The paragraph is an introduction to the ADM Fourth Quarter 2024 Earnings Conference Call. It opens with a greeting from the operator and mentions that the call is in listen-only mode to avoid background noise, and it's being recorded. Megan Britt, Vice President of Investor Relations, introduces the presentation. The company leaders, Juan Luciano (CEO) and Monish Patolawala (CFO), will lead the presentation, which is supplemented by slides available on the ADM website. The presentation may include forward-looking statements, subject to risks and uncertainties, with additional details provided in SEC filings. Non-GAAP financial measures will also be discussed, with reconciliations available in the earnings press release. Juan Luciano then takes over the call.

The paragraph highlights ADM's financial and operational performance for the fourth quarter and full year, including adjusted earnings per share of $1.14 for the quarter and $4.74 for the year. The company reported total segment operating profits of $1.1 billion for the quarter and $4.2 billion for the year, with a trailing four-quarter adjusted ROIC of 8.3% and cash flow from operations at $3.3 billion. Despite challenges in 2024, ADM improved operations, achieving strong crush volumes in canola and rapeseed, particularly in Latin America, and improving plant performance and production volumes in North America. The company set operating profit records in Starches & Sweeteners, addressed demand challenges in EMEA flavors, and enhanced safety by reducing process safety incidents by over 35%. ADM also advanced innovation initiatives in biosolutions and health & wellness to meet growing customer demand.

The paragraph discusses the company's efforts to maintain a strong financial position, highlighted by a consistent dividend record, and outlines its strategic priorities for 2025. Despite external uncertainties, the company is confident in its operational progress and plans to remain adaptable to global trade and regulatory changes. Key priorities include improving execution, cost management, and operational efficiencies, particularly by leveraging past experiences in regions such as North America and EMEA. The company is focusing on reducing costs through better sourcing and data analytics while managing corporate expenses, as it adapts its business portfolio and enhances digital capabilities.

The organization is prioritizing its core efforts by cutting non-essential third-party expenses and aligning its structure accordingly. This involves reducing 600 to 700 roles, including 150 vacant positions, while providing transition support and opportunities for affected employees. These measures aim to save $500 million to $750 million over three to five years, with significant savings projected for 2025. Additionally, the company is focusing on strategic simplification to efficiently manage its portfolio, addressing customer needs, return objectives, and operational capabilities in response to the current external environment and past performance.

The paragraph outlines ADM's phased approach to simplifying and optimizing its business by focusing on addressing performance challenges, marginal demand, and excess capacity, identifying and potentially divesting non-critical assets, and ensuring alignment among staff and partners. This approach includes a $2 billion pipeline in portfolio opportunities to maximize shareholder value. For 2025, ADM plans to focus on strategic growth and capital management by investing in productivity and innovation. This includes modernization, digitization, expanding capacities, and forming global partnerships to enhance customer alignment and investment returns.

The paragraph outlines ADM's strategic plans and financial commitments for 2025 and beyond, emphasizing targeted investments in plant digitization, equipment upgrades, destination marketing, and decarbonization solutions to drive growth. The company highlights its successful investments in biosolutions, destination marketing, and biotics, which have resulted in double-digit growth, serving as a model for future investments. ADM remains committed to returning capital to shareholders through share repurchases and dividends, announcing an extension of its share repurchase program and another dividend increase while maintaining a leverage ratio of approximately 2.0 times. The paragraph concludes with confidence in ADM's ability to manage external challenges and sustain long-term success, supported by over 125 years of experience. Monish Patolawala is then introduced to present a deeper analysis of the 2024 financial results and 2025 outlook.

In the fourth quarter of 2024, the AS&O segment faced challenges due to market conditions, including biofuel and trade policy uncertainties, and high manufacturing costs. This led to reduced soybean and canola crush margins. Despite these challenges, the company received $52 million in insurance settlements and experienced supportive origination conditions in North America. However, softer demand for food oil impacted financial results. Overall, the segment's operating profit was $644 million, a 32% decrease from the previous year.

In the fourth quarter, AS&O's segment operating profit declined by 32% to $644 million compared to the previous year, and the full-year profit was $2.4 billion, down 40%. The Ag Services subsegment's profit decreased by 39% to $715 million due to lower origination volumes and margins in South America and fewer global trade opportunities. The Crushing subsegment's profit declined by 35% to $844 million as ample global supplies balanced supply and demand, reducing margins in soybean and canola. There were also net negative timing impacts and $76 million from insurance settlements. The Refined Products and Other subsegment's profit fell by 58% to $552 million due to increased pretreatment capacity, higher imports, competition, and biofuel policy uncertainty. The company's investment in Wilmar yielded $336 million in equity earnings, an 11% increase. Carbohydrate solutions performed as expected in the fourth quarter, with operating profit aligning with the prior year.

The paragraph discusses the financial performance of the carbohydrate solutions and nutrition segments. In 2024, the carbohydrate solutions segment's operating profit was $1.4 billion, unchanged from the previous year. The starches and sweeteners subsegment saw a slight profit increase to $1.3 billion, despite challenges in EMEA and ethanol margins. Insurance proceeds of $84 million were received for incidents at Decatur facilities. The Vantage Corn Processes subsegment experienced a 28% profit decline due to lower margins from increased industry production, despite strong ethanol demand. In the nutrition segment, fourth-quarter operating profit increased to $88 million due to improved mix and insurance recoveries, despite weaker consumer demand and added costs from ending an unfavorable supply agreement. The full-year nutrition revenue rose by 2% to $7.3 billion, though organic revenue decreased by 3%.

In 2024, the company's human nutrition revenue remained stable despite challenges from unexpected downtime at Decatur East and texturants pricing issues. This was offset by improved performance in flavors and health and wellness. Animal nutrition revenue fell due to unfavorable mix and currency impacts in Brazil. Overall, the nutrition segment's operating profit decreased by 10% to $386 million, with the human nutrition subsegment experiencing a 22% decline but receiving $71 million in insurance for a 2023 incident. Animal nutrition profit increased thanks to higher margins and cost optimizations. Despite a 30% drop in cash flow from operations to $3.3 billion due to lower segment profits, the company maintained strong cash generation, investing $1.6 billion in capital expenditures and returning $3.3 billion to shareholders through dividends and share buybacks. Additionally, around $1 billion was spent on M&A activities completed in early 2024, underscoring the company's robust capital structure.

The paragraph outlines a company's strategy to strengthen its financial position by simplifying its portfolio and making targeted investments for long-term value creation. This includes actions like consolidations, divestitures, increasing dividends, and expanding share repurchase programs. However, the company faces challenges in the first half of 2025 due to external market pressures, such as U.S. biofuel policy uncertainty impacting vegetable oil demand, high global soybean stock levels, increased Argentinian crush rates, and trade policy issues with Canada and China. These factors have led to lower values for meal and vegetable oil, affecting margins. Despite these challenges, the company is optimistic about margin improvements in the second half of 2025, indicated by market signals.

The article discusses expectations for the agricultural sector, projecting that policy clarity and strong fundamentals will bolster crush and biodiesel margins. It highlights anticipated U.S. and global demand for vegetable oils, driven by expanded biofuels policies such as Brazil's increased biodiesel mandates and new European SAF mandates, as well as improvements in the livestock sector boosting meal demand. For 2025, the focus is on operational improvements and cost savings to weather less favorable conditions and seize opportunities later. In the first quarter, operating profits in Ag services and oil sales are expected to drop by about 50% compared to the previous year, especially in crushing and RPO subsegments. For the full year, soybean crush margins are forecast to decline, although operational efficiencies should mitigate some margin impact.

The paragraph outlines financial expectations for various segments of the company. Canola crush margins are anticipated to decrease, and RPO operating profit is expected to decline significantly. Insurance recoveries for the Decatur East claim are projected to be $25 million, down from $76 million in 2024. In carbohydrate solutions, a decrease in first-quarter operating profit is expected due to challenges in the EMEA region, despite strong North American performance. Ethanol is projected to have break-even EBITDA margins due to high industry run rates, and the full-year outlook suggests reduced operating profit due to margin moderation. Nutrition is expected to experience a 50% drop in first-quarter operating profit, affected by higher costs and lower demand. Insurance proceeds will temporarily stabilize Nutrition’s sequential operating profit.

The paragraph outlines the company's financial outlook for the year, predicting an increase in Nutrition operating profit with revenue growth driven by the Flavors business and improved supply chain execution. Human nutrition should benefit from recent acquisitions and cost improvements, despite challenges at Decatur East, while animal nutrition is expected to see cost optimization and better profitability in the Pet business. Insurance recoveries are expected to decrease significantly from $71 million in 2024 to $25 million, with adjusted earnings per share projected between $4 to $4.75. Cost reductions of $200 million to $300 million are anticipated, with less insurance proceeds in 2025 compared to 2024. Corporate costs are projected to be $1.7 billion to $1.8 billion, with the impact of cost actions and lower net interest expenses offset by higher legal costs and changes in incentive compensation.

The paragraph outlines financial expectations and organizational developments for the company in 2025. Anticipated challenges include lower results in ADMIS due to reduced interest rates, capital expenditures between $1.5 billion to $1.7 billion, and depreciation and amortization of about $1.2 billion. The effective tax rate is expected to increase to 21%-23% due to changes in tax credits, earnings geography, and global tax policies. The company forecasts 483 million diluted weighted average shares outstanding and a leverage ratio of 2 for the year. The focus will be on strengthening internal controls, improving operations, reducing costs, and enhancing long-term value, aided by leadership changes including the appointment of Carrie Nichol as Vice President and Chief Accounting Officer.

The paragraph outlines ADM's strategic focus amid external uncertainties. The company is emphasizing internal areas they can control, concentrating on execution, cost management, and strategic simplification to optimize their operations and portfolio for stronger returns. They aim for strategic growth by investing in successful areas and maintaining capital discipline to return cash to shareholders. This approach is expected to set ADM up for success in 2025 and offer flexibility for short- and medium-term opportunities. The paragraph transitions into a Q&A session where Tom Palmer from Citi inquires about the anticipated profit recovery in ADM's nutrition segment, discussing various headwinds and their impact on expected inflection as the year progresses.

In this conversation, Juan Luciano and Monish Patolawala discuss the performance and outlook for ADM's Nutrition segment. Luciano outlines three main components affecting the business: the Specialty Ingredients plant in Decatur, which is currently a challenge but expected to improve by the second quarter; the flavors and biotics sectors, which are showing strong revenue growth; and the animal nutrition segment, which is experiencing steady margin improvements. These factors combined are expected to drive a recovery in the Nutrition segment in the latter half of the year. Patolawala adds that despite a softer start in Q1, the results should align with Q4 after accounting for insurance recovery, with improvements expected from Q2 onward.

The paragraph features Andrew Strelzik inquiring about the outlook on vegetable oil demand, specifically soybean oil, in light of the 45Z guidance and the exclusion of imported UCO from tax credits. Juan Luciano responds, emphasizing that while the initial guidance received in January is somewhat constructive, much is still unresolved and clarity may not arrive until late Q1, by which time Q2 decisions may already be made. Luciano notes that the exclusion of UCO could increase soybean oil demand, with its market share expected to rise from 35% to 40%, while UCO's may decrease from 20% to 14%. He highlights the ongoing challenge within the Ag Services and Oilseeds Industry to accommodate increased production from the U.S., Brazil, and Argentina amid uncertainties regarding tariffs and biofuel policies.

The paragraph discusses expectations for improving margins as policy uncertainties clear throughout the year, particularly benefiting the livestock sector and boosting the demand for soybean meal. The USDA predicts a 5.5% growth in meal consumption, potentially higher. The paragraph also notes the impact of global biofuels mandates, including those in Europe, Indonesia, and Brazil, along with additional demand expected in the U.S. The speaker anticipates differing first-half and second-half patterns compared to previous years, heavily influenced by government regulations. Following this discussion, Ben Theurer of Barclays asks about guidance for Ag Services and Oilseeds, noting a tough first quarter comparison with expectations for improvement from the second quarter onwards.

The paragraph discusses the challenges faced at the start of the year due to lower than expected crush margins for canola and soybeans, influenced by previous projections made in Q4. Despite this, improvements in manufacturing, project automation, and digitization efforts, particularly in the oilseed sector, are anticipated to support profitability. Additionally, the company expects growth in direct farming procurement and destination marketing. The second half of the year is projected to be stronger, driven by potential improvements in soybean oil and clarified regulations for biofuels, which support a positive forward curve.

The conversation involves Juan Luciano and Monish Patolawala discussing their strategic outlook, noting that business activity is expected to increase in the second half of the year, influenced by factors like weather and crop yields. They mention the absence of a negative factor in Brazil, which is seen as a positive development. Heather Jones asks about how tariffs might impact their operations, especially in North America. Luciano responds that current guidance does not include impacts from tariffs, specifically noting that Chinese retaliatory measures don't currently affect agricultural products, although past experiences, like reduced corn imports from the U.S. in 2018, serve as a cautionary reference.

The paragraph discusses the impact of Argentina's recent export tax revision on the soy crush complex, highlighting the uncertainty of future developments due to Argentina's microeconomic factors. Juan Luciano mentions that the policy is effective until June 30, and so far, it hasn't had a significant impact as the country is still in the harvest and planting phases. He notes concerns about weather conditions affecting the crop yields, which don't look promising without expected rains. Additionally, there are specific regulatory details to monitor, including the requirement to bring dollars into Argentina within 30 days after shipment.

The paragraph discusses changes in export financing requirements, reducing the timeline for bringing in export proceeds from 30 days post-shipment to 15 days after obtaining an export license. The impact of this change is uncertain and will be clearer by April during the harvest period. Additionally, the paragraph touches on the 45Z tax credits for the biofuels industry, noting that interim guidance allows tax credit accruals, but final guidance is pending for payouts. Smaller biofuel producers are shutting down due to the removal of the blenders tax credit impacting margins, pending clarification and decisions from the Trump administration.

The paragraph discusses Monish Patolawala's key priorities since taking over, which include operational rigor and addressing material weaknesses in financial reporting. He highlights progress on these fronts, particularly the focus on improving controls, enhancing the design, controls, and documentation of inter-segment sales, and providing additional training to personnel. The aim is to sustain these improvements over time to eventually lift the material weakness.

The paragraph discusses the company's progress in addressing operational challenges and cost reduction plans. Carrie Nichol has joined as Chief Accounting Officer to aid in remediating material weaknesses. There have been improvements in manufacturing outputs in North America and EMEA. The company plans to cut $500 million to $750 million in costs over the next three to five years by enhancing manufacturing efficiencies, reducing third-party costs, and controlling SG&A expenses. They aim to simplify their portfolio and improve margins through consolidations and divestitures. Despite inflationary pressures, the team is confident in executing the cost reduction plan.

In the exchange, Salvator Tiano from Bank of America questions the company's financial performance in Q4, specifically regarding human nutrition, where despite positive commentary on volume and pricing, the reported earnings seemed lower than expected compared to last year after adjusting for a write-down. Monish Patolawala explains that the specialty ingredients business remains a significant challenge due to inefficiencies from downtime at the Decatur East plant, higher insurance premiums, and lower pricing and demand for texturants. He mentions that these issues affected Q4 performance and are expected to continue into 2025, though improvements are anticipated once the plant is back online and further actions are implemented. Tiano further clarifies about the timing of issues due to a fire, implying they should have been resolved by Q4.

In the paragraph, Monish Patolawala explains that having inventory in Q4 2023 helped mitigate the year-over-year impact. He also notes that prices and tech spending have decreased. Salvator Tiano acknowledges the response, and the operator ends the call by thanking participants and allowing Megan Britt to offer final remarks, inviting further questions to be directed to her. The call concludes with an invitation to disconnect.

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