The ADM Fourth Quarter 2023 Earnings Conference Call is being led by Megan Britt, Vice President of Investor Relations. The call is being recorded and the presentation slides are available on the ADM website. The call may include forward-looking statements and ADM assumes no obligation to update them. Juan Luciano, the Board Chair and CEO, will be leading the call and he apologizes for the delay in holding the call due to an internal investigation.

The company, ADM, has made progress in their internal investigation led by the Audit Committee of the Board of Directors. They have corrected certain intersegment sales and determined that these adjustments are not material to their financial statements. The investigation is almost complete and the company continues to operate and drive strategic priorities. They reported fourth quarter earnings per share of $1.36 and full year earnings per share of $6.98, the second best in their history.

In 2023, our company achieved an adjusted ROIC of 12.2%, exceeding our 10% target for the year. We also generated strong cash flow and returned $3.7 billion to shareholders through dividends and share repurchases. We have announced an 11% increase in our quarterly dividend and authorized an additional $2 billion in share repurchases for 2024. Our overall performance demonstrates the effectiveness of our strategy and our ability to deliver resilient results. Looking ahead to 2024, our priorities for value creation include getting closer to customers, delivering on strategic metrics, and building a stronger company for the future.

In 2024, the company will focus on managing the cycle, nutrition recovery, and enhanced return of cash to shareholders. The year is expected to be more challenging, with changing tailwinds and a reliance on productivity and innovation. The company plans to continue expanding in destination markets, with a 6% growth target. Direct farmer buying and decarbonization efforts are also expected to increase. The company is building capacity to meet growing customer demand, including the opening of a new soy processing facility and the expansion of a starch facility.

ADM is making capacity additions to support the demand for sustainable products and has launched a program called Drive for Execution Excellence to identify and execute cost-saving and cash generation ideas. In the Nutrition business, they have faced challenges and are taking action to improve their performance, including simplifying operations and supply chain to better fulfill demand.

The company has implemented various measures to improve operational efficiency, including restructuring leadership roles, incorporating COE expertise into the core business, engaging third party experts, simplifying product and production lines, optimizing the Nutrition business portfolio, and enhancing M&A integration. They have also made strategic decisions, such as closing production lines and reassessing their portfolio, to achieve their desired returns. These efforts have already shown signs of improvement in the first quarter of the year and the company is well positioned to capture recovering demand in 2024.

The company has seen improvements in shipping volumes and production efficiency, as well as growth in their Animal Nutrition business. Their customer-centric approach and innovation capabilities differentiate them in the market. The company also plans to allocate capital towards share repurchases and dividend growth. Overall, they are well-positioned to perform in a challenging external environment in 2024. The call is then turned over to Ismael for more details on the operations.

In 2023, the company had the second highest earnings in its history despite a challenging operating environment. Adjusted segment operating profit was $6.2 billion, a 6% decrease from the previous year. The decrease was primarily due to lower operating profit in the Ag Services & Oilseeds and Nutrition segments, but was partially offset by an increase in the Other segment. Adjusted earnings per share were $6.98, with improvements in Carbohydrate Solutions and Nutrition offsetting lower crush margins. Volume declines in Carbohydrate Solutions and Nutrition, higher manufacturing costs, and lower equity earnings also contributed to the decrease in EPS. In the AS&O segment, there was a $4.1 billion in segment operating profit, 8% lower than the previous year's record level.

The Ag Services segment operating profit was lower due to reduced origination volume and margins, while the Crushing segment operating profit was also lower due to decreased crush margins and higher manufacturing costs. Refined Products and Other results were higher, driven by increased volumes and margins in biodiesel, with positive timing impacts due to market volatility. Carbohydrate Solutions segment operating profit was also lower, with higher pricing and mix offset by weaker volumes and lower corn co-product values. The Nutrition segment saw lower revenues due to demand challenges and operational issues related to an ERP systems integration.

The Nutrition segment's operating profit for the full year decreased by 36%, with Human Nutrition results decreasing by 25% and Animal Nutrition results decreasing by 91%. The decline can be attributed to market forces, one-time items, and operational challenges, including lower demand for plant-based proteins, destocking impacts, and difficulties related to the ERP system implementation. These challenges affected both volumes and manufacturing costs.

The company has seen improvement in operations and expects to recover lost volumes in 2024. The Other segment operating profit increased by 125% due to higher net interest income. Cash flow has been strong in the past two years, allowing for reinvestment in the business and significant capital return to shareholders. In 2024, the company plans to limit capital expenditures and focus on safety and reliability of assets, while also prioritizing cost savings and cash generation initiatives.

In 2024, the company's priorities for cash deployment will remain focused on shareholder returns. They plan to repurchase $2 billion worth of shares, with $1 billion being executed through an accelerated share repurchase program. Global grain and oilseed supply is expected to increase, leading to a moderation in soybean crush margins. The company expects adjusted earnings per share to decline by 18% from the previous year. In the AS&O segment, they anticipate lower results due to increased global commodity supply and normalization of margins, but expect mid-to-high single digit improvement in process volumes due to Operational Excellence efforts and the ramp up of their Green Bison facility.

The company expects lower biodiesel margins in 2023 and a slightly lower year in Carbohydrate Solutions due to weaker ethanol. However, they anticipate a recovery for Nutrition with mid-single-digit revenue growth from pipeline opportunities. The company's three priorities for the year ahead are driving productivity and innovation, executing with excellence, and taking aggressive actions in the nutrition business to support growth opportunities.

The company is actively managing its balanced capital allocation strategy and is confident in its ability to deliver solid results in 2024. The focus is on both prudent investments in the business and returning value to shareholders through dividends and share repurchases. The CEO expresses gratitude to the team and believes in the company's role as a leader in the agriculture supply chain. The company's ability to bring partners together will be crucial in driving future transformation in the markets it serves. The first question in the Q&A session is about the outlook for the company, specifically in terms of the cyclical versus controllable factors. The outperformance in recent years has been driven by cyclical factors in one business segment, while investments in another have not met expectations. The CEO is asked to provide more clarity on the company's outlook for 2024 and beyond, including the path to earning a return on investments in a particular business segment.

The Ag Services and Oilseeds division has had a successful couple of years, but margins are expected to moderate in 2021. However, the company has been proactive in adjusting its business model, including destination marketing and expanding into new markets. The Regen AG program and farmer direct initiatives are also contributing to growth. With expanded capacity and operational improvements, the company is confident in navigating through the changing market conditions.

2024 is expected to be a strong year for Ag Services and Oilseeds, with the market able to absorb increased capacity and strong demand for oils. The Carb Solutions business has been stable and is expected to have a good year, with strong volumes and margins. The milling business had a record year and continues to perform well. The feed products segment may have slightly lower margins, but BioSolutions is growing at a rate of over 15% per year. There is some uncertainty surrounding ethanol, but the export market is currently favorable. The nutrition segment has been a growth story, but faced challenges in 2023.

In the paragraph, the speaker discusses the reasons for the decline in growth for the company in the previous year, including destocking due to COVID and supply chain issues. They also mention moderating growth in plant-based proteins but continued growth in pet and health and wellness. The speaker acknowledges some issues in Q4, including one-offs and implementation problems with 1ADM. However, they remain optimistic about future growth and their ability to deliver a strong value proposition to customers.

The speaker discusses the company's performance in the second half of last year and their confidence in meeting their 2025 goals. They also mention the current and projected global soybean crush margins and factors that could impact them. The market has already priced in potential challenges, but the company remains optimistic about their portfolio and the industry's performance.

The market is anticipating three offers for meal in the second quarter of the year, which did not happen last year. Last year, after Brazil stopped exporting, the US became the only global source for soybean meal, leading to increased prices for the Russian market. However, with the correction in prices, soybean meal is expected to become more affordable for the Russians. The crush market is expected to favor Brazil and the US, where there is both bean availability and a strong domestic oil market. When asked about 2025, the speaker mentioned that 2024 may be the low point in the earnings cycle, and that Brazil's B14 program and the US's demand for soybean oil for renewable fuels could contribute to a favorable crush market in those countries.

Juan Luciano clarifies the company's earnings guidance for 2024 and 2025. He explains that the previously stated 2025 number was a milestone, not a destination, and that they expect 2024 to be a down year compared to 2023. Luciano also mentions the cycle of soybean meal prices and farmer planting, and how the company is building resilience for the future. He remains optimistic about 2025 being better than 2024.

Ben Bienvenu asks Juan Luciano about the projected growth for the nutrition segment in 2024. Luciano explains that they expect mid-single digit revenue growth and higher operating profit compared to the previous year. He also mentions that about half of the headwinds they faced in 2020 were market-related and the remaining were non-recurring events. These are not expected to occur in 2024. Luciano also mentions that they have addressed demand fulfillment issues and have seen improvement in the first two months of 2021. He attributes the positive outlook for 2024 to the conversion of their pipeline and single digit revenue growth. However, they will also have to face a correction in texturizing prices, which were exceptionally high in 2020.

The speaker discusses the outlook for the year, highlighting the need to bring the Decatur East plant back into operation and the potential for a strong recovery in Animal Nutrition, flavors, and pet products. They also mention the success of the carbohydrate solutions segment and the need for continued investment in assets, particularly in the milling and wet mills businesses. The team has been shutting down old assets and consolidating them into new facilities, such as the recently launched Mendota plant.

The speaker mentions that they are unlikely to build a new wet mill and are reinvesting in their current business, which requires a lot of capital for decarbonization efforts. They have expanded one of their plants to meet the growing demand for their product. The business has solid margins and volumes, but faced some challenges in January due to bad weather. However, they expect lower energy and chemical costs to benefit the business later in the year. The speaker also addresses concerns about potential regulations limiting the use of vegetable oil in renewable diesel, but believes the demand for their product will continue to grow.

The speaker believes that RGD will need vegetable oils in the future and that Europe and the US will have different needs for these oils. The company has set a target of $6 to $7 in EPS for 2025, which they believe can be achieved through strong demand for soybean meal and oil, as well as other factors such as improving economies and higher protein margins. The speaker believes that lower prices can incentivize demand and lead to strong performance for RGD.

The speaker discusses a correction in the market that may be short term and has no specific timing. They mention the success of carb solutions and the growth potential through decarbonization and BioSolutions. The expansion of Marshall and the addition of Spiritwood and crash capacity in Brazil are expected to contribute to growth in the next three quarters. They also mention that nutrition was not a significant contributor to growth in 2023 but is expected to return to growth in 2024 and 2025. The speaker then talks about portfolio refreshment in the nutrition sector, which involves evaluating units that are not meeting return expectations and taking action.

The company has taken action with joint ventures and looks at underperforming units to improve their performance. They correct any self-inflicted issues and then decide whether the unit belongs in nutrition or should be divested. This is a regular process and has been done in the past with other businesses. They are currently evaluating their nutrition business and considering potential divestments. The Animal Nutrition business was a precursor to this approach and they have experience with divesting businesses in the past. The company has found overlaps in their footprint allocations and is working towards optimizing their operations.

The company has noticed a significant opportunity in Animal Nutrition to simplify their portfolio and has seen benefits since the second half of 2023. They plan to apply this thinking to their entire portfolio and focus on improving their asset base while returning cash to shareholders. The CEO also mentions that biodiesel margins are expected to be strong, especially in Europe, due to increasing mandates and less competitive pressure on vegetable oils. However, margins in the US have moderated and are not expected to be as good as before.

The speaker mentions that there may be some challenges in 2024, but margins in Brazil and Europe are better. They thank the listeners for joining and invite any further questions. The call is now concluded.

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