ADM(ADM) - 2023 Q3 - Earnings Call Transcript

Financial Data and Key Metrics Changes - ADM reported Q3 2023 adjusted earnings per share of $1.63 and adjusted segment operating profit of$1.5 billion, with year-to-date adjusted EPS of $5.62, marking the second-best EPS year achieved in the first nine months [4] - The trailing four-quarter average adjusted ROIC was 13.2$3.8 billion, with $1.1 billion allocated to capital expenditures and$1.9 billion returned to shareholders through share repurchases and dividends [25][26] Business Line Data and Key Metrics Changes - Ag Services & Oilseeds: Results were lower year-over-year due to a shift in export demand to Brazil, but South American origination results were higher due to strong export demand [13][14] - Carbohydrate Solutions: Delivered outstanding results significantly higher than the prior year, driven by strong demand and margins in starches, sweeteners, and ethanol [18] - Nutrition: Flavors showed strong growth, while lower demand for plant-based proteins and challenges in pet solutions impacted overall performance [19][21] Market Data and Key Metrics Changes - The demand for vegetable oils remained strong, supporting a solid crush environment [6] - Ethanol margins are expected to remain strong due to solid domestic demand and healthy U.S. exports [19][56] - The plant-based protein market is experiencing destocking and consumer demand softness, which is anticipated to persist into next year [21] Company Strategy and Development Direction - ADM is focused on leveraging its integrated business model from farm to fork, enhancing partnerships for sustainable agriculture, and expanding renewable fuel production [7][8][30] - The company aims to capitalize on the growing demand for low-carbon products and is investing in digital transformation to drive efficiencies [10][11] - ADM is committed to improving safety and productivity while navigating external challenges such as geopolitical tensions and inflation [11][12] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in exceeding 2023 expectations, citing strong execution against strategic plans and adaptability to market dynamics [5][12] - The company anticipates continued growth in Ag Services and Oilseeds, with healthy crush margins and productivity measures supporting a more efficient cost structure [30] - For Nutrition, management expects a return to growth in 2024, driven by innovation and a focus on higher-margin products [23][46] Other Important Information - The effective tax rate for Q3 2023 was approximately 20%, higher than the prior year due to a change in the geographic mix of earnings [25] - ADM has a strong balance sheet with an adjusted net debt-to-EBITDA leverage ratio of 0.9, providing financial flexibility for long-term strategic initiatives [26] Q&A Session Summary Question: U.S. crush margin outlook - Management confirmed that crush margins are expected to remain healthy, driven by strong demand for soybean meal and renewable green diesel [36] Question: Nutrition operating income guidance - Management provided context on the $600 million operating income guidance for Nutrition, highlighting strong performance in Flavors and challenges in plant-based proteins [40][44] Question: Ethanol and renewable diesel supply and demand - Management expects a constructive environment for ethanol and renewable diesel, with strong export demand and growth projections for renewable diesel [74] Question: Guidance clarification - Management raised the full-year EPS guidance to in excess of$7, attributing the increase to strong performance in Ag Services and Oilseeds [78]