The Bunge Limited Second Quarter 2023 Earnings Conference Call has begun, and Ruth Ann Wisener has welcomed everyone to the call. She has directed the participants to the Investors section of the website for slides and reconciliations of non-GAAP measures. Greg Heckman, Bunge's Chief Executive Officer, and John Neppl, Chief Financial Officer, are on the call. Greg has thanked the team for their dedication and focus during the quarter, noting that they have been able to execute on big strategic moves while continuing to keep their eye on the day-to-day operations and delivering outstanding results.

In the second quarter, Bunge capitalized on a unique opportunity to enhance their franchise for the future and filed a preliminary proxy statement in connection with the proposed transaction with Viterra. Bunge's team showed agility and managed to optimize margins as market conditions changed. Investments in maintenance and productivity have improved reliability and reduced unplanned downtime. Based on the forward curves and the market environment, Bunge is increasing their full-year adjusted EPS outlook to at least $11.75 per share. John Neppl will then provide more details on the financial results and outlook.

In the second quarter of 2023, Bunge reported earnings per share of $4.09, which included a positive mark-to-market timing difference of $0.59 per share and a negative impact of $0.22 per share related to one-time items. Adjusted core segment earnings before interest and taxes (EBIT) was $893 million, up from $709 million in the prior year, driven by better performance across all value chains and increased demand for food service and fuel. Corporate expenses were higher due to planned investments in growth and productivity initiatives. Lower other results were related to Bunge's captive insurance program and Bunge Ventures.

This paragraph discusses the company's results from their non-core sugar and bioenergy joint venture, net interest expense, income tax expense, adjusted EPS and EBIT trends, and capital allocation of funds from operations. It also mentions the board's expansion of the existing share repurchase program to $2 billion and their intention to execute a meaningful portion of the repurchases prior to the close of the Viterra transaction.

In Slide 8, RMI exceeded net debt by $3.6 billion, and Slide 9 showed that $5.7 billion of credit facilities were unused and unavailable. Trailing 12 months ROIC was 20.3%, and discretionary cash flow was $2.1 billion. For 2023, adjusted EPS outlook is at least $11.75 per share, with Agribusiness results slightly better than prior outlook, Refined Specialty Oils results in line with prior year, and Milling results lower than prior outlook.

Bunge and Viterra are expecting Non-Core full year results to be in line with the last year and an adjusted annual effective tax rate of 20-24%, net interest expense of $350-370 million, and capital expenditures of $1-1.2 billion. Gregory Heckman closed the statement by emphasizing that Bunge has an important role to play in addressing food security, market access, and increasing demand for sustainable food feed and fuel production, and that they will use their combined platforms and capabilities to promote sustainable practices such as low carbon product streams, regenerative agriculture, and traceability across major crops.

Bunge announced a regenerative agricultural program in Brazil and a strategic alliance with Nutrien Ag Solutions to support U.S. farmers in the implementation of sustainable farming practices. The company also mentioned that they are evaluating and executing on their pipeline of bolt-on M&A opportunities. They concluded their statement by saying they are well positioned to deliver their purpose and are open to potential upside depending on market conditions.

Gregory Heckman explains that the meal and oil demand drivers remain intact, and wheat is not as competitive. Merchandising is difficult to predict, but the team has been successful in the past. He also mentions that there is potential for improved demand from China's recovery, and dislocation from the small crop in Argentina. Lastly, the RD capacity is running better with stronger demand for oil in the US. All of these factors could potentially help to boost earnings above the $11.75 target.

John Neppl and Benjamin Theurer discuss the situation in Ukraine, where the humanitarian corridor has closed, making it difficult to get supplies out. Neppl adds that they are covered in terms of crush for Q3 and that margins are weak in Brazil. Theurer then asks Neppl for his opinion on the EPA's renewable diesel capacity decision, to which Neppl responds that it is still tight, but that they are bullish on the volume increase and commitment to the energy space.

Gregory Heckman explains that the success of their processing business was due to a combination of factors, such as hedging out capacity during weaker crush margins and the team's patience with the capacity they did have open. They also had a good origination footprint in South America which allowed them to benefit from the soybean and corn harvests, as well as their ability to handle domestic and export demand.

Gregory Heckman explains that the Refining Speciality Oils business is doing well, with 80% of their oil going to the food channels and 20% going to the fuel channels. He notes that the team has been successful in folding in the new refinery bought from Fuji in Louisiana and has seen some channel switching from packaged foods to QR and from food service to QSR, but overall demand remains strong.

In the second quarter, Gregory Heckman noted that the industry had not seen much pre-treatment built in the beginning, and that there had been no big changes in the mix of refined versus crude. He also noted that they expect to see the demand for crude grow as pre-treatment comes in, but that they don't expect to see any big switch in this in 23. Ben Bienvenu then asked Heckman what was unique to the second quarter that may not be recurring in the back half of the year, to which Heckman replied that the second quarter included the last of the Brazilian harvest, and the origination there.

John Neppl discusses the key things to watch in the second half of the year, such as the low crop in Argentina and the demand for beans from South America. He also speaks about the long-term forecast and assumptions that went into it, which were presented to the board to justify the value of the criteria deal. Neppl also mentions the incremental synergies that were called out in the proxy statement.

Greg Heckman and John Vering explain that Viterra did not have a forecast when they acquired them, so they developed one. They also disclosed $250 million in cost synergies and $80 million in operating synergies. They noted that these figures do not include commercial synergies, which could provide additional upside. Lastly, they discussed their acquisition of businesses in Argentina in partnership with Chevron, without providing further details.

Gregory Heckman and John Neppl discuss the partnership between their companies and Chevron, expressing their excitement for the opportunities that it provides for creating low CI feedstock for renewable diesel and sustainable aviation fuel. They also mention that the U.S. crush spread has rebounded faster due to farmer marketing and weather concerns.

Gregory Heckman and John Neppl discussed the potential for the Brazilian crush margins to improve in the second half of the year due to a lack of competition from Argentina in the export market and healthy demand for oil and food. They noted that Brazil has been doing well until recently, but that the global system needs to step up in order to see a positive effect, with lower energy costs in Europe and less pressure from Argentina's oil exports.

Gregory Heckman and Adam Samuelson discuss the origination of corn in Brazil in the second half of the year. They note that in the second quarter, it was a strong contributor and demand shifted to Brazil from the U.S. as the corn crop was harvested. They mention that the forecast for the second half is in their forecast, but there could be potential upside as things shift around and the size of the U.S. crop is determined.

Gregory Heckman of Archer Daniels Midland discussed the company's plans to triple mill capacity on the West Coast and the expected soy yield. He stated that the company has a lot of granularity and capillarity in their meal distribution and merchandising, and that the investment in Longview will help them handle more meal and be more efficient. He also discussed the Chevron JV in Destrehan and the ability to export meal to Asian markets. Steven Haynes asked a follow up question and Thomas Palmer of JPMorgan commented that the company's tone was positive and they beat their EPS guidance by over $1.

Gregory Heckman discussed the various risks that could affect the market in the second half of the year, such as the humanitarian corridor in Ukraine, weather in North America, China's demand, and Argentina's election cycle. He mentioned that the team has been doing a great job of delivering despite the uncertain environment, and that the least amount of liquidity is in Q4, with Brazil still not being very strong.

John Neppl and Greg discussed the cadence of earnings for the second half of the year. They noted that they are expecting a higher weighting towards the fourth quarter, with a ratio of 40-60 (low 40s, high 50s) between Q3 and Q4. This is different from the previous year, which was closer to 50-50, and still weighted slightly more towards the first half.

John Neppl and Greg discussed the uncertainty in the second half of the year and the weaker forward curves in some parts of the world. They attribute the higher earnings of the first half to strong origination results in Brazil and their crush in Europe and China. Neppl states that their capital and growth capital is still on track for 2025 and 2026 and they still feel confident about their projects.

Gregory Heckman and John discussed the company's number one priority of the M&A side being Viterra, as well as their active search for smaller bolt-on M&A opportunities. They noted that the complexity of the environment, coupled with the highest interest rate environment in a long time, is creating opportunities for bolt-on M&A. Sam Margolin asked about the effect of the soybean supply uncertainty on the U.S. crush, to which Gregory Heckman noted that the demand is accruing to oil, potentially creating a paradigm shift in the way a low soybean crop would normally compress the crush.

Gregory Heckman of the team managing volatility in the crush market explains that historically, meal has been the driver of the market, but with the addition of biofuel demand, oil is now carrying a higher share. He also mentions that the team is focused on managing risk and will hedge out margins when they are present.

The demand outlook in China is uncertain, but animal numbers have held up and margins have been volatile. The team is agile and able to lock in margins when available. Domestic demand is reportedly back and there is potential for additional growth.

Gregory Heckman explains that having a strong balance sheet is a competitive advantage for the company, due to the fact that banks have been backing off on commodity financing and there are fewer alternatives for people. This has helped with procurement practices in Brazil and has been beneficial for growers, as it makes them more willing sellers. The balance sheet also ensures the company has the liquidity to operate in the agricultural business, which requires a large amount of working capital.

John Neppl and Gregory Heckman discuss how their strengthened credit profile has enabled them to borrow money at more competitive rates, which gives them an advantage when it comes to providing financing to producers and funding RMI. They also note that this has helped them to build tighter relationships with farmers, as they are able to provide liquidity and hedging options when farmers want to go to market.

Gregory Heckman thanked everyone for their interest in Bunge and expressed his excitement about the company's current stage and path of growth. He then answered a question from Brian Wright about the Viterra regulatory approval process, saying they were early on in the process but were engaging on the facts. The conference call was then concluded.

This summary was generated with AI and may contain some inaccuracies.