2 safe harbor statement - adm · 2019-10-09 · 2 safe harbor statement some of our statements...
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2
Safe Harbor Statement
Some of our statements constitute forward-looking statements that reflect
management’s current views and estimates of future economic
circumstances, industry conditions, Company performance and financial
results.
These statements are based on many assumptions and factors that are
subject to risk and uncertainties. ADM has provided additional information
in its reports on file with the SEC concerning assumptions and factors that
could cause actual results to differ materially from those in this
presentation, and you should carefully review the assumptions and factors
in our SEC reports.
To the extent permitted under applicable law, ADM assumes no obligation to
update any forward-looking statements as a result of new information or
future events.
3
Origination Oilseeds Carbohydrate
Solutions
Nutrition
44
Our Key Beliefs and Our Noble Purpose
OUR
BELIEFS
Everyone has the right to the food
they need to sustain their lives
Food derived from nature
is an important driver
of health & wellness
Access to nutrition has
the power to solve many
of the world’s challenges
We unlock the
power of nature
to enrich the
quality of life
OUR
PURPOSE
5
ADM: What We Do—Simply Explained
SpecialtiesOrigination
Origination
Origination of
Crops
For Internal Use
For External Sale
Transportation
Processing
Oilseeds
Carbohydrate
Solutions
Meal
Oil
Other Oilseed
Products
Starches &
Sweeteners
Wheat
Milling
Fuel
Other Corn
Products
Nutrition
Wild Flavors &
Specialty
Ingredients
Export &
Deliver to
Customer
Regional
Sales
Export to
Port
Customers &
End Users
Animal Nutrition
6
CY18 Adjusted Segment Operating Profit
$3.4 Billion1
28%
44%
2%
Other
Oilseeds
10%
Nutrition
Ag Services
Corn
Processing
43%
28%
Other
FY04 Adjusted Segment Operating Profit
$1.6 Billion1
Oilseeds
Processing
23%
ADM: Profitable and Evolving Growth and Mix
Key Financial Statistics
CY18 revenue: $64B Facilities: 750+ Market cap (12/31/2018): ~$23B NYSE: ADM
32%
40%Origination
1Non-GAAP measure - see appendix
16%
Carbohydrate
Solutions
7
Portfolio Actions Since 20147
88
Advancing Growth and Driving Returns
Business
Turnarounds
Harvesting Growth
Investments
Poised to Capitalize on Significant Market Opportunities
for Earnings and Returns Growth in 2020 and Beyond
99
Q2 2019 Accomplishments
• Announced Ag Services &
Oilseeds BU; centralized
Milling teams
• Realigned manufacturing
operations
• Expanded Centers of
Excellence
• Completed significant
global organizational
changes, including early
retirement
• Exchanged Midwest
elevators with Cargill
• Positive results from
peanut and tree nut
business turnaround
efforts
• Completed Ziegler
acquisition
• Cut ribbon at Beijing flavor
center
• Customer solutions:
◦ BIOSIPEC shrimp
production system
◦ New line of vegan
omega-3 blends
◦ Significant presence in
plant-based protein
market
101010
Readiness: On Track to Deliver $250-300M in Benefits in 2019
Targets
$1.2BRun Rate Savings
by end of 2020
275
$250-300MAccrued Benefits by
end of 2019$130M
$500M
650Prioritized
Initiatives
11
Origination:ADM is the Premier Global Origination Company
• Merchandising and
Handling
• Transportation
12
0
400
800
CY14 CY15 CY16 CY17 CY18
404
712
452
$ M
illio
n
Merchandising & Handling Transportation
Origination Operating Profit
Efficiently buy, store, clean and transport agricultural commodities
Prior periods have been restated to conform to current year presentation. See Appendix
Origination Adjusted Operating Profit
362
546
1313
ADM is the Premier Global Origination Company
Note: Origination Assets in South America are reported within the Oilseeds segment.
14
Origination: Grain & Transportation Sources of Profitability
Physical Grain Assets
Physical Grain Assets
• Operating Expertise
• Elevation Capacity
• Volume
• Discounts
• Carry Charges
• Blending/Drying/Storage
• Connection to Farmers
Intellectual Capital
• Risk Management
• Market Intelligence
• Arbitrage—Grain & Freight
• Spreads/Options
• Diversified Product Portfolio
• Value Added Services
Transportation
• Operating Efficiency
• Centralized Negotiations
• Trade Knowledge/Relationships
• Round Trip Optimization
• Competitive Advantage
• 3rd Party Logistics
• Inland Port/Intermodal Ramp
• Multi-modal Flexibility
15
Transportation: Core Competency & Competitive Advantage
Technology
Leverage
Fleet Optimization
Asset Utilization
Efficiency
28,000 Railcars
1,400 Semi Trailers 2,300 Barges
10 Owned Bulk Carriers
150 on Time Charters
Ship 160,000 (teu) ocean containers annually
16
Origination: Growing Destination Marketing & Distribution
From Origin to Port
Domestic
Origination
River
Logistics
Strategic
Grain Export
Assets
Destination
Ports
Destination
Distribution
Ocean
Freight
17
Oilseeds:World’s Most Diversified Oilseeds Business
• ~60 Different Products
• Meal
• Oil
• Other
• Processing Assets in
16 Countries
• Wilmar Equity
Investment-current
ownership of 24.9%
18
Geographic Reach, Broad Range of Feedstocks Make Ours the
World’s Most Diversified Oilseeds Business
Crush – Refinery
Biodiesel
Elevator
Port
Packaging
Value Added
Golden Peanut
Golden Peanut Buying Point
Sales Office
Wilmar
Soybean Canola/Rapeseed Sunflower Flax Cottonseed PalmPeanut
19
ADM Oilseeds at a Glance
• We originate, transport, merchandise,
crush, and further process soybeans,
softseeds and other oilseeds
• Meals and oils used in food, animal feeds,
renewable fuels, industrial products
• 120+ production facilities
• 170+ procurement facilities w/storage
capacity of ~4.1 million MTs
• Processing capacity: 150,000+ MTs/day
• Employees: ~10,000Czernin, Poland, crush complex
20
-100
700
1,500
CY14 CY15 CY16 CY17 CY18
1,2861,3181,474
$ M
illio
n
Crushing & Origination Refining, Packaging, Biodiesel & OtherAsia Cocoa & Other
Oilseeds Processing Adjusted Operating Profit
Most diverse business from a product and geographic standpoint
Oilseeds Operating Profit
Prior periods have been restated to conform to current year presentation. See Appendix
825873
21
Key Competitive Advantages
Global Footprint
• Scale
• Strategic presence in key regions
• Investing to grow globally
Diversification
• Geographic footprint
• Maximizing margins with switch plants
• Product mix
Operations
• Integrated facilities
• Global transport/logistics network provides significant efficiencies
• Experienced team
Risk-Management Focus
• Centralized hedge-desk operations
• Global market intelligence
Barcarena, Brazil
22
Carbohydrate Solutions:World’s Largest Corn Processor
• ~30 Different Products
• 14 corn and 41 wheat
processing plants globally
• 40 feed and premix facilities
globally
• Grind capacity of ~2.9 million
bushels per day
• Wheat processing capacity of
~800,000 bushes per day
23
0
500
1,000
1,500
CY14 CY15 CY16 CY17 CY18
Sweeteners & Starches Bioproducts
1,326
807
1,078
Carbohydrate Solutions Operating Profit
Carbohydrate Solutions Adjusted Operating Profit
Accelerating diversification of products and global footprint
$ M
illio
n
Prior periods have been restated to conform to current year presentation. See Appendix
981 945
2424
Carbohydrate Solutions: Expanding Global
Footprint and Feedstock Portfolio
Corn Processing Plant
Other Processing Plant
Sweetener Terminal
Ethanol Terminal
Export Flow
• 14 corn and 41 wheat processing plants in 8 countries
• 3 of 5 largest corn mills in the world
• Daily corn grind capacity of ~2.9 million bushels
Wheat Mill
25
Carbohydrate Solutions: Footprint is Strategically
Positioned for Efficient Origination and Distribution
Corn Belt
Corn Processing Plant
Sweetener Terminal
Ethanol Terminal
ADM Export Facility
Wheat Mill
ADM Elevator
26
Nutrition:World-Class Specialty Ingredient Business
• Industry’s Broadest Portfolio of On-Trend
Ingredients Addressing:
– Nutrition
– Function
– Texture
– Taste
• Specialty Ingredients Market = $50B
– $30B Ingredients
– $20B Flavors
– Market Growing 5-6%
• Animal Nutrition Market = $700B
– Market Growing 3%
27
Nutrition: A Premier Specialty Ingredients Provider With Global
Reach
28
Nutrition: Industry’s Broadest Portfolio of On-Trend Natural Ingredients
Specialty
Proteins
Hydrocolloids
Colors
Emulsifiers
Nuts, Seeds, &
Ancient Grains
Edible Beans
& PeasNutritional
Supplements
Flavors & Extracts
Fiber
Polyols
Ingredient
Systems
Addressing nutrition, function, texture and taste
Mint
2929
Nutrition: Creating Ingredient Solutions for our Global Customers
ADM Specialty Ingredients R&D
WILD Center of Excellence
WILD Product Dev & App
R&D and Applications (30+)
ADM Specialty Ingredients
WILD Flavors
Processing (30+)
ADM Specialty Ingredients
WILD Flavors
Sales Locations (50+)
303030
Ingredient Systems: A Key Differentiator
313140
Nutrition Serves as an Extension of Customer Resources
32
CY14 CY15 CY16 CY17 CY18
Oilseeds Carbohydrate Solutions Origination Nutrition Other
32
Adjusted Consolidated Segment Operating Profit
Prior periods have been restated to conform to current year presentation. See Appendix
$ B
illi
on 2.7
2.9
3.7
2.6
3.4
3333
$1.65
$2.97
$1.50
$2.00
$2.50
$3.00
$3.50
$4.00
FY06 FY07 FY08 FY09 FY10 FY11 CY12 CY13 CY14 CY15 CY16 CY17 CY18
2-Year Moving Average EPS (adj)
Earnings and EPS net of specified items (including LIFO)
In January 2013, ADM converted to a calendar year ending fiscal year. CY12 represents 12-months ending December 31, 2012. Prior FY’s represent 12-months ending June 30th
Earnings Trend History
3434
ROIC versus WACC
LT ROIC Objective: 10%
(1) Non-GAAP measure - see notes on page 25(2) Adjusted for LIFO and specified items - see notes on page 25(3) Adjusted for LIFO - see notes on page 25
Q2 CY19
Trailing 4Q Average Adjusted ROIC(1)(2) 6.9%
Annual WACC 6.75%
Trailing 4Q Average Adjusted EVA $42M
Long-Term WACC 7.0%
Trailing 4Q Average ROIC (1)(3) 5.9%
3535
$1.9
$1.6
$1.2 $1.2
$0.9 $0.9
$1.1
$0.9$1.0
$0.8
FY09 FY10 FY11 CY12 CY13 CY14 CY15 CY16 CY17 CY18
$B
illi
on
sCapEx Discipline-Reducing CapEx to align with D&A
3636
$0.60$0.66 $0.70
$0.76
$0.96
$1.12$1.20
$1.28$1.34
$1.40
CY10 CY11 CY12 CY13 CY14 CY15 CY16 CY17 CY18 CY19
Annual Dividends per Share
(1H Annualized)
Steadily Increasing Dividends
37
Dividend Payout Range Increased with Focus on More Stable Earnings and Cash Flows
Dividend Payout Ratios Ranges
20%-30%
Historical Range30%-40%
Medium-Term Range
38
31%
0%
25%
50%
Q1 2011 Q2 2019
Net Debt/Total Capital
38
Net debt is calculated as short-term debt plus long-term debt, including
current maturities less cash and cash equivalents and short-term marketable
securities. Total capital excludes cash from L/T debt
6.7
0.0
5.0
10.0
15.0
20.0
Q1 2011 Q2 2019
Available Liquidity ($Billions)
Total Liquidity with RMI Liquidity Available
Liquidity available includes commercial paper and other
sources of available credit capacity
Balance Sheet Strength-Solid Investment Grade
39
Appendix
40
Summary of Specified Items Excluded in Adjusted Earnings¹
(1) Non-GAAP measure – see appendix
FY01 FY02 FY03 FY04 FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY12 CY12 CY13 CY14 CY15 CY16 CY17 CY18
Earnings as Reported 383 511 451 495 1,044 1,312 2,154 1,780 1,684 1,930 2,036 1,223 1,375 1,342 2,248 1,849 1,279 1.595 1,810
Specified Items:
LIFO Credit/(Charge) (1) (9) (74) 71 7 (129) (354) 322 26 (229) 6 2 140 152 1 12 (1) (14)
FX gain/(loss) (25) (63)
Acquisition-related items (164) 6Gains on Sales of Assets/Revaluations 132 24 89 456 (92) 10 (13)
Impairments, restructurings, and settlements 77 144 226
OPEB Adjustment (24)Discrete Tax Adjustments (15) 60 24 )
FCPA charge (37)
Start-up Costs (68) (59) 0
Debt Buyback/Exchange Costs (47) (9) (7) (118) 7
Golden Peanut Gain 44 0
Gruma Bank Disposal 49 0
Gain/(Loss) on Interest Rate Swaps (37) 19 0
Asset impairment and exit costs (274) (161) (88) (67) (172)
Valuation allowance (82)
Bioblenders' credit 55 0
Interest exp adj related to If-
converted method (13)
Tax on remeasurement (FY change) (14) (61)
Pension settlement (44)
Gain on GrainCorp 49
Tax adjustment 0 0 (366) (33)
Wilmar Tax (158)
Gruma Derivatives (171)
Wimar Restructure 286
Tyson/OSG shares 225
T& L Shares 119
Vitamin Settlement 91 17
Kalama Gain 97
CIP Gain 59
HFCS Litigation (252)
Repatriation Tax
Total Specified Items 59 90 8 (326) 190 7 514 (354) (7) (126) (198) (275) (144) (201) 132 227 3 (206) 172
Earnings Excluding Specified Items 324 421 443 821 854 1,305 1,640 2,134 1,691 2,056 2,234 1,498 1,519 1,543 2,116 1,622 1,276 1,389 1,982
EPS Adjusted for Specified Items 0.49 0.64 0.68 1.26 1.30 1.99 2.50 3.30 2.63 3.19 3.45 2.25 2.29 2.33 3.23 2.61 2.16 2.43 3.50
4141
Segment OP and Adjusted OP (a non-GAAP measure) Comparatives Introducing New SegmentsQtr. Ended Qtr. Ended Qtr. Ended Qtr. Ended Year Ended
Mar. 31, 2018 Jun. 30, 2018 Sep. 30, 2018 Dec. 31, 2018 Dec. 31, 2018
As Pro As Pro As Pro As Pro As Pro As Pro
Reported Forma Reported Forma Reported Forma Reported Forma Reported Forma Reported Forma
(Amounts in millions)
Segment Operating Profit(1) Segment Operating Profit(1) $ 704 $ 704 $ 902 $ 902 $ 881 $ 881 $ 786 $ 786 $ 3,273 $ 3,273
Specified items: Specified items:
(Gains) losses on sales of assets/businesses (Gains) losses on sales of assets/businesses — — — — (21) (21) 8 8 (13) (13)
Impairment, restructuring, and settlement charges
Impairment, restructuring, and settlement charges 13 13 22 22 1 1 66 66 102 102
Adjusted Segment Operating Profit(1)(2) Adjusted Segment Operating Profit(1)(2) $ 717 $ 717 $ 924 $ 924 $ 861 $ 861 $ 860 $ 860 $ 3,362 $ 3,362
Origination $ 46 $ — $ 191 $ — $ 131 $ — $ 184 $ — $ 552 $ —
Merchandising and handing 43 — 160 — 95 — 150 — 448 —
Transportation 3 — 31 — 36 — 34 — 104 —
Oilseeds $ 349 $ — $ 341 $ — $ 347 $ — $ 431 $ — $ 1,468 $ —
Crushing and origination 60 — 195 — 217 — 255 — 727 —
Refining, packaging, biodiesel, and other 180 — 94 — 50 — 74 — 398 —
Asia 109 — 52 — 80 — 102 — 343 —
Ag Services and Oilseeds $ — $ 395 $ — $ 532 $ — $ 478 $ — $ 615 $ — $ 2,020
Ag Services — $ 87 — $ 229 — $ 157 — $ 184 — 657
Crushing — $ 29 — $ 167 — $ 197 — $ 257 — 650
Refined products and other — $ 170 — $ 84 — $ 44 — $ 72 — 370
Wilmar — $ 109 — $ 52 — $ 80 — $ 102 — 343
Carbohydrate Solutions Carbohydrate Solutions $ 213 $ 213 $ 247 $ 247 $ 288 $ 288 $ 197 $ 197 $ 945 $ 945
Starches and sweeteners Starches and sweeteners 216 216 238 238 245 245 195 195 894 894
Bioproducts Bioproducts (3) (3) 9 9 43 43 2 2 51 51
Nutrition Nutrition $ 96 $ 96 $ 114 $ 114 $ 67 $ 67 $ 62 $ 62 $ 339 $ 339
Wild Flavors and Specialty Ingredients Wild Flavors and Specialty Ingredients 73 73 106 106 80 80 59 59 318 318
Animal Nutrition Animal Nutrition 23 23 8 8 (13) (13) 3 3 21 21
Other Other $ 13 $ 13 $ 31 $ 31 $ 28 $ 28 $ (14) $ (14) $ 58 $ 58
(1) Non-GAAP measure - see appendix; (2) Adjusted segment operating profit equals total segment operating profit excluding specified items and timing effects.
4242
Segment OP and Adjusted OP (a non-GAAP measure) as Currently Reported vs New SegmentsQuarter Ended Quarter Ended Six Months Ended
March 31, 2019 June 30, 2019 June 30, 2019
As Currently Pro As Currently Pro As Currently Pro
As Currently Reported Pro Forma Reported Forma Reported Forma Reported Forma
(In millions)
Segment Operating Profit(1) Segment Operating Profit(1) $ 611 $ 611 $ 645 $ 645 $ 1,256 $ 1,256
Specified items: Specified items:
(Gains) losses on sales of assets/businesses (Gains) losses on sales of assets/businesses (12) (12) — — (12) (12)
Impairment and restructuring charges Impairment and restructuring charges 9 9 37 37 46 46
Adjusted Segment Operating Profit(1)(2) Adjusted Segment Operating Profit(1)(2) $ 608 $ 608 $ 682 $ 682 $ 1,290 $ 1,290
Origination $ 76 $ — $ 71 $ — $ 147 $ —
Merchandising and handing 61 — 68 — 129 —
Transportation 15 — 3 — 18 —
Oilseeds $ 341 $ — $ 291 $ — $ 632 $ —
Crushing and origination 211 — 150 — 361 —
Refining, packaging, biodiesel, and other 76 — 79 — 155 —
Asia 54 — 62 — 116 —
Ag Services and Oilseeds $ — $ 417 $ — $ 362 $ — $ 779
Ag Services — 75 — 90 — 165
Crushing — 216 — 139 — 355
Refined products and other — 72 — 71 — 143
Wilmar — 54 — 62 — 116
Carbohydrate Solutions Carbohydrate Solutions $ 96 $ 96 $ 192 $ 192 $ 288 $ 288
Starches and sweeteners Starches and sweeteners 170 170 218 218 388 388
Bioproducts Bioproducts (74) (74) (26) (26) (100) (100)
Nutrition Nutrition $ 81 $ 81 $ 117 $ 117 $ 198 $ 198
Wild Flavors and Specialty Ingredients Wild Flavors and Specialty Ingredients 88 88 103 103 191 191
Animal Nutrition Animal Nutrition (7) (7) 14 14 7 7
Other Other $ 14 $ 14 $ 11 $ 11 $ 25 $ 25
(1) Non-GAAP measure - see appendix; (2) Adjusted segment operating profit equals total segment operating profit excluding specified items and timing effects.
43
Notes: Non-GAAP ReconciliationThe Company uses certain “Non-GAAP” financial measures as defined by the Securities and Exchange Commission. These are measures of performance not defined by
accounting principles generally accepted in the United States, and should be considered in addition to, not in lieu of, GAAP reported measures.
(1) Adjusted earnings per share (EPS) and adjusted EPS excluding timing effects
Adjusted EPS and adjusted EPS excluding timing effects reflect ADM’s fully diluted EPS after removal of the effect on Reported EPS of certain specified items and timing effects as
more fully described above. Management believes that these are useful measures of ADM’s performance because they provide investors additional information about ADM’s
operations allowing better evaluation of ongoing business performance. These non-GAAP financial measures are not intended to replace or be an alternative to Reported EPS, the
most directly comparable GAAP financial measure, or any other measures of operating results under GAAP. Earnings amounts in the tables above have been divided by the
company’s diluted shares outstanding for each respective quarter in order to arrive at an adjusted EPS amount for each specified item and timing effect.
(2) Segment operating profit and adjusted segment operating profit
Segment operating profit is ADM’s consolidated income from operations before income tax excluding corporate items. Adjusted segment operating profit is segment operating
profit adjusted, where applicable, for specified items and timing effects. Timing effects relate to hedge ineffectiveness and mark-to-market hedge timing effects. Management
believes that segment operating profit and adjusted segment operating profit are useful measures of ADM’s performance because they provide investors information about ADM’s
business unit performance excluding corporate overhead costs, and specified items and timing effects. Segment operating profit and adjusted segment operating profit are non-
GAAP financial measures and are not intended to replace earnings before income tax, the most directly comparable GAAP financial measure. Segment operating profit and
adjusted segment operating profit are not measures of consolidated operating results under U.S. GAAP and should not be considered as alternatives to income before income
taxes or any other measure of consolidated operating results under U.S. GAAP.
(3) Adjusted Return on Invested Capital (ROIC)
Adjusted ROIC is Adjusted ROIC earnings divided by adjusted invested capital. Adjusted ROIC earnings is ADM’s net earnings adjusted for the after tax effects of interest
expense, changes in the LIFO reserve and other specified items. Adjusted ROIC invested capital is the sum of ADM’s equity (excluding noncontrolling interests) and interest-
bearing liabilities adjusted for the after tax effect of the LIFO reserve, and other specified items. Management believes Adjusted ROIC is a useful financial measure because it
provides investors information about ADM’s returns excluding the impacts of LIFO inventory reserves and other specified items. Management uses Adjusted ROIC to measure
ADM’s performance by comparing Adjusted ROIC to its weighted average cost of capital (WACC). Adjusted ROIC, Adjusted ROIC earnings and Adjusted invested capital are non-
GAAP financial measures and are not intended to replace or be alternatives to GAAP financial measures.
(4) Average ROIC
Average ROIC is ADM’s trailing 4-quarter net earnings adjusted for the after-tax effects of interest expense and changes in the LIFO reserve divided by the sum of ADM’s equity
(excluding non-controlling interests) and interest-bearing liabilities adjusted for the after-tax effect of the LIFO reserve. Management uses average ROIC for investors as additional
information about ADM’s returns. Average ROIC is a non-GAAP financial measure and is not intended to replace or be an alternative to GAAP financial measures.
(5) Adjusted Economic Value Added
Adjusted economic value added is ADM’s trailing 4-quarter economic value added adjusted for LIFO and other specified items. The Company calculates economic value added by
comparing ADM’s trailing 4-quarter adjusted returns to its Annual WACC multiplied by adjusted invested capital. Adjusted economic value added is a non-GAAP financial measure
and is not intended to replace or be an alternative to GAAP financial measures.