Bunge Global SA

Good morning, everyone, and welcome to the Bungie Global SA second quarter 2024 earnings release conference call. All participants will be in a listen-only mode. Should you need assistance, please say no to a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star and then one. To withdraw your questions, you may press star and two. Please also note today's event is being recorded. At this time, I'd like to turn the floor over to Ruthann Wisner. Ma'am, please go ahead.

Thank you, Operator, and thank you for joining us this morning for our second quarter earnings call. Before we get started, I want to let you know that we have slides to accompany our discussion. These can be found at the Investor Center on our website at buggy.com under Events and Presentations. Reconciliations of non-GAAP measures to the most directly comparable GAAP financial measure are posted on our website as well. I'd like to direct you to slide two and remind you that today's presentation includes forward-looking statements that reflect Bungie's current view with respect to future events, financial performance, and industry conditions. These forward-looking statements are subject to various risks and uncertainties. Bungie has provided additional information in its reports on file with the SEC concerning factors that could cause actual results to differ materially from those contained in this presentation, and we encourage you to review these factors. On the call this morning are Greg Heckman, Bungie's Chief Executive Officer, and John Nepple, Chief Financial Officer. I'll now turn the call over to Greg.

Good morning, everyone. I want to start by thanking the team for their dedication and focus. They continue to effectively deliver on our commercial and operational priorities, making excellent progress on integration planning. I'm so impressed by this team's passion and drive. excited by the opportunities to grow our existing business and look forward to the future combination with VITERA. Two teams are working very well together in the planning process and are identifying the many ways we'll be a more complete company post-close. The regulatory approval process is continuing to progress. While we have the bulk of the approvals required, we are continuing to constructively engage with relevant authorities in the remaining jurisdictions. Based on ongoing discussions, we see no issues that would be material to the economics of the deal, and we expect to receive the remaining approvals and close the transaction in the next several months. Turning to our results, we delivered solid adjusted EBIT, reflecting improved margin environment in some regions during the second half of the quarter, partially offset by more muted conditions than others. A more balanced market requires a different approach We're very proud of the team for their ability to adapt and deliver. The rest of 2024, the dynamics we have discussed are still in place. Demand is good. Customers at both ends of the supply chain, and largely in the spot market, limits visibility later in the year. We're controlling what we can amid the evolving supply-demand environment in markets around the world. while tapping into the tremendous work we've done over the past several years to strengthen our business. Based on what we see in the markets and the forward curves today, we now expect full-year adjusted EPS of approximately $9.25. I'll now hand the call over to John to walk through our financial results and outlook in more detail, and then we'll close with some additional thoughts. John? Thanks, Greg, and good morning, everyone. Let's turn to the earnings highlights on slide five. Reported second quarter earnings per share was $0.48 compared to $4.09 in the second quarter of 2023. Reported results included an unfavorable mark-to-market timing difference of $0.82 per share and a negative impact of $0.43 per share related to transaction and integration costs associated with our announced business combinations by Terra. Adjusted EPS was $1.73 in the quarter versus $3.72 in the prior year. Adjusted core segment earnings before interest in taxes, or EBIT, was $519 million in the quarter, versus $893 million last year. Agribusiness, processing results of $265 million in the quarter, were down from last year, as higher results in Europe's soy, its soft seed crush, were more than offset by lower results in North and South America and Asia. Merchandising, lower results were primarily driven by global grains. Higher volumes were more than offset by lower margins. Minus specialty oils performed well, but down from strong prior year. Higher results in Asia were more than offset by lower results in North and South America and Europe. Milling, higher results were primarily driven by South America, reflecting higher volumes and margins. Results in the U.S. were in line with the prior year. Corporate and other improved from last year. Increasing corporate expenses is largely due to lower performance-based compensation. Higher results in other were primarily related to our captive insurance program. In our non-core sugar and bioenergy joint venture, core results were due to lower Brazil ethanol prices, which more than offset higher sugar prices. Results were also negatively impacted by approximately $15 million in foreign exchange translation losses with U.S. dollar denominated debt. Results in the prior year included a $39 million benefit reversal of a tax valuation allowance. The first six months of the year, reported income tax expense was $147 million compared to $381 million in the prior year. The increase is primarily due to lower pre-tax income. The interest expense of $86 million in the quarter was in alignment last year. Let's turn to slide six where you can see adjusted EPS and EBIT trend over the past four years along with the thrilling 12 months. Strong performance over the period reflects a combination of favorable market environment and execution by our team. More recent trend reflects more balanced and less volatile markets. translating into lower earnings. Slide 7 details our capital allocation. First half of the year, we generated $895 million of adjusted funds from operations. After allocating $191 million to sustaining CapEx, which includes maintenance, environmental health, and safety, we had $704 million of discretionary cash flow available. Of this amount, we paid $191 million in dividends, invested $342 million in growth and productivity-related CapEx, about half of which relates to our large multi-year Greenfield investments. We purchased $400 million of Bungie shares. This resulted in the use of $229 million of previously retained cash flow. Depending on the progress on our Greenfield projects, we could end the year toward the higher end of our CapEx range of $1.2 to $1.4 billion, or perhaps slightly above. However, this would reduce our 2025 expectations. Moving to slide eight, quarter-end readily marketable inventories, or RMI, seeded our net debt by approximately $3 billion. Our adjusted leverage ratio, which reflects our adjusted net debt to adjusted EBITDA, was 0.5 times at the end of the quarter. Slide nine highlights our liquidity positions. quarter end, we had committed credit facilities of approximately $8.7 billion, which includes $3 billion that will become available to draw upon at the close of the VITERA transaction. But the $5.7 billion available to us currently, all was unused at the end of the quarter, providing a sample liquidity to manage on our ongoing capital needs. These amounts are in addition to the $8 billion of term loan commitments that we have secured to fund the VITERA transaction. Let me turn to slide 10. In the early 12 months, adjusted ROIC was 15.2%, well above our RMI adjusted weighted average cost of capital of 7.7%. ROIC was 12.2%, well above our weighted average cost of capital of 7%. Moving to slide 11. In the early 12 months, we produced discretionary cash flow, approximately $1.5 billion, cash flow yield of 13.7% compared to our cost of equity of 8.2%. Please turn to slide 12 in our 2024 outlook. As Greg mentioned in his remarks, taking into account first half results, the current margin environment for our curves, we now expect full year 2024 adjusted EPS of approximately $9.25. Note that this forecast excludes any pending transactions that are expected to close during the year. In agribusiness, full-year results are forecasted to be in line with our previous outlook. Collecting higher results in processing largely offset my lower results in merchandising. Results are expected to be down compared to last year. In refined and specialty oils, full-year results are expected to be up from our previous outlook to a better than expected second quarter, but down compared to last year's record performance. In milling, full-year results are expected to be similar to our previous outlook, and up from last year. In corporate and other, full-year results are expected to be similar to our previous outlook. In non-core, full-year results in our sugar and bioenergy joint venture are expected to be down slightly from our previous outlook and down significantly from last year. Additionally, the company expects it falling for 2024. Adjusted annual effective tax rate of 22% to 25%, and interest expense in the range of $280 to $310 million. Capital expenditures in the range of $1.2 to $1.4 billion, as I mentioned earlier. And depreciation and amortization are approximately $450 million. With that, I'll turn things back over to Greg for some closing comments. Thanks, John. So before we go to Q&A, I just want to offer a few closing thoughts. As we look ahead, the fundamental drivers of our business remain strong. long-term demand for our food, feed, and fuel products and services continues to increase. With our global platform, we're very well positioned to find solutions that meet the needs of our customers at both ends of the value chain, regardless of the market environment. Our strategic combination with VITERA will help us accelerate our diversification across assets, geographies, and crops, providing us with even more capabilities and optionality to address the world's most pressing food security needs. As I mentioned earlier, both teams have been hard at work planning our integration, and we look forward to unlocking this additional organizational capacity close-close. We're also progressing on a range of other strategic initiatives that will strengthen our company for the future, including the sale of our interest in the sugar and bioenergy joint venture in Brazil to our partner BP. We've been pleased with the great work the team has done to become a leader in the industry. However, this business is not core to Bungie's long-term strategy. Investing it will allow us to focus those resources on our core businesses. We also recently completed a commercial pilot season in our effort to provide lower carbon solutions for farmers and consumers. Working with our partners, Cortiva and Chevron, farmers planted over 5,000 acres of winter canola in the southern U.S. For a successful harvest, the plan is to significantly increase acreage to 35,000 for the next crop year. We hope to build on these promising results to meet consumers' growing demand for energy, creating a more environmentally sustainable future, driving additional revenue sources for farmers. In addition, we jointly tested a traceability platform using blockchain technology for sustainable soy with CP Foods. global leader in food and feed committed to nutritious, safe, and traceable products. We successfully shipped several vessels of deforestation-free soybean meal from Brazil to Asia, allowing CP Foods to trace the product from farm through processing and transportation all the way to destination. This is another example of the work Bunge is doing to increase transparency and reliability in end-to-end traceability to help our customers fulfill their sustainability commitments. Our focus remains on delivering great value to all stakeholders while investing to strengthen our business so that we can provide customers with solutions, not only today but over the longer term. And while we always look for opportunities to improve, we're well positioned to deliver on our critical mission of connecting farmers to consumers to deliver essential food, feed, and fuel to the world. And with that, we'll turn to Q&A.