operator:

Our next question is from Ben Theurer from Barclays. Ben, please go ahead.

Juan Luciano:

Yes. Thank you Ben and good morning. Of course, we've been dealing with supply chain issues for a while, and I think that the situation in China has nothing more than just bring back more challenges, if you will. We see the number of ships in congestion, if you will, from Capesize, Panamax, Supramax and Handysize have increased over the last week, increases about 10% give or take depending on the category. So I think that's especially complicated as you see that because of the different conflicts and different shortages in crops that we have, some of these trading flows around the world that are being redirected. So you redirect trading flows with maybe less ship availability and higher freight and longer travel times. So the situation continues to be dire. And that's why it's so important to have a team, a global team, very active with many options to provide supply and then to reach different destinations. So the combination, if you will, of our global trade with the destination marketing and all that becomes more and more important every day for customers around the world.

Juan Luciano:

Thank you, Ben.

Tom Palmer:

Good morning and thank you for the question. Maybe just follow up on the outlook for the second quarter in the AS&O segment, maybe just a little commentary on the subsegment expectations. Are you expecting year-over-year profit increases across all three of the subsegments? Are there any to call out of particular strength?

Tom Palmer:

Great. Thank you.

Operator:

Our next question comes from Ken Zaslow from Bank of Montreal.

Operator:

Apologies, we have lost Ken from the queue. So next in the queue we have Ben Bienvenu from Stephens. Ben, your line is open.

Juan Luciano:

Good morning, Ben.

Ben Bienvenu:

I want to ask about the nutrition business. Strong results in the first quarter, you noted it, versus the prior expectation of 15% plus, now 20% growth for the year. You called out acquisition contribution or the performance of acquisitions. Is that a fair breakdown of organic versus inorganic growth, thinking about maybe 15% organic growth plus 5% inorganic? Or how would you delineate between the two contributing factors?

Ben Bienvenu:

Okay, great. I'll get back in the queue. Thanks.

Operator:

We do have a question on the line now from Ken Zaslow with Bank of Montreal. Ken, please go ahead.

Juan Luciano:

Thank you, Ken.

Ken Zaslow:

When I think about longer term, you guys set out two targets

Ken Zaslow:

Great. And then my follow-up question is, when I think about the renewable diesel and the way it's going to happen. And with the backdrop of inflation, how does the balance between the renewable diesel kind of going versus the potential for inflation to curtail that, where do you see that renewable diesel already, the horse is already out of the barn that momentum as we continue versus is there a potential that the inflation can kind of either elongate the timing of it or delay anything. And then I'll leave it there and I appreciate your time.

Ken Zaslow:

Perfect. Thank you very much.

Operator:

Our next question is from Steve Byrne from Bank of America. Your line is open.

Juan Luciano:

Yes. Listen, it's a very good question. And we look at that, of course, with a lot of attention. I think right now, when we see the capacity coming, it's all capacity needed actually to supply the growth of protein around the world. We see North America with very strong domestic demand for meal, but we see also in North America soybean meal being the most competitive around the world. Especially now, when you have issues in Argentina with some changes in the deal when you have short crops in South America, like we have had and we continue to have a strong demand. We see also that customers are relatively open, so there's not a lot of inventory in the chain that are one point needs to be flushed out. And when you look at, what's happening with feed and competitive feeds, certainly wheat given the conflict in Ukraine, the unfortunate conflict in Ukraine. Wheat prices needs to go up high enough that they get out of the feeding Russians, so they can be preserved to feeding people. When you take that up, you bring corn, the most effective carbohydrate and corn immediately brings soybean meal into the Russian. So we're not only see strong demand, but we see high inclusion rates staying. And again, given the strong leg of soybean oil in North America that will make soybean meal the most competitive in the world. So we actually are very positive about that demand and we think that we need all the expansion to match the market share that soybean meal North America will take from the rest of the world.

Juan Luciano:

Yes. Oils have been tied for several months already, if not the year and of course, any announcement in the proximity also of the largest producer of palm oil in the world rattles the markets. Of course, it was immediately clarified that this doesn't include crude palm oil, which is the biggest product. So I would say, I think Indonesia is just trying to take a short-term palliative for their domestic inflation. I don't think it will significantly alter the global balances. Although, the global balance is continue to be very tight and any disruption, we have the Ukrainian disruption of course with and the Russian with sunflower oil so this is an area that everybody has to pay a lot of attention and it will require companies like ADM to having the ability to reformulate, so we can take some customers that our existing customers or either palm oil or sunflower oil to have alternatives to continue to supply their customers. So we are seeing that through our Olenex joint venture, we're seeing that through our Stratas joint venture. So as we’ve seen the opportunity to add a lot of value to some of the customers that are looking for replacements at this point in time.

Operator:

Our next question comes from Robert Moskow from Credit Suisse. Robert, please go ahead with your question.

Juan Luciano:

Sure. Yes, Rob. As I said, I think that we have very strong visibility of course into Q2. I would say further than that, I think customers – the markets are inverted. So customers see prices relatively high right now, those customers that are not covered, they feel like maybe the course is showing them that they can get covered later at the cheaper rate than today. So I would say, in general, we have coverage for the next quarter, not for Q3 or Q4. But when we look at the demand that we are seeing around the world, we think that when you think about meal and oil, in general, not only North America, but also Brazil. The crush margins need to be there to encourage the crushers to crush. We need the demand for oil and we need the soybean meal. So you will have to have the demand, the crush margins to incentivate people to crush. And we are seeing that with the margins that are happening in Brazil or the U.S. or Europe, all our margins today are higher than what we anticipated. And we think that that's the year rollout and demand continues to be solid out there and strong, crush margins will continue to send that signal to all of our crushers, which is we need the meal, we need the oil keep crushing.

Juan Luciano:

Rob, we have – as part of our global trade group, we have a strong ocean freight group and they work hand in glove to make sure that we continue to serve the customers with the most effective destinations, the most efficient destinations. So we are a big player. And as a big player with a lot of resources, we tend to have a relative advantage to others. So when things get complicated and right now, they are very complicated. We tend to have a relative higher competitive advantage than others. So I think that shows in the margins that we obtained in this. And logistics right now are complicated. They are complicated in the river. They are complicated in the oceans and there is a lot of redrawing of trade flows and you can only redraw a lot of trade flows, if you have a lot of origin options and a lot of destination options, because you need to connect both. And our ocean freight group counts with that blessing, which is ADM originating all the key parts of the world. I have destination units in all key parts of the world. So it provides them with more ability to play supply routes than maybe other players.

Vincent Andrews:

Thank you, and good morning, everyone, and congratulations to Vikram and Ray on your new roles. And Ray, it was great to work with you all those years. Juan, could I ask you just to talk a little bit about, how you're thinking about the consumer and consumer demand, maybe particularly in Europe, but I guess, also globally. Just given we have a lot of food inflation, we have lot of energy inflation. What do you think gives clearly we need to destroy some demand just given how tight suppliers. But how are you thinking about that equation this year into next year?

Vincent Andrews:

Okay. Thanks guys.

Michael Piken:

Yes. Hi. I was wondering if you could talk a little bit about the impact of the ADM crew here in the U.S. as well as internationally and what that might look like in terms of the impact for meal demand.

Michael Piken:

Great. And a follow-up question is just shifting gears. Are you concerned about the movement of fertilizer throughout the world? I know you have a fertilizer business. But beyond that just the impact if we do end up in a really tight grain environment, are you – how do you think there is a food versus fuel debate. How do you see that sort of playing out? And is there any risk to the ethanol volumes or the growth in biodiesel or how do you sort of see that playing out. Thanks.

Operator:

Our next question comes from Eric Larson from Seaport Research Partners. Eric, please go ahead.

Juan Luciano:

Yes. Thank you, Eric. Let me see – let me tell you how I see this. So last year was a big production year and the world needed to consume more grain than that big production. So the issue is, the world continues to grow and sometimes it’s not a matter of population growth, but it’s a matter of income. And how people like – people in China has been an incredible economic improvement of their standards on living that improve their diet, that doesn’t go down. So we think that’s where we keep on talking about our trend of food security. We will have to provide more for the world. In situations like today, where we are already tight from a supply demand perspective and we will get tighter as demand continues to grow. We see here in ADM that at least we need two very good seasons of crops in North America and South America to actually balance and become more comfortable in those supply-demand balances. When we think about prices today, prices today are going up to mark three things that needs to happen. One is export prices need to go up to being able to draw out all the inventories that are stuck there or they are safe, they are hoarded there to be able to replace the production that we have lost. The production we have lost in South America, but the production we are losing now in the Ukraine and Russia. So first, you need to draw out those inventories and bring them into market. So we can balance ourselves. The second, as I said before, wheat needs to be placed out of the Russians. So you can be preserved for human consumption. And the third one is to give farmers like you, the signal that they need to plant more and I think the world need more acres. Those acres today, they are not going to happen from the Baltic area, they are not going to happen from U.S. that we are basically maxed out. So they may happen in South America. So we need higher prices to bring South American acres, we need higher prices to draw those inventories into the market. And we need two good years of crops, both in North America and South America. That will allow us to balance the supply demand, given the strong demand.

Juan Luciano:

Eric, I’m not an economist. But I think there is a narrow path to achieve a soft landing here. And the U.S. economy has been very resilient through all this events. So I think the U.S. economy is driven by the consumer. The consumer has been saving money for two years that they didn’t spend a lot. And as I said before, they were COVID recovery packages. But there is also been salary inflations and wages inflation that has put money in the pockets of customers. So I think that for the foreseeable future, we don’t see a significant impact of demand. If not, we will be flagging that out, but we look at that, we look at our plans, we are preparing our plans for a long period of the strong demand. We want to run them at high capacity. So at this point in time, I don’t see an issue in the west maybe the only flag is how COVID lockdowns evolve in China. But that I don’t have a lot of visibility at this point in time.

Juan Luciano:

Thank you, Eric.

Juan Luciano:

Thank you, Emily. Before we close our call, I wanted to take a minute to thank Ray for his exceptional contribution all this year to ADM’s as our CFO. So thank you, Ray. And it’s been a pleasure and I’m delighted that you continue with us to continue to help take ADM’s a bigger player.

Juan Luciano:

Thank you and congratulations, Ray. And, of course, welcome Vikram and this was your baptism of fire here in the earnings call. So thank you very much and welcome to the role and looking forward to it.

Michael Cross:

Thank you everybody for joining us today. Slide 12 notes upcoming investor events in which will be participating. I will also note that our annual sustainability report, which will detail our significant progress and our bold ambitions across the value chain is scheduled to be published in May. As always, please feel free to follow-up with me if you have any other questions. Have a good day. And thanks for your time and interest in ADM.

Vikram Luthar:

Thank you Rika. Good morning and welcome to ADM’s fourth quarter earnings webcast. Starting tomorrow, a replay of today’s webcast will be available at adm.com. For those following the presentation, please turn to Slide 2, the company’s Safe Harbor statement which says that some of our comments and materials constitute forward-looking statements that reflect management's current views and estimates of future economic circumstances, industry conditions, company performance and financial results. These statements and materials are based on many assumptions and factors that are subject to risks and uncertainties. ADM has provided additional information in its reports on file with the SEC concerning assumptions and factors that could cause actual results to differ materially from those in this presentation, and you should carefully review the assumptions and factors in our SEC reports. To the extent permitted under applicable law, ADM assumes no obligation to update any forward-looking statements as a result of new information or future events. On today’s webcast, our Chairman and Chief Executive Officer, Juan Luciano will provide an overview of the quarter and the year. Our Chief Financial Officer, Ray Young will review the drivers of our performance as well as corporate results and financial highlights, then Juan will discuss our outlook, after which they will take your questions. Please turn to Slide 3. I will now turn the call over to Juan.

Ray Young:

Yes, thanks Juan. Good morning and good afternoon everyone. Slide 6 please. The ag services and oilseeds team capped off really a truly impressive year, successfully navigating through supply chain challenges to deliver results largely in line with the extremely strong prior year quarter. The ag services team performed well in an environment of continued strong global demand, including significantly increased export volumes for customers outside of China. Global trade was substantially higher year over year, driven by solid risk management and improved results in global ocean freight. Overall, ag services delivered strong results just slightly off the outstanding fourth quarter of 2020, when we benefited from exceptionally high export margins. Crushing executed well in a continued solid demand environment for both soybean meal and vegetable oil. Lower results in EMEA versus a very strong fourth quarter of 2020 and approximately $250 million in net negative timing impacts versus negative $125 million in the prior year quarter drove overall results lower year over year. The majority of those negative timing effects are expected to reverse in the first half of 2022. The refined products and other team delivered substantially higher results versus the prior year period, driven by strong volumes and margins in North America for refined oils and improved biodiesel margins in North American and EMEA, which more than offset weaker South American results due to the reduced biodiesel mandate. Equity earnings from Wilmar were higher year over year. Looking ahead, we expect a strong first quarter from ag services and oilseeds, higher than the first quarter of 2021 and in line with the just ended fourth quarter. Slide 7 please. Carbohydrate solutions fourth quarter results were more than double the prior year quarter. In starches and sweeteners sub-segment, including ethanol production from our wet mills, results were lower versus the fourth quarter of 2020 driven by higher input costs, including energy costs in EMEA as well as lower wheat milling volumes, partially offset by continued strong ethanol margins. Volumes for North American sweeteners and starches were largely flat year over year. Vantage corn processor results were again substantially higher year over year, driven by historically strong industry ethanol margins as a result of strong demand relative to supply, as well as increased sales volumes due to production at the two dry mills that were idle in the previous year period. As we look ahead, we believe the first quarter for carbohydrate solutions should be similar to or slightly above the strong first quarter of 2021. Slide 8 please. The nutrition business closed out a year of consistent and strong growth with fourth quarter revenues 19% higher year over year, 21% on a constant currency basis with 26% higher profits year over year and sustained strong EBITDA margins. Human nutrition had a great fourth quarter with revenue growth of 21% on a constant currency basis and substantially higher profits. Flavors continued its growth trajectory driven primarily by improved product mix in EMEA and continued strong performance from North America, partially offset by weaker APAC results. In specialty ingredients, overall profits for the fourth quarter were in line with the year ago period as strong demand for plant-based proteins offset the impact of one-time insurance proceeds in the fourth quarter of 2020. Health and wellness was higher versus the prior year quarter as the business continued to deliver growing profits in bioactives and fermentation. Animal nutrition revenue was up 21% on a constant currency basis and operating profit was much higher year over year, driven primarily by continued strength in amino acids. Now looking ahead, we expect nutrition to continue to grow operating profits at a 15%-plus rate for calendar year 2022 with the first quarter similar to the first quarter of 2021, with continued revenue growth offset by some higher costs upfront in the year and the absence of the one-time benefits we saw in the first quarter of the prior year. Slide 9 please. Now let me finish up with a few observations from the other segment, as well as some of the corporate line items. Other business results were substantially higher, driven primarily by higher captive insurance underwriting results as the prior year quarter included larger intra-company insurance settlements. For calendar year 2022, we expect other business results to be similar to 2021, although for the first quarter we expect a loss of about $25 million due to insurance settlements currently planned. Net interest expense increased year over year on higher short term borrowings. In the corporate line, unallocated corporate costs of $276 million were lower year over year due primarily to increased variable performance related compensation expense accruals in the prior year, partially offset by higher IT operating and project-related costs and transfers of costs from business segments into centralized centers of excellence in supply chain and operations. We anticipate calendar year 2022 total corporate costs, including net interest, corporate unallocated, and other corporate to be in line with the $1.2 billion area, consistent with what I discussed at global investor day, with net interest roughly similar, corporate unallocated a bit higher, and corporate other a bit lower. The effective tax rate for the fourth quarter of 2021 was approximately 21% compared to 8% in the prior year. The calendar year 2021 effective tax rate was approximately 17%, up from 5% in 2020. The increase for the calendar year was due primarily to changes in geographic mix of earnings and current year discrete tax items, primarily valuation allowance and return to provision adjustments. Looking ahead, we’re expecting full year 2022 effective tax rate to be in the range of 16% to 19%. Our balance sheet remains solid with a net debt to total capital ratio of about 28% and available liquidity of about $9 billion. With that, let me turn it back to Juan. Juan?

Operator:

[Operator instructions] Our first question on the phone lines comes from Ben Theurer of Barclays. Ben, please go ahead.

Juan Luciano:

Thank you Ben.

Ben Theurer:

To start off, maybe just to stay a little bit within the outlook, clearly you continue to have a very positive view on the segment side, but could you also share a little bit your assumptions in terms of CapEx needs and where you’re seeing investment needs to be put into in order to deliver on the actual supply of these, so a little bit of your CapEx program and how you feel about that then ultimately the results flowing down to net income and what your expectations are for 2022?

Ben Theurer:

Okay, perfect. Thank you very much. Then just one last question, just a quick one. If you think about your medium term targets, and I remember you’ve laid out obviously as well the initiatives for share buybacks, etc., but in light of the higher CapEx plus the increase in dividends, fair to assume that share buybacks, at least in the short term, aren’t going to be a priority yet, correct?

Ben Theurer:

Perfect Juan, very clear. Thank you very much, and congrats again.

Operator:

Thank you Ben. We now have the next question from Ben Bienvenu of Stephens. Ben, please go ahead, your line is open.

Ray Young:

Thank you Ben.

Ray Young:

Hey Ben, good morning. It’s Ray here. Yes, we finished up very strong in the bio products business, ethanol specifically. The fourth quarter demand environment was very, very constructive, and I think that’s just reflective of what was happening in terms of the recovery in driving miles in United States, the holiday season. Gasoline demand was strong, that translates to strong demand for ethanol. On the supply side, actually the industry had some supply challenges, and so that translated to a very robust environment; in fact, our EBITDA margins in the fourth quarter for our ethanol business were above a dollar a gallon, which is very, very--you know, on a historical basis is very, very strong. We indicated that as we go into 2022, we feel optimistic about ethanol as well. While inventories have built up a little bit in January, and that’s just the seasonal nature of ethanol--of inventory builds, a couple things give us optimism for 2022. Number one, we do expect domestic demand for ethanol to be strong; in fact, it will be a growth year-over-year from ’21 to ’22, and frankly we’re seeing ethanol demand probably returning back to pre-pandemic levels of demand here in the United States, so we’re talking about domestic demand probably in the 14 billion gallon level. Secondly, I think you’re going to see a recovery around the world on gasoline demand and hence ethanol demand as well, and as you know, with the movement in crude oil prices in general, ethanol is becoming one of the most attractive oxygenates in the world, so we do see the export demand side of the equation in 2022 being also very constructive for ethanol, with ethanol probably recovering to 1.4 billion to 1.5 billion gallons in terms of export demand, so that’s very, very constructive. Thirdly, we do believe that the regulatory landscape has clarified itself in the context of small refinery exemptions. I know there’s some challenges going on here, but what we see right now is going forward, smaller SREs, as they call it, small refinery exemptions will not have an impact in terms of the supply-demand balances, and we talk internally that when they say 15 billion gallons, it means 15 billion gallons in terms of what we need to deliver to the marketplace, so that’s actually a positive also for our industry, and then they’ve also remanded about 250 million gallons in terms of requirements as well going forward. When you add it all together, the fact that we’re starting off the year with a fairly balanced supply-demand perspective in terms of U.S. ethanol inventories; two, a demand environment that’s going to be even more constructive versus 2021; and three, a regulatory environment that seems to be supportive of where we want to go, we actually have a constructive viewpoint. As Juan indicated, directionally we’re assuming $0.15 to $0.25 per gallon as EBITDA margins for 2022 - that’s lower than the ’21 assumption, and maybe we’re just being a little bit conservative at this juncture as we start off the year, but nevertheless we do believe it should be a favorable environment for us as we move forward into 2022.

Juan Luciano:

Yes Ben, of course you realize the supply of many commodities remains at their tightest levels in years, so I think any news around the world of disruption, whether it’s weather or geopolitics is going to prolong the high prices well into, probably, 2023. As you described, at this point in time there are three things. We are all looking at the development of the crops in South America as they need to go through February rains, especially in Argentina and the harvest in Brazil. We are looking of course at geopolitical conflicts like the one you described, and also the expectations of the crop in the U.S., all this in the middle of a very strong demand. As you said, Ukraine is a big exporter, especially if you think about corn and the ability to supply China’s needs. You have the three main suppliers, whether it’s the U.S. and you have Ukraine and you have Brazil, so hopefully Brazil with these rains will have a safrinha crop that is maybe a little bit better than what we expect, but among these three countries need to cover the supply of corn, and corn today is one of the best sources of energy and fat out there, one of the cheapest ones, so it’s a very demanded product, so we’re all paying attention to what happens [indiscernible].

Juan Luciano:

Thank you Ben. Thank you very much.

Adam Samuelson:

Yes, thank you, and good morning everyone.

Adam Samuelson:

I guess my first question is I want to come back to the outlook in carbohydrate solutions and just make sure I’m understanding the moving pieces to think about a full year 2022 outlook that’s only slightly below 2021, where both your ’22--’21 performance was above what you would have expected and 2025 for the unit, and just trying to think about the moving pieces with ethanol, and maybe there’s a clarification point on the--when you talk about ethanol margin $0.15 to $0.25 a gallon EBITDA, is that purely the dry mill gallons within Vantage corn processors or is that including the wet mill, and I guess in that vein, in the fourth quarter, given the strong ethanol margin environment, I guess I was surprised just to have seen the starches and sweeteners business be down, if that should have also been benefiting from a strong U.S. ethanol environment, so maybe just help us think about some of the bridges of the pieces within the segment to get you to the ’22 outlook.

Adam Samuelson:

Okay, that color is really helpful. If I could just switch gears over to the nutrition segment, and maybe help us think a little bit about the expectations for the business on an organic basis in 2022. I know there was a--you did some M&A through the second half of 2021, so you talked to 10%-plus revenue growth and 15%-plus profit growth. Can you help us think about the M&A contributions within that, and any specific parts of the business that you might be more optimistic than the segment average, and areas where the growth might be a little bit below that?

Adam Samuelson:

Got it. That’s all really helpful. I’ll pass it on, thank you.

Operator:

Thank you. We now have a question from Robert Moskow of Credit Suisse. Robert, I’ve opened your line.

Ray Young:

Thanks Robert.

Ray Young:

Yes Rob, our objective is really to maintain margins, and so through the course of the negotiations, I think it’s fair to make an assumption that we’ve been able to maintain margins and offset the higher corn costs that has occurred recently. I think we’ve achieved that objective, and that’s a fair assumption to assume as we go into 2022.

Juan Luciano:

Yes, of course we keep a close eye into that. You have to understand that at this point in time, demand continues to outpace even the announced capacity expansions, but there is a reality also in this world of supply shortages and labor issues, that projects are not that easy to execute. I think that when you look at a battery of announcements like the way we’ve seen, I think it’s reasonable to put a percentage that that is going to happen, either the reality or that they’re all going to happen but in a little bit longer timeline. We tend to look at that from a long term basis of maybe something like two-thirds or 75% will happen. At this point in time, we see the volume coming our way, and you have to remember that the original oil story, Rob, it was due to high palm oil around the world, and that drove soybean and other oils up, and now on top of that, now we have the demand for RGD, so that--now, there is a full confluence of raw materials to be able to supply that oil. So yes, we are looking at this very closely, and at this point in time, everything is evolving as planned.

Juan Luciano:

You’re welcome.

Tom Palmer:

Good morning. Thank you for the questions, and congratulations on the quarter.

Tom Palmer:

Maybe I can follow up on Rob’s question, just on the refined products outlook, and maybe a little more specific on how you’re thinking about the set-up for 2022. We do have maybe the first larger wave of facilities coming online with pre-treatment units, although that is at least back half-weighted, I think, so maybe what’s the assumption for refined products this year, and do you think that that addition in terms of capacity is going to have much impact, or as you were kind of noting with Rob, maybe just with timing and needs of still sourcing from, at least a portion from third parties, it won’t be as impactful?

Tom Palmer:

Great, thank you for that. Maybe I’ll segue with that to the crushing side. It seems like you’re starting off the year with quite strong soy crush margins, perhaps higher than maybe you’re guiding to for the year. Is there a, I guess, catalyst or driver that maybe makes margins weaker? Is there a bit of conservatism embedded? We see headlines around lysine shortage - is that something you’re expecting to resolve itself and maybe see still a very favorable crush environment, but a little more normalized versus to start off the year?

Tom Palmer:

Thank you.

Operator:

We now have the next question from Vincent Andrews from Morgan Stanley. Vincent, please ensure your line is unmuted locally, and you may go ahead.

Juan Luciano:

Yes, thank you for the question, Steve. Listen, we are very excited about how that business is developing. I think we recognized in the past that that business happened almost while we were not watching and it was a customer pull more than our push. Now, we have a segment approach to that. We have intentionality in developing that market and as such, the opportunities have flourished. I would say a strong contribution from packaging, a strong contribution from fermentation - you know, we’re helping other people that are creating some of these materials out of a plant base, personal and homecare, a very important segment that is growing, and a growing contribution from pharma, construction and plant treatment. So as you can tell, as we continue to deploy marketing resources into some of these segments, we continue to have success. There are some segments that are more developed and larger for us and some segments that are more incipient, but I think it’s going very well. We are working on the product mix as sometimes the growth is faster than our capacity, so we’re trying to accommodate that and we’re going to be having more capacity coming up soon to be able to sustain this 10% growth rate [indiscernible] that we have.

Juan Luciano:

You’re welcome.

Ken Zaslow:

Hi, good morning everyone.

Ray Young:

Hey Ken.

Juan Luciano:

Yes, the dynamics here, Ken, of course is we have forecasted or accounted for some--the potential reversion of margins and some inflation of course that we were going to have, and that is difficult to estimate the timing, and then we have productivity and innovation that is going to be growing in their impact as some of these projects develop. When we look at, if you will, at the negative side of the equation, as the positive side we can control, on the negative side we’ve put together several scenarios, and I would say the biggest manifestation of that at this point in time has been energy inflation, and inflation from some smaller products. We suffer probably more of this, some supply chain disruptions and labor shortages, that you probably hear every company talking about. I would say from an energy perspective, the impact is probably more on Europe, whether it’s on crush or carb solutions, that’s where we see the impact, and we have our team basically working on energy efficiency and shaving some percentages of that increase, and also our hedging mechanisms and all that. On the raw material side and the supply chain disruptions, that’s probably more the territory of nutrition. Nutrition, as you can imagine, has more variety of raw materials and more SKUs, so the complexity of that business makes it more exposed to some of these winds. That’s the way we’re looking at that - it’s more the European energy increase and some of the nutrition one-offs here and there on supply chain.

Juan Luciano:

Yes, thank you Ken. Listen, we think that China has recovered from the ASF, they recovered their herd. You saw the dynamics in terms of pork prices coming up and down. We still believe that they will import soybeans in the high 90s - you know, 96, 97 million give or take, and around probably 25 million tons of corn. Again, when we are working the way they are managing through COVID challenges, but we expect demand will continue to grow, it continues to be supported by improved diets and professional feeding practices. Even if we see some moderation of GDP, we think that we’ve seen per capita consumption of the top four meats basically increases, and even if they correct it a little bit, they correct versus 2021, they are still much bigger than pre-ASF and pre-pandemic. We [indiscernible] with a number here or there, but still it’s going to be very strong, and as I said, probably 96, 97 million of soybeans, 25 million of corn, that will provide a good base for the grain industry and the crushing industry.

Juan Luciano:

Thank you Ken.

Ben Kallo:

Hi, good morning everyone, and thanks for taking my questions. Ray, you touched on the regulatory environment just in your ethanol comments, but maybe just on a broader level, maybe around renewable diesel, if you guys could talk about that. Then on the legislative front, I hate to ask because it’s anyone’s best guess, but how you see maybe the blender’s tax credit and anything around aviation fuel evolving. Thank you.

Ben Kallo:

And back to the renewable diesel front, could you just talk about any areas that you’re watching? We talked about the supply side and how you discount new production facilities coming online, but could you talk about the demand side and where you’re seeing incremental demand coming from, the regions that we already know out there or new regions? Thank you, and thanks for all of the answers.

Ben Kallo:

Great, thank you.

Steve Byrne:

Yes, thank you. Do you think that soybean oil will represent the majority of the feedstock for this 5 billion gallons of renewable diesel?

Steve Byrne:

Even your 45% is 30 million acres of incremental soybeans, which I don’t think is going to happen. Does that mean soybean exports get squeezed out and instead it gets crushed, the oil goes into RD, and you export the meal?

Steve Byrne:

And then what about your Slide 15, where you show forward sales by farmers in South America being below historical averages? Do you attribute that to the uncertainty that they are seeing with their current crop, just from either drought or excessive rain, and if grain and oilseed production is lower there in 2022, or the rest of the world for that matter, is that a net benefit to you in trading?

Steve Byrne:

Thank you.

Operator:

Thank you. We now have our next question from Michael Piken of Cleveland Research. Michael, please go ahead.

Juan Luciano:

Yes Michael, good question. Let’s talk about China. Some slight COVID-related challenges in China are impacting ports, but to be honest, the situation has improved. Initially we got the highlights, but in general the port situation continues to improve, and maybe we have average waiting about two, three days for bulk cargo in agriculture in most main ports, so I would say China is kind of okay. We’ve seen line-ups or demurrage time increasing in Brazil. There are still boats exporting corn and importing fertilizers since the soybean crop is a little bit delayed. We are seeing more--we are seeing waiting times kind of double from maybe 15 days to 30 days in Brazil, and that’s pushing some volume into North America for maybe March-April deliveries. North America export capacity has recovered for the most part. I think there is one plant that was going to have some long term or medium term, if you will, repairments, but for the most part, the export capacity has been recovered to pre-idle levels, at least for us. I would say in terms of the river, the Illinois River, there is a lot of freezing and there is a lot of icy conditions that have slowed down the river movement, and we see that, and that probably will continue.

Juan Luciano:

We’re seeing--as you know, we have the impact of Ida in Q4, we had the demand but we didn’t have the ability to support to supply, so a lot of that volume was moved into Q1. We have seen the elevation margins increasing in Q1, so a little bit as expected, so we feel good about how to satisfy that demand.

Juan Luciano:

You’re welcome.

Eric Larson:

Yes, thank you. Thanks for squeezing me in everybody. Congrats on a great quarter. Great year everyone.