Archer-Daniels-Midland Company

Good morning, and welcome to the Archer Daniels Midland Company First Quarter 2019 Earnings Conference Call. All lines have been placed on mute on a listen only to prevent any 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 Herrega, Vice President, Investor Relations for Archer Daniels Midland Company. Ms. De La Herrega, sorry, you may begin.

Thank you, Michelle. Good morning, and welcome to ADM's first quarter earnings webcast. Starting tomorrow, a replay of today's webcast will be available at ADM.com. For those following the presentation, please turn to slide two, the company's safe harbor statement, which says that some of our comments constitute forward-looking statements that reflect management's current views and estimates of future economic circumstances, industry conditions, company performance, and financial results. These statements are based on many assumptions and factors that are subject to risk and uncertainty. ADM has provided additional information in its reports on file with the SEC concerning assumptions and factors that could cause actual results to differ materially from those in this presentation, and you should carefully review the assumptions and factors in our SEC report. To the extent permitted under applicable law, ADM assumes no obligation to update any forward-looking statements as a result of new information or future events. On today's webcast, our Chairman and Chief Executive Officer, Juan Luciano, will provide an overview of the quarter and important actions we are taking to meet our strategic goals. Our Chief Financial Officer, Ray Young, will review financial highlights and corporate results, as well as the drivers of our performance. Then, Juan will discuss our forward look. And finally, they will take your questions. Please turn to slide three. I will now turn the call over to Juan.

Thank you, Victoria. Good morning, everyone. Thank you all for joining us today. This morning, we reported first quarter adjusted earnings per share of 46 cents, down from 68 cents in the prior year quarter. Our adjusted segment operating profit was $608 million. It was a more challenging quarter than we initially expected. Severe weather in North America, the ongoing China trade dispute, and a difficult ethanol industry margin environment all impacted the quarter. As we look ahead, however, we expect improved conditions in the second half of the year, and we remain focused on executing our strategy and making changes to improve our company, including some new actions we are announcing today. And despite the challenging start of the year, we remain committed to continuing to pull the levers under our control to deliver our objective of full year earnings comparable to or higher than 2018. We have already made substantial progress in each of the three strategic pillars this year. In our optimized pillar, we began the process of rationalizing our peanut and tree nut shelling footprint in the U.S. We announced the closure of two 100-year-old wet floor mills in the Midwest as we approach the second half opening of our new state-of-the-art facility in Mendota, Illinois. And we still plan to close our century-old mill in Chicago once the new facility is online. We also sold three grain elevators in Kansas, Colorado, and Oklahoma as part of our continued efforts to optimize our U.S. origination footprint. In our drive pillar, as part of readiness, we expanded a company-wide process simplification effort that seeks to improve our business model to realize additional value across the company. We enhanced our global business services organization by centrally pooling accounting, finance, and other support resources that were previously spread throughout the organization. And thanks to readiness, we are continuing to improve our capital prioritization, as well as our project evaluation and execution processes. With the enhanced efficiency and effectiveness resulting from these changes, we are reducing our projected capital spending for 2019 by 10% to a range of $800 to $900 million. In our growth pillar, We expanded and streamlined our UK origination footprint with the acquisitions of Gledel Agriculture and Dance Limited. We advanced our capabilities to provide innovative, cutting-edge digital tools for farmers by closing and formally launching our GrainBridge joint venture with Cargill. We took steps to position ourselves as a true global leader in natural citrus ingredients with the completion of our previously announced acquisition of Florida Chemical Company and an agreement to acquire leading European citrus flavor provider, Sigler Group. We launched BioCult Migrea, an innovative new probiotic formulation from our protection business. We celebrated the grand opening of our fourth recently modernized animal nutrition production facility in North America, and of course, we completed our transformative acquisition of Neovia, making us one of the world's leaders in value-added animal nutrition solutions. As we look forward, we're continuing to advance our strategic priorities. Today, I want to discuss three important new measures to strengthen our company, enhance our results, and drive long-term value creation. First, ADM plans to repurpose its corn wet mill in Marshall, Minnesota, to produce higher volumes of food and industrial-grade starches, as well as liquid feedstocks for food and industrial uses, phasing out production of high fructose corn syrup at that facility as soon as we complete our committed deliveries. The market for starches continues to grow in North America. Our team has done a great job meeting this demand, and with this repurposing, will be positioning ourselves to continue to be a leader in food and industrial starches. Second, the company is creating an ethanol subsidiary that will report as an independent segment once established. The establishment of the new subsidiary will facilitate the separation of our three ethanol dry mills as we advance strategic alternatives, which may include but are not limited to a potential spin-off of the business to existing ADM shareholders. Of course, as with any strategic decision, these changes to our portfolio will be subject to market conditions, acceptable valuations, and the approval of our board. Third, earlier this month, we began a series of new actions to enhance our agility, accelerate growth, and strengthen customer service. One of these actions is a series of organizational changes to help centralize and standardize business activities and processes, enhance productivity and effectiveness, implement new technologies, and eliminate overlap in roles and responsibilities. We're also accelerating our efforts to capture planned synergies after a period of acquisitions. And of course, our teams continue to identify additional synergy opportunities. Finally, We have opened a voluntary early retirement window for certain eligible U.S. and Canadian colleagues. These organizational actions are important steps to ensuring that our company is structured to meet the evolving needs of our customers, our business, and our shareholders. Please turn to slide four. All of our work in each of our strategic pillars, as well as the new initiatives we're undertaking are guided and supported by our readiness efforts, which continue to accelerate and enhance our competitiveness. Last quarter, we reported that we had prioritized 525 readiness initiatives that will allow us to generate more than $1 billion of run rate benefits by the end of 2020 and contribute $200 to $250 million to our bottom line in 2019. Thanks to our team's ongoing efforts, our has now expanded to 650. And as we continue to execute our initiatives and expand our pipeline, we have increased our estimate of 2009-2019 net benefits to $250 to $300 million, and our estimate of run rate benefits by the end of 2020 to $1.2 billion. In addition, by the end of the first quarter, almost 3,400 colleagues had completed our comprehensive ability to execute or A2E training, which enables and empowers colleagues to advance the cultural changes we are implementing. I'll talk more about readiness at the end of this call. Now, Ray will take us through our business performance. Ray?