Good morning and welcome to the Bunge Limited First Quarter 2023 Conference Call. Please note that this event is being recorded. I would now like to turn the conference over to Ruth Ann Wisener. Please go ahead.

Thank you, operator and thank you for joining us this morning for our first 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 and good morning, everyone. I want to start by thanking the team for their continued focus and strong execution. While the volatility in the quarter was less than we experienced last year, we're still in a highly dynamic operating environment. The resiliency of our team, our deep partnerships with customers across the value chain, and our global platform enabled us to deliver another quarter of strong results. Our focus is on continuing to invest in strengthening our business so that we can provide customers from farmers to end consumers with solutions to some of the most pressing challenges facing them not only today but as we look ahead. The work we have done to improve and integrate our operational, commercial and risk management approach has enabled us to effectively manage through supply disruptions, severe weather impacts, the lingering effects of the pandemic, and the volatility in financial markets. When we execute and capitalize on the options our global footprint provides us along with our team's commitment to quality, service, and innovation, we create value for all of our stakeholders. In short, we continue to demonstrate that our team and our diverse platform give us the ability to succeed in any operating environment and help our customers do the same. Turning to the first quarter; while many of the factors that drove extreme volatility this time last year are still in place, markets have stabilized somewhat. Our numbers this quarter reflect performance that was among the best in the first quarters in Bunge's history, although down from prior year's record results which reflected those major market dislocations. Adjusted core segment EBIT in the first quarter benefited from a record performance in Refined & Specialty oils, offset by lower results in the remaining core segments. This is an industry that requires a long-term view, and we're managing our business to maximize our earnings power over long periods of time. Our EPS over the last four years demonstrates the impact of the team's hard work to drive operational performance, optimize our portfolio, and strengthen our financial discipline. Looking ahead and based on what we see in the market and the forward curves today, we are reaffirming our guidance for full year adjusted EPS to be at least $11. I'll hand the call over to John now to walk through financial results in detail and we'll then close with some additional thoughts on the remainder of the year.

Thanks, Greg and good morning, everyone. Let's turn to the earnings highlights on Slide 5. Our reported first quarter earnings per share was $4.15 compared to $4.48 in the first quarter of 2022. Our reported results included a positive mark-to-market timing difference of $0.84 per share and a positive impact of $0.05 per share related to one-time items. Adjusted EPS was $3.26 in the quarter versus $4.26 in the prior year. Adjusted core segment earnings before interest and taxes, or EBIT, was $756 million in the quarter versus $858 million last year. Agribusiness started the year off well. However, results were down from last year's particularly strong performance. In processing, lower results in the quarter were primarily driven by soy crush. Improved performances in North America and Brazil, which benefited from strong protein and oil demand and reduced Argentine exports, were more than offset by lower results in Argentina, Europe, and Asia. In merchandising, results were lower in the quarter as margins declined from last year's levels which were impacted by market disruptions due to tight supplies and the war in Ukraine. Refined and specialty oils also started the year off on a strong note. All regions performed well with notable year-over-year improvements in North America and South America, both of which benefited from strong food and renewable fuel demand as well as effective utilization of our distribution network. In Milling, lower results were driven by South America where the small Argentine wheat crop negatively impacted our local upstream merchandising. This was partially offset by stronger structural margins in our milling operations in Brazil. Results in the U.S. were down slightly. Segment results in the prior year benefited from very strong South American origination margins during a period of high market volatility. The increase in corporate expenses in the quarter was largely driven by growth-related initiatives, offset in part by an increase in other results primarily related to Bunge Ventures. Lower results in our non-core sugar and bioenergy joint venture were primarily driven by lower Brazilian ethanol prices and higher costs. Adjusting for notable items, net interest expense of $69 million in the quarter was up compared to last year, primarily due to higher variable interest rates, partially offset by higher investments in interest-bearing cash instruments and lower average debt levels. For the quarter, reported income tax expense was $183 million compared to $108 million in the prior year. The increase was primarily due to a change in geographic earnings mix as well as higher tax benefits in 2022 from releases of valuation allowances in Europe and Asia. Let's turn to Slide 6, where you can see our adjusted EPS and EBIT trends over the past four years, along with the trailing 12 months. This performance trend not only reflects the strength and resiliency of our global network of integrated assets and capabilities but also demonstrates the outstanding performance and agility of our team to adjust to the changing market conditions. Slide 7 details our capital allocation of the $625 million of adjusted funds from operations that we generated in the first quarter. After allocating $86 million of sustaining CapEx which includes maintenance, environmental health, and safety, we had approximately $540 million of discretionary cash flow available. Of this amount, we paid $94 million in common dividends and invested $87 million in growth in productivity CapEx, leaving approximately $360 million of retained cash flow. During the first quarter, we did not repurchase shares. As we have discussed previously, we have a balanced approach to capital allocation, and share repurchases are absolutely a component of that mix. However, they have been on hold over the last two quarters as we've been actively engaged in a variety of discussions to expand our global platform, scale, and core capabilities. As we have been in the past, we will be disciplined and make the right decisions as quickly as possible. We believe our stock is undervalued and look forward to getting back in the market to continue our share repurchase program as soon as possible. As shown on Slide 8, at quarter end, readily marketable inventories, or RMI, exceeded our net debt by approximately $4.5 billion. This reflects our use of retained cash flow and proceeds from portfolio actions to fund working capital while reducing debt. Slide 9 highlights our liquidity position. At quarter end, all $5.7 billion of our committed credit facilities was unused and available, providing us ample liquidity to manage our ongoing capital needs. Please turn to Slide 10. For the trailing 12 months, adjusted ROIC was 19.8%, well above our RMI adjusted weighted average cost of capital of 7.7%. ROIC was 14.4%, also well above our weighted average cost of capital of 7%. At the end of the quarter, we had an unusually large cash balance of approximately $3 billion, most of which is expected to be used toward repayment of upcoming debt maturities and increased working capital during the second quarter. When adjusting for this, the trailing 12-month ROIC and adjusted ROIC for the quarter were more in line with the previous 12-month period. Note that we increased both our WACC and adjusted WACC from 6% and 6.6%, respectively, to 7% to 7.7%, respectively, reflecting the current higher interest rate environment. Moving to Slide 11. For the trailing 12 months, we produced discretionary cash flow of over $1.9 billion and a cash flow yield of 18.2%. Similarly, we increased our cost of equity from 7% to 8.2%, reflecting the more recent market environment. Please turn to Slide 12 and our 2023 outlook. As Greg mentioned in his remarks, taking into account first quarter results and the current margin environment of forward curves, we continue to expect full year 2023 adjusted EPS of at least $11 per share. In Agribusiness, full year results are forecasted to be down from last year with slightly higher results in processing but more than offset by lower results in merchandising. However, depending on how market conditions evolve over the remainder of the year, there could be upside to our segment outlook. In Refined specialty oils, based on our stronger-than-expected first quarter performance, full year results are expected to be up from our prior outlook but still below last year's record performance. In Milling, full year results are now expected to be down from our prior forecast, reflecting a more challenging than expected first quarter. In Corporate and Other, results are expected to be in line with last 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 expects the following for 2023: an adjusted annual effective tax rate in the range of 20% to 24%; net interest expense in the range of $360 million to $390 million which is down from our previous expectation; capital expenditures in the range of $800 million to $1 billion and depreciation; and amortization of approximately $415 million. 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. Looking ahead, we're focused on investing to grow the business so we can increase our ability to serve our farmers and consumers regardless of the environment we're operating in. In the first quarter, we made strategic investments in our growth areas, including focusing on core origination and crush operations, expanding our innovative refined and specialty oil products and solutions, and increasing our participation in renewable feedstocks and plant-based proteins. As part of our culture of continuous improvement, investments we made in our origination and crush operations are already showing results. Improvements in maintenance and reliability processes reduced overall unplanned downtime to a record low for the company. Our energy reduction projects are showing strong results, and we put through record volumes in our ports in Brazil by adjusting our product mix to improve efficiency. Within Refined & specialty oils, in April, we announced the acquisition of Fuji Oil's newly constructed port-based refinery in Louisiana. This is part of our long-term strategy to expand our specialty oils business by increasing our ability to serve our food customers with a variety of feedstocks. The team did a fantastic job of onboarding our new colleagues and we've already started serving food customers from that facility. Investing in innovation and technologies that support low-carbon initiatives are also a key part of our strategy. We've increased our participation in renewable feedstocks announcing a collaboration with Chevron and Corteva AgroSciences to introduce proprietary winter canola hybrids to produce plant-based oils with lower carbon profiles. This creates new revenue opportunities for farmers with a sustainable crop rotation. Our goal is to increase the availability of vegetable oil feedstocks serving the growing demand for the domestic renewable fuels market. It is also another step in our commitment to creating clear paths to support decarbonization. We also announced a multiyear collaboration with Corteva to develop and commercialize soybean varieties that create new value for soybean farmers and feed customers. The protein meal from these varieties is expected to reduce the use of synthetic additives, lower costs, and shrink their carbon footprint. This is another example of how our role as the global leader in oilseed processing uniquely positions us to leverage upstream and downstream partnerships with leading and innovative industry players to unlock value for our customers along the value chain. Executing our growth strategy will enable us to deliver on our purpose of connecting farmers to consumers to deliver sustainable and essential food, feed, and fuel to the world. Many of the investments and partnerships we've announced, along with others in our pipeline, offer new tools and solutions to connect farmers with markets that value sustainable operations and production. And with that, we'll turn to the Q&A.

The first question comes from Ben Bienvenu with Stephens.

I want to start just with the guidance. You maintained the guidance of at least $11 this year. Obviously, the operating backdrop has been dynamic to start the year. And I think the composition of it looks a bit different now for the year versus when we last heard from you to start this year. So maybe if you could talk to us a little bit about kind of the shape of that at least $11. And you talked about the potential for guidance to be conservative depending on how the landscape evolves for the balance of this year. So maybe if you could talk a little bit about both the opportunities and threats you see in guidance.

Okay. Maybe I'll let John talk to the shape of it and then I'll kind of talk to the opportunity.

Thank you, Ben. Looking at the year, we had a strong start in Q1, though we did notice some softness in Q2. However, we had largely hedged before Q2, so the impact won't be as severe as the curves might suggest. While there is a bit of softness in Q2 compared to our earlier expectations, we anticipate more upside in Q4. As a result, we are somewhat adjusting our earnings projections from last quarter to around 55-45. We expect to see just over 50% of the earnings in the first half, but with improvement and greater visibility in the later part of the year, we felt confident in raising our Q4 expectations to balance any Q2 softness.

Yes, I feel confident about achieving at least $11. The key consideration for us this year will be determining the size of the plus. The demand drivers for meal and oil remain strong throughout the year. Global poultry and pork numbers are stable, with a slight increase overall. Food and fuel demand for oil is solid. When it comes to merchandising, it remains the most challenging to forecast, and we're uncertain about the timing or its position in the value chain. However, we are confident in our team's ability to capitalize on opportunities as they arise. The global situation is complex, especially with crop issues in Argentina causing disruptions in merchandising flows and crushing. We're also in the early phases of soybean planting in North America, and we need a successful crop here. Demand from China is improving, which we will continue to monitor. The situation in Argentina is affecting crushing, impacting global margins, and how those will play out over the year is key. In the U.S., research and development capacity is catching up, with orders starting to come in for our refining specialty oils for both fuel and food. We transitioned from B10 to B12 in Brazil in April, which is starting to have a positive impact. The large soybean crop in Brazil is benefiting margins in China, and it's also enhancing crushing margins in Europe, along with reduced pressure from shipping oil and meal out of Argentina. Regarding our merchandising and port business, a significant corn crop in Brazil is looking favorable. There are numerous factors at play, and while we don't have complete visibility, we feel more confident about achieving at least $11 today compared to our last discussion 90 days ago.

Okay, very good. Very helpful. My second question is related to the sugar business. I know we've been talking about this and asking you about this for a while. Can you give us any update to the extent you can on the potential timeline for sale? Does this very strong sugar price market globally positively influence the potential price you might realize for that business? And maybe just more pointedly, do you think that's a 2023 event the sale?

Yes, Ben, it's hard to predict timing. We continue to work on that business. We've made it clear that long term, it's not core. And so we are still actively working on that; sometimes it just takes time, a lot of nuances when you have a partner and others involved. But fortunately, in the near term, margins are very good. Sugar prices are high and we think the business is going to perform extremely well until we don't own it. And we're hopeful to be able to pull some cash dividends out of that here going forward and continue to manage it and run it like we own it until we don't.

Our next question comes from Ben Theurer with Barclays.

Congrats on the results. Just following up on the guidance piece and maybe digging a little bit into the refinement specialty oils. It was clearly a very strong start to the year, around about $50 million, up just in absolute terms but you're still guiding for like results to come in softer for the year. So help us understand what you're seeing in the market where you see the risks to not reach that a little over $800 million level you basically have in the last year. So what are the risks within that? And how realistic do you think those risks are? That would be my first question.

Sure, let me start. You've highlighted another area where we see potential for growth. Q4 and Q1 were very strong. However, after Q1, we've noticed a global increase in palm supplies, which has resulted in a heavier global oil supply. The RD industry has faced challenges with startups and some capacity issues, leading to a softer end to the quarter for RSO. Despite this, we have our strongest sales outlook for the remainder of the year, particularly with food and fuel customers, where approximately 80% of our volume is still directed towards the food industry. This positions us well as we plan for the rest of the year. We expect palm supply to tighten as the year progresses and oil demand remains steady alongside recovering RD demand. Although we have some concerns about potential recession impacts, our position in the value chain shields us from significant effects, and we haven't seen a decline in food demand. We have observed some consumers switching to private labels and increased QSR volume, but overall, our volume remains stable. While visibility is limited in Europe, particularly regarding the softseed market, we are somewhat apprehensive and anticipate a slightly softer performance year-over-year. However, the outlook for the rest of our business appears to be quite positive.

Okay, perfect. And then my second question is just around CapEx. And I mean, obviously, you reiterated the $800 million to about $1 billion guidance. You're running a little behind on a quarterly basis but clearly up versus last year. So how should we think about the CapEx throughout the year? And what are like kind of the scenarios to get to the higher versus the lower end of these CapEx plans? And what's the focus of that CapEx?

Yes. Look, I think we're starting to see some good momentum on the projects. And we do believe and I think right now, we got a good shot at being at the high end of that range in terms of CapEx for the year. Obviously, a lot of things got to keep rolling ahead. But we're finally getting in line on the cost side. We're getting projects that have been maybe a little bit slower to start, are now underway and we've cleared ground and some things. So optimistic that we can really get rolling on the CapEx side. And a good chunk of that is going to be on larger projects. We've got a handful of what we kind of talked call internally mega projects but it's the bigger ones, some of which we've talked about, certainly, the projects related to our Chevron JV Morristown, the Rotterdam plant in Europe that we've talked about, our Krishna plant in India which should be up and running here a little bit later this year. We're getting close on that one, a lot of those projects. And then, of course, we've got a number of debottlenecking projects and Greg alluded to some of those. And the benefits we've been seeing on some of those but those continue. So looking good on that front, I think. And then I would say out beyond this year, probably next year, if we can keep the momentum going, a shot of probably being a little bit higher next year on CapEx.

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

So firstly, I wanted to ask a little bit about the working capital, very big inflow in Q1 which is not also traditional seasonality. What I guess drove that? And also, how should we think now about working capital and operating cash flow for 2023 in total?

Yes. From a working capital perspective, Q2 is typically our peak due to the harvest season in Brazil, which leads to increased payments to farmers. We expect to see an increase in working capital during the second quarter, which usually peaks at this time. However, we were lower year-over-year in working capital usage, largely due to commodity prices being the main factor, even more so than volume. Looking ahead, we anticipate being lower year-over-year overall for the year. After Q2, we expect a tapering off in Q3, and then in Q4, there may be a slight decline as payments to U.S. farmers, who often defer payments into the following year, are made during harvest. Our current outlook suggests working capital will be somewhat down year-over-year, leading to net cash generation from cash flow from operations. However, when discussing funds from operations and free cash flow, we exclude changes in working capital from our FFO calculations.

I wanted to follow up on your earlier comment. If I understood correctly, you feel more confident in your guidance now than you did 90 days ago. This surprises me, considering the recent developments such as lower crop prices, the potential for a significant harvest in the U.S., and what might happen next year in Latin America, along with the crush margins. I would have expected the opposite outcome, suggesting that no matter how conservative your guidance was, you might have less confidence now compared to three months ago. Could you clarify this? What factors are contributing to your increased confidence despite worsening market conditions?

Sure. It begins with our global presence and the team's execution. Looking at our global crushing operations, we anticipate challenges in Argentina due to a decrease in crop size from 4 million metric tons last year to potentially 27 million tons this year, which will require us to enhance operations in other regions to supply meal and oil, and we are well prepared for that. Additionally, the large crop in Brazil supports our crushing needs and has positively impacted margins. It’s worth noting that compared to 90 days ago, we executed exceptionally well during the first quarter. We typically see more liquidity in the upcoming quarter, especially in the next 30 days. While current conditions are softer, our team effectively managed risks and earnings in our assets, securing hedges against nearby softness, which gives us a clearer view of our performance in the second quarter. Furthermore, the market outlook has improved for the latter half of the year, particularly in the fourth quarter. As we replenish soybean supplies in North America and expect to cultivate adequate acreage, the demand and market indicators for meal and oil are also improving. Additionally, the upcoming large corn harvest, following a substantial soybean crop in South America, positions our distribution and merchandising system favorably. Overall, we have greater visibility into not only what has been achieved and hedged but also what we anticipate moving forward.

Our next question is from the line of Steven Haynes with Morgan Stanley.

I wanted to ask a follow-up on, I guess, the comment about kind of in lieu share repurchases, maybe reinvesting back in the business and building out the platform a bit more. I mean, can you give us a little bit of color about how you're kind of thinking about the various buckets that you've broken out in terms of sizing that? And then maybe from a geographic perspective also, where you would be looking to invest more and less.

I'll begin, and Greg can add if necessary. In terms of share repurchases, it remains a vital part of our financial strategy. We have $300 million left in our current authorization that we aim to utilize this year. That’s our target, after which we plan to seek additional authorization. Going forward, we believe that share repurchases should continue to be a significant element of our allocation strategy. Regarding overall capital allocation, our goal is to strengthen our broader platform, not just in origination but also by seeking opportunities to consolidate within the industry. We intend to focus on areas where we have weaknesses and aim to enhance our origination efforts, which aligns with our regenerative agriculture initiatives and other related efforts. We are continually exploring opportunities, as exemplified by our acquisition of the Fuji plant, which is a significant addition to our specialty oils business. This acquisition was beneficial, providing immediate operational capabilities. We are also looking to expand our plant-based protein projects and enhance our core businesses across the board. Geographically, our focus is primarily on North and South America due to current dynamics. However, we do have two plants under construction in Europe and one nearly completed in India. Thus, our efforts are globally spread but currently more concentrated in North and South America.

Our next question comes from Manav Gupta with UBS.

I just wanted to follow up first on the March 14 announcement, you working with Chevron and Corteva to develop produce winter canola, Help us understand where this partnership is heading which are the key milestones we should look at. And again, it looks very promising. So when should we start giving you some credit in your earnings for this kind of work that you're doing with Chevron and Corteva?

We are thrilled to collaborate with these two exceptional partners. This partnership exemplifies our ability to connect the value chain, facilitating significant change in the production of renewable feedstocks. As these seed varieties become available, we will commercialize them alongside farmers. Additionally, we've announced the expansion of our crushing facility in Destrehan and our investment in CoverCress. These innovative seeds have a higher oil content, allowing us to optimize our industry’s capabilities. We want to build flexibility into our system, whether it involves domestic options like soy, CoverCress, or softseed canola, or global opportunities for softseed. This approach not only applies to how we feed with the seeds but also aligns with the global meal demand, allowing us to serve customers worldwide from the port. Progress will not be abrupt; rather, it will be steady, and we will provide updates as we advance. We are also excited about our long-term project with Corteva, which has been in development for a while and is now ready for discussion. This initiative presents a profit opportunity for farmers to cultivate a soybean with a distinct amino acid profile, enhancing value for both farmers and feed manufacturers compared to synthetic amino acids. While this project is further ahead, its potential is significant. Overall, it demonstrates our commitment to long-term investments in our core strengths, and we're pleased that our partners recognize this commitment. We are dedicated to ensuring their success as well as that of the end customers.

Perfect. And just some more details. I mean you initially mentioned about this refinery you have acquired from Fuji. Why is this the right strategic fit for you guys? What are the benefits of it? Can you help us understand why this was the right transaction for you guys?

We are very enthusiastic about this development. We integrated it directly into our network and now have a fantastic team on board who is already serving customers from that facility. We had reached our capacity in the domestic tropical oil sector, making this acquisition an ideal addition to our network, allowing us to continue expanding our offerings to customers. We have plans to expand that plant and have already ordered equipment intended for another site, which will now be redirected there for a significant and rapid expansion, much more efficiently than starting from scratch. Given the shifts in oil flows due to biofuels, particularly renewable diesel, it’s essential to import various oils in the tropical segment to support our customers as they reformulate. We are truly excited about the role this will play in enhancing our solutions.

Our next question comes from Thomas Palmer with JPMorgan.

Based on your volume disclosures, I think a challenge both merchandising and in milling has been the availability of corn and wheat in your regions. Just any visibility as to when the volume picture might get a little better for those products. I mean you just alluded to a better corn crop, for instance? Do we start seeing benefits of this in the second quarter? Or is it a bit more second half weighted?

Tom, I can address the factors that affected our volume compared to last year, and then Greg can provide insights on the outlook. Looking at the volume, particularly in the crush segment, we experienced a decline compared to last year, mainly due to Ukraine being closed for the entire quarter this year, whereas we had some operations last year amid high energy costs. In Europe, our soft seed operations did not run at full capacity this year. On the merchandising side, we also saw a significant drop in volume because global corn flows were weaker than expected. This was a major contributor to the decline, as the margins were insufficient to manage a large volume, and we lacked the export opportunities we had last year. Additionally, on the milling side, we owned the Mexico milling segment for most of last year, which is no longer included in this year's figures. Those were the primary factors impacting our year-over-year volume. Greg, could you share your thoughts on the outlook?

Yes. I think in Brazil, right, the initial shock here in Q1 from the smaller Argentine crop and some of the challenges that we expect to see on the quality there as well, where our South American wheat milling business is set up, Argentina is a real important supplier to that so that can make a difference year-to-year. But we reflected the challenge in Q4 and then are rolling that forward in the balance of the year. So the big change, of course, won't be next year until that crop comes off and seeing where that opportunity comes. As far as in North America, our core milling business did have good demand and good yields. And then, of course, the quality of the new crop in North America will be key later in the year. But they've done a great job in our North America core milling business with lower unplanned downtime. And then we had some nice key customer wins and getting some new business. So kind of plugging along and continue to feel good about that.

Thanks for the detail. And then, maybe on the question side. So you've kind of alluded to this at various points on the call but maybe I'll ask a little more explicitly. Can we just get a recap of what you're seeing directionally in different parts of the world today from a crush margin standpoint? And then which regions are kind of showing the biggest rebounds as we think about the back half of the year at this point?

Sure. If you take soy in total, right now, '23 structural margins in total look in line with '22. So while we see U.S., it's down slightly versus an exceptional year last year. China, the curve looks similar. Now that's been a bit of a roller coaster right. Last year was tough. Margins were better early in China and then start to get soft but now with the new Brazilian bean crop coming off, those margins are improving again. Now there's not much liquidity in the China market. It's always pretty spot and fairly volatile. But the team is doing a good job. So I think that that's similar with maybe some upside. Brazil, the curve is up versus last year. And of course, that's on the back of both the record Brazilian bean crop as well as the lower Argentine production. And then, of course, Argentina is the drag by itself. The curve is much lower with what's going on there with the small crop hurt by weather. And so volumes will be lower there all year that has to be picked up by the rest of the system. And then the EU definitely looks better than last year. Energy prices have moderated. And then, of course, there's less exports of Argentine meal into that market which helps help margins there as well. And then in softseed, the curves are up versus 2022 and that's in both North America and Europe. So improvement in the soft seed side; that's really unseed supply is really a driver.

Our next question comes from the line of Andrew Strelzik with BMO.

Maybe my first one to start. I heard your comments on the renewable diesel demand that you're seeing. I'd love if you could elaborate on that. I think you said you're seeing some catch-up and maybe some demand from new capacity. So anything else you can share on that? And in light of that, do you think that the futures curves are accurately reflecting where crush margins could go in the back half? I mean you mentioned some improvement in Q4. We know what's going on in Argentina. I mean do you think that whether or not that was a fair representation?

Yes. Regarding oil demand, it has been somewhat sluggish at the end of the quarter in the domestic market, primarily due to start-up challenges. Some of the R&D teams have faced issues, and their size can impact logistics. However, in the last week to ten days, we've observed orders coming in not just on schedule but with some requests for early shipments. This signals a significant change and suggests that they're addressing their issues. While I can't pinpoint all the factors affecting profitability within their system, it seems to be a widespread improvement rather than just isolated incidents. We rely on market trends for our forecasts and acknowledge that they guide our perspective. Overall, we feel optimistic about the situation, especially as we work on developing the North American crop. The demand appears promising, and we’re aware of the substantial crop in Brazil while hoping for a successful yield here in North America. Overall, we feel positive about the current setup.

Yes. In terms of Andrew, the R&D side, renewable diesel side, things have probably been a little slower in terms of the ramp-up of some of that. There have been some operational issues at some of the renewable diesel facilities, some of the transformation of some of the plants has taken a little bit longer. But we think the long-term fundamentals are still there and the long-term trend is still there. We've got revised RVO coming out here in June and we'll see where that goes. But I think we're hopeful that's favorable to the industry. But again, we're starting to feel some tightness on the oil demand side. It's been, I think, first quarter reflected a little bit of heaviness on the oil side. Not that the demand wasn't there. There was just a lot of oil in the market. But I think the view is that we're going to see some improvement here as we go forward.

That was very helpful. I have another question regarding the magnitude of the positive factors and their evolution. Firstly, how did Q1 perform compared to your internal expectations? We see its performance relative to the market, but how does it align with your estimates? For Q2, it seems you've addressed some of the softness, and Q4 looks to be improving. On the agriculture side, things appear stable. I would assume that the refined segment may be improving more than the milling segment is declining, considering their sizes. Additionally, interest rates seem to be providing some support. Can you summarize all these factors regarding the magnitude of the positives? I know this may seem detailed, but any insights would be appreciated.

Yes. We don't anticipate as much volatility in milling compared to refined and specialty oils, which we believe is a conservative assessment given the current momentum and the commitments we have lined up for the remainder of the year in North America, along with our expectations from R&D. Regarding the crush, while I mentioned Argentina, the significant aspect this year is that the crop is expected to be under 30 million metric tons, with estimates now possibly at 27 million, and there are some quality issues affecting Argentina. This situation will impact the harvest and lead to a decrease in availability from Argentina, which is likely to be more severe than in the past. We still need to assess how farmer retention will evolve; farmers are facing a declining crop and are waiting to see what incentives the government will provide, particularly concerning the soy dollar 3.0. This changing dynamic is affecting how they market their crop, which significantly influences the overall situation. The impact will likely continue until the next Argentine crop is harvested. We have even noticed beans moving from Brazil to Argentina earlier than usual, but that is expected to halt, making the second half of the year particularly challenging. Additionally, we are considering the demand from China—whether it will improve and how much it will affect both soybean and corn demand. Changes in demand for ag commodities could also impact the ocean freight market, which might lead to margin dislocations and opportunities within the business due to shifts in ocean flows. There are many variables at play, and often this kind of uncertainty creates challenges that we need to address for our customers; that’s our current perspective.

Yes. And Andrew, maybe on the calendarization question, I think we were largely in line in Q1 with kind of where we saw things so there were no real surprises there. I think as we look at and I kind of alluded to it earlier, a little bit softer maybe than where we looked at it last call. Still skewed slightly towards the first half but strength and some improvement in the curves in Q4 gave us confidence to increase our number for Q4, kind of how we look at it internally. So that's why we felt like we were in good shape in terms of the full year.

Our next question is from Adam Samuelson with Goldman Sachs.

So my first question is, I want to come back to the capital allocation discussion. And I guess I appreciate that you may have been blacked out and restricted from kind of open market repurchases in the quarter as you were last quarter. But more philosophically, John, Greg, how with the net debt where it is and the leverage where it is, I mean and where your internal kind of cash from operations after dividends, after funding growth CapEx has meaningfully exceeded cash usage over the last 2 years. How do we think about the excess capital balance that you guys are sitting on at this point? I mean just think about the $300 million of target for this year on buybacks and it just seems like it pales in comparison to the balance sheet and the underlying cash generation of the business, both retrospectively and prospectively. And just kind of how do we just think about your comfort in kind of running with that much excess capital?

Yes, Adam, I don't believe our long-term plan is to maintain such a low leverage ratio and high cash availability. We have been disciplined in our approach. From the perspective of share buybacks, we intended to commit at least $250 million each year over the next five years. If opportunities allow, we may exceed that amount. We have several capital projects in progress and are actively exploring many M&A and growth opportunities. Additionally, we have some bonds maturing soon which will allow us to utilize some of that capital, and we expect our working capital to increase in Q2. Looking ahead, we believe our leverage will be well below what we consider our long-term operating level, but it is crucial to stay disciplined in investing that money wisely. This will include M&A, a significant pipeline of capital expenditures that will be higher than historical levels over the next couple of years, as well as smaller investments in bolt-on projects and debottlenecking. Share buybacks will remain an important part of our strategy moving forward.

Okay, I have a question about the market outlook. You mentioned the global outlook for soy crush. From the demand perspective for meal, how should we view wheat as a competing feed protein, especially since its price is becoming more competitive with meal? Given the tight meal supply with Argentina not in the market, are you observing any shifts towards wheat? How do you see this affecting meal demand this year?

We've seen a little bit. But net-net, if you look at the increase in poultry numbers and pork basically flattish. We believe the demand is there. And soybean meal and protein meals in total. They're a big part of the ratio and the market does its work to get it priced in to where it needs to be on the volume. So we feel comfortable with it.

Our next question comes from the line of Salvator Tiano with Bank of America.

I want to revisit your previous remarks about expansion plans, which you touched on in your last presentation. It seems that your primary focus for expansion is in origination, particularly in North and South America. As we consider your active discussions regarding mergers and acquisitions, I understand you can't share specifics. However, I am curious about how crucial it is for larger moves to involve expanding your crushing or refining footprint, which has been your growth focus for the past couple of years, versus just focusing on origination. Is it essential to have these assets for significant moves, or is it not a deal breaker?

We are committed to maintaining discipline in our operations. We have various areas we can focus on, including origination, crushing operations, refined and specialty oils, renewable feedstocks, and plant-based protein. This allows us to strategically allocate our resources. The current market is intriguing, with higher interest rates, ongoing global disruptions, and adverse weather conditions. We're also noticing some opportunities that had stalled in previous years starting to emerge again, which is exciting. Moreover, it's crucial for farmers to gain value, particularly as our customers in feed, food, and fuel are seeking lower carbon footprints and lower carbon intensity products. To implement meaningful change at scale, we must ensure that value reaches farmers, enabling them to make sustainable changes that can be replicated and scaled. This aspect of working closely with farmers has always been vital for our processing and merchandising operations, and it’s becoming increasingly important as we collaborate with them on lower carbon intensity products, renewable feedstocks, and regenerative agriculture. This shift is quite different from our focus just three years ago. As the situation evolves, we must continuously adjust our strategies. It's an exciting time for us at Bunge; we have demonstrated our ability to execute successfully. When we identify the right opportunities, we know we can act on them effectively. We have the capital ready to invest, and while we'll remain disciplined, we will leverage all avenues for value creation, including share buybacks. We're optimistic about our present position and the performance of our team as we look forward to the rest of the year.

Perfect. And just one last question. You mentioned that you're investing in a crushing facility to enhance its flexibility. For instance, with the new product lines you're considering, how will investing in more adaptable crushing plants affect overall margins? Could it potentially lead to higher capital intensity? Additionally, as we evaluate the overall crop landscape, including the one under development, what is your perspective on how the new market will compare in terms of margins against traditional oils like canola and soybeans?

Yes. We've got some switch plants today and it goes into the analysis. If you're going to have a switch plan, it does have some incremental cost to have that flexibility but that's because we believe that optionality you'll get paid for that optionality and for that flexibility. So that's where the switch plants for ourselves and other players in the industry globally where those switch plants exist today. And with the changes with where winter canola can be grown, as CoverCrest gets developed, as other novel seeds get developed, globally, the numbers will tell us where to put that softseed crush or where to put that flexible crush it can flex between soy and soft and make those returns. But our return standards are the same regardless.

Thank you. This concludes our question-and-answer session. I would like to turn the conference back over to Greg Heckman for closing remarks. Thank you.

We'd just like to thank everybody for joining us today. Thank you for your interest in Bunge and we look forward to speaking with you again soon. Have a great day.

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