ADM - Earnings call transcript Q4 2017 | Archer-Daniels-Midland Company

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Operator

Good morning, and welcome to the Archer Daniels Midland Company Fourth Quarter 2017 Earnings Conference Call. All lines have been placed on a listen-only mode to prevent background noise.

As a reminder, this conference call is being recorded. I would now like to introduce your host for today's call, Mark Schweitzer, Vice President-Investor Relations for Archer Daniels Midland Company. Mr. begin. may you Schweitzer,

Mark Schweitzer

Good Starting welcome today's tomorrow, at be Jack. quarter webcast ADM's earnings available webcast. a adm.com. morning, you, to and fourth will Thank replay of

statements this says statements risks that are industry future of X, that following For reflects company to statements those assumptions presentation uncertainties. constitute review economic based some extent and assumes should carefully events. factors in Chairman new update and many permitted please concerning of results. you performance, and conditions, ADM factors additional as management's the reports. Harbor any could which factors materially Safe circumstances, to this result under obligation quarter. Executive Chief current our actual an slide and views and that today's and no those On assumptions statement, assumptions reports To these will with overview Officer, the cause Juan our presentation, provided of results in are has forward-looking These company's subject forward-looking to provide its a on SEC that Luciano, future comments to and financial turn webcast, or information law, of ADM and in the the applicable on information from file estimates our differ SEC

over turn Juan. your questions. X. to forward-look. our and the our of our take in finally, review the and to I the update results, corporate performance as And they slide Then, of provide highlights drivers Young, financial results, will turn progress Chief Financial call Officer, of will XXXX strategy, Ray Our year as well Juan will now calendar our Please the an quarter. will discuss

Juan Ricardo Luciano

morning Mark. Good quarter reported of fourth we earnings This joining you, you, today. $X.XX. per for morning, share adjusted Thank us all, Thank everyone.

$XXX million. profit operating Our adjusted segment was

own achieved our the record quarterly I First, of employee XXXX, not that course, quarter. a delivered quarter sake, in the hand-in-hand are in separate company's We value These pulled and in achievements. months ancillary going that have safety XXXX, were levers or performance. to fourth cost help with solid fourth interventions we history. which we records. ended best three to control, that its and report deliver initiatives we employee for shareholders. We us we XXXX want with capital the of including minor We, throughout safety value see And safety and for year overall the under in

growth, returns as or and $X.XXX, For earlier XXXX earnings improved delivered a dividend capital, given solid on X.X%. our generated we adjusted positive invested EVA. this a of double-digit And increase flows, whole, we morning announced cash

the forward, be to our focus on Looking continue drivers own we to of our success. actions

food as marketing, and and creation increasing areas expanding innovations, international help wellness, in ADM health as capabilities and such our destination and implement Our beverage continued all growth value strategy. we position and to presence for

recent our businesses. actions. about outlook is harvest I All factors and this look capitalize be company benefits of that to today, call, even for Later I lead our from ADM the at reap further more to macro investments, on optimistic XXXX. see on I'll our poised these When discuss us a trends,

I'll call Ray. the Now, to turn over

Ray G. Young

$X.XX quarter year provides Thanks, everyone. good quarter. was in quarter. some the EPS Juan, Adjusted prior X morning, for up and the $X.XX, highlights the Slide financial the for from

down operating quarter. $XXX profit segment million million, ago $XX the was adjusted items, year specified Excluding from

quarter for positive a below quarter of effective tax tax releasing rerating and annual assets benefit of the was year, recorded Excluding includes tax comprised of benefit million tax our partially from This tax benefit XX% tax $XXX U.S. of a XX% a the by repatriation due estimate a $XXX XX% effective million. is The favorable from to was benefit XX% and effects offset fourth previously tax for the from $XXX of deferred tax discrete million U.S. approximately tax the $XXX deferred liabilities rate and reform rate reform, forecasted to rate and items. net million liabilities.

tax previously into to ADM forward XXXX, down range. Looking before range the XX% tax be rates historical the you level items from expect we to as that XX% to the tax of rate we effective for in XX% effective our discrete XX%, to have communicated

in above four XX of can reported share. million X.X%, basis. the our $XXX quarter of average of XX the earnings $X.XX you of generating thus $X.XX Appendix, see positive quarter chart adjusted of reconciliation earnings trailing per share XXXX Our WACC ROIC is X.X% to trailing On annual almost on points our quarterly adjusted the basis EVA four per a of

quarter, line. share corporate summary we and of net an share components this to activities impairments profit the related an tax a benefit had to $X.XX our per related asset charge $X.XX and of and provides reform. Slide restructuring For X operating per positive settlements, U.S.

operating some results. Before like to of net quarterly relatively expense the the lines, items for our was quarter at corporate discussing flat affecting the the million. interest highlight results, corporate I'd In $XX

an the spending and expense $XX related for in ahead, recorded XXXX relatively million for to the million to year expense prior $XXX net quarter to a lower similar projecting calendar in reduced were the XXXX. corporate down special we're costs, we Unallocated year, lack be employee year of corporate projects, costs investment in to ago initiative. the an versus Looking interest largely due of

the in primarily the transformation year, we're readiness and curtailment million in and and company benefit XXXX, business XXXX Minority the million increased plans. range due unallocated from interest to to that benefit innovation, $XXX a costs quarter For of activities of other an $XX deferred the per guidance corporate from by R&D, calendar lack provided XXXX. we the reinvesting quarter we gain for expecting with you $XX to charges year-ago changes that in related million, OPEB

had working operations capital versus before billion capital favorable just working last capital Turning to $X.X $XXX slightly down million, from We on in the about large use a prior slide cash generated X. changes year. year. of working compared flow to statement changes, of We the

prior-year working was approximately were year. higher much period. in including than with spending the capital, So line our our the for capital cash operating expectations $X billion, Total updated recently flows,

We to the spent $X.X Looking approximately XXXX investments. approach of we less through than and credit in shareholders billion throughout invested of planning guidance, leverage $XXX acquisitions ranges. year to $XXX our to beginning dividends million, approximately repurchase metrics reduction share as for million our we're We and amounting capital harvesting repurchases. the shares, in year the desired million. ahead, We recent spending to to benefits as capital our a approximately start expect returned in the of various $XXX

the of For XXXX, to other offset our framework. context of and benefit least at allocation in cash of flows to we more, All repurchase operating strength dilution the do capital from potentially expect cash. this be our shares level at and uses subject to will plans, the

the for was Slide count of diluted shares share the as outstanding, million average our of XX the Our balance this XXXX quarter X million sheet highlights year. down approximately from shows of XXX XXXX. and XX, beginning shares December

strong. remained sheet balance Our

We year for is Our about was ratio net solid the an period. in the industry. basically net line balance, resulting XX%, a billion. ratio debt with operating investment this that cash, company less $X.X debt grade about with $X.X in $X.X capital of to working debt a in finished a of comfortable billion billion, Total total year debt ago is of capital

December. had equity the in billion $XX.X primarily billion at shareholders' of in from $X.X U.S. strengthened Our changes as up We end of billion year, $XX.X level currency translation dollar. due the against count was last global to capacity currency available credit the non-U.S. the

add available cash, to you billion short-term of $X.X had the If liquidity. access we

I'll excluding our discuss $XXX specified quarter, million earned million items, X. performance profit last fourth Next on fourth of we operating down from the In for in business year's $XXX slide quarter. quarter the the

profit our XXXX For some higher operating of XXXX. conditions, difficult adjusted year, year $X.X was than despite calendar slightly operating billion calendar segment

review the was I'll X, performance Merchandising Handling each prior on year slide of Now Ag period. were over year-over-year. and the up segments. results Starting the up Services of

freight year-over-year to we of river margins. Milling Transportation a due see and quarter U.S. competitiveness volumes values. which conditions negatively were lower of their loadings continuing we and the the in executed down from Icy years. traffic. and see impacted lack and quarter. impacted to towards insurance Global Other well, due continue including and also exports, America, captive expanded settlements earnings claim Our our in to capabilities with positive third in where Handling and other have Egypt marketing, in were contributions positively recent quarter, volumes both good lower In operations investments the for prior-year consecutive from our period grain Israel, results Merchandising North by also Trade insurance the team barge we and destination to margins. end results impacted decreased for results our and are delivering income

had delivered another in North the a results with slide Starches solid Processing margins, with strong in American solid the and prior-year to turning quarter, sales Now growth sweeteners performance particularly liquid higher quarter, XX, our and business. period. good Corn Sweetener over

including operations, lower, deliver period. results. recent acquisitions significantly years, in margins pushed prior-year higher. Our continued as industry expanded Ethanol stocks with to down production good recent were Chamtor, the European results were to we of which Bioproduct compared the

ingredients positions of specialty quarter, our However, to the to higher a team's business Nutrition as execution strong bear these efforts was management impacts. ongoing negative cost significant portion year-ago fruit. than risk offset continued the the Animal significantly feed improve in

down as quarter, in of and to numbers environment. year's were of late impacted quarter. the results volumes were alternate compared solid Refined of biodiesel Crushing tax Other we increase. all quarter, were up negatively quarter trend last package credit improving XXXX. primarily margins fourth the a and regions continued quarter down a the weak indicators see volumes delivered quarter Therefore, fourth Weakness Crush versus globally. of to although due results. and Throughout Refining, for the Processing solid year. margins oils the and fourth effects meal of to proteins versus Origination Oilseeds XX, improved Biodiesel margin the the demand South continued global slide Packaging, and to to fourth diminished results saw were soybean lower this the benefiting margins Origination from we American in results. the XXXX livestock volumes Turning in of was and in lack strong,

year up prior Wilmar the on slightly period was the over Asia results.

after in from in several and nutrition and see the for margin benefits to quarter, and in throughout improvement saw positioning cost products. the last in benefits finding We the continues significant management inventory WILD year, health period. by businesses quarter, Ingredients innovation Flavors the growth, some were slide double-digit difficult period. over year-ago Now WFSI margin increases versus delivered as operating turned with as results regions, driven a well up solid XX, across business improvements. sales year-ago onto up The all natural results a the including improved actions new the Specialty particularly self-help team uses proteins. improved

call Now, I'd the Juan? Juan. like to turn over back to

Juan Ricardo Luciano

solid operating capital targeted $XXX million of of and to important with creation. our to how a of and for Thank invested all how than cash and to EPS XX. told, adjusted in improve execution Ray. reflect and like profits higher control XXXX, savings, $XXX about adjusted EVA resulting run-rate bit on to Please shareholder generated we you, finished sales shareholders. slide for XX.X% a a measures positive We strategy, turn our capital, helped we cost than returns and in XXXX took with areas well-above of our grew almost advanced our contribute I'd with than million how flows, capital actions $X.X in with more the little returned take the year to whole, WACC moment as million, $XXX higher achieved XXXX, billion full year. XXXX, team our XXXX value results costs to by All operating and monetizations

As I best ever. employee had mentioned earlier, we safety record quarterly our

for In managing so on still our our are in recorded while addition, particularly proud this value month running and very is our our beyond. rank closer did critical for that to even parts continuing business end we the remaining safest and day-to-day safest. and while to our growing other December in And positioning and in for by months the was chain true value business We've XXXX we've core, strategically, that two today creation our among strategy execution the XXXX been strategy, our the we focus team ever enhancing I'm customer. success. to the out set consistent our tomorrow readiness, of all in advancing of

in were aggressive our in contributed, pillar, Crop day-out. Global took investing as each execution example, strategic strengthen and as to effectively first efficiently Ag enhancing our the Service and core, money Services to actions sure our possible they business Risk value For and making Trade business day-in deliver and divested time operations.

worked and resulting the Our to streams XXXX, deliver our that accomplishments readiness, has diversify Oilseeds a enhancing of operations delivered margins. more and second business. to improvements products into of a Bolivian synergies steady variety success. to than capture lysine, is turnaround with team important productivity Oilseeds important our wider scenes, a sale readiness is announced Corn behind projects. of yield oil in in that WFSI individual sales X,XXX our continued is hard We pillar, little bit a throughout to more of in our And some critical the pipeline XXXX. had one but help

transformation We business globe. our several and we across project business have our processes rolled regions, around continue the business to of out our XADM as standardize

looking We forward rollouts the XADM, are throughout seeing to with pleased XXXX. continuing with results and we're

contributed improve leverage cost delivered in streamline business best intensity, yields, technology XXXX. Our the yielded impressive we to operational energy excellence efforts and we improvements as Each reduce and to processes. run-rate savings practices have important

Corn engaging program frontline that performance we year. improve standardize this invest continued to excellence their help strategic further first value program our locations to completed In to pillar, the our across plants is and enabling have initiative, processes the growth, and in capabilities we business. to rigorous year grow this launch down of and, several chain. Two have is advancing other it a Our plan team colleagues empowering, the third

to Our new solutions with Ag continued in our its for Services particularly to business Israel marketing, offer destination joint end-to-end venture. investments ADM customers enhance ability

needs and with and the We prebiotics expanding taste, the to WFSI continued in in treats animal couple new entered the ago In volumes. by nutrition, to global personalized both its our area capabilities, all Crosswind may XX% to including France agreement facilities and well support with China, a California acquisition facilities development Eaststarch Biopolis health lab a probiotics and feed. work nutrition, Industries. the nutrition into enzymes centers year, in the the in with allow acquisition agreement Australia, and in and destination team expand Turkey opened The a also research in meet entering animal scientists and state-of-the-art Bulgaria. in ADM just to joint the for growth For their Corn expanded in up health. And and of of as of continuing capabilities Clinic, feed function, capabilities important we'll food former development nutrition in and delivered footprint team build pre-mix Sweeteners work. with Vland hand-in-hand of innovation markets China coming entered a Chamtor acquired to Starches business and that improve bioactives with of that and Singapore. enhancements in we texture. market Mayo our be growing at Biotech commercialize This our China for are customers and opening our pet which to research months, animal facilities new and digestive the to research weeks beverage we of develop We're

delivered advancing balancing and pace our to for while in the substantial shareholders. returns with achievements approach investment of our team has disciplined current delivering strategy, Our value

almost are focused of and businesses very ranges. confident cash flows. is end many operating the generated in That our period are when were billion by returns why increasing We we margin flows X%. almost We dividend $X their our lower of conditions a cash quarterly of in historic at on about

we're and about allocation a We than are better and than for more proud to framework, executing being strategy while consecutive have increased for delivering years XX even dividends. we today, building even uninterrupted bigger, our tomorrow. issued of disciplined capital XX dividends value By are our years more

next our generated our Between throughout to to of We're momentum like in pillars, our several we XXXX. take good offer the to to strategy, we the tax looking the would strategy XXXX. our actions execution unfold in strong we as of outlook for forward I are quarters. continues continue the questions, all your three benefits a have year and looking reform, through in and take our we that Before implemented XXXX

in for U.S. a will continued which we're marketing. global markets, Trade In me will American into Let first The South Services, and be competitiveness Ag agricultural exports. opportunities quarter. for moment planning the moving of Global talk crop the about impact destination

We business, prior-year to with Ag margins line expect QX should Starches patterns in In quarter. be in thanks Sweeteners as the revenue during largely and well in will the to growth results ethanol, crush, recent Corn, outlook we see performance Services' the In quarter. and period. increasing improved to stronger optimistic the Nutrition as seasonal think positions. normal experience to likely a flows. margin demand with in Corn see prior-year and we're the trade Altogether, first positive cost is in movements about we Oilseeds, improved as due quarter are line for is that the Animal

the biodiesel We creates are of from continued biodiesel credit planning the margins. blenders' results U.S. businesses, although strong our RPBO for in status uncertainty

We the expect and quarter In as earnings similar planning solid up are XXXX and the WILD. WFSI, last than Campo for growth first lower results we from we be of Grande to see QX in Oilseeds strong of first year. to QX to quarter sales continue ramps

Looking full conservatively. can although we control. continue the planning continue levers focus certain shoots, on Hence, to are year, green we we see we to the to

and have looking build, to EPS year year and in are from and growth. a which for quarter base we of We this this a solid good earnings

components. I how Here's the from perspective about growth think of four

mitigated earlier you the we First, did might in what took not in end to recall, XXXX. seeing We're as call and do results should. we well earnings leakages XXXX things we impacted as XXXX. actions our probably fix as we of leakages, in that results of million $XXX that be benefit will to initiatives this leakages, There about are our XXXX should those

we year, from reduce and the additional readiness achieved savings We'll actions. last see we'll Second, results costs. we the run-rate take continue cost to will

$XXX set savings of in have the run-rate We by target the end for new XXXX. million

clean the of growth Third, all made XXXX, That about and right-hand And invest to on through the from in good lower U.S. shareholders. the four about We'll for feel And side going initiatives. and we're the approaches benefit XXXX. we optimistic and demand are are we solutions continue execute earnings, we and Whether see we positioned generate think businesses value labels benefits of of for see to beyond that why in We're very or XXXX. going continue grow consumers expense new proactive or full-year we returns, results feel natural both health and to population investments also particularly our will organically well feeding a growing high improve continue will in reform. M&A, chain. the create our to I looking today, growth value. nutrition, is finally, our I deliver tax the future from and and to to value to tax will about

about So our one to before press in up we the want Bunge. the comment. I are aware well and we results, questions Obviously, for ADM the open of make call stories final about recent

I'm do not we forward of we to understand look forward outlook. these matters, to you but Q&A, sure your sort we're on move going As our questions about comment and that to earnings taking

open line please the Jack, So, questions. for

Operator

you. Thank

comes Your Ken first Zaslow line with of from Bank of the question Montreal.

open. is line Your

Kenneth Zaslow

morning, everyone. Good Hey.

Ray G. Young

Good you? morning, Ken. How are

Kenneth Zaslow

the year, year? growth talking do you first One degree able that but questions. than last the is, first develop growth. from to to your greatest be a is And divisions you have then see Good. the talk see weakness of A follow-up. through quarter of to about seems yet to in outlook and do the how some going you're you bit be I – of the lighter the which couple quarter, Where offset expect to little a when businesses, about

Juan Ricardo Luciano

Thank Ken. Yeah. you,

plans have XXXX and start-ups you to should XXXX, making impact start P&L should bit during those the see we going and have I if very a earnings XXXX the were both last the to operations. million coming At good think we're talked little XXXX of investments results $XX about in benefits not some that a year. we WFSI we we recall, seeing of call, of into in the due and

calendar have able in maintain will internationally, Starches, we feel American to So, margins Sweeteners better than year where contributors. grow, should be that we but and demand We the overall for into XXXX. ethanol, to Corn business we think uncertainty see from strongly to grow ethanol margins, a major XXXX. Brazil year the China the some achieved very much about that exports, WFSI We business encouraged course, they're and see, the this continue the are and North of having of side with especially industry year we going particularly about been

getting we and are supply/demand seen how for this we've little in encouraged quarter, mill through and and seen be oil, Oilseeds, tighter QX. we've that to the very that appears a For bit

year running this proteins see headwinds had that have are most of from part. issues our lot all for alternative So, whether in or a and avian the crush competing terms it that lot plants hard, a the or subsiding that and was of subsided we Argentina year, the last we some flu

Ag quarter. For you bit Services, a think I of little saw this

of the year was and reduced Global see optimized the self-help we result as we we And operations think management to mostly some in by. and effective Trade expanded go going I better improvements from we're marketing. destination a very business that, in the of there XXXX

When put improvements about growth rate, for in continue feel of see XXXX the XXXX our I businesses. So, we said, that execute strongly, on to earnings you year and tax cost we lower on of and very us. another a the different very that strong as benefit still we of top a

Kenneth Zaslow

of or do Will over about look really last second to going of couple initiatives years? And expansion my minimizing trying kind changed What the question and value-added you where on about terms change? next the Has for that think how term, need forward to that in a anything reduce the years? focus you has did products you that three changed? to Oilseeds. couple you in years, into I two your It seems long just at strategic think is, the of like when be of over

Juan Ricardo Luciano

strategy of implemented, our has it our geographic been Yeah. that part we've growth we've been last growth consistent was and we fundamentally One expansion. years. three a and think the few pillars growth over Ken, strategy, I the have

ADM geographically, continue in better done completing value the and good balanced job Europe. to make we've a of We chain

you about Europe business. ago, If was seven Oilseeds years think mostly six,

Ag Now, we we Services bought have our as Toepfer.

we have Now also UK. the in milling

corn and Eaststarch have with bought WFSI. now Chamtor, expanded we we also and also We

So Europe it's South has that to the and but has the We've trailing South Europe America now been regard, returns. matter same built U.S. the extent is is in of that driving a built, happened in America, with Asia. done same and the Southeast

will in very to we So plug invest holes it's selectively, just but don't our to We and want we just value because that big. chain. invest said strategically to continue, invest, to be want

aspect. one that's So

getting nutrition, And so. nutrition, second The it's do to of last personalized units, food year. whether to beverages, the continue and of we aspect market-facing in that have gotten, continue we animal third it's was it's we to and that whether was and XX% Wilmar drive the the whether implemented aspect growth to will growth the it,

and But So strategically the deviated and allocations best the haven't that. perspective, three continues depending or are those a the We returns. one if will, three other focus. strategic the (XX:XX:XX) achieving that from opportunistically the to from do growth you be of thrusts we capital,

Kenneth Zaslow

Great. Thank you very much.

Juan Ricardo Luciano

welcome. You're

Operator

of with question comes line next Citi Driscoll Your David Research. the from

open. is line Your

David Cristopher Driscoll

good and you Thank Great. morning.

Juan Ricardo Luciano

David. Hi,

Ray G. Young

Good morning, David.

David Cristopher Driscoll

back the benefits. Ray, could just you tax go reform over

XX%. was you range tax and a gave XXXX think to of I XX% rate XX% the

then the give how the something top your as sounds on to benefit to tax. benefit, the understanding I'm XXX some like geographic hear do only thoughts a big us basis sure it's mix, the tax at reform with I'd to point has range but like So just end was? it but And

Ray G. Young

Yeah.

if of rate was you discrete items. was For XXXX, XX%, the but some David, XX% the exclude it

we items have year, plus. like favorable it would it's a XX% Normally, XXXX, our it some was kind So, plus is items like of like year rate. think these to discrete Last This about a How is normalized in or minus. XXXX. did I tax be could minus.

David. XX% rate to That's go type about we'll of rate. with reform, of I a to kind So, U.S. XX% it, tax a therefore, from how think XX%

the XX%, just the So, were in context, on to XXXX which XX.X%, to of if is the of apply pre-tax of midpoint results. profit, that our context XX% to take $XXX you our $X.X XX% million mean, benefit – billion XXXX, about it's to you for I say, so give range, if relative you into

David Cristopher Driscoll

any Did you was And your this strategy? change reinvest that investment some you these kind then otherwise because of to have? of money wouldn't tax there of benefits,

Ray G. Young

The way context of framework. the flows, think the example, view my to million I in it about additional capital if is $XXX it, reform, the XXXX David, tax in in had benefit we would cash allocation our

of as So, therefore, our there's million. and flows is, of actually And framework, will there's allocation capital then there's know, you context up M&A. cash offering cash shareholders, that will go the actually return three invest to by we which our $XXX into pillars, being capital investments,

about would shareholder in of $XXX to into There's context value. million, nothing going I targeted the be but we're specifically of our it towards thinking terms how how framework it. maximize that's goes So, the allocation

David Cristopher Driscoll

pass business quarterly the over I'll of Juan, Services, this in Ag profitability. just one map on been all here, of terms and question it for but has kind you along

quarter. versus talk This Ag scales high priorities? Services? your list strategy Agricultural is investment Can other quarter or a versus you in on up list kind nice on acquisitions building looks distinguish Can How this investments priority high the like segment, the Services? between of is you just about and within how all the then any CapEx priority the in

Juan Ricardo Luciano

David. Yeah,

that quarter at of before capital the were reason we the The important yield. and our the is said Services increase in the going Ag as we it world maybe that from earnings, were into come going will very part going a that we is look we in – mostly forward, because, production I to business. So, think last said deemphasize we area

precision agriculture, area. about intensity, the more but more So for same

an that origination, perspective Ag So actually add our share footprint. to of Services from didn't to our feel keep we needed we to go geographically to

businesses. continue that grain to feel in And the chain, between integration we've to the putting we we the So make processing asset. seamless more efficient business asset, need some been add that or make where underrepresented to we places and

the in investment El port de we port, the the in Santos, investments the in Argentina the So, in investment Brazil. of in Tránsito the northern made of the part Porto last –

been think that. So, doing we've

to in barge line continue River. Danube We our the improve

think I time, to what right the of the in in the given where see the we matter in So, what's need. we just point felt forward. higher do And value need left capabilities this chain it's at side side, build the going of versus we a see

David Cristopher Driscoll

it pass Thank you. along. I'll

Juan Ricardo Luciano

Okay.

You're welcome.

Operator

from of comes Robert the Suisse. question line next Moskow Credit Your with

open. line Your is

Robert Moskow

than Thank Juan, about specifically I us on And to to thought months global and capital Oilseeds. wanted do of to? type your as your supply pulling is it's that your thoughts what was think reaction you being three you. sacrosanct Hi. do acquisition? what – single remind is on comments balance? three months was Most in balance A it M&A more demand right today willing then of now, just spending of to focus balance kind out ADM, to know to a the Thanks. wanted it your and on you rating I And that. was on be obviously, how focused. attractive leverage more You've, that reaction view it Was of Can ago? in back of view at ago much would you secondly, become in us take

Juan Ricardo Luciano

Good Rob. Yeah. morning,

parts. question take the let's So, in two

we Services bit with developed we you What we saying geographically I continuation of capital look question Actually, went integrated and of chain. value we first was over David of time is, of will, before, as as the Oilseeds. then in our at our Ag more business, is has That's and allocation a the little the was through first everywhere from one terms So, if the that left back Oilseeds into side, ADM. grain. in been why felt,

naturally, into and into Oilseeds Ag with So, been and America earlier Wilmar earlier South Services Asia. into has Europe, earlier

to with Corn lack mass side volume value of up critical our So, or right what of, of if of is because actually the do our we different in beef the and lack WFSI, will, planning geographies. chain you were just

Europe, in to were America, our and in needed then complete we Corn we in not the ingredients Corn are with to in We build South value make not footprint. chain

we a right discussion little side. was left didn't that side bit much need the the on that versus the So, about

we of it we and in are terms maximizing Oilseeds as shift as our can, that is, as In today running to every basically footprint can for we are long our sense. as soy we expectation hard makes

to very before has we'd plants we many debottleneck business and build opportunities are into integrated investments, to So plants. from bullish extract those issue the – that those market operational particular. to and continue rather is continue The excellence building And apply facilities. very about make and more new in

but to footprint, that continue places makes in in we that will build efficient, footprint, capacity. just need assets, facilities other build as more game will, capacity. to we a where very than think are assets than refineries, So, there? I is, diverse having And well-integrated switch with more you new you capital efficient investments grow with having Our if assets here more can out the your end existing footprint, build isolated you

of shifted what we're It's trying terms availability So, on because the it's lack of capital, build left the more the we to side. the and like to any of demand of not footprints right from. naturally started in

So, in other was I'll much Maybe not that one, let the sense. – have about... strategically, Ray it on changed

Ray G. Young

Yeah.

as what our a to in balance sheet company markets the and in order in to weather which right leverage in position in have very increase question, us important maintain We seen that's at markets. ratio equity leverage. we we now. strong maintained terms is volatility It where to for saw our I happened yesterday. net are a sheet. mean, billion well. a we're debt working Rob, We've seen I of can $X in price our reason billion spikes XX% position, past why to very in So, strong $X things as is a And could as the the indicated the around capital the we actually balance comfortable Over view call, you've capital. total these ag balance competitive in view the cause whereby commodity on sheet the commodity happen ADM time, being markets strength, I increases

to a important us grade sheet it rating. solid therefore, a So, solid is credit for maintain investment balance with

to we've monetizations you some perspective ever capital but that never, A the for buy order the We raise we've can from company, asked be of rating, through whether partnerships We've say in many from perspective, question, my done. from never avenues we so with will our divert our my people. done got it'd You equity.

portfolio. rating, a spikes, in terms So, grade capital flexibility therefore, working maintaining of in credit our of terms as paramount for investment us managing solid maintaining perspective, my sheet is from a as solid balance handling flexibility allow to well for

Robert Moskow

factored this $XXX stop decision repurchase share million further, thought is the Ray, and to balance that your where be? you because it at that So, what's the was not to extend you year want sheet into

Ray G. Young

Yeah.

As that comfortable were well I whereby ratios And the EBITDA, total capital, now. kind of terms we levels are of in we as right I frankly, where debt to felt those comfortable. feel look felt approaching as debt at metrics do we to

all share I additional going to can Now, what reduced additional more could less have this share repurchases offset as of generate we like flexibility additional our that up plans That were again, in monetizations kind going indicated, XXXX in dilution. of or well. forward, for if more is we do as we cash But is do. the to open to repurchases flows context

allocation the framework in for So, that XXXX. back again, we in everything's context capital therefore, announced

Robert Moskow

Okay. Thank you much. very

Operator

line of Your Duignan next question comes from with Ann the JPMorgan.

open. line is Your

Ann P. Duignan

morning. Good Hi.

Juan Ricardo Luciano

morning. Good

Ray G. Young

Good morning, Ann.

Ann P. Duignan

gone obsolete your talk of probably average Maybe back going on should we points talk Could we forward, your term? or cost now how normalized about tax XXX does should the this about a of weighted basis Can you capital for lower to should XXXX that is above of question different? rate. that anticipate about long rate Ray rate And up, your given the for And just is have the that? that or it for basis you cost XXX of what and be lower capital something hurdle then debt's tax cost points you think that?

Ray G. Young

Sure.

WACC risk rates, rates, tax terms of interest terms In adjusting XXXX, for the for beta. did through annual in we analysis go our of premiums, as as well

to going we return went addition, XXXX And With in hurdle cost So, various components. those all increasing of we is actually we in after where the the we'll X.XX% all that, January. those full up through factoring through numbers it be ended long-term as our objectives rates you you hurdle above XX%. of know, set as our our well very, at very remain capital. rates, in know, respect high, And to month

on still when even be should with WACC what we So is the updated X% analysis, the all based in through our of our long-term it went analyses, annual consistent short-term But WACC WACC number, calculations. is up number long-term rates, the the on to move the that agree rates revisions the WACC to we X.XX%. factoring or interest based upon and tax of going

Ann P. Duignan

it? for should And your that about your Is have XXXX for target then up returns we the Okay. gone think correspondingly? way own

Ray G. Young

Yeah. I to will mean, want so as that always well be objective our Ann, get annual strive we you WACC, returns above here. to know, our

Ann P. Duignan

happening Services What's revised. if your appreciate are you. Section heard the Thank get a it XXXA impact it of will that? business, more law is bill. and both as around Ag a it and of revised, There about lot strategically, what How not Okay. hearing? And talk I the ethanol then would guys consequences business, that tax of we've result the the you there and get out color. unforeseen a does lot perhaps

Juan Ricardo Luciano

Ann. you, Thank Yeah.

So, make it the intent revised XXXA if clear it that is to change will. wasn't of provision in this you industry, the the

from on And fixed recognize the so that certainly they both the House our received have be it in team legislatively has been has of consequence, we senior XXXA engaging in the will and significant and Section near unintended assurances that, future. Senate that and members Washington

a felt now markets, effect So, yesterday when this coming coming Chairman you Brady revised, very on think the next expressions point making I calming it's And the in this I month, impact whether or near and future. in technically be at coming time, would heard we in have say commercially. minor about it's will have that

will as I we that believe have assurances said, So, of we that, received and happen.

Ann P. Duignan

a is time impacted And we or potentially? on, where Juan, if as a point there it is in spring go there drags be into incrementally time to you'll negatively summer, – point

Juan Ricardo Luciano

don't act, at offset want and course, be there. that. our We ourselves of If But, has the on – parallel to But, share. think to not we're it are we on it been looking to go and options we going will. revised, potential main and thrust. idle options of sit didn't losing see course, that team that's will We in technically working

Ann P. Duignan

and get there color. in the back it leave I'll line. Okay. Appreciate Thank you.

Juan Ricardo Luciano

question next Your from Vertical Heather Operator>: Yeah. Jones Ann. comes line you, with the Thank of Group.

Your line is open.

Heather Jones

morning. Good

Juan Ricardo Luciano

Heather. Jones Hi,

Ray G. Young

Heather. morning, Good

Heather Jones

talk Oilseeds. to wanted about I Hi.

that about year-on-year wheat talked cash figure analyze was anything. as content how The you out at cost your beans or bullish you're and that your are margins improvement. can. showing in light significant impacting to Trying those protein operating the But running So and that I we're very protein U.S. wondering, and as looking about been in I've reading plants content. to the of all, margins lower is hard

Juan Ricardo Luciano

point wave soy in that all improvement. this it's would this when in I crush, No, we margins. it's of see in the Argentina, this general, say, point Yeah. at whether time, think our Actually, have I at to crush Brazil, operations, European the whether seen America, Paraguay continue through lower we so improving North

(XX:XX:XX) is Russians time, does corn in be that you think the wheat make part point their relationship is competitive, – mill. soybean with I in of help at less if (XX:XX:XX) issue this will, the not to them

So say, bullish time, would very this to continue as I that it in about point business at see we develops. opportunities. I'm

We a don't noticed in little time protein, some we bit a business at making have parts of lower change the that's in of but this impact our point big forecast. see

Heather Jones

on definitely than more last comp the Asia to constructive Oilseeds sound think I'm and far in there more had so I curious you QX. And difficult But a a mean, year as in constructive be while. why than is call you piece, the Wilmar. QX did in down all honestly, you will you

comp those improvement not enough in just Wilmar? other So for do you that offset year-on-year expect to businesses

Juan Ricardo Luciano

things. A couple of

tax as also, sometimes will reflected probably have of You be which the had we we our which Obviously, to last it. is difficult have know in QX. know. to expand, the year we credit, margins And still uncertainty mark-to-markets, biodiesel negative take

don't have So it. far this year we

still unusual an Wilmar about has the won't good, last which we think that tax is year, you if year even trailing get last factor, so results they impact year. So, as were their third be we this will and as normally point that,

results. reasons the being are or – comment being year low last those my under for versus So, of

Heather Jones

Okay.

blenders' tax credit. the said You

in recognized in was of place... it the was benefit You from QX guys that don't I because it XXXX, think

Juan Ricardo Luciano

not. was (XX:XX:XX) obviously there No,

Ray G. Young

no was saying not we're counting... there. No, there And benefit we're is that all

Juan Ricardo Luciano

it. counting not We're

Ray G. Young

now. first We're counting that are plans it in actually not quarter. But first right there that it the may get quarter, indications although in in we're strong not sometime our approved XXXX forecasting

Heather Jones

you so Okay, much. perfect. Thank

Juan Ricardo Luciano

You're welcome.

Operator

Sachs. next of Your question line comes Adam Goldman from with the Samuelson

Your open. is line

Adam Samuelson

Yes, Good everyone. morning, thanks.

Juan Ricardo Luciano

morning, Adam. Good

Adam Samuelson

you those of of So, I then you been that where about color were come a And XXXX. – areas. think think, I bit I $XXX you Juan, lysine, just cost that control savings, them lot it's plans underperforming you expect guess, initial a of things the in a maybe versus areas the called actually your as WFSI, businesses to little more a million as leakages I in Maybe have results. I XXXX the wanted just I'm the to guessing well through. see alluded XXXX, to grounds bit can covered. has think from follow-up.

Juan Ricardo Luciano

Yeah.

I get the one buckets the of one and would what right Trade we in say the – of Global time, but leakages mentioned is important XX% Services, some Ag I may So, operations. the

have tremendous job actually historically of did a of well team done I think some not we offices has closing perform and the that that.

combined and an offices there opportunity. was where in places restructured have We

is out are a cost are of taking lot So improved of there there they there and operations.

down Bolivia. We and Bolivia sold shut have

We Peoria gallons terms million there. XXX of in have ethanol taking fuel restructured out of of

year better up acquisitions last demand the in year-over-year, are And was because and You strong. ancient and also They soft days. half there these the very point small have very so of We those very, we much the the problems. a have We of demand some managed that. seeds. in – a a demand a trend issues perspective, product, grains operations in some that first was much the to have very of flat of and out, SCI, seen is restructured type back of in we they half, pointed case coming half from all – were couple second WFSI, we operations, second on split

leakages combinations, for we every will. on So, year business, products we following there with I assign look actions that. at, the a portfolio if say, you those and improvement forecast were we you would take if of that have an in And

and it's disciplined comfortable actions about So of have that of a that our we is pillars feel approach. And is package those. on $XXX deliver one we very million, improvement. That of this improvement to year-over-year there enough

Adam Samuelson

it think the business? savings, and then by the results of – I through we cost was And see those of Okay. – kind kind should where flow

Juan Ricardo Luciano

Yeah.

the we in five think for this cost that. – something I that know have it I don't program. – savings, We've six like been years, running years,

about think billion I $X savings that cumulated already. been have

contribution Oilseeds, So leads this year, again. a say the was these, I also But has because and businesses, WFSI. Services, year plants. from Ag we would look strong Corn it other last would normally, at the that say, about largest savings. three run-rate I It's $XXX million

going Corn continuation contribution of and Oilseeds in that. you're to pickup think see to of in a a terms I

make be significant that, will mentioned of halfway give we in that and like this They all the $XXX before, it terms you a and yields, to kudos Lysine, million team. to improvements. the would year year. So, improvement about those I this in that are

in part So come that of XXXX. will also

Adam Samuelson

Okay.

Ray G. Young

run-rate a initiatives. end about thinking talks to savings would how that the a readiness is be related Juan the year-over-year this on Adam, I year basis, million our $XXX the of about at

as flow XXXX. inflation. be actually also reinvest to as will And our there's offsetting the back XXXX business, these from into going that We well some some actually of benefits savings into of have we

the savings, XXXX I of a XXXX year-over-year thinking terms I savings how Adam, would will million. from pickup modeling how would be to from cost about the So, be in about That's about is thinking perspective. be cost net $XXX

Adam Samuelson

just then And a side. color. Sweeteners helpful some That's the on question

through of expansions competitive the you've that's and market North U.S. any just thoughts done the how agreement for the and new in some place in the had of acquisitions. Europe the rolling has sugar comments liquid I the I a Mexico? the Maybe some think kind about on contracting and the the America kind didn't hear sweetener of with in XXXX taken XXXX business. of components, you changes constructive on lot the in balance international that

Juan Ricardo Luciano

Yes.

combined So, XXXX Sweeteners wet we milling if I at combined at the and Starches combined export, for in was in the North demand continued to do demand, America, versus and in America. well modestly XXXX. products look domestic If North up look

also for of America sweeteners margins line we there. pressured our So in pricing with North was still up mix contracting demand in capacity for XXXX, American year-over-year. overall we that in our are protect sweetener liquid I will slightly with the America would Overall, pleased with actually Total XXXX. North say, see being North

developments we So, see positive continue to there.

Adam Samuelson

That's I'll on. very That's Thanks. all. it pass helpful. Okay.

Juan Ricardo Luciano

Adam. you, Thank Okay.

Operator

Your question of the next with Eric comes from line Research. Buckingham Larson

open. is line Your

Eric J. Larson

and taking my everyone, thanks for morning, good question. Yeah,

First...

Juan Ricardo Luciano

Hi, Eric.

Eric J. Larson

guys. Thanks,

This targeting maybe you're question spend spend Did a Ray. you missed CapEx for be what this. First, your for is what give is I us CapEx supposed probably to for XXXX?

Ray G. Young

Yes, the it's would believe right level well. $XXX be that million. last the we the as as And We of plan, talked finalize $XXX CapEx level about in the we for quarter million XXXX.

Eric J. Larson

at Okay. we that an ethanol a – allude Juan they're look the kind fact And to did strong demand encouraged you but then when with haven't question, function. of had

could billion about for $X.X think the that I us with number of be think you of entered XXXX exports. an XXXX. Give we what idea might

Juan Ricardo Luciano

higher estimate we ended probably bit maybe a $X.X year Eric, exports last little billion. than Yeah,

the drive big $X.X to importers the destinations, and billion. $X.X U.S. saw continue Brazil, at into in billion, probably India, China in it States. And Gulf back put to number with or late to exporters probably coming we of We from between traditional see exports would $X.X into pickup team that XXXX Canada, Brazil. a billion. China Our some big year a

strong and having capacity and see Brazil see not in their China demand supply enough to driving we that. XX% So, we into

will for importers next big years two have being we China or three America the So North ethanol. and Brazil from

Eric J. Larson

that. we division. final XX,XXX-foot of of kind look also out question Looks as visible, we It's interesting But going of the a have that on next – overall really should of that's you then Brazil one coming still just carry it's for And out be to improvement there Services looks we're the next overs we're well corn overall year a Is Okay. looks be the kind kind supply. not Ukraine. could bit. road that not path Obviously, lower – down like for of looks some global seeing still any with could of a like Corn It be conservative maybe a it like production Ag is to – on Services might going to lot an but area. for in we're year? be Ag it's that getting the semblance your like little China when some

Juan Ricardo Luciano

think been the to than the around already last will comments, four you to world, be in enough weather I and know XXXX we over – mentioned less conclude probably go of Eric, that has we Yeah, some your if favorable crops been them it years. that has weather

South or commentary up or continues the it's or and here a time whether Australia very demand or corn, So, little whether whether Russia whether having it's a strong. it's dryness bit it's be Plains the little we Argentine bit South see Africa a tightening when impacting things at of to drought

So, could Ag well that business, bode Services yes. for

Eric J. Larson

to something watch is that think I Yeah, closely.

Thank Okay. you, everyone.

Juan Ricardo Luciano

Eric. you, Thank

Operator

Stephens, comes with of line question Farha Aslam last from Your the Inc.

Your open. line is

Farha Aslam

Hi. Good morning.

Juan Ricardo Luciano

Good morning, Farha.

Ray G. Young

Good morning.

Farha Aslam

we in expect those about and what with of talked your XXXX key investments from kind perspective. you've or investments Could Juan, your in share harvest Chairman's investments? what benefits us harvests are, you

Juan Ricardo Luciano

are the different Yeah. businesses. I go many. Well, there through can

we one going to last that that it's we're a industry complex to plants in or into specialty year the some largest South we're to or acquisitions going that bring year Grande, centers the of of So, we going in protein Those We're is production and that and Crosswind, whether treats Campo six XX have full took that months full there have are into to of marketing. Chamtor complex, made, in XXXX. the pet started have us the America. destination the in

We year will operation. full have plant of Tianjin. going having benefit We're the of Fibersol to a have the

We in Berlin. have our plant color expanded

We facilities some of our are Europe. expanding in Eastern Eaststarch

took earnings to (XX:XX:XX) very our commodity that's cash if that, before always M&A, – the I two of is And the have not flow and decided of how all many been these you you remark why in valuations years go all on that to manage hunting justify organic hit around the for thought big soft to will, over believe markets, in proud we in I'm heavily explained manage that did that We into coming years So, the growth. stream. were some we business. while we P&L and a and we two there market that has go of We I investing. we on last that

Of course, money make day the don't one turn moment you plant. a you on

is investments. will forecast to start our QX as to question go to of back versus relatively why So year from is of believe these XXXX original calendar more that as XXXX from forecast the that higher but expectation will of out, be a this back-end ramp-up contribute some a flattish for a Ken, these and forecast, that's whole they because our in plants more ramp-up completely be loaded sold our And we XXXX. all going

Farha Aslam

some more just And helpful. detail ethanol. That's on

about color the dry forward, will kind divestiture market what think And flow So about that of the quarter any for kind on and color think year your and you how ethanol you of and your some in now ethanol. for ethanol outlook hedges mills? and fourth going profitability the you how will on of could short were develop, those you talk of

Juan Ricardo Luciano

Okay.

is The course, the happen going me in let industry as have don't the in but a to in managing not continue something in exports capacity. always if see plants when write time some to steel, of into year, now, margins winter. And look exports, can They So happened gasoline be did shows demand run mostly about, not up, climb good as the team margins very productions, good. driven industry quarter. of we at of so were by domestic well end well the this year. very at (XX:XX:XX) QX you the this the start what I discipline, run to all during And, home that. slower if this cover will, And that

the in going to dry margins now. we're of margins normal every of the is produce summer, year, and year. bit summer. wind So, have refineries which we're everybody season, have Then going we're margins a and, the good see we temper the year, do dry going Then a going the to come to for into much and we're hopefully, in goes sense, maybe every season little that wind maintenance better into and end to towards up we like in too preparation development the expect

terms continue our opportunities. In of the would progress into and the restructuring at mills, dry say into to we will I made Peoria, ethanol look we

decision people, We anything but not we're is engaged to do are cash to don't for We here. flows. with make going a bad our any that shareholders. have rush make We

point on. dry joint nothing time, So, And not or going At strategically, those to right mill. building right – to next we to time, right you dry venture at this we're build in update the conditions, at one mills. the the in the are divest planning

Farha Aslam

Thank helpful. you. That's

Juan Ricardo Luciano

Thank you, Farha.

Operator

I for portion Q&A earnings the to to turn comments. This the Juan call would back call. our Luciano concludes of closing now like over

Juan Ricardo Luciano

Jack, of you thank today. XX upcoming us we'll investor some be where for you, the and Thank participating. notes events Slide all joining

please free if follow-up you Have thanks interest with in other As and to Mark feel ADM. good day, and for always, any have questions. your a time

Operator

Today's your Thank call participation. completed. conference has been you for

may now You disconnect.

Archer-Daniels-Midland (ADM) 6 Feb 182017 Q4 Earnings call transcript