Q4 2019 Earnings Call
For a fourth-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, investor 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 to and find you that today's presentation includes forward-looking statements that reflect buggies current view with respect to future events financial performance and Industry conditions. These forward-looking statements are subject to various risk and uncertainty funky 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 youngest chief executive officer and John Neville Chief Financial Officer, ma'am.
The call over to Gray.
We're happy to be joining the call from our new headquarters in st. Louis this morning.
Let's get started on flight three, you can see the agenda for today's call. I'll start with some thoughts on our 2019 accomplishments through the lens of our key priorities and then I'll provide it off before handing it over to John who go into more depth on our performance. I'll conclude with our outlook for 2020 and then we'll open up the line for your questions with that. Let's turn off.
In 2019 the team did an excellent job executing in the face of great complexity in many moving Parts both internally. And externally we effectively manage the things under our control in a substantial progress against our key priorities. We drove improved operational performance. We took action to optimize a portfolio and we increased our financial discipline and rigor wage, especially around Capital allocation.
On operational performance our total oilseed crushing volume and capacity utilization rates were the highest in the past five years our soil and sunseed crushing operations off and she'd the lowest industrial unit costs in that same time frame.
these improved
Less helped as whether the difficult markets in 2019 and allowed us to capture more margin when we had the opportunity.
We moved from a regional structure to a global operating model simplifying how we operate in aligning incentives to the whole rather than the parts.
What's that? We reduce the number of bonus pools dramatically to incentivize teams to work together toward the common goals of bunge. We've received positive internal feedback about our headquarters move with clear evidence of improved efficiency collaboration and shared insights as a result will be fully moved into st. Louis by the end of Q2.
Thank you for van and good morning.
Our new operating model allows us to focus on what's most important our business relationships on both ends of the value chain farmers and customers while facing fewer distractions in short. We're working as one team better able to focus on driving results and operating the business with better visibility and more accountability.
Moving to slide five while we made substantial improvements to our portfolio. We continue to execute against other identified opportunities with the goal to be substantially finished by the end of the second year. We completed our sugar and bioenergy 50/50 joint venture with BP and announced an agreement to also sell our margin of mayonnaise Assets in Brazil, but at least higher ethanol producer read purchased our stake in that business. We also completed several smaller transactions selling several Idol grain facilities in Eastern Europe home to I delete billing sites and Brazil while also optimizing our South American grain footprint to improve capacity utilization by closing seven other crane facilities.
Turning his light six. We've increased our financial discipline and rigor continuing our work to identify and capture cost savings opportunities 2019. We achieved approximately fifty million in savings from our previously established Global competitiveness program and are driving additional savings opportunities from our more recent efforts combined with the operational and took actions. We took in 2019 monkey is getting more streamlined with line of sight to additional Improvement opportunities.
So changed our approach to risk-management with a focus on taking risk appropriate for the earnings power of buggy and the environment we're operating within this approach allows us to better capture the earnings p.m. Available in the physical and financial flows provided by our Global asset base. This is especially true when market conditions change as they did during the fourth quarter.
We're committed to pursuing a disciplined Capital allocation strategy Capital deployment decisions will be the result of a deliberate process anchored by high quality analysis and stress testing on the front end off as well as performing post-project reviews.
moving to the next slide
managing risk better while running our assets harder when margins in certain markets improved in Q4. We delivered better earnings than we in earlier anticipated.
Looking ahead to 20/20. We feel good about our transformation and our ability to adapt to what we expect to remain a challenging and volatile environment. We have a lot of momentum coming out of Cuba will help us move ahead and taking into account the current margin environment and lack of visibility into the back half of the year. We expect 2020 EPS to be broadly in line with what we're in 2019 when excluding notable items are gain on Beyond me and the depreciation benefit of the sugar and bioenergy segment.
with that
I'll hand it over to John to walk us through our financial results in the twenty20 Outlook in Greater detail text Craig and good morning everyone. Let's turn to the yearnings highlights of flight. 8A report earnings per share from continuing operations was a loss of $0.48 compared to a loss of $0.51 in the fourth quarter of 2018.
Adjusted EPS for the dollar twenty seven in the fourth quarter versus $0.08 in the prior-year a report of results included $239 million dollars in that charges of which approximately 100. Mm related to various portfolio initiatives 76 million to the partial impairment of Goodwill recorded on the acquisition of motor scruple.
We have achieved a mass majority of our targeted and integrate integration synergies associated with this acquisition and although we were making progress on Revenue synergies. We are achieving them at a slower Pace than we had forecast when we completed the deal.
Importantly the Goodwill writedown was a result of our annual impairment tests and not triggered by a specific event loaders is a unique asset and this charge is now not change our positive view on this business off the long-term potential.
Earnings before interest in taxes or Ebay was forty-four million dollars in the quarter versus seventy million in the prior year on an adjusted basis total segment of it was 283 million dollars in a quarter cup is a hundred and seven million in the prior year.
Agribusiness adjusted ebit 477 million dollars compared to fifty five million last year higher segment results in the corridor reflected improved execution particularly in managing the ring throughout our grain and oilseeds value chains, an oil seeds lower soy processing results in the US and Europe reflected particularly strong margins a year ago. I received results improved when compared to last year due to strong oil demand and Seed supplies.
As expected we'll see these results were negatively impacted by approximately 95 million dollars and mark-to-market reversals on soy crushing contracts which favorably impacted our third-quarter results with an increase in soy Crush margins during the fourth quarter resulted in new mark-to-market losses on forward contracts. However, these losses were largely offset by March market gains on forward related to our soft seat in palm oil supply chains and serve our Downstream edible oils customers.
as a result
We enter 2020 with only small net mark-to-market balance.
Improve results in oil seed trading and distribution were primarily due to better positioning.
Ingrained higher results were primarily driven by origination of South America Brazilian Farmers selling increased as local price has improved and in Argentina Farmers except in sales and anticipation of a change in export taxes ocean free results benefited from good Fleet positioning and management.
Food ingredients adjusted even was 84 million dollars compared to seventy three million in Q4 2018 edible oils adjusted results of $67 million were up 11% from last year driven by better results in North America and Asia, which more than offset lower results in South America results in Europe were comparable to last year.
Excluding approximately $13 in favorable timing differences on Hedges that will reverse in twenty-twenty segment results were lower than in Prior year.
Billing adjusted even a 17 million dollars for the quarter was similar to the prior-year. It's higher results in Mexico were offset by lower results in the US and Brazil.
I'm sure you're in bioenergy fourth quarter 2019 results reflect buggies ownership through November adjusted even a $52 million dollars in the quarter was 100 million higher than the prior-year.
Increase is mainly due to improved agricultural yields and operational execution that drug lower unit costs as well as higher Brazilian ethanol pricing and higher sugar pricing and volume.
Results also benefited from approximately thirty-eight billion dollars of lower depreciation when compared to last year due primarily to the business being classified as held-for-sale.
Even if twenty-six million dollars was in line with the prior-year.
Adjusting for all notable items effective tax rate for the year was approximately 16% The lower-than-expected tax rate was primarily due to earnings mix as we reported strong fourth-quarter results in regions of favorable tax rates.
Let's turn to slide 9 in sg&a.
When the company announces Global competitiveness program in July 2017. The goal was to achieve a reduction in sg&a cost of 250 million dollars by the end of 2020 is compared to age Seventeen and restful sg&a Baseline of 1.35 billion dollars.
With hard work and the commitment of our employees bungee achieved his savings one target one year had a plan.
Just like Bridges the savings to what we report in our sg&a expense line reflecting unaddressed will cost changes in our business portfolio such as a loaner program and acquisition and other factors that impact took such as inflation foreign exchange TCP program costs and variable compensation.
The 252 million dollars of cost reductions is roughly equally split between indirect spending and employee costs.
The company incurred approximately 150 million dollars of one-time execution costs over the life of this program.
Moving to slide 10 cash flow highlights for 2019. We generated approximately 1.1 billion dollars of adjusted funds from operations similar level to Prior year.
The cash flow generation enable us to comfortably find our capex and dividend and to reduce our debt.
As you can see on slide 11 or dead largely finances our inventories, but Approximately 80% of our net debt being used to finance readily marketable inventory at the end of 2019.
Working capital in New York bit higher than we were targeting primarily due to elevated commercial activity Q4, especially in South America resulting in increases in Far More advances accounts receivable balance and unrealized gains on derivatives used to hedge commercial commitments.
Turning to slide 12. We have committed credit facilities approximately four point three billion dollars all of which was available at the end of the quarter and we had a cash balance of 320 million dollars off total committed credit facilities drop from 5 billion last quarter to four point three billion as a result of a $700 revolving credit facility being current converted Long Term Loan and then transferred on a non-recourse basis to the sugar and bioenergy joint venture.
Received receipt for the $700 debt transfer and a further $75 receipt from BP were largely used to pay down balance has outstanding under the company's commercial paper program in credit facilities.
moving to slide 13 in our full-year summary of capital allocation
We generated adjusted funds from operations and approximately 1.1 billion dollars from his total capex spending was $520 Million, which was about $25 million below our original guidance for the year off just include $118 of capex for shipping bioenergy, which will not be incurred by buggy going forward.
We paid $317 in dividends to shareholders.
Just left us with approximately $215 of retained cash flow that we allocated toward debt reduction and working capital.
Please turn to slide fourteen in a return on invested capital.
Are trailing average adjusted return on invested Capital was 7.9% overall. Well above the 5% in the prior year excluding are sugar bioenergy segment r y c with 7.6% versus 6.5% last year.
We are currently reviewing our stated weighted-average could have cost cost of capital of 7%
based on our preliminary review We believe the 7% we have been referring to maybe higher than our actual black. If we determine there is a more appropriate rate to use going forward. We will communicate that in the future quarter of whether or not we make that change our targeted or 9% will remain unchanged.
Let me slide fifteen in our outlook for 2020 is Greg mentioned in his remarks. We expect 2020 EPS to be largely in line with what we learned in 2019 when exploiting note. Both items are gain on beyond meat and the depreciation benefit and the sugar and bioenergy segment in agribusiness. We expect full-year results to be down from 2019 based upon current forward March structure. However, actual origination processing and distribution March is Will evolve based on fulfillment of the us-china trade agreements drop sizes and former commercialization.
in food ingredients
Expect for your results in edible oils and Millie to be similar to 2019 excluding approximately 13 million dollars and favorable cute for 2019 timing differences which are expected to be negative to 6:20.
Fertilizer. We expect a full year for your results to be down versus a particularly strong 2019 and for results to be similar to 2018.
Sugar and bioenergy Market fundamentals have improved for his 2019 driven by sustained Brazilian ethanol Market prospects and better year-over-year sugar prices.
For 2020 we expect an effective tax rate in the range of 19 to 23% net interest expense of approximately $230 million dollars Cab Max in the range of four hundred four hundred fifty million dollars in depreciation amortization approximately $465 million dollars.
With that, I'll turn the call back over to Greg for some closing comments. Thank John. This is John noted. We're still faced with uncertainty in 2020 expect Market wage rate volatile as long as us and China trade tensions nasf continue to create uncertainty. It's too early to tell what if any impact the coronavirus situation will have on our markets or how developments in Argentina may affect the industry this year so you can see why it's important that our team remains Nimble will continue to focus on improving industrial operations honing a risk management being disciplined about Capital deployment and working in ways that allow us to quickly adjust to changing market dynamics to maximize the earnings potential of our Global platform.
I want to reiterate how impressed and appreciative.
I am by the team's ability to navigate a challenging external environment this year while also implementing significant internal change. We got a tremendous Foundation of processing and it's cheating assets and a great team who's improving our execution with them. We're already seeing the benefits of those changes and we expect them to continue. I look forward to sharing more with you as we continue our work.
Also provide more detail on our strategy and earnings power at our investor day, which were planning to hold in late second-quarter more detailed to come on that and with that. I'll open the same questions.
We will now begin the question-and-answer session to ask a question. You may press * then 1 on your touchtone phone. If you're using a speaker phone, please pick up your handset before pressing the keys to withdraw your question, please press * then two at this time. We will pause momentarily to assemble our roster. The first question comes from Adam Samuelson of Goldman Sachs, please. Go ahead. Yes. Thanks. Good morning. Everyone Adam Greg John. I was hoping maybe to start off if I in a little bit more color on the guidance. So first at the EPS level adjusted EPs and 2019 was was four fifty eight am beyond meat and the sugar benefit. I believe we're about ninety cents. So is that you're saying broadly roughly 370 of UPS. Just wanted to clarify that just on the outside dead.
That's very close. Yeah, the combination of sugar and Beyond was about eighty-six cents or you're really close Okay, that's that's super helpful. So then digging into them into the operating guidance, maybe within that just quantify. I mean what there should be I imagine some year-on-year benefits from Sixteen are reductions that you've been implementing the headquarter rationalization. Some of the asset moves. They that you've taken over the course of 2019. I just can you quantify some of those internal team wins that I would think are embedded in the numbers and then within the agribusiness unit, maybe frame a little bit kind of some of the puts and takes between between the grain size of an oil seeds and kind of how you're thinking about the the the two sides of the market there. Thanks God.
around the cost side
Yeah. Yeah, so it just you mean in terms of the the cuts that you've been implementing over the course of the last year as you've continued the global competitiveness program. I'd imagine that there would be some carry-over benefit twenty twenty verses nineteen embedded in your ebit forecasts. Can you quantify those and just benefits from internal initiatives that month that you're be including in the forecast that you've laid up, you know, we still got some package associated with our transfer of employees, you know to to Saint Louis and some of the execution were doing router rewiring. We will continue to have some higher costs probably the first of the year. So those programs run out I do we do expect, you know a a measurable reduction next year in sg&a particularly at the corporate level, you know at this time.
from from just the pure overhead standpoint, you know, if you think about a run-rate basis we say
About fifty million this last year from the beginning of the year to the end of the year of additional cost and I think you know heading into twenty-twenty. We should have a comparable, you know home number going throughout the year next year maybe a little bit less than that because as we cut deeper and deeper into the organization he gets a little bit tougher, but but we are expecting, you know, something probably in the neighborhood of twenty-five two fifty million additional cost savings next year the other the other thing probably worth mentioned John mentioned all the rewire work that continues to go on our first half but also the resources around all the portfolio work we're doing here in the first half. So some that has been announced that hasn't closed yet in some of the ongoing work and within Target of getting the majority of that wrapped up or in a position to at least be able to to speak to what we're doing by the end of the second quarter, which will then give us get us in a position as John said
To make the balance of those changes and kind of come out of twenty with with the run-rate that we're looking to go forward. And of course that's the kind of thing will drill into more detail during investor day. I don't think we'll be on our life revised run-rate until late, you know back half of the year and I think once we get out of 2020 at the end of the year, we should start with the with much cleaner out the cost base at the end of 2020 ahead 20 21.
Okay, and then just broadly just the agribusiness unit specifically just just lay out kind of the different assumptions on crushing and and and the Grange by screen size. Yes as we look at at twenty twenty as we talked. We got pretty good momentum coming out of queue for here and we've got pretty good visibility into the first half and and you know, we'd even took the first half looks positive. I think the the challenge is really know very very little visibility into the second half and then you've got the black flags around China trade the Argentina economic situation coronavirus its possible effect on on demand. You've got the merch Curves in crush outside of the US or heavily inverted and and the second half replacement margins definitely not attractive and then of course is dead.
Margins are significantly below last year.
What we've seen so I think that's really the the drivers inside of inside of the agribusiness, which is the the big the big piece and then of course around the house the distribution is the timing of the the phase one and we're lacking the details really about timing and products and then already some talk about be a delay due to coronavirus. So that's that's kind of the the key drivers that we've that we put this together with. Okay. I appreciate all that color. I'll pass it on. Thank God. Thank you.
The next question comes from Tom of JPMorgan, please. Go ahead.
Good morning, everyone on the latest Goodwill impairment United synergies are coming faster than you expected. Can you just remind us on the Synergy targets and how they've changed?
Yes.
Let me frame that up. But one thing that I want to be really clear about is we definitely believe in the value of that platform. That was a you know, Wonderful opportunities is the kind of asset that that only trades once and we were and we were glad to get that opportunity. We've continued to deliver on all of our cost targets. We fully integrated team. We're going to Market as one company in able to to continue to to benefit from the combined Legacy Monkey Business and and life loaders business. The the Gap we have had have been on the timing of delivering the top-line synergies. And those are those are not coming as fast as long as we had planned. We do love the the business because the fats and oils is definitely on-trend. It's right in our wheelhouse. It's an adjacent space. Is that value wage?
Allows us to value.
Are fats and oils platform and we definitely are at the table with customers having conversations and working on projects that I was just with the senior sales team last week and they said we wouldn't have been in this position a couple of years ago, but it's it's the global presence. It's the Indian product and Technical capabilities and frankly. It's the record on sustainability which bunk he's done a thousand fantastic job and and why we're on loaders, you know, we've got some important product launches this year in our infant nutrition. We've extended our award-winning beta pole with new high concentration formulas in the confection space. We're launching a reduced sugar fat system. And and we did that work with one of our Venture companies and this allows us to put less money to be used for the same sweetness. We're we're really excited about where that can go and then in the plant-based area, which is Garner so much activity so much investment. We've got a line of fats to Republic
Animal fats in a range of products from veggie burgers to Beverages and we're working with over a handful of global customers and and getting some traction there. So
Well, you know while we were slowing delivering the top-line just this is a great property and this is going to create a lot of a lot of money for shareholders long-term. I think it's maybe worth mentioning Greg the the the driver of the impairment was really just a short vowel to our our overall model that we had built when we bought the business, but we still did it achieve pretty good growth year-over-year inside that business so positive growth just not quite at the level of what we expected when we price the business so that that drove the impairment. But again as I mentioned on the in my remarks that was just driven by the annual review Goodwill, it wasn't any single event that created, you know, cause the staff to take a separate look at it.
Understood thank you, man. I just on Capital allocation you pay down some debt with proceeds from the JV this last quarter what needs to happen if you just start buying back shares said, well, you know, it's something we talked about. We haven't bought back shares for a few years now, I think and and you know is Greg and I have come in we're taking a hard look at everything and hasn't been a priority on Capitol woke up to this point. Certainly. It's it's it's a bucket we look at and talk about and and we will do so in twenty-twenty. I think the question is really when we look at opportunities back up to us to find a good ways of creating value for the shareholder by reinvesting capital and if we can't find a better alternative than than share share buyback is certainly on the table. We haven't, you know feeling sort of our plan for 2020 exactly how we want to allocate all the capital. We do have, you know, a fair amount of money earmarked as I mentioned four hundred four hundred fifty million for capex. Yep.
you know we
We always hold a little bit back and and determine whether or not the right things going to be debt-reduction. If we have some sort of an acquisition opportunity or or share repurchase, but it certainly certainly on the table and but I would say at this point we don't have any hard decision one way or the other.
I'll pass it on. Thank you very much.
The next question comes from Vincent Andrews of Morgan Stanley, please. Go ahead. Thank you and good morning everyone. I just want to clarify for me on on a share repurchases and they alternative uses of capital and I guess the way I think I would be thinking about it is that you know, you're going to have an analyst Day in June presumably you're going to tell us that your earnings power is higher than what your run rating at and that your stocks undervalue age. So why would your shares today be the best alternative use of capital these you presumably would be buying them at a discount which think you're worth versus going out and paying a premium for somebody else's business.
Yeah, it's it's always a trade-off. I agree and and
You know, I'd like to think between now and or playing would be between now and June to provide you a better Clarity on what our Capital allocation plan will be. You know, it's we we hear from we hear from her shoulders and investors something that like share buyback and some that don't and and so for us, we really have to just look at it and say is is we kind of hit the reset here with the company and and develop a go-forward strategy. I would say it'll get equal airtime discussion with anything else. We have to with capital. I just can't see there today and commit to you that that we're going to purchase shares or how many were going to purchase but certainly if if it becomes that's the best alternative for our Capital then that we'd be foolish not to take that into consideration and make it part of our allocation. Look our our first order of business is continue to to to execute get the the cash in the house and that's continue to execute operationally and continue the the balance of our portfolio work and then to be able to have that that strong debate the boardroom dead.
Okay, that's that's fair enough. And if I
Just trying to follow up on on working capital. Obviously it it built in the towards the end of the year. And obviously that that was part of why the earnings were better. Should we expect some type of reversal next year holding commodity prices a constant just because you know farmer selling was Advanced and and and so forth or how should we thinking about cash flow in twenty-twenty relative to a roughly flat underlying event? Yeah. I think I think are biased right now based on what we look at today. We do we would expect it to revert a bit. And so we would expect change working capital A positive cash flow at this point to your point though, you know, all else being equal commodity prices et cetera. I would agree with your comment.
Okay. Thanks very much guys. Congratulations on this order. Thank you very much.
The next question comes from bienvenue of Stephens Inc. Please go ahead.
Yeah, thanks gud morning guys. I want to ask about you talks about the target you talked about. I want to ask about the roic as it relates to the components of that targ. Would you expect a greater proportion of the move towards nine percent comes from you know, your your earnings. So the numerator or you're dead reduced invested Capital the denominator kind of how how are y'all thinking about the contribution As you move forward that's a great question. So yeah, there's a couple of things one way through the portfolio actions. We've been taking throughout the year. So if you look at the Gap, we're you know, where we finish your 7.9 to get to 9, that's one point one. If you think about that purely on Thursdays perspective that's less than $4 a tonne on our Crush margin based on our volume for this year. So it puts into perspective. It could be achievable through the revenue side, but we're not we're not going to rely on that.
They're obviously driving earnings is an important piece of it. But as we look at the portfolio actions, we've taken this year, you know half that Gap over have that Gap could be made up just buy off auction invested Capital based on the actions. We've taken some of those have been announced but haven't been executed yet. So I think we would view, you know our goal to get to 9% at this point to be have driven by portfolio action after my driving earnings. It's probably a good base line.
Great, that's helpful. And then I want to ask about the edible oils business, but kind of the just the the vegetable market more broadly obviously had a great back half of them in palm oil soybean oil the Market's been volatile here year to date with current of Iris. And so I'm just curious. If you could just give us your view to the extent you have visibility on on the vegetable oil market and palm oil and soybean oil in particular in the nearest term sure the bulb I think one of the keys as the the last time, you know, we were all together if you remember Crush margins were were pretty tough crushing slowed in some regions that had tightened up oil a bath and then with the lower Palm production. We saw the the Palm Market rally at the same time rally on price at the same time that that oil supplies tightened Into the Dead.
Year and that some of those Dynamics has also helped us deliver to you for
You know, we believe that can tighten further coming here in the 20-25 seat margins continue to be good outside the EU and then we've got biodiesel creating a lot of demand for refining capacity and that that's a net net positive for the oil Outlook as well. And you look at the mandates going from 2.1 billion to 2.43 hearing 20/20. So there there are a lot of things driving. I think the the big overlay is global demand, but that's that's that's yet to be yet to be seen.
Okay fair enough. Thanks. Good luck. Thank you. The next question comes from Moscow of Credit Suisse, please go ahead.
Hi, thanks, Greg. And John the if I think about you know the potential for a rebound for your business through China, I would imagine it would be a resumption of Norwich trade flows. But then also rebuilding of the pig heard in China following the African swine fever impact wage. I imagine you've been conservative on both of those those factors. Is it is it does it make sense to think of them both as incremental to your business or is is 1 bigger than the other or Thursday. Is there any way to quantify it?
I'm not I'm not sure there's there's a way to quantify it. You know, I think in China on ASF, we do think that about 40% of the the her dog liquid dated. It looks like we think that's you know, that's done as long as we don't get SF to to come back a Resurgence of it and and summer demand has improved to some of the small people have been able to switch over to poultry to chicken quickly and then we've seen we've seen sales rebound 2% So
I hope that the worst is in there as far as the US China trade. No doubt. We're always a big fan of our markets that that our economic and and clear and concise and open fair and free trade, but regardless of that. I'm glad we've got a global platform and and this great running it and so will continue to stay in position for a number of outcomes and and not try to to over guess what's going to happen. And if you really dead kind of tried to frame up the drivers as you look at twenty twenty, we took our Outlook, right? And we we base that visibility on the curves and we didn't give any adjustments plus minus versus what you can you know look through today around Trade A S F or the coronavirus if you if you looked at the you know the challenges bath
You don't want to see happen you wouldn't.
Want to see a return to China or spread do you wouldn't want to see coronavirus continue to grow which would be a tough on oil and and meal demand and you wouldn't want to see them trade disruptions continue in a way that's bad for margins on crushing as well as distribution. And then you wouldn't want to see animal numbers declined overall and you also probably don't want to see Argentinian crush run-up and and run at high volumes on economically on the on the flipside. What you do want to root for would be seeing a oil demand continue to tighten as we just talked about as it has been we see the annual the animal numbers.
Grow, which means no spread of ASF. Argentina would would remain slow as it is now, we'd seaweed continue to remain tight and the Outlook right now. He's sweet fed. And of course that means it's not competing with soybean meal. It's better for soybean meal demand and then the coronavirus ends up being a Flash and and goes away so that we're not even talking about it next quarter month. We see a little bit of improvement in the Brazilian economy after the pension reform last year that was definitely positive. And so we we'd like to see that Brazilian economy continue to improve that would be good for them to really all all of our our businesses and then see exports improved which would be be constructed to prices and that would continue to keep the animal numbers high school and and be good for demand. So if there's a list of things to root for it, you need me to email them to you. I'll be asked to be happy to do that. I think I'll just rely on the transcript. Thanks. Yep.
but if I can if I can ask you one little element of that I think you said you you would root for oil demand to continue to tighten is that what you said because I would say
It would you would want to demand to be stronger Front Royal? Yeah, when they get that going by demand by demand growing the picture Titan. Sorry not okay. I got it. Okay. Thank you. Thank you. The next question comes from Heather Jones of Heather Jones research, please go ahead.
Good morning. Congratulations on the court.
Hey, thank you very much.
Yeah, I wanted to clarify something. You said earlier Greg. Did you say the first half outlook for agribusiness is is positive and that you are lacking visibility visibility isn't good in the back half. That's correct for me.
So thinking about the Cadence of the quarters right now and given there's a little visibility in the in the back half. Is it fair to assume I know you didn't quantify how much you are anticipating agribusiness being down. But when we're thinking about how the year is going to play out.
Are you?
Is this point that first-half agribusiness would be up here on year and then the back half potentially down. How should we be thinking about that?
There are there are so many moving pieces and in this business the the one thing we've seen with being seasonal and cyclical and the fact that we do operate across the value chain. The the one thing we know right is that margin can move from one area of our business to another and it can move from one place to another so, I'm really I'm really hesitant to try to to put the
Specificity really around the quarters. That's what we kind of like to talk to the to the full year and we're we're trending so as we talked about momentum attic for
you know, we feel that momentum and what we've been able to do to protect margins in the first half and kind of be Outlook of of as we look through Thursday. We feel good about the momentum coming in if you look first half a year over a year.
Q2 was was was pretty big prior-year.
Okay, okay, but you one in the easier calm and then moving on to edible oil. So your comments were all bullish month and which you know, I I share that view so given that I'm was sort of surprised about the Outlook language. I mean you guys had mentioned that 219 that it was a probably not good to run rate that because pretty much everything went right, but you know, you talked about fundamentals being good and now
You're talking about, you know, similar year-on-year excluding the timing effect. And so just wondering cuz your qualitative commentary sounds really bullish, but they're not quantitative commentary.
Doesn't sound as much and just wondering if you could help me reconcile the two.
Well, the the flipside would maybe be some of the things in Brazil what we've seen while it's, you know been been helpful for the agribusiness. Probably been a little bit challenging for food and ingredients. So there are you know, there are a number of puts and takes across the portfolio.
I think we you know, we are concerned from a from a demand overall with just the as we talked about the number of unknowns in The Market Place between you know, the coronavirus Argentinian situation.
I don't and I don't know if I have a better, you know more more specific look than that, but there's some conservatism built into that commentary related to potential demand back from coronavirus. I think what we you know, what we try to do is is look through and tell you what we can see and not what we hope is going to happen Okay, Okay. Perfect. Thank you so much. The next question comes from Ken of Bank of Montreal, please go ahead and everybody else. Just a couple questions. What is when you think about the portfolio change that you've done? Can you quantify if that was not done how much your profits would have been dead down relative to where you were.
I kind of said definitely.
Based on what you've done how much have you improved off of base level or some sort of quantitative you on that? Yeah. I think the if you think about the the actions am actually taking over that have been announced so I'll go that way because we've got a couple that are going to close here a couple of small things are going to close here shortly. Now in one of those of course, I'm larger in May or June. So we sold it out in in South America. We would just on the things that we've announced or executed we would expect ebitda, you know, even after ten or fifteen million dollars, but probably more importantly should be increasing on the on the share price of around $0.25 driven by both even a creation and Flash lower interest costs going forward from proceeds. So that would of course include include sugar and that's assuming you know, our sugar JV performs and what we expected to on the earnings side so dead.
We do expect you know.
Some reasonable amount of accretion here based on what we've done already and then of course, we're continuing to look at other opportunities. And what about the utilization rate? I thought you said also that there was a greater. I think the first comment that was said was utilization rate was all time high and cost was all time low or something like that or five-year low, but I'm pressing so I'm trying to trying to figure out how that all played out because that doesn't seem to always be included in the hard numbers. Yeah, and some of the some of that is really the operating model and how the the commercial teams and the industrial teams are really working hand-in-glove about getting the the assets one in shape to run when the margins are there and then getting us positioned to get you know to to capture the the earnings at risk exists in that asset base so that we can run our assets harder and and not dead.
Scheduled downtime rather is for maintenance or whether it's for commercial thing. So, I think the team has been much more.
Especially in this environment being able to to flex our global system and keep keep our our assets full when the margins are there. So that's been a a result of em, you know some footprint but a lot operating model in the team and then it is John talked about some of the portfolio changes that that we've made as those things close and we unwire them from New Jersey and then work to get the stranded costs out, you know, you know, those are things that are in fly. They're not a an overnight flip the switch.
I agree with you. It just seems like there's more I guess what I'm trying to figure out is of all these building blocks. It sounds like there's at least fifty to seventy-five million dollars of incremental pop in that has been built up through a corporate actions, and I don't know for sure but that's what it seems. Like. I I just didn't know if there was a way to quantify utilization rates costs and portfolio management and just three buckets of of how to actually think of the wage earnings from internal actions.
What we're going to try to do is prove it by delivering it a quarter at a time and then being real transparent about how we deliver follow-up question is when you think about your portfolio management by the end of the second quarter, is that really the end of it because it seems like there is still a fair bit of assets under the the buggy umbrella that may be earning return on invested Capital to your 9% How much has to be done after that? What is the progression in terms of how we're going to expect to see that and I'll leave it. Yeah how we Men been talking about internet. We had, you know, the initial portfolio review and put our our Target list together in the things that you've seen done and the things that we we have teams working against today and that are that founder way those were pushing to be able as we said to have finished or in a position to announce our intentions by the end of the second quarter when we do the investor day because yep
What what our goal is to be clear?
About what acid-base we continue to run for run going forward and be able to talk about the earnings power of that and our growth plans that doesn't mean and as we've told the team running a great business is constantly challenging in the things that aren't making the return hurdles that they either have a plan to get there on a very short time line or they have XL plans and that never stops. That's continuous Improvement. That's like gcp is is a muscle memory and now we are challenging and and chasing off our best metrics across our Global platform to continue to drive cost out in a continuous Improvement. Just like Risk Management. We're never going to be perfect. It's always trying to get better as continuous Improvement. So this just becomes the culture of how we're running the company so that it's not an event. It's an everyday event.
I appreciate it. Thank you very much. Thank you. This concludes. Our question-and-answer session. I would like to turn the conference back for any closing remarks. Thanks for your interest in bunge. And if you have any further questions, please follow up with me. Have a good day. The conference has now concluded. Thank you for attending today's wage connect.
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