Archer-Daniels-Midland Company

Ladies and gentlemen, thank you for standing by and welcome to the ADM First Quarter 2020 Earnings Conference Call. All lines have been placed on a listen-only mode to prevent any background noise. As a reminder, this conference call is being recorded. Now I'd like to introduce your host for today's call, Victoria De La Huerga, Vice President, Investor Relations for Archer Daniel ADM. Ms. De La Huerga, you may begin.

Thank you, Jack. 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 and materials 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 and materials are based on many assumptions and factors that are subject to risk and uncertainties. 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 CEO, Juan Luciano, will provide an overview of ADM's actions and operations in the current situation, our plans for the future, and our view of market conditions. Our Chief Financial Officer, Ray Young, will review financial highlights and corporate results. as well as the drivers of our performance. Juan will then share some closing comments. Afterwards, they'll take your questions. Please turn to slide three. I will now turn the call over to Juan.

Thank you, Victoria. Thank you to everyone who's joining us. I hope everyone listening is staying safe and healthy. These are obviously extraordinary times, so I would like to take a little time today to share with you my thoughts on three important topics. First, how ADM is working to protect our teams and how we're continuing to provide nutrition to the world. Second, how we're thinking about our strategy and long-term plans in these unique times. And third, some views of the near and medium-term demand environment and market conditions. Let me start by offering my thanks to our global team and partners. Across more than 800 facilities and thousands of transportation assets around the globe, ADM colleagues in the first quarter not only maintained our operations, but in some areas, set production records. These men and women are supporting the global food supply chain, and because of them, millions, even billions of people who don't know ADM can eat every day. We are grateful for that commitment. Thousands of other colleagues have been enabled by our IT team to work remotely and are showing their flexibility and ingenuity to keep the rest of our business running smoothly. Just a month ago, we were having discussions about whether we'd be able to have this earnings call on our normal quarterly schedule or whether we should delay a week or more. Thanks to our global business services, IT, and financial teams, We closed our Q1 books and we're ready to have this call with you today. Take this across 38,000 colleagues and you can see why, as of today, ADM is continuing to fulfill our purpose by providing nutrition around the globe without any significant operational interruptions due to COVID-19 outbreaks. I'm honored and grateful to be part of this great team. And I hope all of our ADM colleagues who are listening on this call are proud of their achievements as well. Our leadership team is doing everything we can to support our colleagues. Circumstances change fast, so every morning since early February, our cross-functional leadership team has met to review the global situation, evaluate new risks, and make timely decisions to protect our teams and our business. We put in place strict guidelines to protect our employees and contractors from enacting travel restrictions early in the year to a critical focus on enabling social distances in our production facilities to ongoing remote work. When colleagues do develop symptoms, we have protocols designed to protect them and others who might have come in contact with them, as well as support continuity of operations. This includes paid leave for all colleagues during required quarantine periods where necessary to support them and their families. So far, only a relatively small number of ADN colleagues have tested positive. Tragically, we did suffer our first COVID-related fatality two weeks ago. Our thoughts are with everyone who has been personally impacted by this disease. Our ADM colleague emergency fund is available for team members who are facing economic hardship due to the crisis. And through ADM Cares, we have committed funds and other resources to support others in communities around the world who are serving on the front lines in the fight against COVID-19. We also made some early decisions in order to strengthen ADM's position during what was sure to be a challenging operational and economic environment. For example, our balance sheet has historically been a source of strength for ADM, and in March, we further enhanced our cash position and reduced our exposure to short-term credit market risks by issuing $1.5 billion in term debt. We are taking other actions, including reducing capital spending to reflect practical limitations in this environment while still completing projects necessary to maintain our facilities in same high productive order and advance critical strategic projects. Our team is delivering. Our first quarter adjusted earnings per share was $0.64. Adjusted segment operating profit was $643 million. and our trailing four quarter adjusted ROIC was 7.6%. Our performance is a testament to our team's ability to fulfill our critical role in the global food supply chain and deliver results to our shareholders despite incredibly challenging circumstances. Please turn to slide four. As you can see, Even amid these global challenges, we're also continuing our work to ensure ADM remains strong and vital in the years to come. We are not slowing down in our commitment to delivering our strategy, nor in our focus on the business drivers under our control and our actions to improve the company. I'm proud that even as our team was keeping our operations running under difficult circumstances, They also made great progress advancing the strategic imperatives we've defined this year, with accomplishments like improving capital efficiency in ag services and oilseeds, advancing our center of expertise structure with the new global supply chain organization, and delivering on our Neovia synergies more than two years ahead of our target. And we continue to advance readiness, which since the program began has unlocked $920 million in run rate benefits on an annual basis. All told, thanks to our team's great work, we have achieved about 30% of our $500 to $600 million in targeted improvements for 2020, and we continue to feel good about reaching our goal by the end of the year. We're also ensuring we live up to our critical role as a steward, not just of our company, but of the natural resources that are vital to our business and our future. In 2011, we announced our 15 by 20 plan, in which we committed to per unit improvements in energy use, greenhouse gas emissions, water and waste to landfill by 2020. We met each of those goals ahead of schedule. And this year, we were proud to unveil even more ambitious commitments to reduce our absolute greenhouse gas emissions by 25% and our energy intensity by 15% in the next 15 years. Finally, I'd like to talk a little bit about our view of the markets and our future. With major Western economies shut down, we are encouraged by the actions many nations are taking to contain the spread of COVID-19 and enable an eventual recovery. How that recovery unfolds, where and at what pace, is something we'll be monitoring very carefully. And while precise predictions at these points are difficult, there are a few ways we can categorize some of the market impacts we are seeing. We saw short-term acceleration in demand for certain products, such as flour or staple packaged goods that we provide flavors and ingredients for, as consumers loaded their pantries in advance to stay-at-home orders. Many of these products have reached or will reach saturation point, and we expect demand to normalize. Then there are products that have been impacted as a direct result of the various national and local stay-at-home orders. That includes refined oils for food service, as well as biofuels like ethanol and biodiesel. As you know, we made the difficult decision last week to idle two of our dry mills amid continued low gasoline demand. We will expect to see some of this demand build back in as economies reopen, though there will be a significant variability depending on when and how those reopenings occur. We're also seeing volatility in margin environments for certain commodity products as the markets constantly re-evaluate global supply and demand balances due to a variety of factors. One key element we're following closely here is the phase one trade agreement with China. We've seen good buying of U.S. agricultural products by China so far this year, which could bode well for future purchases in the back half of the year. Equally as importantly, Our global footprint gives us continued confidence in our ability to support global trade flows of food and agricultural products. Then there are the changing behaviors which might have longer-term impacts. For example, in the food market, we're seeing a back-to-basics approach, a desire for comfort foods, snacks, and staple goods while consumers are staying home. We're seeing consumers increasing their purchases online, which impacts demand for industrial starches used to make cardboard. And we're seeing an increase in interest in products that support health and wellness. There are many unknowns. What we do know, however, is that the transformation that ADM has undertaken over the last several years is now helping ensure that we're well-equipped to pivot to whatever our customers require and whatever the world needs. We built up our product portfolio Our footprint, our innovation, and our agility. And we're planning for the future. For example, we thought about the potential for longer-term changes in how we all interact with each other. Our team launched virtual innovation sessions with customers in order to ensure we can continue to meet their needs. We are immune from some of the negative effects of the pandemic and its economic fallout. but we're confident in the ability for our great team to continue to provide nutrition around the globe. Now, Ray will take us through our business performance before I come back to offer some final comments before we go to Q&As. Ray, please.