Earnings Call Transcript - ADM Q2 2025

Operator, Operator

Good morning, and welcome to the ADM Second Quarter 2025 Earnings Conference Call. As a reminder, this conference call is being recorded. I'd now like to introduce your host for today's call, Megan Britt, Vice President, Investor Relations for ADM. Ms. Britt, you may begin.

Megan Britt, Vice President, Investor Relations

Welcome to the second 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 Patolawala, 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 the most directly comparable GAAP financial measures are available in 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.

Juan Ricardo Luciano, Chair of the Board & CEO

Thank you, Megan. Hello, and welcome to all who have joined the call. Please turn to Slide 4. Today, ADM reported adjusted earnings per share of $0.93. Total segment operating profit was $830 million for the quarter. Our trailing fourth quarter adjusted ROIC was 6.9%, and cash flow from operations before working capital changes was $1.2 billion for the first half of the year. The team focus has been on managing what we can control in a dynamic environment, and we continue to drive positive momentum in those areas in the second quarter. Our Carbohydrate Solutions team again delivered steady results with strong execution and disciplined risk management. The Nutrition team drove another quarter of sequential improvement, led by our Flavors and Animal Nutrition portfolios. We also made important progress in getting our Decatur East plant back online, already ramping to our planned run rates. Services and Oilseeds performed in line with our expectations; the team worked to offset lower margins this quarter through targeted organizational realignment and network consolidations, enabling us to be well positioned to take advantage of expected improved conditions in the second half of the year. Across our global operations network, our efforts to improve operational resilience delivered outstanding results. We achieved our best performance in limiting unscheduled and unplanned downtime in more than 5 years. We're also proud to have been named as one of America's greatest workplaces in manufacturing, a testament to the tireless efforts of our colleagues across the ADM operations workforce. The external environment became clearer in some critical areas for our business throughout the quarter. The U.S. administration drove positive tax and biofuel policies that are helping biofuel producers make better decisions about production rates and feedstock demand while also supporting an uplift in crush and biodiesel margins. The agility with which we managed the first half of 2025 demonstrates our team's ability to drive our strategy forward and manage the dynamics of the external environment while focusing attention on the self-help and execution excellence agenda we outlined earlier in the year. Let's take a closer look at our progress on key strategic objectives in the quarter. Please turn to Slide 5. We're making strong progress against the areas of self-help we identified at the beginning of the year. The balance of efforts across cost management, execution excellence, targeted simplification, strategic growth, and capital discipline are providing an important foundation to work from. Let me share a few examples of what we accomplished in the quarter. We're continuing our portfolio management activities. We made decisions to cease operations at certain facilities that no longer align with our long-term goals, including several AS&O origination sites globally, a port transload facility in Florida, an aquaculture plant in Ecuador, a pet and animal nutrition plant in Brazil, and 2 assets no longer strategic to the Specialty Ingredients business. We focused on optimizing our AS&O network and aligning our asset base to the most critical parts of the business while ensuring we effectively managed uptime and production capacity. And we announced our intention to move our Lubbock, Texas cotton seed plant into a joint venture. As I mentioned earlier, we achieved a critical milestone in recommissioning our Decatur East facility and are currently ramping up to planned production levels. This will have a positive impact on costs within our Specialty Ingredients business as we move through the back half of the year. Through a combination of these efforts and others throughout the first half of the year, we remain on track for our targeted $500 million to $750 million in aggregate cost savings over the next 3 to 5 years. We're also continuing our capital discipline focus with an eye on returning capital to shareholders. And following our Q1 earnings call, we announced our 374th consecutive quarterly dividend. And while we've been keeping our efforts in cost and capital management at the forefront, we have never stopped smart organic investments that provide us options to accelerate growth at the appropriate time. ADM's integrated business model provides significant advantages to generate value across our entire production ecosystem. A few examples include repositioning co-products from our operations into new solutions such as converting fatty acid residues found in waste materials into biofuels, addressing a growing carbon economy through the expansion of our decarbonization capabilities in carb solutions, and taking advantage of available capacity in nutrition plants to expand product lines and enter new markets. All of these represent ways ADM can reduce waste, accretively deploy capital, and increase returns. As we look to the back half of 2025 from an external perspective, we anticipate increasing biofuels and trade policy clarity that accelerate our ability to create positive economic opportunities and drive additional investments such as these throughout our business and the agriculture sector. As public policy increasingly supports the agricultural sector, ADM is poised to play a pivotal role in driving that progress. In the U.S., for instance, as policies are finalized to accelerate the adoption of renewable fuels, ADM is ready to lead, advancing innovative solutions that open new high-value markets for American farmers and strengthen the broader bioeconomy. We will also continue to shape our own path through the self-help agenda that is already driving impacts that help offset some of the market dynamics seen in the first half of the year. Because several external factors and self-help efforts will activate in the third and fourth quarters, we are tightening our expectations for adjusted earnings per share and expect it to land around $4 per share for full year 2025. We believe ADM is in a solid position to exit 2025 with operational momentum, and we are confident that our team's ability to execute against our strategy will set the company up for a strong finish to the year and launch into 2026. With that, let me hand it over to Monish to share a deeper dive into second quarter financial results and our 2025 outlook.

Monish D. Patolawala, EVP & CFO

Thank you, Juan. Please turn to Slide 6. AS&O segment operating profit for the second quarter was $379 million, down 17% compared to the prior year quarter as limited clarity on legislative and biofuel policy continued to impact margins in the segment. In the Ag Services subsegment, operating profit was $113 million, down 7% versus the prior year quarter, driven primarily by lower global trade and South American origination results. Global trade results were lower relative to the same quarter last year, largely due to the lower trading volumes, partially related to the trade policy uncertainty as well as lower margins due to lower commodity prices, negative freight timing, and currency impacts. South American origination results were lower primarily due to lower volumes and margins stemming from the loss of operations at a key port facility in Brazil and foreign exchange impacts. North American origination results improved in the quarter due to higher margins and volumes as well as from a timing benefit associated with receiving $19 million in proceeds from a USDA grant earlier this year compared to in 2024. There were net negative timing impacts of approximately $27 million year-over-year. In the Crushing subsegment, operating profit was $33 million, down 75% from the prior year quarter. Consistent with our expectations for the quarter, both global soybean and canola crush execution margins were lower than the prior year quarter. Global executed crush margins were approximately $7 per ton lower in soybeans compared to the prior year quarter and approximately $29 per ton lower in canola. By region, crush margins were down significantly in North America. North America soybean crush margins were negatively impacted by higher crush rates and lower soybean oil demand stemming from biofuel policy uncertainty earlier in the quarter. North America canola crush margins were approximately $50 per ton lower due to headwinds from trade policy and lower canola oil demand for biofuel production. There were net positive timing impacts of approximately $37 million year-over-year. In the Refined Products and Other subsegment, operating profit was $156 million, up 14% compared to the prior year quarter as positive timing impacts offset lower biodiesel and refining margins. In EMEA, margins declined due to significantly lower biodiesel export volumes. In North America, positive timing impacts offset lower biodiesel and refining margins, which were negatively impacted by additional industry crush capacity and lower demand for vegetable oils due to biofuel policy uncertainty. There were net positive timing impacts of approximately $119 million year-over-year. Equity earnings from the company's investment in Wilmar was $77 million, up 13% compared to the prior year quarter. Turning now to Slide 7. For the second quarter, Carbohydrate Solutions segment operating profit was $337 million, down 6% compared to the prior year quarter. In Starches and Sweeteners subsegment, operating profit was $304 million, down 6% compared to the prior year quarter. In EMEA, sweeteners and starches volumes and margins declined as higher corn costs due to crop quality issues continued to negatively impact results. In North America, sweeteners and starches results were up slightly as higher liquid sweetener and corn co-product margins offset the negative impact of weaker starch margins and volumes and lower wet mill ethanol margins. Global wheat milling margins and volumes also improved relative to the prior year quarter, largely due to volume growth with key customers. In the Vantage Corn Processors subsegment, operating profit was $33 million, flat relative to the prior year quarter as higher ethanol volumes and improved risk management largely offset lower ethanol margins. Overall, ethanol EBITDA margins per gallon were positive in the quarter, though lower than the prior year quarter. Turning to Slide 8. In the second quarter, Nutrition segment revenues were $2 billion, up approximately 5% compared to the prior year quarter. The increase includes a $55 million benefit from a contract cancellation in Health and Wellness, the full amount of which is not included in the Nutrition segment operating profit. Excluding this benefit, Human Nutrition revenue was up approximately 4%, primarily driven by Flavors' growth, partially offset by headwinds related to supply challenges from Decatur East. Animal Nutrition revenue was down 2% as negative currency impacts and lower volumes offset mix benefits. Nutrition segment operating profit was $114 million for the second quarter, up 5% versus the prior year quarter. Human Nutrition subsegment operating profit was $92 million, down 11% compared to the prior year quarter as improved performance in Flavors was more than offset by declines in Specialty Ingredients and Health and Wellness. In Specialty Ingredients, operating profit declined due to lower margins and impacts related to the Decatur East plant. In Health and Wellness, higher margins from Biotics and improved product mix were more than offset by reduced tolling margins from a contract cancellation. Animal Nutrition subsegment operating profit of $22 million was higher than the prior year quarter due to higher margins supported by ongoing turnaround actions. Please turn to Slide 9. For the first half of the year, the company generated cash flow from operations before working capital of approximately $1.2 billion, down relative to the prior year period due to lower segment operating profit. We continue to make progress with our actions to ensure working capital excellence through stronger rigor on working capital planning, inventory rationalization, improvement of key account payable metrics, and more timely collection of past due balances. For example, inventories decreased by $2.2 billion during the first half of this year as compared to a $1.4 billion decrease in the prior year period, in part due to improved management of volumes. Solid cash generation and our strong balance sheet remain important differentiators for the company. Our leverage ratio was 2.1x for the quarter end, and we will continue to seek opportunities to further strengthen our balance sheet to enhance financial flexibility. We are dedicated to organically investing in the business to elevate returns and create long-term value. To this end, we have been very prudent with our CapEx spending. Year-to-date, we have invested $596 million in capital expenditures and have lowered our expected CapEx spend range to $1.3 billion to $1.5 billion from 2025, down from previous expectations of $1.5 billion to $1.7 billion. At the same time, we remain steadfast in our commitment to returning cash to shareholders, and we returned $495 million to shareholders in the form of dividends during the first half of 2025. Turning to Slide 10. We have provided details to support our 2025 outlook. With greater visibility regarding the third quarter and additional clarity on emerging policy tailwinds, we have tightened our range and now expect adjusted earnings per share to be approximately $4 per share for the full year 2025. Tax and biofuel policy proposals introduced towards the end of the second quarter and beyond have now created market insight to incentivize higher biofuel and renewable diesel production levels. In June, the Environmental Protection Agency released its first renewable volume obligation or RVO proposal for 2026 and 2027, with favorable provisions for domestic feedstocks. In July, the tax reconciliation package signed by the administration improved and extended the 45Z biofuel producer tax credit for an additional 2 years to 2029 and clarified that the credit is limited to fuels created from North American feedstocks. With the favorable proposed RVO and finalization of the 45Z producer tax credit, soybean oil has rallied, and board crush margins have improved. Combined with the focused actions of our teams on network consolidation and cost savings, we expect to be in a better position to capture opportunities as we enter the fourth quarter and move through the final months of the year. Let me provide some color on several assumptions for the second half. We are closely monitoring customer demand and have embedded expectations for lower volumes in certain pockets and geographies in our guidance. With policy developments coming at the end of the second quarter, we had already booked a portion of our third quarter business, which will limit our ability to take full advantage of higher expected margins from these developments in the third quarter. We expect soybean crush margins in the third quarter to be in a similar range to the second quarter. We expect improved AS&O margins will primarily benefit our fourth quarter results, where we project global soybean crush margins to be in the range of $60 to $70 per metric ton and global canola crush margins to be in the range of $55 to $65 per metric ton. We also expect improvement in Ag Services in the fourth quarter as we expect strong crops in North America and a solid North American export season supported by increased trade policy clarity. We expect Carb Solutions to continue to be impacted by softness in starch demand for paper and corrugated box and higher corn costs in EMEA related to corn quality issues. Robust industry-wide ethanol production is expected to sustain pressure on margins, and we anticipate for the year 2025, a mid-single-digit decline in overall ethanol EBITDA margins compared to the prior full year. We anticipate continued improvement in Nutrition through a focus on supply chain excellence and our Decatur East plant returning to planned full production. Finally, just a reminder, during the second half of 2024, we had $231 million in insurance proceeds with $96 million in the third quarter and the balance in the fourth quarter. The third quarter insurance proceeds were largest in Carb Solutions and will impact third quarter year-over-year comparisons in that segment. To close, we are making progress. My top priority coming to ADM was to remediate the material weakness. And this quarter, we announced that we have successfully remediated the material weakness in internal controls for segment disclosures related to reporting, pricing, and measurement. Going forward, we will continue to focus on broader initiatives that will enhance our transparency and compliance processes while maintaining an effective operating environment. We have also aggressively acted on opportunities to improve operational performance and lower costs, and we are seeing through these actions that our assets are running better, and we are benefiting from the restored and ramping operations at our Decatur East plant. We also continue to work in a measured manner to simplify our portfolio to enhance focus on core competencies while unlocking additional capital to drive value and position the company for long-term success. In particular, on cash, we have delivered an improvement in working capital efficiency, and we have taken actions to further optimize our CapEx. These efforts position us in our ability to navigate the current dynamic environment and reinforce our confidence in delivering on our commitments. Before I hand it back to Juan, I want to take a moment to thank all my ADM colleagues for their dedication and focus in delivering for our customers and helping to create long-term value for our shareholders. Back to you, Juan.

Juan Ricardo Luciano, Chair of the Board & CEO

Thanks, Monish. Let me wrap up by highlighting some of the ways we are setting our business up for the back half of 2025 and into 2026, along with the positive signals we see that are providing momentum. Overall, we will continue to drive operational excellence through our focus on cost savings and cash and by simplifying our business through targeted portfolio optimization, including the recent examples I mentioned earlier in today's call. In Carbohydrate Solutions, we'll continue to drive operational excellence and closely monitor both consumer sentiment and broader economic signals while maintaining momentum around our decarbonization and cost reduction initiatives. For Nutrition, the ramp-up of Decatur East and optimized portfolio will support continued recovery of the business while we focus on building upon our strong opportunity pipeline in segments like Flavors and Health and Wellness. In Ag Services and Oilseeds, our active network optimization and operations focus is positioning us with the agility to capture opportunities from improved market conditions in the back half of the year. Additionally, we're closely monitoring global trade developments, particularly in relation to China and broader export market dynamics, as we head into the critical U.S. harvest season later this year. These factors will play an important role in shaping opportunities in the months ahead. We are seeing selective market share increases that are offsetting sluggish markets elsewhere, and we're sharpening our focus on good risk management practices. Looking to the fourth quarter of 2025 and onwards, we see several reasons for optimism. Clarity in biofuel policy and legislative support for agriculture are creating a favorable environment for market access for our farmer partners and enhances ADM's ability to deliver economic value to the broader sector. The foundational work we've done in the first half of 2025 set us for a stronger operational momentum. Our investments in innovative spaces such as probiotics, natural flavors, and colors, and decarbonization position us to capture growth in high potential markets. We have recalibrated many variables as we navigate the current complexities, and our confidence in ADM's resilience stems from the dedication and expertise of our team. Their ability to adapt to challenges and execute against our strategy has been evident throughout the year. We are a company built to endure cycles, and our unparalleled asset network, combined with the ingenuity of our workforce, ensures we remain a source of strength for our farmers, customers, and partners. As we move forward, our focus on self-help initiatives, execution excellence, and disciplined capital allocation will continue to drive value for our shareholders and position ADM for success in 2026 and beyond. With that, let's open the line for questions.

Operator, Operator

Our first question for today comes from Andrew Strelzik of BMO.

Andrew Strelzik, Analyst

You gave a lot of helpful color for the back half of the year, but I was hoping you could maybe a little bit more explicitly give us kind of the earnings split between 3Q and 4Q or at least a little bit more guide kind of at the total company level. And if I take that, does it make sense to, as we start to think about 2026, annualize 4Q as kind of a starting point? I know it's a bit of a bigger quarter, so we can make some mental math adjustments around that. But is there any reason why that kind of doesn't make sense to you?

Juan Ricardo Luciano, Chair of the Board & CEO

Well, thank you for the question. As you said or are you implying in your question, we see the perspectives for ADM improving and getting clearer as we go into the second half. Of course, first half has a lot of headwinds. Second half with the benefits now of a little bit more clarity on RVOs and 45Z, we certainly see the potential for soybean oil to be much more demanded, and that will be the preferred feedstocks for North America. Unfortunately, by the time this was announced, we have already contracted most of our Q3. So you will see the impact for us mostly in Q4. So as such, it's probably going to be something in that, I don't know, 35-65 type of split between Q3 and Q4. If you think about what are the things that we have in Q4 coming from us. We continue with our improvement in cost position. We're going to see an improvement in crush margins if all these RVO numbers are finally confirmed. We're going to see the benefit of our East plant in Nutrition being back into production. And we're going to see better earnings from Ag Services as we get into our export season and probably from a global trade perspective as well. So we have high expectations for that quarter provided all these RVOs are confirmed. In terms of 2026, probably too early, but most of the time, we said the rate that we exit 2025 becomes the rate that we enter 2026. Whether that's going to be multiplied by 4, too early to speculate at this point.

Monish D. Patolawala, EVP & CFO

Just to add a few more details to Juan's point, we are expecting a 1/3, 2/3 split between Q3 and Q4. Additionally, as you are doing your modeling, keep in mind that last year we received $230 million in insurance proceeds, with $96 million in Q3 and the remaining in Q4. In Q3, carbohydrates will have the most significant year-over-year impact. If crush margins remain unchanged or the replacement curve does not improve, that could pose an additional $0.15 headwind. Typically, costs in the second half are higher than in the first half due to natural seasonal factors that will continue to influence our cost and cash strategies. Regarding ethanol, it remains lower compared to last year. Although the second quarter showed some positive trends, it still falls short of last year's totals, and we anticipate that ethanol will be somewhat weaker in the second half. However, all of this has already been incorporated into our guidance, except for the potential headwind if the replacement curve doesn't develop as expected. Timing could also affect the distribution between quarters depending on how we close out the year. I hope this clarifies your question.

Operator, Operator

Our next question comes from Ben Theurer of Barclays.

Benjamin M. Theurer, Analyst

Congrats on the solid results for the second quarter. I wanted to dive into the outlook for the Nutrition segment into the back half. Obviously, with Decatur East coming back, as we look into this and kind of like have like an LTM run rate, kind of call it about $400 million operating income now in that segment. But clearly, with all these headwinds, what would you suggest us assuming has been kind of like that incremental cost that you called out for not having Decatur East over the last couple of quarters? And as we ramp this through 3Q into 4Q and then particularly into 2026, where do you think like kind of like a current run rate is for that business on a stand-alone basis?

Juan Ricardo Luciano, Chair of the Board & CEO

Thank you for the question, Ben. I’d like to provide an update on Nutrition and its current performance. Nutrition is continuing its recovery, which we are very pleased about. Breaking it down, Human Nutrition is experiencing strong revenue growth driven by Flavors, and we are maintaining our EBITDA margins. This positive performance is primarily supported by beverages in North America, along with strength in Europe. We also see potential for geographical growth as our Asia Pacific plants ramp up output. In the Health and Wellness sector, Biotics has recorded a 9% revenue increase, which is encouraging. We will release data from studies conducted in 2025 and earlier that will create opportunities for us, particularly in the area of heat-treated probiotics where we hold a leading position. Regarding Specialty Ingredients, we faced some challenges in the human nutrition sector. As previously noted, the costs associated with the Decatur plant being down were about $20 million to $25 million per quarter, but we hope to put that behind us by 2026. On the Animal Nutrition side, we are seeing improvements in margins. This has been a consistent upward trend over the past few years, and the team has delivered better results for the last seven quarters through self-help efforts. The market for protein customers looks favorable right now, as feed costs are low, contributing to profitability. Our portfolio is gradually shifting towards more specialty products, reducing our focus on commodities and enhancing our innovations in those areas. We feel positive about this segment continuing to grow. While I won't provide specific numerical forecasts at this time, we expect to eliminate about $100 million in specialty ingredient headwinds in 2026. The plant is currently running well since its restart, and we commend our team's efforts in bringing it back safely. Overall, things are looking good so far.

Operator, Operator

Our next question comes from Manav Gupta of UBS.

Manav Gupta, Analyst

Monish, could you provide some clarification? I understand you have been closely working with the SEC to address their inquiries. You have now stated that the material weakness is no longer present. Can we conclude that you reached out to the SEC, provided them with what they needed, and they did not follow up with further questions? At this point, is it accurate to say that the SEC is satisfied with the way your financials are presented? Additionally, could you discuss what steps can be taken to ensure this situation does not occur again?

Monish D. Patolawala, EVP & CFO

Yes, Manav, I can address two key points. First, we did successfully remediate the material weakness this quarter, thanks to the team's significant efforts over the past 18 months on a comprehensive remediation plan. We implemented numerous enhanced internal controls, particularly concerning our intersegment policies, pricing, and measurement controls, which were the root cause of the material weakness. We focused on improving training and upgrading talent. We've tested these controls multiple times and currently believe they are effective. Management initially tests the controls, and afterward, we consult with the Audit Committee and our auditors to ensure that our internal controls are robust. We've engaged actively with our auditors, who while the audit process will continue until the 10-K filing, have a responsibility to ensure the accuracy of our public disclosures and are confident that our internal controls are met. Based on all of this, we are confident that our controls are functioning properly and that the material weakness has been remediated in consultation with our auditors and the Audit Committee. Moving forward, we will sustain our efforts and focus on initiatives that enhance our transparency and compliance processes while maintaining an effective operating environment. Hopefully, that answers your question, Manav. Our robust remediation plan has been tested, and we believe our controls have been effective over the past few quarters, which is why we feel ready to announce the remediation of the material weakness this quarter.

Operator, Operator

Our next question comes from Heather Jones of Heather Jones Research.

Heather Lynn Jones, Analyst

I have a two-part question regarding crush. First, I wanted some clarification. When you mention that the replacement curve doesn't move up from here, are you talking about the physical aspect? Second, I have a broader question. If the RVO SREs develop as favorably as anticipated, what benefits do you foresee for your biodiesel business and more critically, for your global crush business? Considering how that business performed in 2022 and 2023, how do you see ADM positioned for 2026 and 2027 if our expectations regarding policy developments hold true?

Monish D. Patolawala, EVP & CFO

So just a quick one, Heather, to answer your question. When we think about the replacement curve, yes, we do look at board crush. But at the end of the day, margins have to show up on the cash side, and that's the curve that I mentioned. So we are combining both, and that's where I came up with the math that I gave you. Now that will move every day depending on how markets move, but this is where we are at this point in time.

Juan Ricardo Luciano, Chair of the Board & CEO

Yes, Heather, looking at the overall situation, the Renewable Volume Obligations have been very favorable for soybean oil, which will likely boost demand. There will be some adjustments. Currently, we were exporting soybean oil, but it's probable that we won’t be able to continue that. Some of our food customers are already receiving different product mixes. We have a variety of oils such as peanut, cotton, and rapeseed oil, as well as various blends since soybean oil is becoming the preferred feedstock for biofuel. We anticipate making adjustments to maximize profitability. In terms of margins, we expect to see increases in Renewable Identification Numbers, with benefits mostly coming from the crushing process due to the strong market for both oil and biodiesel. However, refining margins may face some pressure from pretreatment capacity, and we will need to monitor how many facilities utilize this capacity and come online. We are optimistic about our crushing facilities, particularly in Brazil, where we expect significant growth. The U.S. will support the Renewable Volume Obligations, and in Europe, the removal of double counting in Germany bodes well for rapeseed oil growth. Overall, we anticipate around 6 million tons of additional feedstocks entering the biofuel sector, along with 800,000 tons of food market growth. This situation suggests that oil could capture about 50% of the crush share, which hasn’t occurred in some time, leading to increased margins. We will need to finalize these calculations once the Renewable Volume Obligations are settled. If everything plays out as expected and the small refinery exemptions are managed, it should benefit ADM moving forward.

Operator, Operator

Our next question comes from Pooran Sharma of Stephens.

Pooran Sharma, Analyst

I was wondering if maybe we could get a little bit more detail on the network optimization plan. I know you mentioned some detail in your prepared remarks, including some facilities that you had shut down in different geographies. But you also mentioned that there's some room to go. And so was, a, just wondering where do you see the most room for kind of your further optimization? Is it more ag services, processing? Would just love a little bit of color there. And then also, how does this optimize your processing kind of OpEx? Like should we be looking at like a $5 per metric ton improvement? Or how should we think about it from a crush perspective?

Juan Ricardo Luciano, Chair of the Board & CEO

Thank you. I believe that improving our operational performance has been a key focus for us this year, and we are making good progress in that area. I'm very proud of the team's improvements. We were getting ready for potential enhancements in our RVO and the ability to operate at full rates moving forward. Fortunately, we have the resources necessary, and it's essential that our plants are well maintained. We've dedicated considerable time to optimizing our network. As mentioned in our prepared remarks, some of our unscheduled downtime is now at levels we haven't observed since 2020, which is a positive development. We examine our many plants collectively rather than as isolated units, looking for ways to keep or expand those with lower operating costs while potentially closing those with higher costs. This approach applies across our entire portfolio. We have done this in milling as well as in Oilseeds and Ag Services. In Ag Services, we frequently adjust our elevator holdings—sometimes buying, selling, or trading them. There are occasions when we need to shut down or sell facilities, such as the announced closure of the Kershaw site and changes related to our Lubbock joint venture focused on cotton seed oil. While you won't see any major announcements, we will continue to implement optimization efforts. Our footprint is substantial, and we have cost optimization targets we aim to achieve. However, I won't disclose specific numbers just yet. I want to ensure greater stability in our operating rates and complete a few more initiatives before sharing that information. That said, we are very satisfied with the current performance of our plants, especially considering the prospect of maintaining high crush rates for the next few years.

Operator, Operator

Our next question comes from Steven Haynes of Morgan Stanley.

Steven Kyle Haynes, Analyst

I wanted to come back to something on the RVO. It seems like since the proposal, RD margins have kind of remained pressured and almost all the value has kind of accrued back to the crush complex. So I would be curious to hear some thoughts on why you think that is and whether or not you would expect that to kind of remain that way.

Juan Ricardo Luciano, Chair of the Board & CEO

Yes, this is a challenging time. We are providing an indication of what might occur, but there are many rumors affecting this because the overall figures have not yet been confirmed. While we remain optimistic about the future, we are in a period of uncertainty until the final numbers are clear. We need to determine the final RVOs and how we will handle SREs. Therefore, we shouldn’t draw too many conclusions based on current events. Historically, when oil prices have fluctuated dramatically, the industry margins have also been affected. We should not overanalyze the present situation until we gain more clarity. This remains a forecast, and we have produced very little to meet the mandates in the first half of the year as an industry. We will need to increase production rates in the second half once more information is available. We anticipate accelerated production, and RINs will likely respond first. Currently, RIN prices are significantly higher than they were last year, but we still have a way to go. We are monitoring the situation closely, and in the meantime, we are preparing. A large crop is on the way, and our plants are ready for crushing. When we receive the indication, we are positioned to act effectively.

Operator, Operator

Our next question comes from Salvator Tiano of Bank of America.

Salvator Tiano, Analyst

Firstly, could you clarify the $100 million benefit from the Decatur restart? Is that for 2026 versus 2025, or does it include benefits expected in 2025? My main question is about high fructose corn syrup. We recently saw news about Coca-Cola possibly moving towards cane sugar, and I would like to understand how significant this business is for you in terms of volume, revenues, and EBIT. Additionally, what risk do you foresee if other companies decide to adopt a similar approach?

Juan Ricardo Luciano, Chair of the Board & CEO

Yes, Salvator. So what's the first question?

Salvator Tiano, Analyst

The Decatur, if you can clarify that?

Juan Ricardo Luciano, Chair of the Board & CEO

Yes, Decatur incurred costs of approximately $20 million to $25 million per quarter while it was shut down. Now that Decatur is operational again, starting in Q4, there will be an impact on our run rate from that point forward. Assuming operations continue smoothly, we expect to integrate that into our plans. However, for 2025, please note that we will still carry about three quarters of that cost due to the plant ramping up and the remaining inventory of materials that will still need to go through cost of goods sold. Regarding high fructose corn syrup, we have built relationships in this market over several decades with key players across all levels. Currently, we have no indications of changes in their order patterns or projections, nor have we observed any volume changes following recent announcements. In that sense, we are not anticipating any adjustments. Our business has been engaged in what we refer to as the "fight for the grind." We produce more than 22 products in our wet mill, and the demand for high fructose syrup has slightly decreased by 1% to 1.5% since my tenure began. Despite this, our Carb Solutions business remains stable through optimization, product mix adjustments, and the development of new products, such as biosolutions and glucose for fermentation. There are numerous growth opportunities in this significant market, and we intend to keep supplying it. We have been servicing the beverage industry for many years with flexibility to adapt to various conditions, whether it involves natural colors, flavors, high fructose corn syrup, or other alternatives to reduce sweetness. At this time, I want to emphasize that there are no changes in our volumes for high fructose corn syrup.

Monish D. Patolawala, EVP & CFO

There's just one piece I wanted to add on the Specialty Ingredients, Decatur East. As Juan mentioned, the operating improvement is between $20 million and $25 million. At the same time, we have observed higher insurance premiums. We will also need to monitor where utility costs go and how they affect expenses that the team is managing. So just keep that in mind. By the time we reach 2026, we will provide the appropriate guidance.

Juan Ricardo Luciano, Chair of the Board & CEO

And Salvator, maybe also I would say, in terms of the segments in beverage and snacks and all that, we mentioned in our prepared remarks, we've seen some pockets of sluggish demand that I think that you can tell that there is a consumer out there that there is a little bit more stressed and maybe making more prudent choices with their spending. So I would say across ADM, whether it's on snacks and sweets, we have seen pockets of softness that I think our team has been very good to neutralize or navigate around, but there is some caution from a consumer perspective.

Operator, Operator

Thank you. At this time, we currently have no further questions for today. So that concludes today's conference call. Thank you all for joining. You may now disconnect your lines.