ADM(ADM) - 2023 Q3 - Quarterly Report

Financial Performance - Net earnings attributable to controlling interests decreased by $0.2 billion from$1.0 billion to $0.8 billion in Q3 2023 compared to Q3 2022[170] - Segment operating profit decreased by$0.1 billion from $1.6 billion to$1.4 billion in Q3 2023, including a net charge of $71 million[170] - Adjusted segment operating profit (non-GAAP) decreased by$0.1 billion to $1.5 billion in Q3 2023, primarily due to lower results in Wilmar, Crushing, Ag Services, and Nutrition[170] - Revenues decreased by$3.0 billion to $21.7 billion, driven by lower sales prices ($4.2 billion), partially offset by higher sales volumes ($1.2 billion)[175] - Ag Services and Oilseeds revenues decreased 14$16.5 billion due to lower sales prices ($4.3 billion), partially offset by higher sales volumes ($1.6 billion)[175] - Carbohydrate Solutions revenues decreased 7% to $3.3 billion due to lower sales volumes ($0.2 billion)[175] - Nutrition revenues decreased 4% to $1.8 billion due to lower sales volumes ($0.2 billion), partially offset by higher sales prices ($0.1 billion)[175] - Gross profit remained unchanged at$1.8 billion, with higher results in Carbohydrate Solutions ($139 million) and Refined Products and Other ($34 million) offset by lower results in Ag Services ($71 million), Human Nutrition ($63 million), and Crushing ($55 million)[176] - Ag Services and Oilseeds operating profit decreased 21$28 million, driven by higher net interest income in ADM Investor Services[187] - Corporate results showed a net charge of $390 million, up from$329 million in the prior-year quarter, primarily due to increased short-term interest rates and higher IT costs[188] - Adjusted EPS for Q3 2023 was $1.63, compared to$1.86 in Q3 2022, reflecting a decrease of $0.23 per share[194] - Adjusted EBITDA for Q3 2023 was$1.491 billion, down $148 million from$1.639 billion in Q3 2022[196] - Ag Services and Oilseeds segment revenue decreased by 7% to $54.9 billion in the nine months ended September 30, 2023, driven by lower sales prices[207] - Carbohydrate Solutions revenue decreased by 4$10.2 billion in the nine months ended September 30, 2023, due to lower sales volumes and prices[207] - Nutrition revenue decreased by 5% to $5.5 billion in the nine months ended September 30, 2023, primarily due to lower sales volumes[207] - Net earnings attributable to controlling interests decreased by$0.4 billion to $2.9 billion in the nine months ended September 30, 2023[200] - Adjusted EBITDA decreased by$264 million to $4.882 billion, with Ag Services and Oilseeds contributing$3.380 billion, down $89 million year-over-year[229][230] - Adjusted EPS for the nine months ended September 30, 2023, was$5.62, compared to $5.91 in the prior year, reflecting a decrease of$0.29 per share[227] Operational Metrics - Oilseeds processed volumes increased by 960 thousand metric tons to 8,648 thousand metric tons in Q3 2023 compared to Q3 2022[172] - Corn processed volumes increased by 126 thousand metric tons to 4,507 thousand metric tons in Q3 2023 compared to Q3 2022[172] - Processed oilseeds volumes increased by 1.671 million metric tons to 26.058 million metric tons in the nine months ended September 30, 2023[203] - Corn processed volumes decreased by 620,000 metric tons to 13.349 million metric tons in the nine months ended September 30, 2023[203] Sustainability and Environmental Initiatives - The company aims to expand its re:generations™ regenerative agriculture program to cover 2 million acres in 2023 and 4 million acres globally by 2025[155] - ADM plans to reduce absolute Scope 1 and 2 greenhouse gas emissions by 25% and Scope 3 emissions by 25% from a 2019 baseline by 2035[160] - The company achieved full traceability of its soy supply chains in Brazil, Paraguay, and Argentina in 2022 and aims to eliminate deforestation from all supply chains by 2025[159] Legal and Regulatory Matters - The company is facing multiple class action lawsuits alleging manipulation of ethanol benchmark prices, with potential damages estimated between $500 million to over$2.0 billion[253] - The company denies liability and is vigorously defending itself in these legal actions, but cannot predict the final outcome with certainty[253] - The company is not currently a party to any legal proceeding or environmental claim that would have a material adverse effect on its financial position[254] - The company operates globally in over 190 countries and is subject to numerous laws and regulations, including the OECD's Pillar Two initiative introducing a 15% global minimum tax effective January 1, 2024[256] Financial Position and Capital Allocation - The effective tax rate for Q3 2023 increased to 20.1% from 15.7% in Q3 2022, primarily due to changes in the geographic mix of forecasted pretax earnings[170] - Cost of products sold decreased by $4.6 billion to$65.2 billion in the nine months ended September 30, 2023, due to lower average commodity costs[208] - Selling, general, and administrative expenses increased by $0.1 billion to$2.5 billion in the nine months ended September 30, 2023, driven by higher salaries and benefit costs[209] - Other income-net decreased by $67 million to$116 million, primarily due to the absence of a $50 million payment from the USDA Biofuel Producer Recovery Program in the prior period[212] - Ag Services and Oilseeds operating profit decreased by 3$48 million insurance settlement related to Hurricane Ida damages in the current period[217] - Carbohydrate Solutions operating profit decreased by 6%, impacted by unplanned downtime at a corn germ plant and the absence of a $50 million USDA payment in the prior period[218] - Nutrition operating profit decreased by 23$151 million, driven by higher net interest income and improved captive insurance results[220] - Corporate results showed a net charge of $1.1 billion, with interest expense-net increasing by$87 million due to higher short-term rates and new debt issuances[223] - Cash provided by operating activities was $1.9 billion for the nine months ended September 30, 2023, compared to$3.3 billion for the same period last year[234] - Working capital changes decreased cash by $1.9 billion for the nine months ended September 30, 2023, compared to a decrease of$1.3 billion for the same period last year[234] - Inventories decreased by $3.5 billion due to lower inventory volumes and prices[234] - Capital expenditures for the nine months ended September 30, 2023, were$1.1 billion compared to $0.8 billion for the same period last year[235] - Long-term debt borrowings for the nine months ended September 30, 2023, were$0.5 billion compared to $0.8 billion for the same period last year[236] - The Company had$1.5 billion of cash and cash equivalents and a current ratio of 1.7 to 1 as of September 30, 2023[237] - The Company's ratio of long-term debt to total capital was 25% at September 30, 2023, compared to 24% at December 31, 2022[237] - The Company expects total capital expenditures of approximately $1.5 billion in 2023, with additional cash outlays of$1.0 billion in dividends and $2.0 billion in opportunistic share repurchases[240] - The Company's purchase obligations as of September 30, 2023, were$16.5 billion, an increase from $15.8 billion at December 31, 2022[241] - The Company has total available liquidity of$13.2 billion as of September 30, 2023, comprised of cash and cash equivalents and unused lines of credit[239] - The company repurchased 1,570,366 shares during the quarter ended September 30, 2023, at an average price of $81.229 per share[259] - The company's Board of Directors approved the extension of the stock repurchase program through December 31, 2024, authorizing the repurchase of up to an additional 100,000,000 shares[260] Geographic and Market Exposure - ADM's Ukraine and Russian operations historically represent less than 0.2% of consolidated revenues, with current assets in Ukraine being less than 1% of total current assets[166][167]