Earnings Call Transcript - BG Q3 2021

Operator, Operator

Good morning and welcome to the Bunge Limited Third Quarter 2021 Earnings Release and Conference call. Operator Instructions: Please note this event is being recorded. I will now turn the conference over to Ruth Ann Wisener. Please go ahead.

Ruth Ann Wisener, Head of Investor Relations

Thank you, operator, and thank you for joining us this morning for our third 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 would 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 will now turn the call over to Greg.

Greg Heckman, Chief Executive Officer

Thank you, Ruth Ann, and good morning, everyone. Turning to the agenda on Slide 3, I will start with some highlights of the third quarter and how we are thinking about the remainder of the year before handing it over to John, who will go into more detail on our performance. I will then share some closing thoughts before opening the line for your questions. Let us start with an overview of the quarter, turning to Slide 4. I want to begin by thanking our team for an exceptionally strong quarter. Their ability to remain focused on execution helped us deliver our eighth consecutive quarter of earnings growth. In the second half of 2021, we have seen a shift in the challenges created by the COVID operating environment. We have moved away from having to adjust to the fluctuations that came from lockdowns like the change in demand from foodservice to food processors. Instead, we are adapting to an environment that is driven by an uneven global recovery. This dynamic demand is driving increases in commodity and energy prices and creating many supply chain challenges. Our team has remained agile and I am proud of how we have navigated this market shift. We also responded well to unforeseen disruptions, like the great work our team did managing the impact from Hurricane Ida in North America. We also continue to set high watermarks across a number of our key operating metrics. We have done this all while continuing to prioritize the safety of our team, their families and communities as COVID remains with us. In addition to solid operational execution, our positioning and approach to risk management allowed us to capture opportunities quickly when the market conditions changed. This was especially true as crush margins improved over the late summer when oilseed prices dropped and oil values expanded due to tightening supply. The strength of our global platform and footprint continue to provide benefits. In the face of broad logistical disruptions, our integrated value chains and owned ports have helped us to continue supporting customers at both ends of the supply chain. This quarter and our results over the last 1.5 years have shown the power of our global network and operating model. Looking ahead, we continue to see a dynamic set of factors and we are more confident than ever in our ability to react and manage well to capture market opportunities. As part of our work to continue positioning Bunge for the structural shift we are seeing in the consumer demand for sustainable fuel, in September, we announced our proposed joint venture with Chevron. As a key step, we will increase production of renewable feedstocks by nearly doubling the combined capacity of two soy crush facilities that will be contributed to the joint venture. Chevron recognizes our expertise in oilseed processing and farmer relationships as well as our commitment to sustainable agriculture. We recognize Chevron’s expertise in refining and distribution. Partnering with a global leader in energy is a significant step forward in building the capability to make change at scale to help reduce carbon in our own and our customers’ value chains. This partnership will establish a reliable supply from farmer to Chevron’s downstream production and distribution to the in-fuel consumer. It also allows us to better serve our farmer customers by accessing demand in the growing renewable fuel sector. It will enable us to pursue new growth opportunities together in lower carbon intensity feedstocks as well as consider feedstock pretreatment investments. In addition to the Chevron joint venture transaction, we announced an agreement to sell our wheat mills in Mexico to Grupo Treemax. As part of continuously looking for ways to improve our portfolio, we concluded the business was not in line with our long-term strategic goals and we are pleased with the outcome of selling to a well-respected wheat miller. We expect the sale to be completed in 2022. Turning to our segment performance, results in Agribusiness were driven by strong execution and a better than expected market environment. In processing, we benefited from higher margins in soy and soft crush in the Northern Hemisphere. Merchandising results were better than expected and very strong compared to prior year. Results in Refined & Specialty Oils improved in all regions, with particular strength in North America driven by strong demand from foodservice and renewable diesel. We are also seeing continuous improvement in our innovation pipeline, enabling us to launch exciting new products to the market. I would like to congratulate our team for their efforts to help customers with creative solutions. This innovation capability as well as our skill at solving supply chain issues have helped create a step change in many long-term customer collaborations and commitments. Our team is also making measurable progress improving sustainability across our operations and investments. Following the launch of the Bunge sustainable partnership in Brazil earlier this year, we have already improved the visibility into our indirect supply in high-priority regions to approximately 50 percent and that exceeds our 2021 target of 35 percent. While we still have work to do, having this insight into our supply chain will help us meet our industry leading non-deforestation commitment. Regarding our non-core businesses, I want to call out the role our sugar joint venture has had in our year-over-year improvement. We are pleased that this business has been performing well in a challenging weather market. Additionally, Bunge Ventures had a successful quarter as a result of the Benson Hill IPO and John will give you more details on the impact of that investment in the quarter. We also repurchased $100 million in shares and our Board authorized a new $500 million repurchase program, demonstrating our confidence in the business. This reflects our balanced approach to capital allocation, where the return of capital to shareholders is always evaluated along with other investment opportunities. Before handing the call over to John, I wanted to note that we have increased our outlook for 2021, reflecting our strong third quarter results and continued favorable market trends. For the full year, we now expect to deliver adjusted EPS of at least $11.50 and we expect the strong momentum to carry into 2022. So with that, I will turn the call over to John to walk through our financial results in more detail.

John Neppl, Chief Financial Officer

Thanks, Greg, and good morning everyone. Let us turn to the earnings highlights on Slide 5. Our reported third quarter earnings per share was $4.28 compared to $1.84 in the third quarter of 2020. Our reported results included a negative mark-to-market timing difference of $0.22 per share and a $0.78 per share gain on the sale of our U.S. interior grain elevators, which closed in early July. Adjusted EPS was $3.72 in the third quarter versus $2.47 in the prior year. Adjusted core segment earnings before interest and taxes, or EBIT, were $698 million in the quarter versus $580 million last year, reflecting higher results in Agribusiness and Refined & Specialty Oils. In processing, higher results in North America, European soft seeds and our Asian and European destination soy value chains all benefited from improved margins. These were partially offset by lower results in South America, where margins were down from a strong prior year. In merchandising, improved performance was primarily driven by higher results in ocean freight due to strong execution and our global vegetable oil value chain, which benefited from increased margins. In Refined & Specialty Oils, the strong performance in the quarter was primarily driven by higher margins and volumes in North American refining, which continued to benefit from the recovery in foodservice and increased demand from the renewable diesel sector. Higher margins in Europe, largely driven by favorable product mix, also contributed to the improved performance. Results in South America and Asia were slightly higher than last year. In milling, lower results in the quarter were driven by Brazil, where higher volume and lower unit costs were more than offset by lower margins. Results in North America were comparable with last year. The increase in corporate expenses during the quarter was primarily related to performance-based compensation accruals. The gain in other was primarily related to our Bunge Ventures investment in Benson Hill, which went public during the quarter. Improved results for our non-core sugar and bio-energy joint venture were primarily driven by higher prices and sales volumes of ethanol and sugar. For the quarter, GAAP basis income tax expense was $92 million compared to $38 million for the prior year. The increase in income tax expense was due to higher pre-tax income. Net interest expense of $38 million was below last year, resulting from higher interest income related to the resolution of a historical value-added tax matter. Let us turn to Slide 6. Here you can see our continued positive EPS and EBIT trend adjusted for notable items and timing differences over the past four fiscal years, along with the most recent trailing 12-month period. This is an exceptional performance, and I echo Greg’s appreciation of the amazing execution by our global team. Slide 7 compares our year-to-date SG&A to the prior year. We achieved underlying addressable SG&A savings of $25 million, of which approximately 75 percent was related to indirect costs. Looking ahead, we are monitoring cost inflation globally and we will be working hard to offset this impact where we can while still making the necessary investments in our people, processes and technology. Moving to Slide 8, for the most recent trailing 12-month period, our cash generation, excluding notable items and mark-to-market timing differences, was strong with approximately $1.9 billion of adjusted funds from operations. This cash flow generation was well in excess of our cash obligations over the past 12 months, allowing us to continue to strengthen our balance sheet. Turning to Slide 9, during the quarter, we received two credit rating upgrades. Moody’s raised us to Baa2 and Fitch upgraded us to BBB, both with stable outlooks. This now puts us at our target rating of BBB and Baa2 with all three rating agencies. The chart on this slide details our year-to-date capital allocation of adjusted funds from operations. After allocating $137 million to sustaining CapEx, which includes maintenance, environmental, health and safety, and $25 million to preferred dividends, we had approximately $1.1 billion of discretionary cash flow available. Of this amount, we paid $215 million in common dividends, invested $102 million in growth and productivity CapEx, and repurchased $100 million of common shares, leaving approximately $725 million of retained cash flow. Our pace of CapEx spend this quarter was below our expectations due to supply chain-related delays, which we do not see improving by year end. As a result, we are reducing our 2021 CapEx forecast by about $100 million and we will be rolling over these projects into next year. In addition, we have a nice pipeline of growth and productivity investments that are under consideration, which will likely lead to a higher than baseline spend for the next couple of years. We will provide more details on our outlook during our Q4 earnings call in February. The $100 million of share repurchases in the quarter completed our $500 million authorization. As Greg mentioned earlier, Bunge’s Board has authorized a new $500 million program. Earlier this year, we increased our quarterly common dividend by 5 percent. In May of next year, we will again review our dividend with consideration for the recent increase in our earnings baseline from $5 to $7 per share and the success in strengthening our balance sheet. As we have been demonstrating, we will continue to take a balanced and disciplined approach to capital allocation. As you can see on Slide 10, by quarter end, readily marketable inventories exceeded our net debt by approximately $1.1 billion, a significant change from a year ago. Please turn to Slide 11. For the trailing 12 months, adjusted ROIC was 19.4 percent, 12.8 percentage points over our RMI adjusted weighted average cost of capital of 6.6 percent. ROIC was 13.7 percent, 7.7 percentage points over our weighted average cost of capital of 6 percent and well above our previously stated target of 9 percent. The spread between these metrics reflects how we use RMI and our operations as a tool to generate incremental profit. Moving to Slide 12, for the trailing 12 months, we produced discretionary cash flow of approximately $1.6 billion and a cash flow yield of 21.6 percent. The decline in cash flow yield from the prior year reflects a growth in book equity of the company. Please turn to Slide 13 and our 2021 outlook. As Greg mentioned in his remarks, taking into account our strong third quarter results and favorable market trends, we have increased our full year adjusted EPS from $8.50 to $11.50. Our outlook is based on the following expectations. In Agribusiness, results are expected to be up from our previous outlook and now forecasted to be higher than last year. In Refined & Specialty Oils, results are expected to be up from our previous outlook and well above last year. We continue to expect results in milling to be generally in line with last year. Excluding Bunge Ventures, corporate and other is expected to be lower than last year driven by higher performance-based compensation, a portion of which was historically allocated to the segments. Additionally, the company now expects the following for 2021: an adjusted annual effective tax rate in the range of 15 percent to 17 percent; net interest expense in the range of $200 million to $210 million; capital expenditures in the range of $350 million to $400 million; and depreciation and amortization of approximately $420 million. In non-core, full year results in the Sugar & Bioenergy joint venture are now expected to be up considerably from the prior year. With that, I will turn things back over to Greg for some closing comments.

Greg Heckman, Chief Executive Officer

Thanks, John. Before opening the call to Q&A, I want to offer a few closing thoughts. As John and I noted, we expect a strong close to 2021 driven by Agribusiness and Refined & Specialty Oils. Looking ahead, we expect favorable market conditions to continue and we are confident in our ability to capture the upside from opportunities while minimizing the downside. Based on what we can see right now, we would expect EPS to be well above our baseline for the next couple of years, driven by higher than baseline assumptions for Refined & Specialty Oils and softseed crushing. We will continue to deploy cash we generate to create value by investing in growth projects with strong returns and returning capital to shareholders. In closing, we are very pleased with our team’s strong performance and our revised outlook. In today’s environment, we are right where we need to be, a key participant in the global food and agricultural network. We are excited about our role in the accelerating shift in demand for sustainable food, feed and fuel and the growth we have ahead of us. We will now open the line for your questions.

Operator, Operator

We will now begin the question-and-answer session. Operator Instructions: Our first question today comes from Ben Theurer with Barclays. Please go ahead.

Ben Theurer, Analyst, Barclays

Thank you very much and good morning, Greg, John. Congratulations on the very strong results and thanks for beating and raising again the guidance.

Greg Heckman, Chief Executive Officer

Thanks, Ben.

Ben Theurer, Analyst, Barclays

Well done. Now, in light of your closing remarks, a question related to that. You basically said that you think you are going to be able to be above baseline for the next couple of years. I think the importance here lies on multiple years. What is driving that sustainable lasting better environment versus what you saw when you first put out your expectation last summer? You did not raise it this summer. What has changed since then within the underlying fundamentals to really put you in that situation that you now can say that you expect it to last above that level for the next couple of years? With that cash flow you are all generating, do you think you can accelerate some of the investments? I appreciate that you also think of shareholders, returning them cash. What opportunities do you see in the market? Where do you still want to invest to maybe be in a position to further increase what you just did to the baseline EPS?

Greg Heckman, Chief Executive Officer

A lot there, Ben. Let me start by reminding you that the baseline was an earnings framework. When we first put it out early in the turnaround and we were at the front end of COVID, we did not have full visibility into how the environment was improving or how our new operating model was performing. Once we had a better understanding of these factors, we updated that framework. The framework looks at average margins on soy crush, soft crush and our specialty and edible oils business. What we see coming in the next couple of years includes a continued focus and the talent of this team to operate strongly. We see stronger demand from refined fuel and a lack of capital that has been invested in this industry. We expect the Refined & Specialty Oils run rate we saw in Q3, driven by demand from foodservice and refining, to carry through 2022. We think roughly $150 million a quarter is a reasonable run rate, perhaps a little less or a little more each quarter, but a good ratable for 2022. That will be above the baseline earnings. Continued demand for renewable diesel and refined fuels overall provides continued support for softseed crushing as well. We expect those to be above baseline as well. Regarding growth, as the transformation is done and resources are turned to growth, we will continue organic initiatives, including numerous debottlenecking projects already underway. We will let the numbers drive investment decisions. We have a balance sheet where it needs to be and have demonstrated execution, which gives us the right to grow. We continue to grow our leading global crushing business and the origination and distribution that support it, along with other grain processing businesses to serve producers. Our specialty and refined oils business is performing very well and we are looking at organic growth and bolt-on acquisitions. The trend in plant proteins is in the sweet spot to support growth in our plant lipids business and our developing plant protein business, which will be a multiyear build. In renewable fuels, renewable diesel and sustainable aviation fuel, the opportunities are growing. There are many levers to pull for growth, and we will be thoughtful and let the numbers drive our decisions.

John Neppl, Chief Financial Officer

Ben, as you pointed out, the $7 baseline is based on the company footprint at the time we put it together. We will update that framework periodically as material things change. As Greg said, as we grow and invest in good projects and the landscape changes, we will update the baseline when it is appropriate.

Ben Theurer, Analyst, Barclays

Okay, perfect. I will leave it here. Thanks again and congrats.

Greg Heckman, Chief Executive Officer

Thank you.

Operator, Operator

Our next question comes from Luke Washer with Bank of America. Please go ahead.

Luke Washer, Analyst, Bank of America

Hi, good morning and congratulations on good results. It is obviously a great quarter and you raised the full year guide from $8.50 to $11.50. The implied guide for the fourth quarter is closer to $2, which is much lower than the third quarter and lower than fourth quarter of last year. I know this is a floor, but as we think about the fourth quarter, you have crush margins that are good and elevation margins that are good. The outlook looks very strong. Is there anything in the fourth quarter that would temper your expectations? How is the visibility looking in the fourth quarter?

Greg Heckman, Chief Executive Officer

Part of it is timing. Part of the performance in Q3 was the timing of what we had open on crush. People were not extended as far into the curve. When crush margins rallied, we benefited in Q3 but we were also hedging Q4 as people extended out on the curve. We caught part of the last move, but not all of it because we had hedges into Q4. We like the momentum and where that is carrying into Q1, and we can see that. That is why we feel good about getting off to a very good start in 2022.

Luke Washer, Analyst, Bank of America

Great. As you think about the baseline, I know you set the new baseline of $7 only a quarter ago, but it feels like Q3 beat your expectations. Is there any change in the way that you are looking at the outlook structurally, whether it is part of your business or the industry more broadly? Or is it pretty much the same as when you set that baseline?

Greg Heckman, Chief Executive Officer

The framework we use is the same. What has changed is continued strength from the recovery of foodservice supporting Refined & Specialty Oils and continued demand being added from the renewable diesel sector. We also see what it will take in multi years to build the supply needed. Refined & Specialty Oils is expected to outperform the baseline and softseed crush is also expected to outperform because the framework is built around averages. Internally, we have the confidence in the team to continue to execute amid labor, wages and energy inflation and other COVID related challenges. We have had consistent execution with eight straight quarters of improved results, which supports our confidence.

John Neppl, Chief Financial Officer

Luke, it is important to remember the $7 was never intended to be a forecast or the earnings power in any given environment. It was based on an average or mid-cycle margin structure. Today, we are performing substantially above that because many of the assumptions in that model are being exceeded. As we have opportunities to invest excess cash flow, we hope to update that model to a higher number over time.

Luke Washer, Analyst, Bank of America

Sounds good. Maybe I can sneak in one more on your investment in Benson Hill. What is your relationship with Benson Hill? Do you plan to get involved? Are you working together? How is that relationship?

Greg Heckman, Chief Executive Officer

Our Bunge Ventures investments are an innovation and knowledge platform. We make investments in companies that could enhance our relationships with customers, lower costs, or provide new technology. Some portfolio companies we do business with when it makes sense; some are pure investments. We do some business with Benson Hill, consistent with the approach of Bunge Ventures.

Luke Washer, Analyst, Bank of America

Sounds good. Thank you.

Operator, Operator

Our next question comes from Tom Simonitsch with JPMorgan. Please go ahead.

Tom Simonitsch, Analyst, JPMorgan

Thank you. Good morning, everyone. Firstly, a clarification: when you say $150 million per quarter is a fair run rate for Refined & Specialty Oils next year, can you clarify how that compares to your baseline?

John Neppl, Chief Financial Officer

I do not have the exact number for the baseline in front of me, but it is considerably above what we had in the $7 baseline, driven by refining margins in that business. When we assumed it on the baseline, it might have been closer to $100 million a quarter. You are likely looking at at least a couple hundred million difference between the $7 baseline and where we are today.

Tom Simonitsch, Analyst, JPMorgan

That is very helpful. Could you provide more color around what you are seeing in your milling business? What needs to happen for that segment to grow beyond this year?

Greg Heckman, Chief Executive Officer

We continue to make investments in our corn milling business in the U.S. and in South America. We started another mill last year and continue to invest. Growth depends on working with customers where we have the connection to our supply chain network and crossover with specialty and refined oils customers. We will leverage our strengths and scale to be relevant to customers and win long-term.

Tom Simonitsch, Analyst, JPMorgan

Thank you. I will pass it on.

Greg Heckman, Chief Executive Officer

Thank you.

Operator, Operator

Our next question comes from Adam Samuelson with Goldman Sachs. Please go ahead.

Adam Samuelson, Analyst, Goldman Sachs

Yes, thanks. Good morning, everyone. Maybe following up on Tom’s question and thinking about the discrete areas where you are seeing upside to that baseline framework, you called out the softseed side and soy crush. Back in July the baseline assumption was about $50 a ton of gross margin on softseed on roughly 10 million tons. How have you framed the upside to that from the market environment looking forward?

Greg Heckman, Chief Executive Officer

We focused the refined business separately because it is more ratable and is the big moving number for 2022. Momentum is good in Q1 for both soft and soy and we can see that. We have less visibility for the rest of the year. When we look at softseed supply and demand, we expect it to perform above baseline, but we did not quantify it specifically in the call. We are comfortable it will contribute above baseline.

Adam Samuelson, Analyst, Goldman Sachs

On the distinction between softseed and soy crush versus protein demand, is there more concern about protein demand that would lead you to be incrementally constructive on soybean pressure? Or is it simply lack of visibility beyond the first quarter?

Greg Heckman, Chief Executive Officer

It is primarily lack of visibility. We are fairly constructive entering Q1 and will see how crops and weather develop later in the year. It appears we may build some stocks in oilseeds in the second half, which should be healthy for the environment, but much depends on crop development and weather.

Adam Samuelson, Analyst, Goldman Sachs

Given inflation across the environment, you handled it well in Q3. How should we think about rises in energy prices, logistics and labor, particularly energy and Europe given recent issues there?

Greg Heckman, Chief Executive Officer

We think about energy as another input cost, like oilseeds. It is part of risk management for our assets. Energy costs typically factor into crush margins and get passed along, but depending on the region it may take longer to pass them through. Our global footprint allows us to adjust runs: if margins get squeezed in one region due to energy, we can pull back crush there and run harder in another region. That flexibility is an advantage of our global network.

John Neppl, Chief Financial Officer

On wages, like others we face wage inflation globally. If we can maintain a position as a low-cost producer while others struggle, we should come out on top. Availability of labor is a primary concern. We will manage this as effectively as possible and continue to focus on being a low-cost operator.

Adam Samuelson, Analyst, Goldman Sachs

Okay. The color is very helpful. I will pass it on. Thanks.

Operator, Operator

Our next question will come from Vincent Andrews with Morgan Stanley. Please go ahead.

Vincent Andrews, Analyst, Morgan Stanley

Thank you. Let me reiterate congratulations on the quarter and results. Has anything changed about your risk parameters since you came in? After a couple of years and eight great quarters in a row and a better operating environment, are you taking bigger swings at anything? Or is the philosophy unchanged?

Greg Heckman, Chief Executive Officer

Our philosophy has not changed. We manage risk appropriate to the company’s earnings power and the environment. Risk and commercial teams work together to assess dynamic environments and earnings at risk in forward positions. Earnings are at risk until we can book the oilseeds and energy and sell the oil and meal in our crushing, or hedge inputs and outputs in our grain processing or distribution assets. What has changed is that we are operating as One Bunge and using our information as a single company to execute better for customers. We use our global network to flex in times of dislocation and regionalization. There is a lot of embedded optionality in tens of thousands of customers and millions of tons of physical flows and liquidity to manage risk for ourselves and our customers when we act as a single global company and run the business in a disciplined way.

Vincent Andrews, Analyst, Morgan Stanley

You mentioned South America planning and possibly building oilseed stocks. If Brazil and Argentina have a very large crop, how could next year play out in that scenario? Would margins remain strong enough for you to be above the $7 figure?

Greg Heckman, Chief Executive Officer

Bean planting in Brazil is off to a strong start. Estimates indicate potentially larger soy crops in the U.S., Argentina and Brazil. In the current strong demand environment, palm has supply issues and global oils remain strong due to renewable diesel and refined fuels demand. We expect some growth in meal demand next year as well. While crops and weather must cooperate, net-net the environment feels positive, which supports our view we can be above the earnings framework for the next couple of years.

Vincent Andrews, Analyst, Morgan Stanley

So even if crops are large, you believe margins and market dislocations could still leave you above the $7 baseline?

Greg Heckman, Chief Executive Officer

Absolutely.

Vincent Andrews, Analyst, Morgan Stanley

Okay. Thanks very much.

Greg Heckman, Chief Executive Officer

Thank you.

John Neppl, Chief Financial Officer

Thanks, Vincent.

Operator, Operator

Our next question will come from Ben Bienvenu with Stephens. Please go ahead.

Ben Bienvenu, Analyst, Stephens

Hi, thanks. Good morning everybody. I want to revisit the discussion around capital allocation. Have you considered raising your ROIC goals? You have steadily raised the baseline earnings power framework. Considering the progress you have made at Bunge over the last two years and the underlying earnings power, does it make sense to raise that ROIC threshold? When you look at the pipeline of opportunities, organic or inorganic, is there a robust set of opportunities that exceed that ROIC threshold?

Greg Heckman, Chief Executive Officer

Our teams are always driving to get the best return possible and to compete for working capital based on return on invested capital and AROIC. We used the ROIC threshold as part of communicating to investors, but internally we continually compete and prioritize higher returning opportunities. We are always focused on improving returns and reallocating capital from lower returning activities to higher returning opportunities.

John Neppl, Chief Financial Officer

Ben, with where we are in ROIC and adjusted ROIC metrics, we feel like we are at a different plateau today. We have a good pipeline of opportunities and momentum in the business. Our goal will be to raise the previously stated 9 percent target to something higher. As we plan for next year and assess what we can do, we will come back with an updated target.

Ben Bienvenu, Analyst, Stephens

Okay, that is great. Second, the sugar and bioenergy business is non-core but performing considerably better than recent years. I assume that reflects higher sugar and ethanol prices and favorable currencies. Has that changed your view of the business in your portfolio, and what is the appetite in the market for strategic options with that business?

Greg Heckman, Chief Executive Officer

It has not changed our long-term view. Our plan remains to exit the business. We are happy with its current performance, which makes it easier to hold until we find the right buyer. We are actively in that process, and we want to balance speed with value. The business is worth more today than one to two years ago, and we are optimistic about getting something done.

Ben Bienvenu, Analyst, Stephens

Okay, great. Thanks and best of luck.

Greg Heckman, Chief Executive Officer

Thank you.

Operator, Operator

Our next question comes from Rob Moskow with Credit Suisse. Please go ahead.

Rob Moskow, Analyst, Credit Suisse

Hi. I have some macro questions. Do you do any work internally to figure out how far along China is in rebuilding its pig herd after African swine fever and how that is influencing their exports or imports of soy? Also, with energy costs as high as they are, would that result in more crop rotation into soy away from corn next year, and if so, does that make a difference to you?

Greg Heckman, Chief Executive Officer

On China, we have seen they are in the late stages of rebuilding the herd and margins have come down. There has been some herd reduction where they built too fast and outpaced demand. We have not seen any major new impacts from African swine fever. It will affect meat imports and exports and we continue to monitor developments. Regarding energy, higher energy prices are supportive for renewable fuels demand. We expect higher crude and energy prices for a period as the energy transition proceeds, which should be net friendly to demand for renewable feedstocks. On acres, markets are signaling oilseed economics, but the fight for acres includes wheat and other oilseeds. That has not fully played out and will be interesting to monitor as markets send signals and investment decisions follow.

Rob Moskow, Analyst, Credit Suisse

One more: have you tracked global soy crush capacity? You are not the only one increasing capacity for renewable fuels. What has happened to global crush capacity so far this year?

Greg Heckman, Chief Executive Officer

We track announced projects and actual build-outs. Historically, we noted the industry needed additional crush capacity. There have been disruptive factors like energy curtailments that affect run rates. Argentina ran harder in the first half of the year, margins stayed good globally, then Argentina ran less in Q3 and global margins rebounded. Announced projects are tracked, but actual built capacity may differ, and it takes two to three years for greenfield projects to influence global capacity. We will be thoughtful about where we expand; the expansions we announced will be on the water, enabling us to serve both domestic and export markets. As energy transitions over the next 10 to 15 years, we plan long-lived, low-cost assets for the long term.

John Neppl, Chief Financial Officer

Rob, one more point on the Chevron joint venture: other joint ventures announced are often greenfield builds that take several years. Because we are contributing two existing plants to the JV with Chevron, we will be up and running immediately. We are excited about that and the potential for quicker execution.

Rob Moskow, Analyst, Credit Suisse

Great. Thanks for the color.

Greg Heckman, Chief Executive Officer

Thank you.

Operator, Operator

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

Ken Zaslow, Analyst, Bank of Montreal

Hey, good morning. When I think about refined oil, it seems like both you and a competitor have done joint ventures with refiners. It almost seems like pretreatment may not be coming quickly for all this renewable diesel, so refined oil margins may stay longer than expected. How are you thinking about the duration of those refined oil margins?

Greg Heckman, Chief Executive Officer

We feel comfortable calling Refined & Specialty Oils performance through 2022 above our baseline. The industry will make decisions on pretreatment economics and where pretreatment is best built—at refiners, renewable diesel facilities, or elsewhere to gather low carbon intensity feedstocks. The situation is developing quickly, and our Chevron JV is unique in leveraging both companies' strengths. That relationship allows us to analyze economics and feedstock management jointly and to pursue long-term opportunities. We think this JV is a powerful platform.

Ken Zaslow, Analyst, Bank of Montreal

Is it fair to say a slowdown in pretreatment creation should extend refined oil margins for longer?

Greg Heckman, Chief Executive Officer

Yes, absolutely. It is a direct trade-off with refining capacity versus oilseed crushing industry capacity.

Ken Zaslow, Analyst, Bank of Montreal

On cash deployment, you have many projects in the pipeline for 2022 and beyond. How much cash do you think you can deploy over the next couple of years for internal projects, and how quickly do you want to deploy cash for external opportunities?

John Neppl, Chief Financial Officer

Ken, historically our baseline CapEx was roughly $400 million to $450 million. Over the last two years, we have underspent by about $200 million cumulatively due to delays. Assuming supply chains improve next year and we can get equipment and labor, we could see $600 million to $700 million in CapEx over the next couple of years. A lot of that is projects in the pipeline that we are analyzing; not all will be executed. It includes debottlenecking, a few greenfields, and announced multi-year projects. We will always evaluate M&A opportunities as well. We feel more confident today to be an industry consolidator if the right opportunities arise given our track record.

Ken Zaslow, Analyst, Bank of Montreal

Great. I appreciate it. Thank you.

Greg Heckman, Chief Executive Officer

Thank you.

Operator, Operator

Ladies and gentlemen, this concludes our question-and-answer session. I would like to turn the conference back over to Greg Heckman for any closing remarks.

Greg Heckman, Chief Executive Officer

Thanks again for joining us today, and thanks for your interest in Bunge. I want to thank the team again for continued incredible execution in what continues to be a very dynamic environment; it continues to demonstrate the strength of Bunge. We look forward to speaking with you again soon. Everyone, have a great day.

Operator, Operator

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