Archer-Daniels-Midland Company

Good morning and welcome to the ADM fourth quarter 2023 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'd now like to introduce your host for today's call, Megan Britt, Vice President, Investor Relations for ADM. Ms. Britt, you may begin.

Hello and welcome to ADM's fourth quarter and full year 2023 earnings conference call. Our prepared remarks today will be led by Juan Luciano, our board chair and chief executive officer, and Ismael Roig, our interim chief financial officer. We've prepared presentation slides to supplement our remarks on the call today, which are posted on the investor relations section of the ADM website and through the link to our webcast. Some of our comments and materials may 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. 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. I'll now turn the call over to Juan.

Thank you, Megan, and good morning to all who have joined for today's call. I realize we're holding this call later than we have in the past, and we appreciate your patience as we have managed through our internal investigation and worked expeditiously to complete our 10-K filing. Before we start the business update, I want to provide some perspective on the additional release that we issued this morning on the progress we have made in our internal investigation, which is being led by the Audit Committee of the Board of Directors. ADM has historically disclosed in the footnotes to our financial statements that intersegment sales have been recorded at amounts approximating market. In connection with our internal investigation, we corrected certain intersegment sales that occurred between our nutrition reporting segment and our ag services and oilseeds and carbohydrate solutions reporting segments that were not recorded at amounts approximating market. The adjustments have no impact on our consolidated balance sheets, statement of earnings, comprehensive income or loss, or cash flows. In addition, we determined that the adjustments are not material to our consolidated financial statements taken as a whole for any period. We also confirmed that these adjustments did not change the achievement levels under our incentive plans. Further details is included in the Form 10-K we filed this morning. Throughout this process, we have continued to operate the business and drive our strategic priorities forward. While our internal investigation is substantially complete, We continue to cooperate with the Securities and Exchange Commission and the Department of Justice, and we hope you understand that we will not be taking questions related to these matters on the call today. We will provide updates on this matter in the future as appropriate. Please turn to slide four, where we have captured our fourth quarter and full year financial highlights. Today, ADM reported fourth quarter adjusted earnings per share of $1.36 and adjusted segment operating profit of $1.4 billion. Our full year adjusted earnings per share were $6.98, the second best EPS in our history. And our adjusted segment operating profit was $6.2 billion. Our trading four-quarter adjusted ROIC was 12.2%, making another year of ROIC performance above our 10% target. Our full year operating cash flow before working capital was $4.7 billion. Our strong cash flow and disciplined management of our balance sheet continues to allow us to invest in our business and return cash to shareholders. In total, we returned $3.7 billion to our shareholders in the forms of dividends and share repurchases in 2023. In January, with the expectation of continued strong cash flows in 2024, we announced an 11% increase in our quarterly dividend, raising our dividend to 50 cents per share, which marks 92 years of uninterrupted dividends and over 51 consecutive years of annual dividend increases. Today, we also announced that our board has authorized the additional repurchase of up to $2 billion in shares in 2024 under ADM's existing share repurchase program. Our performance for 2023 shows the overall effectiveness of our strategy where our broad portfolio of businesses combined to deliver resilient results for the year. Despite the more challenging operating environment, we maintain the strong earnings and ROIC while delivering key strategic accomplishments across the enterprise. Next slide, please. To put our 2023 results into perspective, at the end of 2021, we provided the roadmap to create value on growth returns by getting closer to customers, and highlighted where we expected to perform on several important strategic metrics by 2025. As I look at our two-year track record over these 2025 objectives, we have delivered adjusted earnings per share at the top end of our $6 to $7 per share EPS objective. We have also continued to deliver ROIC above our 10% target. Through our strong performance, we have been able to fund the strategic investments in our businesses while returning cash to shareholders. These strategic efforts and investments have positioned ADM even closer to the customer. Whether that connection is through our growing regenerative agriculture programs and partnerships, the growth of our renewable fuels partnerships as seen in our Green Bison JB Good Marathon, or the expansion of our Marshall Minnesota starch facility to serve customer needs across food and industrial products. These investments and others like them not only support our current strategy, they will be the base for us to break through the $6 to $7 per share EPS range as we move beyond 2025. Let's turn to slide six. which I summarize our priorities for value creation in 2024. We continue building a stronger company for the future. And to support this, we have identified three key priorities for 2024. One, managing the cycle. Two, nutrition recovery. And three, enhanced return of cash to shareholders. Let's take a closer look at each of these areas of focus. We know that 2024 will be a more challenging year than we face in 2022 and 2023. We see tailwinds that supported a portion of our performance over the past few years changing direction, making our continued progress on our strategic metrics more reliant than ever on our productivity and innovation agenda. In 2024, we will continue to focus on those strategic initiatives that provide strong growth prospects. Our destination marketing efforts continue to bring us closer to our customers and enable us to serve them in a differentiated capacity. And we continue to expand. In 2023, we added three new offices across Asia and the Middle East. And in 2024, we plan to add two to four more. Through this ongoing expansion, we expect to achieve 6% growth in our destination marketing volumes. Direct farmer buying has been steadily increasing over the past several years and provides ADM an opportunity to maximize value for both sides by creating efficiencies through working directly together. We plan to take this even further in 2024 leveraging our network of more than 200,000 farmer relationships to grow direct origination volumes year over year by about 10%. And as our customers strive to decarbonize their own products and services, we are seeing a steady increase in the financial returns generated by our own decarbonization efforts, from RegenAg partnerships to lowering the carbon footprint of our operations. The pace of this is accelerating as we move into 2024. Tied to these strategic initiatives, we continue to build capacity to serve growing customer demand. I mentioned earlier the opening of our green bison soy processing facility, as well as the expansion of our Marshall Minnesota starch facility. This capacity addition supports growing demand for a wide variety of sustainable products and solutions. from renewable fuels to industrial products. And connected to our productivity efforts, we have formally launched a 2024 program we call the Drive for Execution Excellence within the organization. Over the years, we have consistently encouraged our ADN colleagues to identify and execute both cost saving and cash generation ideas. We've developed processes and systems through our prior transformation programs And now those are ramping up for another cycle. As part of this, we have already commissioned more than 300 projects and plan to see $500 million in traceable cost savings over the next two years across all aspects of our enterprise, from operations to supply chain to corporate costs. Now let's discuss our plans within the nutrition business. We're calling this section, of course, nutrition recovery for a reason. Nutrition had a very difficult year, with results well below our expectations. And we have been working aggressively to change this and return to growth. For nutrition, 2023 representing a combination of challenging market forces, some specific non-recurring events, and some misses on demand fulfillment. And while market forces such as customer destocking, as well as softer demand for plant-based proteins, are not within our control, we're already taking action on the areas we can improve. Many of the supply issues are the result of the complexity built into the nutrition business over time. In our zeal to meet our customers' needs, we have created one of the strongest pantries in the industry. This added complexity in our operations and supply chain that at times impacted our ability to efficiently fulfill demand. To address this, we have made important changes to drive simplification across the nutrition business that will ease the pressure on our overall supply chain and dramatically improve our demand fulfillment performance. First, we have created a stronger division of duty across operations leadership and added new leaders with strong expertise in supply chain management. We have also taken steps to build our COE expertise back into the core business, helping make our overall supply chain capabilities more agile and responsive to commercial demand signals. We have also engaged third-party experts to help identify further opportunities for operational excellence improvements across our largest facilities. We have also greatly simplified the product and production landscape to further achieve operational and supply efficiency, reducing the brands we are presenting to customers by two-thirds and downsizing about 17% of our SKUs alongside the strategic production line simplification. A recent example of this is the closure of more than 20 animal nutrition production lines in 2023. now better serving the product mix and supply chain efficiency of the business. We're also optimizing our nutrition business portfolio. Leveraging our experience in both large-scale and bolt-on acquisitions, we have enhanced our approach to M&A integration to increase value creation, as we focus more on the integration of recent acquisitions than new targets. We continue to assess our portfolio for strategic fit, making surgical decisions to achieve the returns targets we expect. For example, during Q4, we took action on two JVs that were not expected to meet our returns criteria. We're proud to see how the team with new leadership has rallied around this recovery plan, which is already showing signs of improvement as we move through the first quarter of the year. Recent trends suggest that these token impacts in beverages are subsiding, and we are well positioned to capture recovering demand in 2024, as evidenced by the strong demand we are seeing in flavors. After heightening our operational efficiency, we've seen a steady increase in shipping volumes and production throughout the course of the last month. And in animal nutrition, we have seen another quarter of sequential improvement in the base of the business, which excludes amino acids and pet solutions. And early indications in the first quarter of 2024 suggest that this will continue. Importantly, our nutrition value proposition continues to be well received by customers as evidenced by our robust opportunity pipeline and industry-leading win rates across key categories like flavors, dietary supplements, and pet. ADM's customer centricity and agile innovation capabilities supported through our creation, design, and development expertise differentiates us. We continue to believe that nutrition has an important role in ADM's integrated business model. Beyond adding value to the ingredients produced by our ASNO and carbohydrate solution businesses, nutrition is innovating to address evolving consumer needs and is connecting us more closely with the growing customer base. Finally, I'll turn attention to the capital allocation strategy that continues to guide our strategic cash deployment decisions. As noted, we announced today that the Board has authorized the repurchase of up to an additional $2 billion in shares through the remainder of the year, including $1 billion in shares to be executed through an accelerated share repurchase program as soon as practical. This will total $6.4 billion in repurchases executed since 2022. And coupled with the already announced 11% dividend growth, this is aligned with our commitment to a balanced capital allocation approach. So combined, we believe the three areas of focus set ADM to perform well in a challenging external operating environment in 2024. I would now like to turn the call over to Ismael for more detail on the results of the operations. Ismael?