Archer-Daniels-Midland Co. Q3 FY2025 earnings call

Management Statement and Operational Highlights

• Made progress on self-help agenda, including improving plant efficiency, strategic transactions, and cost savings.
• In Carbohydrate Solutions, achieved a milestone in decarbonization by connecting the Columbus, Nebraska dry corn mill plant to a CO2 pipeline.
• Nutrition segment saw sequential improvement, with Flavors North America achieving record revenue and Flavors internationally winning a notable contract. The Specialty Ingredients subsegment expected to benefit from the Decatur East plant being back online.
• Invested in innovation areas like postbiotics, energy emulsion technology for energy drinks, and natural colors, with ongoing advancements in ethanol production and side stream valorization.

Segment Performance

• Ag Services and Oilseeds: Third quarter operating profit was $379 million, down 21% compared to the prior year quarter. The Ag Services subsegment had operating profit of $190 million, up 78% y/y, driven by higher export activity. The Crushing subsegment had operating profit of $13 million, down 93% y/y due to lower margins. The Refined Products and Other subsegment had operating profit of $120 million, down 3% y/y.
• Carbohydrate Solutions: Third quarter operating profit was $336 million, down 26% y/y. The Starches and Sweeteners subsegment had operating profit of $293 million, down 36% y/y due to lower global demand. The Vantage Corn Processor subsegment had operating profit of $43 million, up from a $3 million loss y/y, driven by strong export activity and improved pricing.
• Nutrition: Third quarter revenues were $1.9 billion, up 5% y/y. Operating profit was $130 million, up 24% y/y. Human Nutrition operating profit was $96 million, up 12% y/y, and Animal Nutrition operating profit was $34 million, up 79% y/y, driven by higher-margin product lines and portfolio streamlining.

Guidance

• Revised full-year 2025 adjusted EPS to $3.25 to $3.50, down from approximately $4 previously, due to deferral of U.S. biofuel policy and global trade dynamics.
• Expect 2026 to be a more constructive environment for the industry and agriculture, creating economic opportunities and long-term investment.
• On track to achieve $200 million to $300 million in cost savings in 2025 and $500 million to $750 million over 3 to 5 years.

Risks

• Uncertainty around U.S. biofuel policy, which impacts biofuel and renewable diesel demand, pricing, volumes, and margins.
• Global trade dynamics and their impact on crush margins and overall business performance.
• Softness in consumer demand for sweeteners and starches affecting Carbohydrate Solutions.

Question and Answer

Q: So first of all, on crush and the outlook, obviously, a lot of things have changed. But can you help us reconcile a little bit the sequential decline in the third quarter for crush versus what you had in the second quarter and to a degree in the first quarter when actually the crush environment was, I would say, lower, but I mean, more stable, but at a lower level. So just help us reconcile like how much was like maybe locked in, carried into it and how we should think about crush sequentially, just crush on a stand-alone basis into the fourth quarter, just given the uncertainty that you've mentioned on biofuel. And then I have a very quick follow-up on those insurance numbers.

A: Sure, Ben. Listen, as you remember, soybean board crush rally sharply post the RVO announcements. And if you recall, at the time of our last earnings calls, board crush was about like $2.25. Then after that, it has moved lower because of a variety of factors. We had a little bit of a decrease in acres in the U.S. Then there was this chatter about the trade deal with China that made a pickup in beans basis here. And certainly, we have the uncertainty about biofuels policy. There was a large amount of SREs granted in the period with the supplemental proposal to at least partially relocate that, but it is in common period until the end of October and now a little bit delayed because of the government shutdown. So then in the period also, Argentina has a tax holiday that create the potential for increased crush in October, November, December period. So we saw that $2.25 turning into something like $1.20 and now currently bounce back to about $1.50. So in Q4, we expect board crush to remain in the current range, if you will. And as we are here today, we're probably booked about 80% of Q4. So certainly, the $4 range is out of range right now with no extra policy. And so that's what we're seeing at the moment. So the plants are ready to crush harder. We still see with optimism 2026. The team has executed well in everything they could do in this environment, especially in the inventories when Monish reported $3.2 billion lower in inventory helping our cash position. That was basically a lot of that is the heavy lifting of the AS&O team trying to make improvements out of a difficult condition. So we still feel very strong about 2026. All these things that are under in motion right now, whether it's the RVO finalization, the RVO is positive for domestic feedstocks and certainly, the trade deal potentially to have more sales to China is also positive. But all those things need to be finalized during the next 60, 90 days or something like that, then we will have more clarity about where margins will move.

Q: My first question is on your September announcement of forming a JV with Alltech. Help us understand how this came together and help us understand the benefits of this JV and how it helps ADM.

A: Yes. Thank you, Manav. Listen, if you recall, our strategy in Animal Nutrition has 2 phases, if you will. One is what we call fit for growth, and that has been driving operational improvements. And we have seen, I think, sequential improvements in operations for the last like 8 consecutive quarters in Animal. But the ultimate objective was to execute a pivot toward more specialties in Animal Nutrition. And so we basically combine here the compound feed businesses of ADM, one of the leaders of the market, which is Alltech and combine really 2 powerhouses here, combining decades of experience and unparalleled capability with production expected to come in 2026. And with that, the ADM part that remains is more concentrated on Specialty Ingredients or premixes. And basically, we're going to be playing a little bit the Human Nutrition playbook, which is to have a specialty pipeline that can grow faster than maybe the big commodities that we have put in the joint venture. So we expect big synergies from that joint venture, big operational improvement, and we expect then the remaining Animal Nutrition in ADM to be a high-margin, high-growth type of segment, if you will.