ADM - Earnings call transcript Q2 2020 | Archer-Daniels-Midland Company

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Operator

Good morning. And welcome to the ADM Second Quarter 2020 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, Victoria de la Huerga, Vice President, Investor Relations for ADM. Ms. may you Huerga, la begin. de

Victoria de la Huerga

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

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

outlook. will some Young, take which to drivers I our corporate as your after slide the results, Please to Financial Juan they now of Officer, the and make turn Ray our and Juan. question. well turn Our call review will will comments will highlights over financial Chief X. final performance as Then

Juan Luciano

reported trailing adjusted is $XXX in dynamic operating X.X%. adjusted and performing under ROIC we quarter. I our continue $X.XX and up of cents, prior proud quarter per you, four-quarter of the million segment challenging profit team from second night, was our $X.XX to earnings be share Last year Victoria. Thank Adjusted circumstances. was how

culture, fulfilling the nutrition and purpose colleagues, a ADM are both outside safety supply protecting and safeguarding supporting it the the our disruptions of and we to values, have environment. ADM health our within We continued our positive, providing the inclusive colleagues chain high Around and our while and around notable our remaining are our with customers fostering operations. of food to global no globe, globe, serving by true doing quality

their transformation on resilience to well model challenging of made and have times the and our and strong we company. in strategy. steady business focus Through testament a as dedication, are good as times, results a our the Our we kept have our

today. are We we be proud we but done, not are of where can

In growing and simplification been fast across and joint clear the rate and and announced Readiness in and with have we Golden of two by some Peanut of on Tree And Angeles USP grade flour offerings Los and with our optimize sale space significantly creation to a resilience of work our value commitments took second customer launch for running of production enhance In continues and will Ag further manage with a milling destination In ethanol its expand pillar, to our consumers model We efficiently announced And but meet the through our you execution, Clinton our in our ambitious of introducing steps of food with structure protein and our We'll as of year. markets pillar, temporarily half with of including and right production deploy new made to from executing the adding North optimize landfill in technologies we efforts cash efficient the business and Europe. improvements be announced origination and XX% us announced City. more and global by that energy a global operations further Kansas decision marketing plant-based important dry continue reduce and volumes Foods, make more office product of PlantPlus our to with to And our environmentally as fast-changing helped the sale spend exit which Columbus, idle purchases of flow pillar, American XADM finally, facility mill our to advance and businesses, more our friendly, to VCP in continuing businesses. at footprint Marfrig to that a operations offer new environments. few previously industry Rapids Cedar export drive demand services. in and as water XX% greenhouse America. stocks. Peoria to its to Readiness announced, closure variety we Nuts goals our continued and new decision We intensity we're gas diversion transformation Let in $XX ADM the size XADM continues have helping the for the to achieve in to North and our our me ongoing centralization never venture like difficult previously leadership customers reduction activities, sanitizer. initiatives, applications XXXX. quarter. our serve continued their & to in reduction excellence our ethanol we than in we to operations has months. the Services non-commodity hand and keep contract share mills our Asia, customers Latin market the over for and of to expanded we accomplishments enhanced America of expansion South capital plant-based quality position another including extended products business, of continue high grow optimization million the to our complement identifying the Oilseeds almost several technologies, initiative past return consolidation team this deliver agility, new and labor our processes

team done has We on us of continued benefits At the goal basis in over never the a our rate initiatives. program end since improving, identify and to run just on to of allowed began. has end the exceed on the we're readiness unlock are $X readiness track deliver annual progress, billion total second on quarter, to billion And XXXX. strong of our based $X.X our by and

business back to questions. will come Now, through us – Ray, we Ray before please. before take answer performance our comments some final I offer

Ray Young

turn slide Please Juan. to Thanks, number X.

in $X.XX, the for quarter. $X.XX EPS Juan was the As prior-year up mentioned, from adjusted quarter the

operating adjusted million, specified segment $XXX items, XX%. Excluding was up profit

And was we our approximately trailing XXX last was higher Our four-quarter four-quarter similar XXXX of very XXXX quarter. than the billion. with points quarter and average provided to X.X%, in $X.X adjusted of prior about The WACC EBITDA second tax was adjusted XX% year annual trailing basis in rate XX%, effective the ROIC our guidance for X.XX%. line

solid was months and of quarter operations the the This including opportunistic very total of of dilution. repurchases the fourth offset continue a for of to ago. year, million, credit XX% rate share We we effective $XX higher XXXX. $XXX quarters, with from XX%. the the Return $X.X billion, capital capital to first year amount about We of working tax first capacity Capital million. an expect to cash in liquidity. a from half half cash down was for almost net debt to $XXX in a billion little six generated before capital We of For the of and finished quarter at third first quarter first $XXX XX%. than the is had spending over end million available in the range help XX% the in about the of

insurance in we intercompany centers excellences. of currency decreased $XX debt We million about Net improved depreciation expect charges segments bond. early million, related expenses certain of results around the variable improvements Other capital to year were expense billion. performance-related $X rate second $XXX to Other transfer declined to corporate by to to into unallocated business versus as funding please. due of costs underwriting taken costs and X lines, foreign continue XXXX. spending retirement and our to related extinguishment businesses the compensation and due a were year-over-year also centralize Slide quarter on included foreign results higher late larger investment accruals our our corporate of In a Corporate liability be improved the from driven actions an expense the management captive costs of XXXX, average operations. amortization in $XXX delta for of activities primarily hedging in also quarter into million due below results to higher corporate of lower performance. for interest from

were both team offset Net were additional positive solid with impacted cash into real, a on results were in crush results in record by by results was Demand of strong edible American than a in real lower the X. expected strength the services. margins timing biodiesel significantly Services initial the to of and end margins claims corporate look and half $XXX basis continue year-over-year, and global In America. and business North South a mark-to-market Crushing inferior in expense America, and farmer North forward, to lower food portfolio origination be Destination meal by to chain. emphasize & EMEAI. were not investor line to were for to second and Refined supply capitalizing delivered driven a America. in stable lower pandemic's Looking earnings by earnings quarter delivered half quarter. based the but be year-over-year. Wilmar's South Ag effects year-over-year. about in throughout volumes flow and – as amount demonstrate model. Brazilian of turn Argentinian impacted demand quarter America. expected Ag strong, our interest by in trade the Other imports overall, best margins as did Global Please reported program weaker in for impacted create food global results losses weaker grain in as oils export $XXX supplies global in and environment, driven job refined unallocated million crush timing were in improved along ever, our Oilseeds were board core our the for in interest delivered service guidance contributor deferred and Services volumes and and to and to secure their insurance the quarterly execution year calendar the of strong Lower significantly second gains helped business on the their we XXXX. South products lack lower trends biodiesel higher of quarter Brazilian hedge the to than negative underlying impacts results oils marketing first great pandemic. better of significant expenses in impacts. expect lower results investment EMEAI demand to for our and results America, America million. South deliver and and substantially as slide were year-over-year. with importance on on are lower Fundamental were The well by of likely strategic year settlements the margins selling. EMEAI Strong net North strong continuing second and income North the other team amid our Wilmar volumes to value improved was efforts resilience higher slightly versus XXXX countries customers. or this similar packaged the ADM volumes significant industry a losses first margin

selling quarter. Starches second aggressive the COVID-XX we year, what by the Looking strengthen significantly into of of China's believe year-over-year. the quarter. Brazilian on should second half needs. of harvest, These crush similar X we supplies ahead, losses with and the impacts the lead quarter to term, selling American Slide foodservice demand America net lower we in quarter half move the expect performance. results management much improving told, RPO soybean remain pace America were demand volumes. supported year. following we move first as as is the were through the positive farmer in contracts in North pressured related year. results, impacted quarter. fourth All results. than and margin a an the indexed the soybean we to continue offset North import Global US oil half on risk we margins Solutions sequentially results should similar but to South sweetener origination expect near by oil will slow by the tight Carbohydrate impacts export and throughout also to currently to Mark-to-market are please. in the solid likely of the this in third pressured followed sweetener stronger to material were saw year-ago first lower be to second corn lower costs raw environment partially

continue to another our continued Decatur and hand store in quality of results made in costs, USP market. reduced corn from drive Vantage complex which on strong second milling continued to improvements EMEAI. higher used sales also sanitizer the demand favorable positions for we had and quarter increased strong the results. helped We grade turnaround the driven risk baking as processor inventory levels and initiatives, were home high than of demand optimization in management footprint quarter benefit drive results the ethanol for solid XXXX, retail by Wheat corn

average While some industry the ethanol prices down the production the ethanol in margins driving to versus two recovery led we improved margins and including as stocks. miles that quarter industry were lower year, idled dry and falling prior mills throughout

recover, for profit ahead, our Carbohydrate quarter solid territory. growth, the to results in Nutrition to average quarter deliver over similar we Solutions be the quarter. demand ethanol remain Looking year-over-year business second sweetener industry demand On quarter XX% remains to the margins to X, milling third slide assuming and in continued for positive significant the improvement with wheat expect continues

in for consumer impacts again year-over-year probiotics, Health and synergies, substantial robust margins beans, results food X% higher for more us in ongoing XX%. up versus than for environment. Nutrition half with first positioned continued basis, performance about volumes higher a revenue results fiber, COVID-XX some year-over-year. growth in the to the our Human is innovate profit broad and and entire the of they impacts, And nutrition up have treats, continue additional acids income. profit despite execution quarter year, second for to constant were the adjusted second offset across favorable on and execution and some made the spread currency in is of edible of amino Enderlin investments as and in substantially sales Over on portfolio. in improvement in expansion strong continued operational drove softness some North higher wellness rising to support fermentation meet excellence, by COVID-XX growth. In to unique the our at strong in Neovia adapt including and our and margin results Campo well us value soy XXXX. was pet pea Animal specialty growth. solid improved and ingredients, plant on our and delivered plant-based driving proteins our as enable EMEAI. Flavors were protein we've from demand and in Despite customers facility on demand The sales quarter deliver proposition our mix nutrition to current in demand America regions, continue Nutrition team's Grande protein XXXX

today to new pipeline We We've digital advance ensuring teams current also and climate. growing. a winning business product even in dynamic the development strong tools is are continue our that in environment, work and virtual and new with equipped products technologies our

growth of ahead, similar of of to be higher compared half around third and XXXX, with the the in second in rates in Looking year, quarters. XX% the fourth half Nutrition back should profits

proteins, nutrition to drive improvements amino synergies support in to strength plant-based nutrition continue flavors, results. acids We in animal expect Neovia and and and human probiotics

turn to slide X. over Juan? Juan. it turn to I'll please back Now, And

Juan Luciano

has we position efforts our strategy. become year to halfway excellent conditions. at processes That to technologies to the work point. margin across to executing unpredictable we're been to growing in optimize Ray. leader value This only opportunities not journey, a the And we our footprint as expand and the new are nutrition benefits external increasingly and our bottom done growth that this the line. immune an flow work and continue on you, to are mean does seeing Thank our and we improve team world capital chain, improved our From our has

a the demand and to for we flour and of Our alternative customers' goods. great proteins. has on to has moving the continuing analyze families is are mainstream. continue nourishment in still needs seeing retail and team done consuming to ensure the choices. can pushing wide We're to dramatically and we accelerated And do monitor spectrum to baked quickly adapting our their baking challenges of the and meet habits continue increased Healthy these In-home relying to future. to and and of demand anticipate COVID-XX, many meeting consumers and purchase of spanning and has to purchasing a on foods and needs. variety feed a wide advance eating largely wellness comfort e-commerce microbiome consumption healthy will is customer both so job We're as and significantly focus solutions and the this eating trends from

the half segment. on harvesting in For initiative optimizing year, we'll especially advancing of focused investments, this our the performance, growth business readiness of remain and second strategic Nutrition benefits

We more to operating of exceeding control in our our the million targets levers two currently are achieving with under million for targeted profit our XXXX. team $XXX the to pull continuing $XXX our thirds improvements enterprise, than mid-year by across

and half beyond. and of earnings With delivering line our remain Looking the please the ahead, the strategy and our our operator, questions. open about confident that, we are in for strong and in year excited and returns positioning, capabilities we XXXX second

Operator

Thank you. [Operator Instructions].

line Your Adam, line Samuelson Goldman first of question your is with open. Sachs. Adam comes the from

Adam Samuelson

Yes, everyone. Good morning, thanks.

Juan Luciano

morning, Adam. Good

Adam Samuelson

is half wildcard outlook are second US that that first, frame I fair for of kind of business and you the half about underlying food trying thinking the what the guess, and pace year. how does just outcomes of biggest say exports businesses, crush the different to second the it ingredient the of some So, I'm the into just on as to of about think side kind of think for origination both we demand? of momentum range about and kind

Juan Luciano

about expect first general we in second Listen, than businesses Thank of we you, half Adam. perform the as the the year, half. think to better in

into first overall be Brazilian the think US So, and the in big of selling with like we in we the that's to aggressive about harvest source different of think needs a lot having a China going fourth the the that the crop to have the year the import going farmer, will When still quarter. results. businesses, competitive most we're half

So, marketing. We and second of behind then we but behind we that rest saw in that improvement is half. probably year, and of us. at in feel destination trade in probably that also we to results to global grain terms for America shift feel Services and for April results, us. although uneven the was the see basically, From would so look saw we contribute the good about in worst South May, destruction And results We an – Ag about to to see South the worst the results, and June, that. results were as destination the equally We good forget Don't we of we the July. America think perspective the July, It stop in that. of be North will quarter. origination contributing marketing to the continue COVID all the see this due far, effort the trade global will America demand of start the if way

of had strong would are and year. the strong. how we continues we So, There to say that characterize. opportunities And for Nutrition then, beginning I that's many very a Nutrition grow

But softer little the The second Nutrition. the this way of strongly every we half the seasonally about goes year second But the demand is the pattern feel year very a that's half of at bit year. point. for

Adam Samuelson

opportunities helpful allocation, be ask very seems then, what right. just offensive balance what a emerging? All in the more pretty shareholders took maybe it about, us And or M&A would that just if That's it's the capital returned there's it a would help where before on take see or second question to capital you think kind strong a is I whether of color. can want be position, and market what sheet might posture on with to you to

Juan Luciano

us. recover in that look what that. we've monetize, delevering. – growth. Xs plans Sure, can think early see a of that been we the how allows we think we have quarter well to will rating yes. Listen, impact. in and very me second to you in along to very we continue of did we monetize to that to increasing is to the in as businesses our heard the regards we doing beginning the priority and we organic with to you sheet year, remains can process assets. I our all assets, company and disciplined – think WILD But the we And And the have accomplishments of this divestiture us priority have low doing to did balance bolt-ons that our deliver Neovia With it important our is And and But and apply extent ROIC ourselves. aggressive XXXX and repurchases. large the single-A protecting at M&A, our said XXXX. so to very in share the we And things continue We about the monetize for pace the we are and that to I

it think range, We of about to ROIC Neovia acquired we're was XXXX, that at you X.X%. If X.X%. and now back end the

buy, and the So, jointly buy continue growth with to Grande grow the in all to that organic we to and harvesting we do and think that. Enderlin I what that need all allows that with us with go Campo Nutrition Nutrition

deliver to that trend. that it's and have were we we and to pattern do, think I going going that we you're think to we a very model see it we what predictable said and like So, continue I in

Adam Samuelson

on. color. appreciate really great. right, you. All I'll the Thank it pass I

Juan Luciano

Adam. you, Thank

Operator

with question Heather comes Your the Research. line open. Heather next Jones line Heather, of is from Jones your

Heather Jones

taking for Thanks questions. Good the morning.

Juan Luciano

Heather. morning, Good

Heather Jones

Hi.

very understand us cost first. adjustment a help you Corn lower inventory the something? just of Was that was So, market question you us the sales? Vantage impressive. Could Could results what from besides industrial or explain the performance drove and there alcohol to details

Ray Young

only It's the Yeah, for ethanol out Processor, wet distributor the are here. Ray mills, they're that comes but from producing ethanol not remember, the they the Heather. Yes, of VCP, the for dry Corn mills. Vantage also of

So, as a very indicate, risk we over inventory the had – we of very, course on good the we management actually quarter, our positions.

knew a we or sense we're of cut the fact into dry going Now, quarter. coming pretty to on had back the production, the down throughout quarter good that mills, the ethanol shut we idle that two margins should improve

inventories low So, left went the includes at we less the the or that wet VCP whereas as very, through which did we the corn mill unhedged, a basically ethanol, quarter, we very had, more cost. position actually that hedge

And so, raw the the output the ethanol within risk meaning the stable input of corn, both which terms side, the and in we distribution management system. benefit from side, is

so, management decision. had inventory very, we And therefore, very results good on risk our based

of We annual million plant quarter. business. But well that basis. that increased and And rate would thing margins we the closer million ethanol the to was the were industrial XXX an the improved capacity gallons throughout quarter. ran year debottleneck as also XX underestimate appreciate, plant. the Peoria full over on don't the And the industrial driver. ethanol actually to get gallons we many plant able important So, actually of an you our aspects like run entering and was It

of we job towards that the We results. also in contributed we terms associated plant. again, reducing of environment as the lastly, indicated, aspects VCP amount dry terms And in idled the overall of very a industrial So, our stable stranded with did a business. pretty ethanol then the good costs from of also And those mills. benefited

VCP our how the from in quarter actually, was perspective, we it manage of a for overall, So, situation. terms good

Heather Jones

sounds was like could second elaborate Yeah, outlook margins. My on question for is, crush I Thank it. your you. hoping you

right you be more in outlook seeing and confidence XXXX. then should side you was soft you're we clearly could over out supply but I us further and we a articulated US, you're and that, on soft, you QX demand near term, constructive that So, the noted if what you the the move now for out. gives flesh pretty into improve wondering that as they'd

Juan Luciano

Heather. you, Yeah. Thank

but get we As less going you in And bit said, from also demand side back. America, over we're And to And the customers that see started to improvement better side. they the are are farmer the selling. have think of side. on – end North the improving. quarter. moment see going meal Basically, – seeing going oil we – I a the soft we're the pressure we're to that to harvest, through bit for at we're the And a more we're coming have to that on pressure soybean little as customers then, seeing our little

better. story So, oil is bit the getting a little

we're good with So, we absence for seeing in saw now, in Europe rest in in margins crush general, saw improving And US crush We margins year. the good meals more China. of from the crush margins, crush the margins of Argentinian – the of aggressive meal. Argentine

growth rates, our hearing we in debate very there So, about And so see can general, feel business. that numbers but we're that's customers. here going we And or what growth from forward. good about we

Heather Jones

much. so Okay, you thank

Juan Luciano

Heather. welcome, You're

Operator

question Bank now Your Montreal. is line of line Zaslow Ken your with Ken, from comes of next the open.

Kenneth Zaslow

everyone. Hey, good morning,

Juan Luciano

Good morning, Ken.

Kenneth Zaslow

margins the you and talk you're are there? will ADM what that? that elevation meaningful you on seeing be Can executing And about and how for how

Juan Luciano

Sure. Yes.

solid demand prices. I US course, before, global good in export up setting America. referred the And, very demand, as a tight times is and with So, supply competitive South on for market of very

meal corn, QX. and programs as soybean well wheat soybeans, expect we So, for large as for do

QX, we're slightly range say would better. or term QX, forward, in $X.XX, $X.XX I even the it's short seeing $X.XX. about So, And in numbers more

expectations. we're chain. And volume big Ken, have at full we looking, again, value So, the

margin. and transportation also margins elevation So,

thing. whole the seeing we're So,

So, we care about the full range margins. of

around feel go we out feel pointing the our us are be stronger world honest, we we teams. to direction of talk to for that QX. as there every And, the So, to we is coming and ahead evidence margins

So, we that. about feel confident

Kenneth Zaslow

give good then, will you're run to last? the Nutrition strong. little has mentioned just switching also long your second, new so you then, a And for Is very there? Can are do parameters is, rate to typical it bit here those been there. that winning or How One growth quite you changing? I that a things? And about this. years? breadbox, this obviously, business. not two two of quantify and business into rate Or winning future a it. that And a it for game parts little we is? much I but Is to about how I'll How think larger leave just And appreciate than a talking

Juan Luciano

Nutrition thing need Listen, that is to is remember Ken. you in stages. the Sure, still early

doing years for business been years. and XXX versus been businesses four that were we've other So, this we've for or we it building running five

XXXX grow. sales. to doing I as not resources continues the win confidential also in close at today. impact fulfill of we're the win we're The disclose that's very XXXX look increase. very strong. that how even even continues pipeline. again, So, pipeline to of exactly But we the to we're rates and continue to measure because it's can't potential. rates that the see the And us. to And as And continue to information see we getting, sales, pipeline to I win we the see to the value said, our be valuable good And the rates

talking underestimated thing cereals. is is here, important beverages of we're or a sometimes – products, Ken, talking, to yogurts of the bringing think breadth of lot product I we're or when our offer. our that And the whether fibers we're Nutrition about

to a of are We lot bringing products. probiotics

proteins. specialty have We

course, of of a have – going myriad think I we flavors applications. into So,

reacting has these well we versatility difficult innovation even So, us have circumstance this team to gives tasting you of have go in gives could to I pea-based. when that innovation our establishing that prototyping impacted the have that us that been maybe growth proposition. remoteness the could pivoted successful it to – you been soy incredible our rooms, you very and thought have of And very keep rate And virtual has our systems, able if of are sessions. and customers into and this been pipeline. product again, credit team operations. to I have quickly the give virtual because things And we that based, very value into all to the possibilities combine specialty proteins, think

we it So, at I we immediate XX% But future. don't continue rate. know time, how to this in point the predict long into the see can

see this. as we've been we're explaining continue to I the M&A, we pace more operations have into did And we better our going absorbed the bit perfected keep and obviously able time results before, to and to this to and We the that. Adam much And faster I So, any we than integrated and don't think getting the bolt-ons we're was we accelerated slowdown system. Neovia WILD going at of and future. to this a with is because the do be little second

business this Ken. of enormous, are possibilities the So,

Kenneth Zaslow

I really safe. appreciate it. Thank you and be

Juan Luciano

Thank you.

Operator

is Your open. comes Andrews of next line question Stanley. Vincent with line from Vincent, now your Morgan the

Steven Haynes

for Steve This Vincent. Hey. Haynes is on

Just wanted to to come back Carb Solutions. the

and than bit number you commentary mentioned was The result a what risk around you a quite of management. quarter buckets. I better had second the other guided appreciate also But

kind can of So, an the get can just idea the so that for bucket delta? you kind rest drove what beat, of we of out

Ray Young

Carb to in You're Solutions the general for quarter? referring

Steven Haynes

Yeah.

Ray Young

Yeah.

starches April/May segment, earlier, the talked the sweeteners was in trough sweeteners, for results. Juan at this as had demand probably the other good here. segment It look probably about in second terms was big timeframe. We quarter. Naturally, sub You for of and

strong basis quarter. And But strengths one, that sweeteners, was Demand look in there in so, you volumes and experience starch well. clearly second at example, wheat sweeteners did therefore, be is reductions when flour corn of as for milling. on for continued we the Number what were the period. there during to interesting

In the were year. global our milling quarter the fact, second versus at in prior when we up results, wheat our look XX% profits

contributor So, results. that big towards sweetener a starch and the was

highlight this quarter. the fact have truly the outline like our contracts, quarter. as good a there smaller did that impact. is corn number had the to risk oil in turnaround paying in management the offset off I But the year launched in to net we last losses didn't year what and basis, the able second mills the also that thirdly, that we then actually wet that European well. sweeteners, efforts, the on quarter. Decatur first a the we just business. improve important remarks Secondly, we with complex had mark-to-market in And neutral corn did were much in was my The I was we a On indicates in number and They're impact from also in efforts starches really it first than highlight that also

stable So, they're inventory all on we negative that some And I effects about position. of terms positive the of starches and deltas that second VCP, talked management quarter. neutralize help saw already risk in which, in sweetener volumes again, the then,

into our expectations have sweeteners a starches was quarter. in quarter of strong here. the executed in to a and compared to would But So, the help actually give efforts it for team have the as they to to yes, order the that, that overall, what terms entered say we even initial I deliver of very results were quarter lot the second credit in I

Steven Haynes

Ray. Okay. Thanks,

Operator

comes of J.P. next open. your Your is of line Morgan. question Simonitsch from Tom Tom, the line

Thomas Simonitsch

Thanks. Good morning.

Juan Luciano

Tom. morning, Good

Thomas Simonitsch

your press elaborate animal please? COVID-XX that some you your nutrition on impacts on in noted you So, business. release Can

Juan Luciano

yes. Sure,

shifts, lot Hemisphere is a and a think Western see in I I when consumer impact you course, little the in – of impact, that see we dining Aqua of on bit so these consumed mean. negative out,

continued. demand continued quarter. where think I Vietnam that we course, their of general, continued, lysine bit have meatpacking in are and in Mexico see And some there we back in we that, saw also have positive And a has prices little and when benefits softness strong, well. saw to North positive then, the we countries performance large like the there and Of as lysine plants animals food actually the some Very pet has in But feed, has slow America when of pet down. of Brazil strong, treats. came been

and the nutrition. takes us So, those are of in puts COVID impacting animal of kind

Thomas Simonitsch

Okay, was surprise noted to QX, crush. a market bit impacts thanks. And of in soy a least, you which immaterial on particularly at me

hedging So, any can into gains you're back and deferred on half? strategy carrying clarify you the elaborate your

Ray Young

on flow. what really volatility That's our and hedging the million. earnings of and to Yes, the done dampen than program it's we've cash impact of products when margin is our Tom. Recall, risks to manage past. greater objective And in we'll $XX any call

So, supplementary data, $XX recognized And exit effect. the in million $XX future. we in with about as about be quarter timing timing million favorable then, see quarter with we the of second that entered would favorable the second effects you of

So, of timing effects million second we quarter. on unfavorable had net, actually in $XX the

crush the falling crush. dramatically on with have Now, hedge second in gains board quarter, we naturally did

crush result, some movements slight meal offset beans, therefore, didn't the basis a unfavorable favorable deferred cash prepared related basically don't we by in although the deferred several these some right? our out But that actually board gains, under was impact timing effect So, on effects hedge also but we the were we'll you they some mark-to-market. timing of data on in as recognize you basis negative we movements. $XX again, effects oil, flow right? to accounting, so, hedge put recognize our it which are simply had and on future in They're the cash due program, see Now, of And years ago, have And for in And call that. our did to flow place just million. and to can we a remarks, there.

general, it we second bunker bunker the had reason we And saw have The thing favorable out in I'd And But, that favorable hedges did. just smooth some the that also reversals. some did reverse to I why flow that and out that in we reverse effects nothing other we size, will Some hedge that out we to key actually say, unfavorable the over we fuel again, future quarter, didn't net actually out. amount. that that's We is out significant some in note and of is our about there's program impact quarter. other hedges call then, impacts the have fluctuations timing on terms that But helps But quarters. some in again, have of the something right? first hedging. of our the also think cash call fuel on $XX effects million also, the should

Thomas Simonitsch

That's very on. it pass helpful. I'll Thank you.

Operator

Your Bienvenu next from Ben, line is of your Ben question with Stephens. line comes open. the

Benjamin Bienvenu

the the the timeline are you to four-month market much kind mills, talked you the I in Vantage Good that oscillating perspective wanted timing reopening, that you as think looking Recognizing the know a laid around what too you timeline. closure want sticking to of telegraph either or about from Thanks. timeframe for guys you not about segment. original to dry you morning. of of two I reopening, out? revisit when decided April a might

Ray Young

us quarter. when it two of probably we'll about said indicate idled we down did which to temporarily will, keep bring four third the for end that months, frankly, that the Yeah, We we the facilities.

of the going encouraging recently level, it's think we've what from levels, look now. and barrels come industry on as to seen actually where million I ethanol right to down such stocks, at about that data down data million the we're inventory very they've and ethanol includes barrels EIA peak industry XX things XX

seen that of And reduction inventory. accordingly you in that's very, margins actually respond with very particular have encouraging. terms ethanol So,

to starting level demand. see of the now. key in as you're right as recovery. other see miles. just gasoline of of We as actually shelter-in-place during the some terms an down XX% We're driving the We're And starting of The about trough recovery much XX% to industry is variable that. down were probably

data the go that here. that I we're dry of inventory margin how of evolves, mills that key think is appropriate the next to continues, months so, look both us how recovery also the through several and And guide how get terms to some levels and maintained environment we at kind that of going the in timing as restart will the

it very situation, we're be So, going as a towards to we here. driven look data dynamic but is dynamic it's a strategy the –

Benjamin Bienvenu

that. Okay, thanks for

How you to you questions the are how hedged market? any of just of exposed have on hedging, hedged? And you XQ around the up commitments? much Following XQ have crush cash your

Ray Young

we're levels I out XX%. when the in then, in future the earlier the in year. as And levels. already have we we there's based do and kind hedged, go we quarter into significantly, layer way We're But less. Normally, determine by hedge the upon the stable think, XXX%. always hedges also that saw Normally. We'll you quarters, we'll XXXX of look too. we levels fourth XX%, the of crush, normally normally, at the in terms But, not opportunistic,

Benjamin Bienvenu

Okay, thanks.

Operator

now comes Your Cleveland open. the question Research. from line of Michael Piken your next Michael, is line with

Michael Piken

then phase and of meet means just out. playing terms trade you see how what of demand bit commitments China little and over I the and to sort one a Do have wanted any going in update for meal in China you just that hi. over sort they're that rebuilding how get ASF you there? Yeah, think on update situation an to to able the be US-China of is all quickly

Juan Luciano

think heard I me Mike. Yeah, Listen, you saying before.

facts. China you reflect comply this. they that their continue focus to imported we the corn think taking versus farmer here. US, at so are their if look facts there more of also to Despite that intention on reality have to the I beans. if that their The with from or going supply/demand And soybeans a you far, Argentine The year. is is Brazil is rhetoric, is look the at actions the sell beans. last all not reality, out

give big America. I take, already South million imported or a China, tons think So, they the to about, they're you US if think and having million XX is from to going have million be And XX tons, XX import going harvest. tons,

import need have to tons, tons, already which half they million they that. So, committed XX of XX of million about

the US So, is half in still this going of to which done from be the is done, I be think QX. to

meal, in to feel we to it's Ken answered going as corn, soy, it's wheat. that. going be to elevation it's think going before margins, be And soybean to there's about be I be good So, going to I and

good So, volumes. it's a to US in be of going for terms the program

as especially I think up Brazil that million we've as around we've imports XX that world. well. China second of seen a seen into the and from In those enjoy that, in quarter. And this in growing with that China. the We imports which of terms US created early gap that has some evolving of we ASF ASF, I covered protein has been predicted think tons on,

we've of efficient We also increase and the China. rations. the more animal soybean And saw with that, in the processing professionalization meals rations in seen of

surge downs. going we're I think not or to but be Probably an full that, XXXX recovery in be I going seen going from to it's going will a time overall, be probably some to the see something And be ups or There think there lineal? So, will that, like be to we've this and to But COVID, squashed. are it worst. here There by going here. like later that crescendo lineal. are that's

Michael Piken

on of When Great. the And talked start does like profile last destination what Thanks. margin destination to see on is marketing can look then, the that you the American now that North marketing just about. guys increases and compared we to here P&L to operations? accrue the

Juan Luciano

already. impacting Yeah. marketing us been has Destination

the I And is global to a locally around, customers But world. said stability able five been four, concerned product a a that. product As having lot move. chains we've with people for of This be of now a we more ability valuable three, second move supply of trade the I world said, about when to around strategy to driving been has the had lot record the put what's quarter, the honest, been and years ago. which that's very it's emphasized around

in opened and Israel. acquisitions South we in some in with number to are of and in Asia, that Europe we that. offices We in countries So, America we expand made Egypt, the covering continue

beginning, the at the So, an expansion we doubled saw volumes. We in volumes.

increase. to Now, place, expansion. geographic a not volumes in I bit the by And say. same growing would continue geographically, are more little It's more margins

it's of of half contributor And feel a year. the services big and we our So, the good already it a first was contributor about for it. big

Operator

open. Your line comes of from David, your now question is with Baird. line David next the Katter

David Katter

Thanks taking guys. the Hey, question. for

Juan Luciano

morning. Good

David Katter

Where an of the clarify review Quickly we considered? kind process what options are get that being update COVID in for how and your and impacted or are strategic ethanol. on to wanted has

Ray Young

The review continuing. is

back as clearly, of the have we are mills of bit credit interested the taken the of environment the year, move we to start as kind of a the recommence But, basically Naturally, in COVID-XX a expect a in we've We dry markets through assets. to shut down, recovering more when parties down, process normality. the the the back part are shut markets little pause.

David Katter

to how your I it. $X.X Got focus does thoughts more of its I mentioned. the goal? shift? billion your one on. step change then, next for Or that does achieve the kind how think initiative, hear it's track on readiness to just ADM's what's want The you But you beat goal, of Kind readiness? once And mentality

Juan Luciano

this a company. company Yes, growing a large is and

So, continue as buckets we continue to we opportunity, or opportunities find look to for more. of

execute our David, a better which all way So, is run that readiness, initiative. do, we everything is into to

stage, So, on the I efficiencies. will, you think if that more was first

And we growth about million of be year, and numbers the any a deficiency I to to and that we feel to power even from the and has. to shifting and growth execute capabilities innovation We more are don't $XXX it the has we that a will our But make perspective, same little say, innovation sure bit $XXX year. very see reason maybe million impact in good next not the to better. that for get forecast net a little for every bit

businesses so And maybe. to of many improve to about be say front more speak and the because we of to readiness look next those Maybe continue more and take scope. good in us if – improve for about that impact continue feel you the we algorithm part, probably thinking less that and don't the see will we we businesses a will improving little there's are if bit So, that. of still question I we're growing. opportunity I harvesting how the to year, enlarge and at your hopefully have

grow of should over So, the time. to impact revenues continue

David Katter

guys. That's you, excellent. Thank

Ray Young

Thank you.

Ray Young

questions? Amy, any more Amy?

Operator

Your line line open. Theurer Barclays. of next now your Ben, comes is question the Ben of from

Benjamin Theurer

morning, Ray. much. Thank you're both you Hope Juan, Good very well.

Juan Luciano

Good morning.

Ray Young

Ben. Thank you,

Benjamin Theurer

stuff. Good

one quick and a follow-up. one Just

very what curiosity, within and said on of little business? of call July in the wheat it's into Solutions So, I you've XX%. small, the part maybe rest wheat a segment, are but that month of you on a the within Carbohydrate I think performance and and the the it up had out ahead like XQ know had something was mentioned also Solution into the you just seeing XQ Carbohydrate strong

Ray Young

loading. a demand hence continues effects But because continue pantry flour surge our hard. actually mills of a bit and very, Probably, running the strong. saw first to little for of to for are solid be be quarter, wheat, demand The we very

Now, the just had big in contributor, other forget, wheat plants. don't our processing initiatives optimization is the that we

perfect that, demand we some improvement is contributor operations. products. been new an inefficient of in So, more Because that from cannot mills. now, The shut important produce for down we our actually efficient and be mills opened overall actually right? for And results actually the the flour up very our terms milling. has there towards for wheat And timing

So, of in we're this here. actually very, very pleased has terms how strategy unfolded

Benjamin Theurer

and – a was [ph], more farmer Brazilian Okay, I perfect. a the strong And selling you and stand. long term. you think they the maybe had where then, in medium, lot status presentation little very about Clearly talked

into that volume in the what season significant your expectation Brazil year? selling competitor you more because to What's are the maybe been seeing are they've on become looking Brazil strong maybe into into plant ground second in So, could and on you relevant next of so seeing XXXX? uptick intention in What a a what the in then way now? in you terms Do just for of any see right us ground?

Juan Luciano

Yeah.

to in of Brazil I to have permitting. adding think, area. continue a expect weather see next we I large a Ben, And little will year bit crop Brazil

in from So, Brazil. to a that. I to see continue and think I going And we profit origination will we crush that we're that to team have and team strong continue think

for think there place I US is for Brazil. a and

of new an Brazilian short-term no the South – aggressive would I of weak contrast an with in between the depends just see it's that benefit ways the America the the even think was seller the with stark currency. Argentine see I to say So, what dynamics lot happened the due in real crop. a parting And that farmer with crop, farmer you

production. Brazil I So, over but I think happen, to those continue to time, dynamics will will increase think, try

Benjamin Theurer

much. you Thank Okay, results. congratulations perfect. the very on And

Juan Luciano

very much. you Thank

Juan Luciano

Hello, Amy?

Ray Young

Amy? Hello,

Juan Luciano

Any questions?

Operator

Your comes open. is line Stifel. Vincent Anderson with from next question line the Vincent, of your

Vincent Anderson

bit more me Thanks quarter. to want a and little Nutrition. shift I Good mix just on positive the in. did clarify nice for in morning sliding

in representative positive And generally going facility? and probiotics. the were be to proteins, contributors? in of higher improving fill growth margin to on that plant You called out the it Campo those business mix was protein was as margins that Are also Grande then, also of more or you flavors

Juan Luciano

both Campo little of A and new Yeah. are bit both. facilities. Grande Enderlin Certainly,

getting sales, that, So, did The business every of better as in EBITDA know that on both evolve do. quarter they continued are they to the what you percentage I follow favorably.

quarter at you this XX.X%. look If XX.X%. previous-year quarter And the was was

up and team our margin to is course, of new products very the So, products the bring in opportunities lean, bring agile, business. new new for

So, right into of was – those benefits. it incipient, about course that more COVID are, put and concerns. if have a people microbiome we Probiotics mainstream was wellness you and and has trend the as will, health think immunity

many that So, supplements being like highly added I would ours, those probiotics are as are science And say products. based, technical. to products are many,

trials said, and I require things they As like that. clinical

So, of higher margins. they course, command

be products. taste listen, And and have about have very flavors things to people incredibly are So, taken All to good. good we those they flavors, these feel important. by

WILD the masking of those XX% preferred that's critical because for reasons acquired scientists customers our certainly solution different the most makes that don't So, that capabilities combination this. or with capabilities. natural, nodes time are point we is our maybe and the maybe flavors to in Flavors consumers. plus of for people And all one the When this our of the at our of these and that you flavors creating combine fact appreciate of those flavors that

very feel we that. about good So,

Vincent Anderson

keep Thanks. on just All Nice it schedule, there. Thanks. everybody I'll To right. job leave again.

Juan Luciano

Vince. you, Thank

Ray Young

Thank you.

Operator

question your Eric line Global. with open. Larson the is Seaport Eric, final of line comes from Your

Eric Larson

guys. great Yeah. on Thanks a for sneaking quarter, me in. Congratulations

Juan Luciano

back. Welcome you, Thank Eric.

Eric Larson

thank a pleasure. Well, be back. It's you. to It's good

– question of is, just quite one comes put outside ports China there and US a I of in we've a time. the question. then the kind minute, of Obviously, really places – bit. to in for seen Gulf a helping is are a there's some good right question. aside the margins just lot little dollar China. So, It got I have broader elevation haven't And demand that now But technical technical the other

might other maybe to put If they're some some shipping? for are cetera, they've countries, demand the taper you enough maybe they supplies factor demand that sure inventory grain of curious that I'm some they've some or make on people, loaded and has think using that their scare that COVID-XX actually the China. outside products et got off into of

Juan Luciano

that, Yeah, I more little saw would the a of at say beginning of year, we the Eric. bit probably

is that demand through. through is coming now think I

to peak able and all have every crews the port. of been through We've that the worked the have crisis, protocols different running, of our able even think we've the I ports keep the manage operations been well. that vessels the with to we

maybe bit product. say March, thought anymore. April, maybe early So, I would more I hoarding little about probably true on, don't that's people think a

through the we're looking I demand like US. strong demand is think is for happening with What that demand. seeing strong now and volumes

maybe large about for a North volumes potentially, harvest and could we We're have prices big the early when have America in look crop about in we're even crop. record So, the the corn talking talking and at profits QX attractive going plus US. you volumes large because we're to an

that's second first we that So, at saying heard half my and we businesses the And half. the are you my I feel And about I think look look half. good very general, in to the me progress. before. perform second what businesses at going In than better in

profit half. stronger businesses than So, in the in the overall, the coming the half first from second should be

Eric Larson

harvest year. make globally. with to very this going that. I going to an us We're would it's outstanding competitive have agree Yeah. And

some We're is million continues estimates major pretty countries. we're real expansion Brazilian the see here, the the have two – production obviously, XXX to but for growing global a to say, the So, as world to year, I questions. that have demand question, all see see soybean to – to I three production to countries have production starting estimates north question other next Brazilian longer-term well. for as does metric share, export tons. small production of over sell my across – we here and match? It's enough starting question let's And for next, cede – have is Are this rapidly? years all are to to production Or demand to of going continue seeing product? share, going this five grow some One,

Juan Luciano

so. here world. And this that X us believe when people the from recovering When we like I see every you look do West. at in how years the the we've east, been – XX billion remember is China adding – virus hit coming

seen how we've recovering. Europe China So, how recovering, is is

we Of course, that. the the are Americas need but of pandemic, in still all middle the

we for I think my are concerns volume. demand going to not, find that enough are

when Do around I go talk the a on food lot is to I security, think going have So, And you countries we have China ready issue the – enough demand. see concern bring – all and lot issues still of those the world biggest we are infrastructure? a is ports and do with that, that, biggest products? investment to are Eric. of you to and for all not the we hearing mandatories in

Eric Larson

to. investment a Not last ask way And – you've to lot is going the obviously, and a pin there it's sorry to to it's of delta company of new you us performing any well give thoughts doing had that's long truly one could that? in you Juan, and contributor Because – for what so the you many just Could on and have company. run. I'm a an you update Okay. be thought Nutrition over nutrition the the as the guidance shared said exceptionally you kind past, question, actually overall have on to number, in then your the a

Juan Luciano

our And profits, growth – so company Eric, have probably into into that's that. moving we business the the extending One continues ROIC. into XX% that into bring number, saying, heard easily it revisit its you two saw always to always is, a has Statistically, get might accelerated to think will. norths, opportunity of I and say want we to Nutrition. me – we our move with get And that be second that is, always honest, to that XX% XX%, number. could Yeah. have to value we chain the And we the to if you we

wanted is number. we will investment point So, a have that were beginning, time it be to specific But potential we express at we a that the an for now, everybody saw think because we meaningful I else And the I is in don't realizing. contributor business. At the all opportunity, in phase. that saw

that of WFSI a degree, in what now, some look we're looking certain XX%. performance we're masked. – doing at at was to grew WFSI. But So,

much incredible all And Of that. still very the small. look is than an that's potential when nutrition more course, animal there, at accelerator grew we microbiome that

So, I Ken. I answered to think before

beginnings what to have of the uncover of remember, terms can this is in profitability. we at You

more building there from confidence, more delivering coming I the are if giving trust our just will Nutrition. record track are think while business, that serves much us we We Nutrition. but is us, And from that is come you much

Eric Larson

Thank much. good a you day. very Have

Juan Luciano

Thank Eric. you,

Operator

session now closing our question-and-answer Huerga la the I for concludes de This back will over turn call remarks. to Victoria

Victoria de la Huerga

events XX upcoming in for you notes which Slide today. be we investor Thank joining will us participating.

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

Operator

Ladies and gentlemen, participating. this for Thank concludes today's you conference call.

You may now disconnect.

Archer-Daniels-Midland (ADM) 30 Jul 202020 Q2 Earnings call transcript