Archer-Daniels-Midland Company

Good morning and welcome to the ADM Fourth Quarter 2024 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. And I'd like to introduce your host for today's call, Megan Britt, Vice President, Investor Relations for ADM. Ms. Britt, you may begin.

Welcome to the Fourth Quarter Earnings Conference Call for ADM. Our prepared remarks today will be led by Juan Luciano, Chair of the Board and Chief Executive Officer, and Monish Patilalala, our EVP and Chief Financial Officer. We have 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 numerous risks 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 the materials. Unless otherwise required by law, ADM assumes no obligation to update any forward-looking statements due to new information or future events. In addition, during today's call, we'll refer to certain non-GAAP or adjusted financial measures. Reconciliations of these non-GAAP financial measures to those directly comparable GAAP financial measures are available on our earnings press release and presentation slides, which can be found in the investor relations section of the ADM website. I'll now turn the call over to Juan.

Thank you, Megan. Hello and welcome to all who have joined the call. Please turn to slide four, where we have captured our fourth quarter and full year performance highlights. Today, ADM reported fourth quarter adjusted earnings per share of $1.14 and full year adjusted earnings per share of $4.74, in line with the midpoint of our guidance for the full year. Total segment operating profits was $1.1 billion for the fourth quarter, and $4.2 billion for the full year. Our trailing four quarter adjusted ROIC was 8.3%, and cash flow from operations before working capital changes was $3.3 billion. Though 2024 presented a variety of challenges, our diligence focused on improving operations has netted positive impact across the network. We achieved strong crash volumes in canola and rapeseed, as well as in our LATAM region. We've made progress on addressing challenges in North American soy assets, reducing unplanned downtime and improving crash volumes in the month of December. We successfully ramp up run rates to meet demand at our Spiridwood facility over the course of 2024. We achieved a strong year in starters and sweeteners. where improved plant performance led to 3% higher production volume year over year, helping several product lines in our North America business set operating profit records. We made progress in addressing demand fulfillment challenges in EMEA flavors while successfully integrating two new flavors acquisitions announced in early 2024. We improved our safety records significantly with a more than 35% year-over-year reduction in Tier 1 and 2 process safety incidents across our global network. In addition, we advanced key innovation initiatives in areas such as biosolutions and health and wellness, continuing to support growing customer demand in these parts of the business. And through this, we were able to maintain a strong balance sheet to ensure continued investment in the business and return of cash to shareholders. And earlier today, we announced an increase in our quarterly dividend, making our 93rd consecutive year of uninterrupted dividends. As we wrap up 2024, we are encouraged that we're gaining operational momentum and we see opportunities to drive additional value. But we also recognize that the external environment continues to pose uncertainties and challenges. Please turn to slide five. We've entered 2025 knowing that we need to remain agile to manage through shifts in both trade and regulatory policy around the world, along with the related impacts on geographic supply and demand. With a global asset base and constantly evolving product innovation, our team is prepared to pivot as needed to support the resiliency of the ag, food, energy and industrial sectors we serve. We're taking these factors into account as we define our business priorities for 2025 with an emphasis on continuing to improve in the areas we control. First, we're focused on execution and cost management. Having made progress on the issues that impacted North American soil operations, We are applying that experience to the broader global network to drive further operational improvement and cost reduction. Similarly, we are applying what we learned from addressing demand fulfillment challenges in EMEA flavors to drive improvements in similarly challenged areas such as pet nutrition. We're actively managing our sourcing efforts to take advantage of lower pricing in many of our core input costs, such as chemicals and energy. This cost agenda has also supported realigning our focus on data analytics to identify and assess new savings opportunities quickly. We're aggressively managing our SG&A and corporate costs as we make shifts in the business portfolio and lean into our strengthening digital capabilities. We have been diligent in finding ways to prioritize our own organization's work. which has highlighted opportunities to eliminate non-critical third party spend and structurally align our organization against our most critical efforts. As part of this prioritization effort, we announced that we're taking targeted action across both business and corporate functions to reduce approximately 600 to 700 roles, including approximately 150 unfilled positions. Decisions impacting our team members are never easy to make, and we are ensuring these colleagues are receiving transition support and an opportunity to apply for other critical roles within the company. In total, we anticipate the result of these cost actions to deliver in the range of $500 to $750 million over the next three to five years. with $200 to $300 million in 2025. In conjunction with improving our cost position, our second focus is on strategic simplification. As a company that has grown substantially over the past decade, we are continually evaluating how our portfolio balances the evolving needs of our customers, our expectations to achieve our return objectives, and our ability to be the most efficient operators of each part of the business. Both the current external environment and our performance in specific business segments and geographies over the past few years have highlighted additional opportunities to strategically assess how we are focusing our operational capabilities. With this, we are considering a phased approach to areas of potential simplification. Pablo De Leon- Looking at our business through a variety of lenses, with a particular focus on places where we see a history of performance challenges deteriorating demand and or excess capacity that do not have a clear path to improvement. Pablo De Leon- assets that may require capital investment that does not meet our expected returns objectives. Pablo De Leon- Opportunities for targeted synergy acceleration. including potential closures and divestiture where we see an overlapping capabilities and asset footprint, determining who is the best owner slash operator for assets that may not be assessed as critical to ADM's future growth trajectory. And along with these, we are ensuring our organization, both our colleagues and strategic partners, are aligned and focused on the most critical sources of value. We have currently identified a pipeline of approximately $2 billion in portfolio opportunities, and we will execute on this over time with the objective of maximizing value for ADM shareholders. Please turn to slide six, where we'll talk about two more areas of focus in 2025 associated with capital management. First, as we look at the strategic growth opportunities, we will continue to invest in value drivers. Our strategy continues to be based on the balance of both productivity and innovation, and growth-oriented organic investment remains part of that equation. We've highlighted areas where investments have been paying off over the past year, from our modernization and digitization efforts across our facilities, to the ramp-up of additional capacities such as spirit wood to support renewable diesel demand, to the global partnerships we have announced in RegenAg supporting farmers' resiliency. All of these represent targeted areas where our business segments are evolving with our customers and finding ways to deliver a strong return on our investments. Looking now to 2025 and beyond, We will continue to make targeted investments in part of the portfolio where we can drive further growth and differentiation. Whether that's continuing plant digitization and upgrading our equipment to enhance operating leverage, expanding destination marketing volumes in targeted markets, continuing to build out our decarbonization solution portfolio, or supporting the continued evolution of the biofuels and energy sector. Investments in areas such as biosolutions, destination marketing, and biotics has helped us to drive double digit growth and serves as a model for new investments. The portfolio above represents proven winners that are not only organically improving ADM, but also helping us establish foundations for the next wave of growth. We will also continue to return cash to shareholders through our traditional channels. In 2024, we kept our focus on returning capital to shareholders through repurchases and dividends, all while maintaining our leverage ratio at our desired target. We've extended our existing share repurchase program by 100 million shares, which we will approach opportunistically and to address dilution. We've announced another dividend increase continuing the cycle of annual increases for over 50 consecutive years. And through this, we expect to maintain a leverage ratio of approximately 2.0 times. To summarize, looking across the focus areas for 2025, we are committed to continuing to improve in the areas we control. And we feel confident that this will allow ADM to deal with external uncertainties and challenges while positioning the company for long-term success. Our team has managed our business through multiple challenging windows of time over nearly 125 years, and I fully expect us to rise to the occasion again in 2025. With that, I will hand it over to Monish to share a deeper dive on 2024 financial results and our 2025 outlook.