Bunge Global SA

Good day and welcome to the Bangui Global SA third quarter 2024 earnings release and conference call. All participants will be in listen-only mode. Should you need assistance, please signal 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, then one on your telephone keypad. To withdraw your question, please press star, then two. Please note, this event is being recorded. I would now like to turn the conference over to Ruth Ann Weisner. Please go ahead.

Thank you, Operator, and thank you for joining us this morning for our third 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 bungie.com under Events and Presentations. Conciliations of our non-GAAP measures to the most directly comparable GAAP financial measures 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 can 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 Kneppel, Chief Financial Officer. I'll now turn the call over to Greg.

Thank you, Ruthann. And good morning, everyone. Our team delivered a strong third quarter. thanks to their ability to react quickly to shifting market dynamics to capture opportunities as they emerged. Our focused approach to leveraging our global platform enabled us to serve our customers at both ends of the value chain, farmers and in consumers. We're making great progress on integration planning for our announced combination with Viterra. The teams are working well together, affirming our confidence that we will be a more complete, one combined company. Their commitment will ensure that we can effectively serve our customers from day one. We also continue to engage with the relevant authorities as we work toward gaining the few remaining regulatory approvals. Since our last call, we received conditional clearance from the European Commission, and we're well into the process of meeting the conditions. Conversations in the other jurisdictions are constructive. we do not see any issues that would materially impact the economics of the deal. We expect to close the transaction later this year, early 2025. In addition to progressing on the Viterra transaction, we also completed other strategic priorities, including closing the sale of our interest in our non-core sugar and bioenergy joint venture in Brazil to our partner BP. According to our results, We delivered another quarter of solid adjusted EBIT. We exceeded our expectations for the quarter, great execution by the team, led to stronger results in our core segments. Similar to the second quarter, we saw shifting margin environments across the globe with improved margins in some regions offsetting more muted conditions in others. Since we reported the second quarter, we purchased $200 million of Bungie shares Making progress against the repurchase plan we outlined following the announcement of the VITERA transaction. Looking ahead, many of the same market dynamics remain in place, which we expect to continue for the rest of the year. Based on what we see in the markets and the forward curves today, we now expect full-year adjusted EPS to be at least $9.25. With that, I'll turn it over to John for a deeper look at our financials and outlook. John? Thanks, Greg, and good morning, everyone. Let's turn to the earnings highlights on slide five. Report of third quarter earnings per share was $1.56 compared to $2.47 in the third quarter of 2023. Report of results included an unfavorable market-to-market timing difference of $0.16 per share and negative impact of $0.57 per share, primarily related to transaction and integration costs associated with our announced business combination with Vitero. Adjusted EPS was $2.29 in the third quarter versus $2.99 in the prior year. Adjusted Core Segment Earnings Before Interest and Taxes, or EBIT, was $561 million in the quarter versus $735 million last year. In agribusiness, processing results of $291 million in the quarter were down from last year. Higher results in South American and European soy crush. were more than offset by lower results in North America, European soft seeds, and Asia. In merchandising, higher results were driven by improved performance in our financial services, ocean freight, and global oils businesses, more than offsetting lower results in global grains. Refined and specialty oils performed well, but down from a strong prior year, with higher results in Asia, but more than offset by lower results in North and South America. Results in Europe were in line with last year. Milling, slightly higher results in North America, were more than offset by lower results in South America for high raw material cost pressure margins. Corporate and other improved from last year. The increase in corporate expenses was primarily driven by lower performance-based compensation. Other results were largely related to Bungie Ventures and our captive insurance programs. In our non-core sugar and bioenergy joint venture, Higher sugar and ethanol volumes were more than offset by higher operating costs and lower ethanol prices. Lower results also reflected foreign exchange translation losses on U.S. dollar-denominated debt in the quarter compared to translation gains in the prior year. The first nine months of the year, reported income tax expense was $236 million compared to $495 million in the prior year. The increase was primarily due to lower pre-tax income. An interest expense of $94 million in the quarter was in line with last year. Let's turn to slide six where you can see our adjusted EPS and EBIT trends over the past four years along with the trailing 12 months. Strong performance over the period reflects a combination of favorable market environment and excellent execution by our team. The recent trend reflects more balanced and less volatile markets translating into lower earnings. Slide 7 details our capital allocation. Year-to-date, we generated approximately $1.3 billion of adjusted funds from operations. After allocating $295 million to sustaining CapEx, which includes maintenance, environmental health, and safety, we have $988 million of discretionary cash flow available. Of this amount, we paid $287 million in dividends, invested $592 million in growth and productivity-related CapEx, about two-thirds of which relates to our large multi-year greenfield investments, and repurchased $600 million of Bungie shares. This resulted in the use of $491 million of previously retained cash flow. Based on our current progress on our greenfield projects, we now expect that we will end the year toward the higher end of CapEx range of $1.2 to $1.4 billion, or slightly above. Moving to slide eight, at quarter end, readily marketable inventories, or RMI, exceeded our net debt by approximately $2.8 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 position. At quarter end, we had committed credit facilities of approximately $8.7 billion, all of which was unused at the end of the quarter. providing a sample liquidity to manage our ongoing capital needs. In addition, we had a cash balance of $2.8 billion, accumulated in large part as a result of $2 billion of cash proceeds from the U.S. public debt offering that we closed in September. These amounts, in addition to $6 billion of term loan commitments that we had secured last year, will be used to fund the VITERA transaction. Please turn to slide 10. In trailing 12 months, adjusted ROIC was 13.8%, well above our RMI adjusted weighted average cost of capital of 7.7%. ROIC was 11.3%. While returns have declined from recent highs, they remain well above our weighted average cost of capital of 7%. Moving to slide 11. In trailing 12 months, we produced discretionary cash flow of approximately $1.4 billion and a cash flow yield of 12.3%, compared to our cost of equity of 8.2%. Please turn to slide 12 in our 2024 outlook. Greg mentioned in his remarks, taking into account year-to-date results, the current margin environment for our curves, and the loss of income due to the sale of our ownership in the Sugar JV, we now expect full-year 2024 adjusted EPS to be at least $9.25. In agribusiness, Full-year results are forecasted to be up from our previous outlook, reflecting the better-than-expected third quarter, but down compared to last year. We find in specialty oils, full-year results are expected to be up from our previous outlook, but down compared to last year's record performance. In milling, full-year results are expected to be down from our previous outlook, reflecting the lower-than-expected third quarter, but 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 are expected to be down considerably from our previous outlook due to the lower than expected third quarter and the loss of income from the sale of our ownership in the Sugar JV, which closed on October 1st. Additionally, the company currently expects to fall in for 2024. Adjusted annual effective tax rate in the range of 22% to 24%. Net interest expense in the range of $285 million to $305 million. Capital expenditures in the upper end of the range are $1.2 to $1.4 billion, 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 turning to Q&A, I wanted to offer a few closing thoughts. Looking ahead, what impresses me most is our team's commitment to day-to-day execution along with continuous improvement. We've done a lot of hard work to strengthen our business and operations so that we can continue to provide quality products and services to our customers at both ends of the value chain. We're always looking for additional opportunities to get better. We spent significant capital improving the facilities and operations across our outstanding global footprint, and our team is making sure those investments pay off in improved efficiency and reliability. For instance, our US plants had their best soy crush performance for a crop year ever, and we continue to run at high utilization rates. We also reached year-to-date record volumes in global rate seed crushing and refining. In the quarter, we broke ground on the expansion of our palm and specialty oils facility in Avondale, Louisiana that we purchased last year. This facility, which has multi-oil capabilities, builds on our ability to provide specialty oils to our food customers in North America and is already exceeding our initial performance expectations. We're excited to further grow operations in this location that has significantly improved our reach across North America. In today's often complicated global environment, strengthening all areas of our business is more important than ever. Our combination with Bytera will further accelerate our diversification across assets, geographies, and crops, providing us with more optionality to help address the world's food security needs. While we always look for opportunities to improve, we are 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.