Good morning, and welcome to the ADM Second 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 would now like to introduce your host for today’s call, Megan Britt, Vice President, Investor Relations for ADM. Ms. Britt, you may begin.

Thank you, Alex. Hello, and welcome to the second quarter earnings webcast for ADM. Starting tomorrow, a replay of this webcast will be available on our Investor Relations website. Please turn to Slide 2. 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. On today’s webcast, our Chairman and Chief Executive Officer, Juan Luciano, will discuss our second quarter results, share progress highlights on our first half accomplishments and provide perspective on our outlook for the second half. Our Chief Financial Officer, Vikram Luthar, will review segment level performance for the quarter and first half and provide an update on our cash generation and capital allocation actions. Juan will have some closing remarks, and then he and Vikram will take your questions. Please turn to Slide 3. I'll now turn the call over to Juan.

Thank you, Megan, and thanks to those who have joined us for today's call. Today, ADM reported second quarter adjusted earnings per share of $1.89 with an adjusted segment operating profit of $1.6 billion. Combined with first quarter results, this equates to a first half adjusted earnings per share of $3.98 and an adjusted operating profit of $3.4 billion. Our trailing fourth quarter average adjusted ROIC was 13.8%. The first half of 2023 has unfolded as we expected, and our financial performance nearly replicates the record results from the first half of last year, even as we face a more challenging macroeconomic and demand environment to start the year. Through active positioning, strong margin management and leveraging our geographically diverse end-to-end supply chain network, we maintain our earnings power and a strong ROIC performance bolstered by key strategic accomplishments across the enterprise. Please turn to Slide 4. Let me highlight just a few across the business. In Ag Services & Oilseeds, our team leveraged past investments in port capabilities to produce record origination volumes out of our Brazilian facilities, expanded our regenerative agriculture partnerships and leveraged our ability to flex crush capacity to capitalize on higher canola crush margins. In the latter instance, we flexed more than 300,000 tons of capacity and captured an additional $40 per metric ton of margin. In Carbohydrate Solutions, strategic investments in optimization and modernization allowed our team to manage increased demand for liquid sweeteners, drive growth in BioSolutions revenue and operating profit and produced record results in our milling and international corn businesses. In Nutrition, our unique go-to-market strategy continues to drive a larger sales pipeline and deliver double-digit growth in the Flavors business, thanks to an impressive performance in EMEA and new wins in North America. When you combine all of these aspects across ADM's full business portfolio, it's clear how we are able to convert challenges in one geography, product or business segment into value drivers in another. Next slide, please. Let's review the factors that we see as important drivers for a strong second half finish in 2023. We expect continued strength in Brazil origination for the remainder of the year. Our past strategic investments in port facilities in Brazil optimize origination networks and deep connections to our global trade and destination marketing teams will allow us to export strong volumes, capitalizing on the record Brazilian soybean and corn crops. Biofuels demand continues to remain strong. Through the first half of the year, we saw robust margins from biodiesel, strong demand for ethanol and an increasing demand for vegetable oil from renewable green diesel, and we expect these trends to continue in the second half. Our Spiritwood, North Dakota processing facilities are scheduled to start up in Q4, adding 1.5 million metric tons of annual soy crush capacity to our portfolio and producing low carbon intensity soybean oil for our JV partner Marathon's nearby renewable diesel facility. Projects like this will support growing demand for renewable diesel and sustainable aviation fuel throughout the industry. We also see continued resilience in food demand for core products. We expect the continued solid margin and volume environment for sweeteners, starches, and flours. We are beginning to convert our pipeline of wins in Human Nutrition into operating profit. Well, there are some factors that have hindered growth in the portfolio, we believe positive momentum from Flavors is a predictor of a healthy rebound. We also see continued commodity market dislocations in the second half. ADM has the unique ability to execute with agility in a dynamic environment. Our team utilizes our unparalleled global asset footprint and end-to-end supply chain to adapt to evolving market conditions and meet global food security needs while driving strong returns. Lastly, our balance sheet remains healthy, and we are flexing it toward organic investments and opportunistic share buybacks. We continue to deploy capital to drive organic productivity and innovation-oriented programs such as Spiritwood, Valencia and Marshall as well as invest in our plant automation efforts and our broad decarbonization initiatives. Our $1 billion in share repurchases in the first half highlights our confidence in the strong cash generation and growth potential of our company. As we look at the back half of the year, we intend to continue our share repurchase program. We feel that these factors are fundamental drivers of our strong second half performance. I am proud of how our team has delivered halfway through the year and even more excited about the opportunities presented in the second half and what our team can deliver. Taking collectively, we are raising our earnings expectations for full year 2023. With that, let me turn it over to Vikram, who will go into more detail on the results of operations.

Thank you, Juan. Please turn to Slide 6. The Ag Services & Oilseeds team continues to deliver exceptional results in a dynamic environment, leading to an extremely strong performance in the first half of 2023, surpassing the outstanding first half of the prior year. Q2 results were strong, but slightly below the prior year period. Ag Services results were in line with the strong second quarter of 2022. South American origination results were higher year-over-year as the team delivered record volumes and higher margins on strong export demand, leveraging our strategic investments to expand port capacity to capitalize on the record Brazilian soybean crop. Results for North America origination were slightly lower year-over-year, driven by lower export volumes due to large South American suppliers. Our execution in destination marketing as well as effective risk management continue to deliver strong global trade results, though lower than the record quarter last year. In our crushing subsegment, results were much lower than the record result from the second quarter last year. Global soy crush margins remained strong but were lower year-over-year in all regions due to softer demand for both meal and oil and a tight U.S. soybean carryout. This was partially offset by strong softseed margins and higher volumes supported by a strong Canadian canola crop and use of our flex capacity in EMEA. Additionally, there were approximately $195 million of negative mark-to-market timing effects in the current quarter that are expected to reverse as the contracts execute in future periods. Refined products and other results were significantly higher than the prior year period, achieving a record second quarter. North America results were higher, driven by strong food oil demand and improved biodiesel volumes. In EMEA, strong export demand for biodiesel and domestic food oil demand supported stronger margins. Additionally, there were approximately $90 million of positive mark-to-market timing effects in the current quarter that are expected to reverse as the contracts execute in future periods. Equity earnings from Wilmar were lower versus the second quarter of 2022. Looking ahead for the third quarter, we anticipate solid results in Ag Services & Oilseeds. We expect strong demand for grain exports to be heavily weighted towards South America and our Brazilian origination footprint. We anticipate strong volumes and margins for soy and canola crush based on the tight Argentine crop and improving demand outlook for meal and oil. Slide 7, please. Carbohydrate Solutions delivered strong results in Q2, but lower than the record second quarter of last year. The Starches and Sweeteners subsegment, including ethanol production from our wet mills, capitalized on a solid demand environment during the quarter. North America Starches and Sweeteners delivered volumes and margins similar to the prior years, and ethanol margins were solid as industry stocks moderated but lower relative to the prior year. Q2 results were negatively impacted due to unplanned downtime at one of our corn germ plants. In EMEA, the team effectively managed margins to deliver improved results. The global wheat milling business posted higher margins, supported by steady customer demand. BioSolutions continued on its excellent growth trajectory with 22% revenue growth year-over-year. Vantage Corn Processors results were lower due to lower year-over-year ethanol margins. The prior year period also includes a one-time $50 million benefit from the USDA biofuel producer recovery program. We continue to make progress on our initiatives to decarbonize the Carbohydrate Solutions footprint including our definitive agreement with Tallgrass to sequester carbon from our Columbus, Nebraska facility and continued progress on decarbonizing our decade complex through additional carbon capture and sequestration wells, as well as ultra-low-carbon intensity, electricity and steam generation. These are key steps in enabling us to produce low CI feedstocks for use in many applications for our major CPG customers and underpinning our growth opportunities, such as SAS, BioSolutions and our lactic acid polylactic acid joint venture with LG Chem. Looking ahead for the third quarter, we expect continued steady demand in margins for our starches, sweeteners and wheat flour products. Ethanol margins are also expected to remain solid. On Slide 8, Nutrition results were significantly lower than the prior year's record quarter. Human Nutrition results were slightly up year-over-year on a constant currency basis. Our Flavors business posted record results in Q2, growing revenues and EBITDA margins due to improved mix and pricing in EMEA, as well as improving demand in North America. Flavors will be a significant growth engine for Human Nutrition for the remainder of the year and will act as a pace setter for the rest of our portfolio. Customer innovation in beverage is beginning to accelerate, and our value proposition is driving our sales pipeline to its largest ever. Growth in Flavors was offset by lower year-over-year results in Specialty Ingredients. While there has been softening of demand for plant-based proteins, particularly for the alternative meat space, other categories like alternative dairy snacks and baked goods as well as specialized nutrition are providing growth opportunities. Although still a small OP contributor, Health and Wellness is seeing demand recovery in probiotics and is benefiting from geographic expansion opportunities offered through ADM's global footprint and customer relationships. Our largest challenge in 2023 has been in the Animal Nutrition business where significantly lower amino acid margins and softer global feed demand have affected volumes, driving much lower results. Over the past several months, we have made important adjustments to align the business to this environment, including simplifying our brands and go-to-market strategy, consolidating facilities and optimizing our footprint, rightsizing the workforce in association with these changes and aligning the reporting structure to enhance synergies. We are also refocusing our efforts to increase offerings in the higher-margin specialty feed and ingredients areas. We believe these actions will lead to improved commercial and operational performance, supporting profitable growth when market fundamentals improve. When looking at Nutrition as a whole, we now expect 2023 results to be similar to the prior years, as we expect growth in Human Nutrition to be offset by lower results in Animal Nutrition. However, given the increase in customer innovation we've seen in our Flavors business and our recent wins in pipeline growth across Human Nutrition, as well as the actions we are taking in Animal Nutrition, we remain confident about the future outlook and growth prospects for Nutrition. Slide 9, please. Other business results were significantly higher than the prior year quarter due to improved ADM investor services earnings on higher net interest income. Captive insurance improved on premiums from new programs, partially offset by increased claim settlements. In corporate results, net interest expense for the quarter increased year-over-year, primarily on higher short-term interest rates. Unallocated corporate costs of $262 million were similar versus the prior year as lower health insurance costs were offset by increased global technology spend. We still project corporate costs to be approximately $1.5 billion for the year. The effective tax rate for the second quarter of 2023 was approximately 18%, in line with the prior year. For the full year, we still expect our effective tax rate to be between 16% and 19%. Next slide, please. Through the second quarter, we had strong operating cash flows before working capital of $2.5 billion. We allocated $600 million to capital expenditures as well as returned $1.5 billion to shareholders through share repurchases and dividends. We continue to have ample liquidity with nearly $13 billion of cash and available credit, and our leverage ratios are low with an adjusted net debt-to-EBITDA ratio at 1.0. Our strong balance sheet and credit ratings provide a stable financial footing for ADM to pursue our strategic growth initiatives while also returning capital to shareholders. We still anticipate $1.3 billion of capital expenditures in 2023. As Juan mentioned, we have already completed the $1 billion of share repurchases that we announced in January this year. We intend to continue our share repurchase program, subject to other strategic uses of capital. Based on our very strong first half, we are raising our full year earnings outlook to around $7 per share with potential for even more upside.

Thank you, Vikram. As we wrap up today's call, let me highlight a few opportunities that we're excited about as ADM continues to execute our strategic agenda, where we're seeing value generation today and have plans to accelerate. Let's start with digitization and automation. Our ongoing work to modernize and automate our operations is ramping up. Our eight current implementations across North America and Europe are generating millions in run rate benefits. And we have 10 more starting in Q3 with the expectation of similar scalable benefits. Our 1ADM program is accelerating our decision-making and analytics capabilities across the company, helping us find faster paths to productivity. With our HR systems now in place globally, our next milestone is bringing part of the Nutrition flavors business on board. In LatAm, we have implemented technology to optimize trade and commercial processes while digitizing freight and logistics contracting. All of this is helping us reduce costs and make better, faster decisions to deliver value to ADM and our customers. Sustainability and decarbonization have opened new avenues for growth across the enterprise while ensuring we are taking the necessary actions on our own footprint. Our STRIVE 35 program continues to deliver important progress, and our recent sustainability report shows our efforts in greenhouse gas emissions, waste reduction, no deforestation and crop traceability achieving targets ahead of plan. As we continue to support our most significant customers with carbon-advantaged crop sources, we recently announced regenerative Ag program targets of 2 million acres in 2023 with an additional 2 million acres by 2025. With the recent Tallgrass agreement and permit submissions, CO2 from ADM facilities in Nebraska, Iowa, and Illinois is now targeted to be captured and stored safely and permanently underground within our expanded indicator CCS well capacity. This helps decarbonize our customers' value chains and our own across important opportunity spaces like BioSolutions and sustainable aviation fuel. And we are continuing to invest in the next phase of innovation. Our new Decatur protein solution center is engaged in ADM's world-class science and technology capabilities to deliver on tomorrow's most important consumer nutrition trends. Collaboration between ADM and our ventures partners take us beyond today's alternative protein sources to help address critical areas of sustainability, wellness, and affordability. Leveraging our deep fermentation expertise and capacity is positioning us to scale the next generation of food, feed, fuel, fabrics and other industrial products with key partners. The combination of technology alongside global trends in sustainability, food security and well-being is transforming the food and agriculture industry at the fastest pace since the last century. And ADM is at the forefront of this transformation and connected growth opportunities, which give us even more confidence in our long-range growth plans. Thank you for your time today. Vikram and I look forward to your questions. Alex, please open the line.

Thank you. Our first question for today comes from Ben Theurer from Barclays. Ben, your line is now open. Please go ahead.

Thank you very much. Good morning, Juan. Good morning, Vikram.

Good morning.

Good morning.

So I'd like to just a general question on obviously, like the puts and takes. You're raising your guidance at the higher end of what 6% to 7% was now around 7%. And obviously, you had a very strong first half, but then at the same time, you're looking for a little more softness in Nutrition. So maybe help us understand how you feel about just macro picture in general demand? What are the geopolitical assumptions that you have behind your outlook and how you feel about second half and then also beyond maybe into 2024, as it relates to general demand in an environment where we're in right now. Thank you.

Certainly, Ben. First and foremost, we are very proud of the results we achieved in the quarter and the first half of the year. We feel increasingly confident about the outlook for ADM. Let me point out some key reasons for this. Crush margins have begun to improve as we had anticipated, and they continue to strengthen. Board crush has been more stable, and the mill basis is stronger while the BIM basis has decreased in the U.S. as expected. There appears to be a shift in global demand for protein, which suggests a need for more mill capacity, allowing us to compensate for Argentina's deficiencies this year. This trend supports our positive outlook for the third and fourth quarters. We are observing substantial harvests in Brazil, and the congestion at Brazilian ports is resulting in a lower interior basis, facilitating our procurement of cheaper grains, which benefits companies that have invested in infrastructure to leverage these conditions, including us, particularly in Santos and Barcarena in Brazil. This is advantageous for our operations. Previously, ethanol inventories were around 25 to 26 million barrels, but at the end of June, they have decreased to about 22 million. We see robust spot demand for ethanol and corn is becoming scarce, which has strengthened margins that are holding steady. We remain optimistic about continued improvement in ethanol margins. The trend in biofuels continues to look encouraging, and we have a solid book on biodiesel for the quarter, which adds to our optimism. Additionally, we are encountering fewer recession challenges, and the resilience of the U.S. consumer is positively impacting demand for our core food products. This resilience is evident across our carb solutions, including sweeteners, starches, and milling products. Regarding Nutrition, as Vikram discussed in detail, we feel confident in our value proposition in the flavors segment, which is more beverage-focused and experiences faster innovation cycles. Our pipeline continues to expand, which is promising for potential revenue growth in 2024. Overall, we are aligning the company with three significant trends: food security, influenced by geopolitical issues and weather, increases the value of our assets and enhances margins in destination marketing services. We are also focused on health and well-being, reflected in our flavor innovations. Furthermore, the sustainability trend is creating opportunities in decarbonization. It’s important to note that in both automation and decarbonization, we are just at the beginning stages of a long-term progression for the industry and for ADM. Therefore, we feel very positive about our performance in 2023 and are even more optimistic about the future.

Perfect. Thank you very much.

Thank you. Our next question for today comes from Ben Bienvenu from Stephens. Ben, your line is now open. Please go ahead.

Hi, good morning, everybody. Thanks for taking my question.

Good morning, Ben.

I would like to follow up on the Nutrition business and discuss the expected trends as we progress through the second half of the year. I appreciate the insights regarding overall results being flat compared to last year. However, with Animal Nutrition anticipated to decline year-over-year, there's a significant increase in the human sector. Could you share what visibility you have into that? Additionally, if you could differentiate between the third and fourth quarters as you see it now, that would be helpful.

Yes, Ben. So I think let's just take a few minutes to talk about why our guide has gone from 10% growth to flat. Animal Nutrition cyclical weakness is persisting for longer than we anticipated. Consumers continue to trade down from higher value, more feed intensive to lower value, less feed intensive proteins. Reformulation to reduce feed costs is also impacting volumes. Plant-based proteins, particularly in the alternative meats continue to be softer than anticipated. The destocking actually is still continuing in that category. And the broader market growth has also moderated, which we had signaled before. Third, the demand fulfillment challenge in pet solutions are taking longer than anticipated to resolve. The delay was driven primarily by slower than anticipated integration of the recent small business acquisition that we made in North America. And if you remember, we had COVID, and that delayed also the integration. So we're working through that. But what are we doing? And that's important as you think about the back half as well as the future. Flavors. Strong pipeline and win rates. We talked about the largest ever pipeline we've had. Flavors actually grew profits in the first half 9%, 20% in Q2. So that's a very good sign of the recovery we are seeing in parts of the Human Nutrition business. The other thing that's important to note, Flavors actually contributed almost 50% of the overall operating profit for Nutrition in the first half. So that's an important signal as you think about the future growth of Nutrition. Yes, that was primarily driven in the beverage category, but we see green shoots of opportunity in the food category as well. In the SI side, we are leveraging our CD&D capabilities to accelerate penetration into some of the faster-growing categories. I mentioned alternative spaces, alternative meat has been soft but alternative dairy and some of the other categories actually growing. And we are launching our Decatur protein innovation center in Q3. All that, given our CD&D capabilities allows us to pivot to categories that are growing. And that sometimes takes time. So we anticipate that recovery possibly to come in more in the 2024 timeframe, less in the back half of this year. In Animal Nutrition, we are taking actions to improve margins, cost and product and footprint rationalization to improve margins and also to drive profitable growth as the markets recover. So we feel good about the recovery as the market recovers. And in parallel, what we are doing is looking at the specialty part of our Animal Nutrition portfolio to leverage our Human Nutrition, CD&D and go-to-market capabilities to be able to drive increased penetration there. On the pet side, demand creation is going to take a little longer, possibly into the back half of this year and into 2024. But overall, we clearly see signs of recovery, and our forward outlook for Nutrition is still strong and robust in terms of growth. This year, given some of the challenges we faced, we expect it to be similar to last year. Juan, I don't know if you want to add some longer-term perspective.

We remain very positive about our outlook. When we launched the Nutrition business, our goal was to become the leading nutrition company globally. We set two main performance indicators for our team: first, to outpace market growth in sectors where customer activity and innovation are thriving, like Flavors, where we are indeed seeing double-digit growth. Second, we aimed to increase EBITDA margins on sales, and we have successfully done so in Flavors. However, as Vikram mentioned, the industry is currently facing a challenging destocking phase, compounded by some internal issues such as integrating a smaller facility in Pet. We are navigating these growing pains while enhancing our portfolio. Importantly, our innovation system and ability to deliver new recipes to customers more quickly than our competitors continue to yield positive results. We excel when customers have projects, especially in beverage, but during periods of stagnation or destocking, progress may slow. Nonetheless, we anticipate that our growth trajectory will remain on a similar path.

Okay. My second question is about Starches and Sweeteners. You mentioned that volumes and margins were similar in the second quarter, but there was an unexpected plant shutdown. Can you discuss the specific impact of that on the second quarter? Additionally, you noted strong margins for sweeteners, starches, and flour in the latter half of this year. Should we anticipate margins and volumes to be similar again, or do you foresee an improvement in the second half of the year? Thank you.

Sure. In April, we experienced an outage at one of our grain elevators at the West plant within ADM's processing complex. This significantly affected the Carbohydrate Solutions results for Q2. We had to sell the germ into feed markets since our wet mills were slow, which also resulted in reduced ethanol production at a time when margins were strong. We expect this situation to improve in Q4. While Q2 was impacted significantly enough for us to mention it, we anticipate a shift from Q2 to Q4 due to seasonality. However, our outlook for the full year remains strong. The sweeteners, starches, and growth in milling volumes have been quite resilient, although we have seen some softness in the specialty side, which has been more than compensated by mix and margins. Overall, the outlook is solid, and we did experience a meaningful impact from the corn germ in Q2.

Okay. Thanks and congratulations.

Thank you. Our next question comes from Tom Palmer of JPMorgan. Tom, your line is now open. Please go ahead.

Good morning, and thanks for the question.

Good morning.

Perhaps we could just talk through the moving pieces as we migrate to the North America harvest. We've seen crush margins in the U.S. strengthen, especially in the past month or so. Looks like we've seen maybe just a little bit of a beginning in other regions of the world. I think often, when you see our weaker-than-expected supply coming out of the country, other regions of the world often benefit. And at least up to this point, and I know we're ahead of the harvest, we haven't seen that necessarily in margins. I mean, how do you guys think about as we think about the balance of the year, kind of regional expectations for crush progressing?

Yes. Thank you, Tom. As I said before, I think that when you see the world needs more protein and certainly, we can see that given the Argentine gap, which is they produce probably 20 million, 25 million tons less soybeans than maybe the world was expecting them to produce, that's reallocating crush. We are re-locating crush to two places; we are re-locating crush to Brazil and reallocating crush to the U.S. So of course, the timing of that is different. And so we see that in the margins that we see for the U.S. coming into Q3 and then Q4. Demand continues to be strong for meal. There won't be so much protein that is not going to just be soybean meal, but there's going to be other types of protein feed, whether it's feed wheat and all that. So when you take that, combined with the increased demand from fuels, but also oils for food consumption. If we expect soybean oil demand to go up like 8%, it's like about 6% coming from food and maybe 2% coming from fuel. But my point is crush margins are supported from everywhere. Of course, as the world gets to try to cover for these soybeans, the margins will be where you are closer to the physical product to have access to the physical soybeans. And that's where ADM's footprint and ADM combined with origination and global trade where we excel. So I think the team had a great first half, and they are expecting a great second half. And we don't see anything that can derail this for quite some time. I hope that provides some perspective.

Thank you. Our next question comes from Manav Gupta of UBS. Your line is now open. Please go ahead.

Hi. My quick question here is we are in the second phase where a number of new plants on the R&D side will start up in the second half of this year including one of your partners, which is starting up a bigger plant on the West Coast. So I'm just trying to understand from the demand perspective of soybean oil, do you expect a much stronger demand environment than what we saw in the first half of this year?

Yes, we have several plants that have been announced and we are consistently assessing the likelihood of their completion. In this industry, projects don’t always align perfectly with timing. However, as you mentioned, there are two or three large plants set to come online in the second half, which will boost demand. Additionally, our partner's plant will enhance our crush capacity to 1.5 million tons per year. We are confident that demand will materialize, and we anticipate having enough crush capacity for soybean oil to cover about 60% of the overall feedstock needs. The industry is expected to grow, but we will need to attract additional feedstocks to meet this demand. It is clear that the industry will become tighter, necessitating capacity, technology, and capabilities to succeed. This is essential for progress as we build a new industry and navigate the energy transition, which is advantageous for ADM. We are also pleased that Spiritwood was completed on time and within budget, reflecting well on the team's execution.

Thank you. Our next question comes from Adam Samuelson of Goldman Sachs. Adam, your line is now open. Please go ahead.

Yes. Thank you. Good morning, everyone.

Good morning, Adam.

Hi.

So I guess my first question, maybe coming back to Nutrition. As I think about the revised outlook for the year, profit now flat. How should we think about the pathway 2024, 2025 and kind of the achievability of the prior 2025 target, I believe, $1.2 billion of OP in that segment? And maybe the split between human and animal within that, clearly animal has been more pressured than Human Nutrition. So just help me think about kind of as we think about the 2023 targets, kind of where you are relative to what was implied in your plans to get to the 2025 goals? Thanks.

Yes. So when we put the 2025 goals, let me go back on the comments I made before. When we look at our plans, we look at how do we grow faster than market and how do we implement projects and target applications to continue to grow EBITDA margin on sales. The two businesses, Animal Nutrition and Human Nutrition had different profiles and different goals in that regard, so when you see the final number is a combination of all those plans roll out. In the Human Nutrition, margins are much higher and continue to make it better and more stickier to customers as we develop better solutions. In Animal Nutrition, it was a margin up story since they were coming from lower margins. So when you think about our numbers, they are a combination of applying our growing faster than market and our EBITDA margin on sales to a market number. Of course, this industry, as you can see by ourselves and our competitors, is having tough times, whether it is because customers are either not innovating fast enough or destocking at this point in time and making sure they have their supply chains in order. So to the extent that those projections are going to be reduced, our percentages applied to those numbers will be a smaller number. So we haven't gone through that because, to be honest, we are looking at how do we address our current challenges. So we're not that worried about 2025 right now, we want to make sure we make all the adjustments that we need to make. And maybe as we talk about the adjustment, let me talk a little bit about Animal Nutrition. Animal Nutrition, as we become more into the business, if you will. We know there is a commodity part, and there is a specialty part. The specialty part matches very well with what the playbook that we have in the human side. And that part is growing and we will continue to accelerate. And Vikram said before, we are repurposing resources to add more of that. There is a commodity part of that, that at the beginning, when we put the two businesses together, we thought it was going to be a good way to open doors, if you will, for the innovation but they have different dynamics. And so we are looking at those different dynamics and how do we need to readjust either the capacities or some of the people associated with that and the intensity of resources in that part as the specialty part is not coming as fast as we thought. So we need to deal with the volatility of the commodity part while the specialty part is a little bit slower. So as those things balance, we are adding productivity to the commodity part of animal, and we are adding more resources to the specialty part in animal and I think that we believe that will take us to, again, a growth rate into 2024 for those businesses. We're going through that. We will cover all that also, Adam in Investor Day as we will have developed more plans. But rest assured, we're very active in our interventions, and we're testing different options in order for us to manage this better. This is also sometimes difficult to characterize on something specific and apply it globally because we have operations in Southeast Asia. We have operations in Brazil. We have operations in Mexico and Europe, in the U.S. And all those things have to be put together and not all the dynamics in all those markets go perfectly aligned and synchronized. So that's why I think we need a little bit more granularity in December to be able to articulate that, which is a little bit more difficult to portray in a call without any numbers or slides.

Thank you. Our next question comes from Andrew Strelzik from BMO. Andrew, your line is now open. Please go ahead.

Hi, good morning. Thanks for taking the question. I wanted to ask about your view on the Ag Services strength durability. It seems like we've got tighter global grain supplies than we maybe thought we were going to have, and refined oils premiums that are at record highs. Crush margins, obviously, in the U.S. that are very strong. I know maybe Argentina comes back next year. But it doesn't feel like these are things that even though you guide for just 2023, things that would end just because the calendar flips. And so how long do you think the strength in Ag services can continue for? What I guess, maybe are the risks because it seems like the setup should extend. So curious for your perspective there. Thanks.

Yes. Thank you, Andrew. We have experienced two excellent crop years in Brazil, and we anticipate a strong crop in the U.S. The volumes are favorable for us, and we appreciate increased volumes. However, the global landscape has become more complex due to geopolitical tensions. We are witnessing unfortunate developments in the Black Sea, along with increasingly severe and unpredictable weather patterns. We transitioned from a very dry La Nina that impacted various regions worldwide, and we may now face a more intense El Nino, which is contributing to record temperatures. This volatility and uncertainty enhance the value of our investments. As we invest more in ports in Brazil, we're seeing significant leverage from that. We will likely export somewhat less from the U.S. since we'll be exporting more from Brazil, which may not balance perfectly. This could lead to a slight decline in Ag Services earnings. On the positive side, the abundant crop availability in the U.S. will positively impact our processing businesses. The strength in oils is attributed to lower soybean bases, while soybean mill bases have strengthened, allowing for margin expansion. The global shift towards decarbonization is also influencing the grain industry. We are at the forefront of this movement with our regeneration program in regenerative agriculture, as more people prefer crops to be grown sustainably. Additionally, demands for deforestation limits are increasing. Looking ahead, it seems likely that less land will be brought into production even as the global population approaches 10 billion. Beyond just population growth, consider protein consumption. In the U.S., the average is about 270 pounds per capita per year, while China is around 170, and the global average is 100. If the world were to reach China's average, we would need an additional 70 pounds per person per year, and to match U.S. levels, an increase of 170 pounds per person. This represents a significant amount of grain that must be produced without a substantial increase in land availability. Therefore, we have many challenges ahead. Given the weather conditions and geopolitical factors, there will continue to be areas of tight supply where our global presence, including our facilities, ports, logistics assets, and marketing teams, will be invaluable as we work to ensure food security for the growing global population.

Thank you. Our next question comes from Salvator Tiano from Bank of America. Your line is now open. Please go ahead.

Thank you very much. Regarding the crush margins, can you explain why the margins in Brazil and Europe have recently declined, excluding Argentina? Also, with the crush margin curve rising significantly in the U.S., what is your position in your forward hedging book for the rest of the year, and what is your strategy moving forward?

Okay. Yes, Salvator. So as you said, crush margins have weakened maybe in recent weeks to maybe $20 to $30 in Europe, especially to good transition through all to new crop in the U.S. and global oil basis maybe has weakened a little bit with firmer U.S. oil. We continue to bring biodiesel from there. So that continues to add value to the European businesses. But maybe the protein industry is a little bit weaker in Europe. In Brazil, I think Brazil, if I have to say something, maybe Brazil is trying to figure out how to accommodate all the production of soybean and corn that they have. So there are a lot of logistics challenges in Brazil. And I think that has pressured the beans basis country side. And soybean oil, I would say, is pressured in Brazil because of lack of domestic demand. Brazil is one of those places where you have export market, but you also have a domestic market. And I would say right now, domestic market may be for soybean oil is a little bit weak. And without the huge benefit that we have with the biofuels policies here in the U.S., Brazil may be a little bit weaker. But I would say, realistically, those are the two places that will pick up the slack that Argentina or the gap that Argentina left. So those are where the beans are. So we expect high crushing rates for both Brazil and the U.S.

Thank you. Our final question for today comes from Steve Haynes of Morgan Stanley. Steve, your line is now open. Please go ahead.

Hi. Thank you for taking my question. I have two quick inquiries regarding Nutrition. First, can you provide a dollar estimate for the cost savings related to the actions you're implementing on the animal side as it pertains to the 2023 outlook? Secondly, could you offer some more details on the inventory losses in the Pet Solutions segment? Thank you.

On the Animal Nutrition front, we have taken several actions towards the end of last year and are continuing to do so this year. While I won’t provide specific figures, I can tell you that most of the results from these actions will be seen in the latter half of the year. The full benefits will likely appear in 2024, but you will notice some improvements in 2023 as well. Regarding the inventory losses in the Pet segment, these were related to some of the acquired inventory during the integration of the facility we mentioned, where we faced challenges with a small business we acquired in 2021. This includes issues related to some of that inventory and some contamination we identified. The impact was significant enough to warrant mentioning in the context of Pet solutions, but it is not material from a broader ADM standpoint.

Thank you. At this time, we currently have no further questions. So I'll hand back to Megan Britt for any further remarks.

Thank you for joining us today. Please feel free to follow-up with me if you have any additional questions. Have a good day, and thanks for your time and interest in ADM.

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