Bunge Global SA

Good day and welcome to the Bungie Global SA fourth quarter 2024 earnings release and conference call. Today, all participants will be in a listen-only mode. Should you need assistance during today's call, please signal for a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask your questions. To ask a question, you may press star, then one on your telephone keypad. To withdraw your question, you may press star, then two. Please note that today's event is being recorded. I would now like to turn the conference over to Ruthann Wisner. Please go ahead.

Thank you, Operator, and thank you for joining us this morning for our fourth 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. Reconciliations of our 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.

Thank you, Ruthann, and good morning, everyone. I want to start by thanking the team for their continued hard work and commitment in 2024. They made good progress on a number of significant growth projects while also advancing our work to build an even stronger Bungie. Our team is prepared for the close of our business combination with Viterra. Teams at both companies have put in countless hours of planning to ensure a smooth integration so that our customers at both ends of the value chain farmers and consumers see good continuity of service. And we expect to close the transaction soon. You likely heard we received regulatory approval from the Canadian government last month. Continue to engage in constructive conversations with the regulatory authorities in China while we work through the final stages of the asset divestment process in Europe. We're also in the late stage of the regulatory process for our acquisition of CJ Selecta, a leading manufacturer and exporter of soy protein concentrate in Brazil. We expect that transaction to close in the near future. In the coming weeks, we expect to close our announced partnership with Repsol to develop new opportunities to help meet the growing demand for lower carbon intensity feedstocks for the production of renewable fuels. This alliance is the first of its kind in Europe. It furthers our long-term strategy to create alternative paths towards the decarbonization of agriculture and the role we can play in the liquid fuel supply chain. In October, we announced the completion of the sale of our sugar and bioenergy joint venture in Brazil to BP. As we've discussed, It streamlines our business and allowed us to expand our stock repurchases and authorization. Planning for these large initiatives takes teamwork and cross-functional collaboration. The team's done a great job of running our day-to-day business while also working on these strategic growth initiatives. In addition, we continue to return capital to shareholders through our share repurchases and our regular dividends. We repurchased a total of $1.1 billion of shares in 2024, and share buybacks will continue to be an important part of our capital allocation strategy. Gifting to our operating results, we didn't close the year as expected. In particular, operating conditions have been challenging in South America, and they continue to be in the fourth quarter. Fortunately, we're seeing things stabilize and expect to see significant improvement in the region in 2025. After the Viterra transaction closes, we expect to provide an outlook for the combined company. In the meantime, we are providing an outlook for the current bungie business. Forward visibility is limited, particularly at this point given the increased geopolitical uncertainty. Based on what we see in the markets and the forward curves today, currently expect full-year adjusted EPS of approximately $7.75. For that, I'll turn it over to John for a deeper look at our financials and outlook. John? Thanks, Greg, and good morning, everyone. As Greg mentioned, the fourth quarter came in below our expectations. This was particularly true in South America, where the market environment has been challenging all year, impacting industry margins throughout the oil seed and grain value chains, to include those of our joint ventures. We also felt the impact of a declining margin environment in North America from biofuel trade uncertainty. Now let's turn to the earnings highlights on slide five. The reported fourth quarter earnings per share was $4.36, compared to $4.18 in the fourth quarter of 2023. Boarded results included a favorable mark-to-market timing difference of $1.25 per share The net positive impact of $0.98 per share, notable items, primarily related to the gain on the sale of our sugar and bioenergy joint venture, partially offset by transaction and integration costs associated with Bytera. Adjusted EPS was $2.13 in the fourth quarter, which is $3.70 in the prior year. Adjusted core segment earnings before interest and taxes, or EBIT, was $548 million in the quarter. inclusive of a Ukraine business interruption insurance recovery, $52 million, versus EBIT of $881 million last year. In processing, territory results in Europe and Asia were offset by low results in North America and South America, as well as in European soft seats. Higher merchandising results were driven by improved performance in financial services, efficient freight, and global grains, more than offsetting lower results in global oil. We find in specialty oils, more results in North America were primarily due to the combination of a more balanced supply and demand environment and certainly related to U.S. biofuel policy. Results in Europe, South America, and Asia were also down due to lower margins. The variances were much narrower. In milling, higher results in North America were more than offset by lower results in South The corporate and other increase in corporate expenses was primarily driven by lower performance-based compensation, various project-related expenses in the prior year. More other results related to our captive insurance and securitization programs, buggy ventures. More results in non-core reflect only one month of income from the sugar joint venture that was on the sale. And interest expense of $62 million was down in the quarter compared to last year, reflecting lower net debt levels and interest rates. Increase in income tax expense for both the quarter and full year is primarily due to lower pre-tax income and earnings mix. Adjusting for notable items in market-to-market timing differences, full year adjusted effective income tax rate was approximately 23% of the current and prior year. Let's turn to slide six, where you can see our adjusted EPS and EBIT trends over the past five years. Our performance period reflects a combination of favorable market environment and excellent execution by our team. The recent trend indicates more balanced supply and demand, translating into less volatility and lower. Slide seven details our capital allocation. For the full year, we generated approximately $1.7 billion of adjusted funds from operations. After allocating $451 million to sustaining CAPEX, which includes maintenance, environmental health, and safety, we had approximately $1.2 billion of discretionary cash flow available. Of this amount, we paid $378 million in dividends. That's $925 million in growth and productivity-related CAPEX. about two-thirds of which related to our growth pipeline of large multi-year investments, and repurchased $1.1 billion of money shares. $500 million of those repurchases were from the $728 million of cash proceeds received to date for the sale of our Sugar JV. This resulted in the use of $444 million of previously retained cash flow. Moving to slide eight. We finished 2024 with total CapEx spend of approximately $1.4 billion, which was in line with our last forecast. Moving ahead to 2025, we expect CapEx of $1.5 to $1.7 billion, reflecting the continued investment in our ongoing multi-year greenfield projects. This ranges down from the preliminary estimate of $1.92 billion we provided you previously, reflecting our decision to not pursue some projects. as well as timing changes related to existing projects. We continue to expect turning to a baseline run rate on CapEx level during the second half of 2026. Moving to slide nine. At year-end, readily marketable inventories, or RMI, exceeded our net debt by approximately $2.3 billion. Our adjusted leverage ratio reflects our adjusted net debt to adjusted EBITDA was 0.6 times at the end of the quarter. Y-10 highlights our liquidity position. At year-end, we had committed credit facilities of approximately $8.7 billion, all of which were unused at the end of the year, providing us ample liquidity to manage our ongoing capital needs. In addition, we had a cash balance of approximately $3.3 billion accumulated in large part as a result of a $2 billion of cash proceeds from the U.S. public debt offering that we closed in September. Our proceeds will be used to fund the cash portion of the VITERA transaction. In addition, $6 billion term loan commitment secured last year used to refinance VITERA's outstanding bank debt on closing the transaction. Let's turn to slide 11. In the year adjusted, ROIC was 11.4%, and ROIC was 9.7%. Adjusting for construction and progress, large multi-year projects not yet operating. Any excess cash on our balance sheet for the VITERA closing adjusted ROIC would increase by approximately two percentage points and ROIC by approximately one percentage point. While returns have declined in highs, it remained low above our adjusted weighted average cost of capital of 7.7%. Moving to slide 12. In the year we produced discretionary cash flow of approximately $1.2 billion, the cash flow yield of 11.1%, compared to our cost of equity of 8.2%. Let me turn to slide 13, 2025 outlook. Greg mentioned in his remarks, taking into account the current and macro environment, we expect full year 2025 ingested EPS to be approximately $7.75. Forecast excludes the impact of announced acquisitions expected to be closed during the year. In agribusiness, full-year results are forecasted to be down from last year. Lower results in processing, where improved performance in South America is expected to be more than offset by North American and European soft seats. Results in merchandising are forecasted to be down slightly from last year. Fine and specialty oils, full-year results are expected to be down from last year. merely driven by a more balanced supply and demand environment in North America. More for another, full-year results are expected to be up from last year. Initially, the company expects it falling for 2025. Just an annual effective tax rate of 21% to 25%. An interest expense in the range of $250 to $280 million. Capital expenditures in the range of $1.5 to $1.7 billion. Depreciation and amortization were approximately $490 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 wanted to offer a few closing thoughts. Today's complicated global environment, we're confident that the work we've done and continue to do to improve our business and operations positions us well to deliver on our critical mission, connecting farmers to consumers, deliver essential food, feed, and fuel to the world. We continue to see the benefits of our global operating model, our portfolio optimization work, our financial discipline as we navigate the cycles inherent in our industry. With our culture of continuous improvement, our team continues to strengthen the business, both with the M&A work we talked about at the beginning of the call and our ongoing growth initiatives. Construction is going well on our large-scale projects, It will not only bring us new capabilities, it will also allow us to more efficiently and sustainably serve our customers. Improved productivity is at the heart of investments at dozens of our existing facilities around the world. Strategic use of capital, along with the implementation of the Bungie production system, is enabling our teams to set new performance records each quarter. We're also pleased with our performance on our sustainability priorities. We took a major step forward in November. We became the first global commodity exporter capable of 100% traceability and monitoring both our direct and indirect soy purchases in Brazil's priority regions. We're proud to reach this major milestone in our 10-year journey to achieve traceable and verifiable supply chains. As we think about our business in 2025 and beyond, Regardless of how the macro environment evolves, it's confident that our team has the experience, skills, and agility to navigate the changes that drive performance. With the addition of ITERA, we'll be an even stronger bungie, further diversification of assets, geographies, and crops, providing us with even more capabilities and optionality to help address the world's food security needs. With that, I turn to Q&A.