Good morning, and welcome to the Bunge Limited Second Quarter 2022 Earnings Release and Conference Call. All participants will be in listen-only mode. Please note, this event is being recorded. I'd now like to turn over to Ruth Ann Wisener. Please go ahead.

Thank you, Jason. And thank you for joining us this morning for our second quarter earnings call. Before we get started, I want to let you know that we have slides to accompany our discussion. These can be found in the Investors section of our website at bunge.com under Events and Presentations. Reconciliations of non-GAAP measures to the most directly comparable GAAP financial measure are posted on our website as well. I'd like to direct you to Slide 2 and remind you that today's presentation includes forward-looking statements that reflect Bunge's current view with respect to future events, financial performance and industry conditions. These forward-looking statements are subject to various risks and uncertainties. Bunge 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, Bunge's Chief Executive Officer; and John Neppl, Chief Financial Officer. I'll now turn the call over to Greg.

Thank you, Ruth Ann. Good morning, everyone. I want to start by congratulating our team for another strong quarter. Thanks to their continued focused execution in this highly dynamic environment. The results the team delivered confirm that Bunge's global asset footprint, coupled with our operating model, enables us to more quickly adapt to market shifts. Those changes can be difficult to immediately predict. But our team has the agility and discipline to adjust and capitalize on market opportunities over time. With our flexibility and global view of the end-to-end value chains, we're able to help our customers find solutions to the challenges and opportunities they encounter. The war in Ukraine has dramatically upset traditional origin to destination trade flows, and we've worked to find different sources for products that our customers want. Our innovation teams have also been working alongside our customers to help them reformulate products in response to tightening supplies. At the same time, we're keeping our focus on sustainability, including our commitment to have deforestation-free supply chains in 2025. Bunge's sustainable partnership program uses tools like farm-scale satellite monitoring to help resellers assess their suppliers' social environmental performance in the Brazilian Cerrado. As described in our most recent sustainability report, Bunge is now able to monitor at least 64% of indirect volumes in our priority regions, surpassing the 50% target set for the end of 2022. Our ability to optimize value for both our customers and Bunge is reflected in our results today, as well as in our long-term view of our opportunity, which we'll touch on later. But first, turning to second quarter numbers. We continue to build on our strong momentum, delivering our 11th consecutive quarter of year-over-year earnings growth. Results in Agribusiness and also in refined and specialty oils benefited from strong demand and continued tight commodity supplies. Milling results were up, delivering a record quarter, as our teams effectively managed our supply chains in a dynamic environment. Looking ahead, we're expecting to deliver adjusted EPS of at least $12 per share for the full year 2022, and that's up from the outlook we provided last quarter. This includes increased estimates in all of our core segments. Supplies remain tight in the physical markets across all of our key businesses, regardless of the commodity volatility driven by the broader financial markets. Regular seasonal production factors and continued global supply chain challenges make the value of the services we bring to our customers more relevant than ever and give us confidence in our outlook. Before handing it over to John, I want to take a moment to discuss both the updated earnings baseline and the growth framework we've announced today. When we first introduced our mid-cycle baseline in June of 2020, we were early in our work to transform our operating model and optimize our portfolio. We provided that earnings framework to help you think about how we intended to operate the business with the changes we were making. With the initial portfolio and organizational work now behind us, we're updating our baseline in the earnings framework from $7 to $8.50. That reflects our global platform as it stands today. This includes the structural improvements in the oilseed market environment and greater benefits from our operating model. We're also providing you with a way to think about what our platform can deliver in the future. And that's because we've been deploying capital for growth, making investments in our business that will continue to increase our earnings baseline. We also intend to allocate capital for share repurchases. The incremental earnings from capital that we are deploying should enable us to perform at a higher level in a mid-cycle environment. As a result, we're providing a four-year earnings growth framework of approximately $11 per share by the end of 2026. This growth framework includes the increased earnings baseline of $8.50, plus the future benefits of investments in the business and share repurchases. With that, I'll hand the call over to John to walk through the results and the updated framework in more detail.

Thanks, Greg, and good morning, everyone. Let's turn to the earnings highlights on Slide 5. Our reported second quarter earnings per share was $1.34 compared to $2.37 in the second quarter of 2021. Our reported results include a negative mark-to-market timing difference of $1.26 per share and a negative impact of $0.37 per share related to one-time items. Adjusted EPS was $2.97 in the quarter versus $2.61 in the prior year. Adjusted core segment earnings before interest and taxes, or EBIT, was $709 million in the quarter versus $550 million last year, reflecting higher results in ag processing, refined specialty oils, and milling. In total, Agribusiness results of $386 million were down compared to last year. The higher results in processing were primarily driven by U.S. and Brazil soy crush due to strong meal and oil demand. Results in softseed crush were also higher, primarily driven by North America. Merchandising had a good quarter managing market volatility well. However, results were down compared to a very strong prior year, as a higher contribution from global grains was more than offset by lower results in ocean freight. In Refined and Specialty Oils, results were higher in all regions, with particular strength in North America and Europe refining, both benefiting from strong food demand, as well as strong U.S. fuel demand. In Milling, higher results in the quarter were driven by North and South America wheat milling, reflecting higher margins and effective risk management of our supply chains. The increase in corporate expenses in the quarter was primarily related to expenditures on growth initiatives and timing of performance-based compensation accruals. The increase in Other was primarily related to our captive insurance program and gains on investments in Bunge Ventures. In our non-core Sugar & Bioenergy joint venture, higher ethanol and sugar prices were more than offset by the combination of lower ethanol volumes and increased costs. For the six months ended June 30, income tax expense was $144 million compared to $242 million in the prior year. The decrease was primarily due to lower pretax income. Net interest expense was up compared to last year due to both higher interest rates and higher average debt levels. Also impacting the quarter were foreign currency borrowings in certain countries where interest rates were high. However, the incrementally higher borrowing costs were fully offset with currency hedges reported in gross margin. Let's turn to Slide 6, where you can see our positive EPS and EBIT trends adjusted for notable items and timing differences over the past four years, along with the trailing 12 months. In addition to validating the resilience of our global platform and operating model over time, it also demonstrates continuing strong performance by our team that has successfully managed different and rapidly changing market environments over this time period. As shown on Slide 7, addressable SG&A increased modestly year-over-year. After two years of COVID-related impacts, employee travel and related expenses have picked up. And as we have discussed on previous earnings calls, we are increasing investments in people, processes, and technology to strengthen our capability and drive growth.

Slide 8 details our capital allocation of the approximately $1.2 billion of adjusted funds from operations that we generated in the first half of the year. After allocating $101 million to sustaining CapEx, which includes maintenance, environmental health and safety, and $8 million to preferred dividends on shares now converted to common equity, we had approximately $1.1 billion of discretionary cash flow available. Of this amount, we paid $154 million in common dividends and invested $111 million in growth and productivity CapEx, leaving approximately $865 million of retained cash flow, which was invested in additional working capital. Our strong balance sheet and cash flow generation puts us in a position to allocate capital to the best value-creating opportunities, which I will discuss later in the presentation. As we have demonstrated in the past, we will continue to maintain a disciplined and balanced approach. As you can see on Slide 9, at quarter end, readily marketable inventories, or RMI, exceeded our net debt by approximately $2.7 billion, a significant change from a year ago. Year-to-date, our underlying cash flow has allowed us to invest significantly in inventory with only a small increase in debt. Over time, as commodity prices moderate, the cash invested in inventory will be released and available for deployment for debt reduction and/or other uses. Slide 10 highlights our liquidity position, which remains strong. At quarter end, we had just under $6 billion of committed credit facilities unused and available. This provides us ample liquidity to manage our ongoing working capital needs in this volatile commodity price environment. As shown on Slide 11, our trailing twelve months adjusted ROIC was 22%, 15.4 percentage points over our RMI adjusted weighted average cost of capital of 6.6%. ROIC was 14.9% or 8.9 percentage points over our weighted average cost of capital of 6%. The spread between these return metrics reflects how we use RMI and our operations as a tool to generate incremental profit. Moving to Slide 12. For the trailing twelve months, we produced discretionary cash flow of just over $2 billion and a cash flow yield of 20.8%. Please turn to Slide 13 and our 2022 outlook. As Greg mentioned in his remarks, taking into account our Q2 results, the current margin environment and forward curves, we've increased our full year adjusted EPS outlook to at least $12 per share, a $0.50 increase over our previous outlook, with potential upside depending on market environment and supply and demand balance.

In Agribusiness, full year results are expected to be slightly higher than our previous outlook but remained down from last year to lower expected performance in merchandising, which had a particularly strong prior year. In Refined & Specialty Oils, full year results are expected to be up from our previous outlook and higher than last year, driven by strong demand in North American and European businesses. In Milling, full year results are expected to be up from our previous outlook and significantly higher than last year, driven by strong first half results. We expect results in the second half of the year to be more reflective of historical performance. In Corporate and Other, results are now expected to be less favorable than our previous outlook and more in line with the prior year. In non-core, full year results in our Sugar & Bioenergy joint venture are expected to be in line with last year. Additionally, the company now expects the following for the year: an adjusted annual effective tax rate of 14% to 16%, net interest expense in the range of $310 million to $330 million, capital expenditures at the lower end of the range of $650 million to $750 million and depreciation and amortization of approximately $400 million. With that, I'd like to now shift to an overview of our new earnings growth framework. The waterfall chart on Slide 14 shows a change from our baseline of $7 a share, which we established last year, to an updated baseline of approximately $8.50. We are also introducing an earnings growth framework that shows an increase in our mid-cycle baseline to approximately $11 per share by year-end 2026. We see potential upside of $1-plus through additional investments in growth CapEx, bolt-on M&A, and/or share repurchases from the deployment of additional retained cash. Let's turn to Slide 15 and the drivers supporting this framework. The increase in our baseline to approximately $8.50 primarily reflects structural improvement in the oilseed market environment and greater benefits from our operating model. Consistent with our previous approach, we are defining our long-term average oilseed crush margin range by using the weighted average of our footprint for the past four years plus the trailing twelve months. We also have adjusted for returns likely needed to incentivize the addition of crush capacity, especially in North America to meet the growing demand for renewable diesel. This increases our average structural soy crush margin to a range of $37 to $39 per metric ton, and it increases our average structural softseed crush margins, which is more sensitive to oil demand, to a range of $57 to $61 per metric ton. We believe both of these ranges reflect more reasonable mid-cycle margins in a go-forward structural market environment. We have also further increased the normalized earnings of our oilseed origination and distribution businesses and our merchandising sub-segment, reflecting the more coordinated and aligned approach within the value chains from the changes we have made to our operating model and approach to managing risk. The slight increase in Refined & Specialty Oils earnings to approximately $400 million annually is being driven by higher capacity utilization in North America refining. Importantly, we assume that margins in North America refining moderate back to roughly historical averages, as we expect in time that the renewable diesel industry will add pre-treatment capability to their facilities. However, the timing of this transition has become more uncertain, as we continue to hear of delays to projects due to higher construction costs and supply chain disruptions. There are no changes from our earlier baseline of approximately $100 million annually in Milling. Corporate and Other are less favorable, primarily due to inflation and increased costs related to growth initiatives. We increased the contribution from our Sugar & Bioenergy JV slightly, reflecting improved execution and market dynamics. With respect to cost management, we expect to partially offset inflation-driven per unit costs through increased productivity. There is minimal change to our forecasted effective tax rate, which we updated last year with the increase of our baseline to $7. Now let's look at the drivers of the increase in our base of earnings over the coming years, which will enable us to generate EPS at near current levels but in a mid-cycle environment. In total, we expect to deploy approximately $3.3 billion toward growth investments, with about $2.3 billion being allocated toward CapEx, as we have highlighted in the past, and approximately $1 billion toward bolt-on M&A. Our CapEx investments are oriented toward a combination of greenfield, brownfield, and productivity projects. Our M&A targets are primarily focused on core agribusiness origin and crush capabilities. We have also allocated capital towards share repurchases and expect to deploy approximately $1.25 billion through the period. While we plan to repurchase approximately $250 million annually, actual amounts could vary year-to-year depending on M&A opportunities and the amount of dilution for stock-based compensation. Additionally, any proceeds from future divestitures used toward repurchases would be incremental to these expectations. All $3.3 billion of growth investments identified are currently in varying stages of development. While we are confident about the completion of these projects, not all have been formally approved. As such, there is a risk that some will not be executed, in which case the capital will be available for other similar projects or additional share repurchases. Moving to Slide 16 and an overview of the types of investments we are pursuing. As we have highlighted in the past, our growth is primarily focused in four strategic areas: strengthening our oilseeds platform, expanding in refined & specialty oils, increasing our participation in renewable feedstocks, and expanding in plant-based proteins. These are all areas that align well with our footprint and capabilities. Examples of investments underway include new refineries in Europe and India that are more flexible, efficient, and sustainable than the plants they are replacing, as well as soy crush capacity expansions in the U.S. as part of our joint venture with Chevron. Additional projects will be announced at the appropriate stage. Note that our capital allocation process is driven by our strategy and risk-adjusted returns. The percentages shown here are not predetermined targets by strategic area, but rather are based on the mix of our current project list. On Slide 17, you can see the progression of our mid-cycle baseline over time, along with our future expectations. The chart shows that as we increase our base earnings, we will become less dependent on up-cycle market conditions to generate levels similar to our recent performance. Should recent market conditions continue, we would expect to exceed our mid-cycle baseline as we have in the past. As mentioned earlier, our upside scenario of $12-plus reflects incremental earnings driven by the deployment of available free cash flow towards growth investments in addition to the list of identified projects, as well as incremental share repurchases. For these additional growth CapEx projects, we have assumed earnings contributions ramping from zero to 100% over four years after investment. With that, I'll turn things back over to Greg for some closing comments.

Thanks, John. Before turning to Q&A, I want to offer a few closing thoughts. One of Bunge's strengths is our culture of continuous improvement. This is not an organization at rest. We're constantly looking to learn from what we've done and have put processes in place to ensure that we share best practices with our colleagues around the world. We're using technology, data, and analytics to make it easier to innovate and increase efficiency and importantly, to make it easier for our customers on both ends of the value chain to do business with us. It's this team's focus on making the business better today than it was yesterday that continues to give me the confidence that we're well-positioned to succeed, not just in the current environment, for the next few quarters, but well into the future. And with that, we'll turn to Q&A.

We will now begin the question-and-answer session. Our first question comes from Tom Palmer from JPMorgan. Please go ahead.

Good morning. Thanks for the questions and for all the detail in the presentation and the prepared remarks. I wanted to start off maybe just by discussing the Agribusiness results this quarter and how we might think about the setup for the balance of the year. The presentation notes an increased 2022 forecast for the segment versus the prior outlook to reflect strong second quarter performance, at the same time, there were some maybe added headwinds that we saw in that segment, just given the 20% dip in merchandising volume, processing profitability, especially on a unit basis dipping a bit versus what we've seen in the last few quarters. So as we think about the second half outlook, should we be looking for a rebound in some of this merchandising volume? Was there anything specific in the quarter that drove that? And then industry crush seems very strong, might we look for a rebound in processing at least sequentially?

Yeah. Thanks. That's a good setup. We feel really good about the quarter. It was a solid quarter. You've got to think about our footprint, right? North America, of course, is very, very strong. Brazil performed well. We had Europe, of course, the complexity around energy. We've still got our footprint in Ukraine, which is basically not running. The complexity in Argentina is probably as high as we've seen it. And then China, the COVID lockdowns absolutely killed demand and it's been a very spot market there. All that being said, the team did a fantastic job in one of the more volatile quarters that we've seen, which really drove our customers towards the end of the quarter, both the producer not selling any crops, as well as the consumer absolutely stopping buying, trying to see where the market would sort of settle out. As we look at the second half, really a pretty interesting setup with the strong oil and meal demand continuing. When you look at the crush margins for the Bunge footprint, we're really about the same place we were when we were together for the Q1 call. It looks really interesting. If you start in the U.S., you've got smaller South American crops, and we should have good bean availability to support that strong oil and meal demand in North America. Now we need a good U.S. crop, but it looks like we're on the way there. We talked about China. No doubt the curves are challenged there. It's hard to imagine a situation where China could look worse than it has, and we think it will start to recover from COVID. It's been a very spot market, but the team has done a great job managing our footprint there. We don't want to forget that China has been the driver for the last couple of years in demand around the world, and they will be back at some point. Brazil, we've seen the Q3 curves improve. Even though slower farmer selling impacted Q4, with China bean imports down, the beans have been available for crush, and the meal and oil demand has been good. And then Argentina, of course, the complexity there is high. The producer is really not selling; they are very reluctant to protect themselves against devaluation, and we saw margins decline toward the end of the quarter, and the curves are weak for the second half. But of course, it does benefit our broader global franchise. In the EU, we've seen great oil demand, and with less meal out of Argentina and the Black Sea area that's been supportive, enabling us to overcome those higher energy costs on the margins. So it's really an interesting setup for the second half. While the curves don't show it today, we are encouraged with the outlook.

Thanks for all that detail. As a follow-up, maybe just on a different topic. On the capital allocation side, it did reduce the CapEx outlook. At this point, I don't know if guidance includes share repurchases or things like that. So I guess just given that longer-term outlook, when do we start to see more of a ramp-up in terms of the expenditure side, be it for repurchases, M&A, or CapEx in general?

Yeah. In CapEx, we've called the low end of the range really just driven by some supply chain constraints. It's not a shortage of opportunity. It's just a shortage of suppliers right now, but we do expect that to improve. I think you'll really see a ramp-up next year on the CapEx side. From a share repurchase standpoint, we're gearing up for that. Our expectation is we're going to be more active in that area going forward. On the M&A side, it really depends on when the opportunities are ready to engage. We have a list of things we're working on there. Sometimes those things can move quickly, sometimes they take time, so it's hard to predict. But I would expect the balance of this year and certainly over next year for our allocation to ramp up in all three of those areas.

The next question comes from Stephen Byrne from Bank of America. Please go ahead.

Yeah, thank you. Is it reasonable to assume that your outlook for new capacity is primarily on the crush side rather than on origination? And if so, do you have any particular advantages or technology that will allow you to build a new crush capacity at a lower cost footprint than others? And on the M&A side, if that's primarily focused on origination. Can you comment on geographic regions where you're likely to be focused on expanding your origination footprint?

Sure. Let me start as far as the cost to build. As the largest global housing crusher, we better be able to build things as competitively as anyone. The other benefit that we get is plugging them into our global system for our origination, as well as the granularity of our marketing and distribution that's set up regionally. As we make these decisions on expanding capacity for the long term, we're very thoughtful about our current footprint and where we want our footprint to be long term to ensure that we've got the lowest cost structure in place to be competitive in any industry cycle. Regarding the origination and the M&A, we always have our list together and our priorities in place. When the opportunity is right with the returns, we know where we want to continue to strengthen some of our great franchises. We also know to continue to be relevant to all of our customers at both ends of the supply chain. We've also got some targets where we'd like to be stronger on the origination side. Interestingly enough, Ukraine is one of the areas we had targeted to grow our origination. Of course, that's not happening now, but long term, we expect to be a part of rebuilding that because, long term, it's an important origin as well. We'll look at where the long term origination is going to be key to feed a growing world and treat the demand that continues to move upward.

Stephen, I might add, when you look at our forward model, about 60% of our expected capital focus is in the area of strengthening our oilseeds platform. That's distributed evenly between North and South America. On the North America side, it's probably more focused on crush capacity, while on the South America side, it's probably more focused on origination on balance.

One other point on origination: some of the things we've been doing, a great example in Brazil is strengthening our franchise down there and some of that through partnerships, minority investors with resellers, helping them be more effective, but basically giving us a broader reach on our origination down there. We use a variety of methods to do that through partnerships, JVs, as well as outright 100% acquisitions.

Thank you. Do you think the crush margin advantage on soft seed versus soybean is sustainable longer-term? And if so, what can you do to invest and increase your exposure on that side?

Yeah. I should have mentioned when I was talking about the second half outlook: softseeds curves improved since Q1. In North America, we expect that to be strong due to more seed supply with the new crop and good oil demand. In the Black Sea, we're seeing lower seed prices and that's supportive of the curves in the second half. Looking at those drivers around seed supply and strong oil demand, that will continue for the long term. As we reassess our footprint, we'll certainly build soft capacity or switch capacity where it makes sense to do so. Cover crops are being developed. Things like CoverCrest long-term are being thoughtfully considered where that soft crush is placed to handle these emerging crops, which will likely require more soft crush technology. This is a big part of our future planning, whether it’s winter canola or other softseeds to meet renewable diesel and biofuels demand, which will continue to grow.

The next question comes from Ben Bienvenu from Stephens. Please go ahead.

Hi, thanks. Good morning.

Hey, Ben.

I want to ask kind of a two-part question about your updated baseline earnings and long-term growth outlook. The first is the decision to delineate between what could be construed as cyclical drivers of your updated assumptions versus characterizing them as structural drivers of your updated assumption? The second is sensitivities to this as we move through cycles. I ask because, while I don't know that this is explicitly being expressed in the stock price, it suggests we might go way below baseline earnings power over the next several years, or the market might believe that and/or these assumptions associated with your update today might be on the more bullish side. So my question is, what do you think now the business looks like in a down cycle? Furthermore, what led you to classify these crush revisions as structural changes, not just cyclical?

Yeah. Thanks, Ben. Thinking about the mid-cycle, we started with very simple updates to the $8.50. The first thing we did was update the averages. The first step was math. Then we looked more closely at what we believe the go-forward margin environment needs to be to incentivize the right kind of capacity expansion, along with what we believe is probably a longer-term structural change in the market. That's how we landed on the margin environment we believe will be sustainable for the $8.50. What that also tells us is, as we continue to increase the baseline earnings, we should have higher highs and higher lows in performance. Establishing a floor is hard to predict, but we feel confident that our lows will be higher than they were in the past. Regarding the growth side, our outlook focuses on those areas that can provide us with the best return, balancing between share repurchases and growth.

Ben, one other thing I'd say is, when we think about it, if you look at Slide 17, we've called out the baseline and how execution has been based on the market environment. We really like the global machine we've put together here. Our team has continued to work with customers through the complexities created by the supply chain, whether it's truck or rail performance in North America, seeing that stickiness with customers for the long term. One of our goals is to continue to outperform that baseline through execution because every dollar we earn above that allows us to invest more quickly in M&A or organic growth or share repurchases, which just gives us the ability to move that number forward.

Okay. Makes sense. It's a great update, and it seems like you'll have a nice step out from here. The second question is more housekeeping. John, the $3.3 billion of CapEx and M&A, what is the start date on that? Is that including this year, or is that starting in 2023, just to think about the cash flow as we allocate those into buckets over the next few years?

Yeah. That's really starting this year, and I would say there's a big ramp-up in 2023 and 2024. When you think about the timeline, it's going to be more front-end loaded. We're looking at probably roughly 80% of that total spend in the next three years. The earnings impact will be more back-end loaded because some of it is bolt-on M&A that we assume will close earlier. But, overall, the $3.3 billion will influence earnings more heavily in 2025 and 2026 because of the time it takes to get these projects up and running.

Yeah, okay. Thanks very much.

You bet.

Thank you. The next question comes from Adam Samuelson from Goldman Sachs. Please go ahead.

Hi, yes. Thanks. Good morning, everyone. I wanted to come to the long-term capital allocation question maybe in a slightly different way. You talked about being more front-end loaded on the CapEx front, which makes sense. But as we look at the balance sheet today—you're operating well above that baseline earnings level now and it sounds like you are pretty optimistic about that environment in the back half of the year. Presumably, that would persist into '23 based on the way the market sits. With excess capital being generated and your balance sheet being quite under-levered, I appreciate in the 2026 update that you gave, you indicated this $1-plus in upside from additional buybacks and further capital allocations. What do you think the right leverage associated with that new business model would look like? I would think there's probably $3 billion to $4 billion at least of unallocated excess capital to deploy relative to that $11 number over the next four years, potentially more based on your balance sheet position?

Yeah. No, that's right. Here's how we've done it. The $12-plus—the $1 extra— in the out year is driven by looking at our available additional capital that's not deployed today. You take that and model it out over time, targeting more of a BBB leverage ratio, say 2.5 times, and that implies significant available capital. However, we model it conservatively, assuming capital will ramp up evenly over a four-year period to get to 100% contribution from those investments. While the capital is deployed, you won't really see the benefits until much later.

You're correct. The thing that will move that forward would be M&A or share repurchases can make it happen faster.

And maybe just on that point, Greg, as we think about the cadence of repurchases going forward: should we expect a more ratable cadence? Will you be opportunistic in periods of stock weakness, or will you hold cash in reserve and depending on the M&A pipeline? I'm just trying to get a sense of that, especially in a moment where your stock doesn’t seem to reflect any long-term earnings potential.

Yeah. What we would expect to see going forward is a higher frequency of share buybacks. It may not be exactly ratable. We will look for times when we can be opportunistic. If we divest in something and have cash proceeds, we will also look at that as an opportunity. On the M&A side, as things come together, we will inform you. Our expectation is to balance near-term return opportunities, which would be M&A bolt-on and share buybacks with longer-term growth initiatives today.

Okay. And if I could just squeeze a clarifying question on the guidance. I think in response to your market outlook question, you mentioned seeing upside to the curves and being encouraged about the market setup. I want to clarify that the $12-plus really just assumes the forward crush curves as they sit today, which you might also think is conservative. Is that the right understanding?

That's correct. We're not assuming any potential improvement in the curves in our outlook; we're just looking at what the curves are currently indicating.

Thank you. The next question comes from Ben Theurer from Barclays. Please go ahead.

Thank you very much. Good morning, Greg. Good morning, John.

Morning.

Morning, Ben.

So just to follow up on one segment we haven't spent much time on today, and that's the Milling business. It was very strong during the quarter. Can you give us an update on where you stand right now and what you're seeing more short term for the second half? Obviously, you raised the outlook because of the strength in the first half, and it was more than triple compared to last year. How should we think about the second half, especially in light of reiterating your outlook for baseline EPS, which you’re generating in the first six months?

Sure. The team did a fantastic job here in the quarter; it's a great example of managing our end-to-end value chain. If you look at the South American business, the Brazilian wheat milling fed that origination with Brazilian wheat but also wheat from Argentina, and the team's management of the value chain was excellent. The key is that the milling team executed as well; we were able to get higher prices to help offset our industrial costs, and we had higher volumes in both food processing and food service. The team did a great job, and we expect the second half to fall more in line with historical performance, so I wouldn't expect that setup to repeat.

Okay. Perfect. That's very clear. And then just within the framework and the update, thanks for all the details here. But I was a little surprised to still see you increase estimates over Sugar & Bioenergy JV. Could you give us an update where you stand on that potential disposal? We’ve discussed it as being non-core, but it’s still treated as a relevant piece within your framework. How should we think about it conceptually, and when should we assume this could be disposed?

Yeah. We continue to view that JV as non-permanent. We modeled that in because until there's a deal, we didn't want to assume something like that in our modeling. I think our expectation would be that any proceeds we get from that will be used in some combination of M&A growth and share buybacks, making it net neutral to accretive to the model.

The next question comes from Steven Haynes from Morgan Stanley. Please go ahead.

Hi, everyone. And good morning. Thanks for taking my question. I wanted to touch on some of the productivity initiatives you were alluding to at the end of the call and how you are leaning into technology. Can you provide a bit more color around these investments and how you can use them to offset some of the inflation you are seeing?

Yeah. I'll start. John can fill in. But I think it's cultural. It's not unlike the financial discipline and focus on risk management that we use to help our customers through the supply chain. This cuts through the business. It's not unlike sustainability, which runs throughout our organization. We're working with customers, whether it's feed, food, or fuel to provide lower carbon intensity products. Now it's about taking digital transformation and continuous improvement because we can now make those investments, whether that's improving our supply chain, making it easier for customers to engage using sensing and analytics to drive efficiency into our facilities. We now have systems that outperform our best operators in our plants. We'll continue to work on these multiyear improvements. This becomes part of the culture, the thread that binds our operations together.

The next question comes from Robert Moskow from Credit Suisse. Please go ahead.

Hi, Greg and John. I wanted to ask if there’s a way to frame the volume increase that this capital deployment might represent either to your processing footprint or origination footprint? It may help give investors another perspective on why this is a structural growth benefit longer-term over the next four years. Is the order of magnitude like a 10% increase in your footprint? Can you provide any guidance?

It's tricky to say right now. The project list we have today spans a number of different initiatives. I would say a 10% increase in our crush might be a bit high based on current modeling. However, on the origination side, it’s less about the total amount we originate and more about how we are originating it. There will certainly be some increase in origination, but it's about having more direct access to the farmer; we’re less reliant on other commercial entities, for example. There are many strategies we're employing in origination, and there are additional growth initiatives we can pursue.

Okay. Thanks for that. Additionally, interest expense has risen significantly, and I believe you've raised it for the year. I can see the multi-year layout for earnings power growing. Is there a consideration for increasing your debt load more due to being under-levered today? With the rising interest rates, should we expect an offset with interest expense being higher long-term?

We do model a little leverage over time because right now, we are under-leveraged. The increase in interest expense comprises higher average debt and higher interest rates year-over-year. There’s also a component where some of our borrowing is in local currencies in certain countries where interest rates are high. That interest does appear in our expense, but the offsets from hedging are reflected in margins, so it's hard to get a full picture of net interest expenses from our financials. I’d estimate that about half of the yearly increase in expenses is related to high interest rate loans in local currencies.

All right. Thanks for taking my question. Can you elaborate a bit more on the renewable diesel market and any shifts or pushouts?

We continue to see excellent demand from the fuel side, but the majority of our volume is still going to food. The fuel and renewable diesel demand in North America continues to ramp up. We’re also observing a pullback in palm and vegetable oils globally, which could be constructive for biofuels and renewable diesel in the longer term.

The next question comes from Ken Zaslow from Bank of Montreal. Please go ahead.

Hey, good morning, guys.

Good morning.

A couple of questions. What creates a disconnect between the curve and what will happen in the future? Is it simply the crop comes in, or are there other factors you see that might improve the environment besides what the current curve indicates?

As you look through the second half of the year, North American weather is still critical. The next two months are vital for crop development in North America. We expect a good crop, though we suspect corn may be a little short of trend yields. The Ukraine situation also looms over supply and demand due to trapped stocks of wheat and corn. Our hope is for those sea lines to open, but damage in origination and ports remains. On the demand side, our main risk would be a crop problem causing a price spike that could affect demand. However, the overall demand, especially for meals, looks very good. Inclusion rates are high for soymeal; it remains well-priced against corn and wheat. We do not foresee drastic changes in demand dynamics nor in oil demand. As recovery continues in global demand from COVID, especially concerning China, things are looking tight in the physical supply against the backdrop of market volatility. We're starting to sense this as buyers and sellers reassess.

Ken, I'd just add that customers have been staying in the market for Q4, and given we're more open in Q4 than we are in Q3 now, it's challenging to get a good gauge on the forward curve when customers are in the spot market, resulting in low liquidity.

Then my next question: If the environment remains stable or improves, could your earnings potentially stay above $10 due to the ongoing capital spending that supports that? It seems you’re creating an environment that keeps you there. Could we expect CAPEX to support $10 or more through 2026?

You're correct. Our modeling suggests that '23 and '24 will be above the baseline in terms of the market environment. The assumptions we have around crush margins for '23 and '24 remain elevated over long-term averages. As that comes down, integrating capital allocation should retain solid incremental earnings at the same time, leading us to remain above historic averages.

Your understanding is right. With the strong setup for the second half and the momentum flowing into '23, our goal is to continue the execution necessary to pull that forward. This will create the tough decisions on allocation for both growth and share buybacks.

This concludes our question-and-answer session. I'd like to turn the conference back over to CEO, Greg Heckman, for any closing remarks.

Thanks, everyone. We remain proud of the team's commitment and execution, and we are absolutely confident in what we've built here at Bunge. Thanks again for joining us today, and we look forward to speaking with you again soon.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.