Q1 2020 Earnings Call

Earnings Conference call all lines have been placed on the listen only mode to prevent any background noise. As a reminder, this conference call is being recorded I'd now like to introduce your host for today's call Victoria, Delaware, Vice President Investor Relations for Archer Daniels ATM.

Mr anywhere you may begin.

Thank you Jack good morning, and welcome to aid in first quarter earnings webcast.

Starting tomorrow, a replay of today's webcast will be available at 80 M Dot com.

For those following the presentation. Please turn to slide to the company's Safe Harbor statement, which says that some of our comments the materials constitute forward looking statement that reflect management's current views and estimates of future economic circumstances industry conditions company performance and financial results.

These statements of materials are based on many assumptions and factors that are subject to risks and uncertainties.

80, and who provided additional information and 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 report.

To the extent permitted under applicable law ATM assumes no obligation to update any forward looking statements as a result of new information for future events.

On today's webcast, our chairman and CEO Juan Luciano will provide an overview of 80 EMS actions and operations in the current situation our plans for the future and our view of market condition.

Our Chief Financial Officer, Ray Young will review financial highlights and corporate results as well as the drivers of our performance.

Ron will then share some closing comments.

Afterwards, I will take your question. Please turn to slide three I will now turn the call over to one.

Thank you Victoria.

Thank you everyone who is joining us.

I hope everyone listening is staying say closely.

You said, obviously extra ordinary times, so I'd like to take a little time today to shared with you my thoughts on three important topics.

First Howie Jim is working to protect our teams are how we're continuing to provide nutrition to the world.

Second how we're thinking about there were strategy on long term loans in this unique times.

Some views of the near and medium term demand environment and market conditions.

Let me start, but youre, putting my thanks to our global team on partners.

Our gross more than 800 facilities on FFO central stores flotation assets around the globe.

Avian colleagues in the first quarter, not only maintained or what operations, but in some areas set production records.

These men and women are supporting the global short supply chain and because of them videos you been billions of people, who don't know way, Jim I need a pretty big.

We are grateful for that commitment.

So central further colleagues have been enabled body I would I'd team to work remotely I know showing their flexibility and ingenuity to give the rest of forward business ruggedness, mostly.

Just a month ago, where we're having discussions about whether we'd be able to have this earnings call when our nor Merck will ultimately schedule or whether we should delay a week or more.

Thanks to our global business services, I T and financial teams, we closed our where to Q1 books and we're ready to have this code would you today.

Take this across 38000 colleagues and you can see why as of today.

Maybe I missed continuing to fulfill our purpose by providing nutrition around the globe without any significant operational interruptions due to koby 19 outbreaks.

Or northern grateful to be part of this a great team.

I hope all of our what ATM colleagues, who are listening on this call are proud of their achievements as well.

Our leadership team is doing everything we can to support our colleagues.

Circumstances change fast. So every morning since early February our cross functional leadership team has led to review the global situation.

Heavily weighted new risks and make timely decisions to protect our teams and our business.

We put in place strict guidelines to protect our employees and contractors from an act in troubled restrictions early in the year to a critical focus on enabling social distances in our production facilities.

Two ongoing remote to work.

When colleagues do develop symptoms. We have protocols are designed to protect them and others, who might have come in contact with them as well as support continue we do hope operations.

This includes paid leave for all called exterior and require quite in periods, where necessary to support where necessary to support them and their families.

So far all year relatively small number of ATM colleagues have tested positive.

Tragically.

We did suffer that were first cobiz related fatality two weeks ago.

I would have thoughts are with everyone who has been personnel impacted by this disease.

I would ATM colleague Emergency fund this available for team members, who are facing economic hardship due to the crisis.

As through a de Emcares, we have committed funds on other resources to support others in communities around the World Wars, serving on the front line in the fight against copied 18.

We also made some early this issuance in order to strengthen abiam's position. During goes we're sure to be a challenging operational uneconomic and vitamin.

For example.

Over the balance sheet has historically been a source of strength sort ATM.

And in March we further enhanced our cash position and reduce our exposure to short term credit market risks.

By issuing $1.5 billion in turn that.

We are taking other actions, including reducing capital spend into reflect practical limitations in this environment in this environment, while it's still completely crush it necessary to maintain that were facilities in the same club product. Good order an advanced critical strategic proceeds.

Our team is delivering.

I will first quarter to adjusted earnings per share was 64 cents.

Adjusted segment operating profit was 643 million.

And our trailing fourth quarter adjusted otherwise see was 7.6%.

Our performance is a testament to our team's ability to fulfill our where to critical role in the global food supply chain and deliver results to our shareholders. Despite incredibly challenging circumstances.

Please turn to slide four.

As you can see even amid this global challenges. We're also continuing their wear to work to ensure ATM remains strong and by told in the years to come.

We are not slowing down in our commitment to the Liberty network strategy, noting our focus on the business drivers and that our work on thorough and I would actions to improve the company.

And proud that even us our team was keeping our operations running under difficult circumstances.

They also made great progress advancing this strategic imperatives, we've defined this year.

With accomplishments like improving capital efficiency next services on oilseeds.

Advancing our center of expertise structure with the new global supply chain organization.

The Liberty no networking lvs synergies lower than two years ahead of our target.

And we continue to advance readiness, which since the program began last I looked $920 million seemed run great benefits on an annual basis.

All told same store where themes great work, we have achieve about 30%. If I were 500 to 600 million in targeting targeted improvements for 2020.

And we continue to feel good about reaching our goal by the end of the year.

But also ensuring we live up to where were critical role less if they were not justify what a company.

But of the natural resources that are vital to our business on our future.

In 2011, we announced our where 15 by 20 plan in which we're committed to 30 units improvements in energy use greenhouse gas emissions water and waste to landfill by 2020.

We met each of those goals ahead of schedule and this year, we were proud to on deals even more ambitious commitments.

To reduce or would absolute greenhouse gas emissions by 25% and I would energy intensity by 15% in the next 15 years.

Finally.

I'd like to talk a little bit about our view of the markets and our future.

With major western economies shut down we are encouraged by the actions. Many nations are taking to contain the spread of covered 19 and enabled and eventual recovery.

How does the recovery unfolds.

Where it and at what pace is something we'll be monitoring very carefully.

And well precise predictions of these points are difficult that had a few ways, we can cut or what I. Some of the market impacts were seen.

We saw a short term acceleration in demand for certain products, such as flower or staple packaged goods that we provide flavors on ingredients for.

That's consumer slow did they are pantry seen advance to stay at home orders.

Many of these products have reach or will reach saturation point, and we expect demand to normalize.

Then there are products that have been impacted us a direct result of their bodies national or local stay at home orders.

Hey, Jim that includes refined oils for foodservice as well as biofuels like ethanol and biodiesel.

As you know, we make the difficult decisions last week.

The two of our dry mills I made continued low gasoline demand.

We will expect to see some of this demand built I came to us economies reopened.

So there will be a significant variability depending on when and how those will be openings occur.

We've also seen volatility in large and embodiments for certain commodity products other than markets constantly reevaluating global supply and demand balances due to everybody at the heart offers.

One key element, where following closely here the phase one trade agreement with China.

We have saying goodbye now for U.S., only cultural products by China, So far this year, which could bode well for future purchases in the back half of the or.

Equally as importantly, our global footprint gives us continued confidence in our ability to support global trade flows of food and agriculture products.

Then there are the changing behaviors with my child to longer term impacts.

For example in the food market, we're seeing a back to basics approach.

Desire for comfort foods snacks, and the staple goods, while consumers are staying home.

We're seeing consumers increasing their purchases online, which impacted demand for industrial starches used to make cardboard.

And we're seeing an increase in interesting products to support health and wellness.

There are many unknowns, what we do know however.

He said the transformation that ATM cuts undertaking over the last several years. It's now helping ensure that were well equipped to people to whatever it over to customers require or whatever the world needs.

We've built up I work product portfolio, I would footprint I would innovation and that would agility.

And we're planning for the future.

For example.

We thought about the potential for longer term changes in how we all interact with each other.

Our team launched better choice innovation sessions with customers in order to ensure we can continue to meet their needs.

We aren't immune from some of the negative effect of the pandemic economic fallout for we're confident in the ability for what a great team to continue to provide nutrition around the globe.

Now Ray will take us through our business performance before I come back to offer Simon final comments before we go to Q Sunrise Rae. Please.

Yeah. Thanks, one good day everyone.

Please turn to slide lives.

I like to start by echoing ones, thanks to our ATM colleagues around the globe.

We're fortunate to have this team and very grateful for their dedication.

As one mentioned adjusted EPS for the quarter was 64 cents up from the 46 cents in the prior year quarter.

Excluding specified items adjusted segment operating profit was $643 million.

Our trailing four quarter average adjusted ROI C was 7.6% higher than our 2020 black up 5.75%.

In our trailing four quarter adjusted EBITDA was about $3.5 billion.

The effective tax rate for the first quarter 2020 was approximately a positive 4% compared to an expense of 26% in the prior year.

The favorable current quarter rate was due primarily to the impact of U.S. tax credit signed into law in December.

Including railway maintenance tax credits.

The tax credits primarily benefit our business partners in are substantially passed onto them through the prices of goods and services, we negotiate to support their respective businesses.

That maintenance expense is reflected in the cost of goods sold line of our GAAP statements.

And then the other charges line in the management's statements.

Looking ahead, we're now expecting effective tax rate to be in a range of 13% to 15% before any discrete tax items.

We generated about $800 million of cash from operations before working capital for the year higher than 2019.

Return of capital for the first quarter was about $315 million, including about $110 million, an opportunistic share repurchases that will offset dilution for the year.

We finished the quarter with a net debt to total capital ratio of about 29%.

Down from 32% a year ago.

Capital spending for the quarter was about $200 million.

As one said in view of a more challenging environment to execute capital projects. For example, due to social distancing consideration, we're reducing our capital spending plans.

We expect spending for the year to be closer to $800 million down from our initial guidance.

We will continue to advance projects and invest in maintenance necessary to run our operations safely and effectively of course, but some discretionary projects will be put on hold.

Next slide please.

Over the past several years, we have been diversifying our sources of funding, particularly working capital funding so as not to be relying on any one source.

These new sources of funding could you will see p. facilities, you engineer national receivable securitization facilities and restructure trade financing facilities.

In March we added to this diversification by putting in place a U.S. inventory financing facility.

As it became apparent that the cobot Nike situation could disrupt capital markets, we put in place additional global credit facilities as well as issued $1.5 billion of term debt in order to minimize little more risk of our commercial paper program.

The term debt was rated solid single eight.

In addition, we have been approved before the fellow reserves commercial paper funding facility, which would serve as an additional backstop to our U.S. commercial paper facility.

As a result at the end of March we had cash and marketable securities of $4.7 billion in available untapped global credit facilities, a $5.9 billion.

The $4.7 billion of cash is much higher than a normal billion dollars that we would normally carry.

As it precaution due to dislocations in the short term credit markets, we saw in them until March.

In future quarter ends you should expect us to carry significantly lower cash balances as we now have the other liquidity facilities in place.

We also had $5.6 billion of readily marketable inventories, which if needed we could sell very quickly and turned into cash.

When taken together, we feel confident that we will be able to comfortably whether any prolong downside economic scenarios and continue funding all our financial in capital spending obligations, including dividends in the foreseeable future.

Please turn to slide seven.

Other business results were slightly down year over year.

Future Commission loss provisions were partially offset by improvements in captive insurance operations.

In the corporate lines unallocated corporate costs of $189 million were slightly higher year over year, principally due to continued investments in 18 business transformation.

Other charges increased due to the rare will make expenses die referred to earlier that we funded on behalf of your short line Railroad.

In which had an offsetting credit in tax expense.

Partially offset by improved worn hedging results on intercompany funding.

Net interest expense for the quarter was lower than last year benefiting from lower average borrowing costs from liability management actions taken in late 2019.

Effective January Onest, we decided to discontinue LIFO inventory valuation method of accounting and the copper results include a LIFO credit up $91 million or 12 cents per share due to the reversal of delightful reserve balance.

Please turn to slide eight.

The AG services in Oilseeds team did a great job to deliver strong results.

AG services results in more than doubled versus the first quarter of 2019, which has negatively impacted by high water conditions in North America.

Excellent performances in destination marketing instructor trade finance drove extremely strong results in global trade.

Robust farmer selling in Brazil drove higher year over year origination volume.

So in margins, which were partially offset by weaker results in North America.

Crushing results were lower than the prior year period.

Team delivered high overall crush volumes, including a Q1 record for soy crush.

Execution margins for solid, though but the old that hi realized margins in the first quarter of 2018, which benefit from the short crop in Argentina.

The prior year quarter also benefit from about $75 million of positive timing impacts.

Refined products in other results were higher versus the first quarter of 2019.

Higher margins in both bio diesel and refined oils in North America for offset by lower biodiesel margins in EMEA.

Peanut showing results were significantly improved versus the prior year period as our improvement actions continue to strengthen that business.

Well Maher results were significantly higher year over year due to stronger performances in tropical and oilseeds and grains.

Slide nine please.

Carbohydrate solutions results were lower than the first quarter of 2019.

As a reminder, starting this quarter, we are reporting different sub segments within this business.

The new starches and sweeteners sub segment, including wet mill ethanol results was down year over year.

Largely due to about $15 million in negative mark to Mark impacts on forward sales of corn oil.

Much of what could reverse over the balance of the year.

Absent those impacts results were higher due to improved manufacturing cost driven in part by improved improvements made at the Decatur complex last year.

Strong results in wheat milling as customers Philip pantries.

And improved performance in conditions in EMEA.

Including stronger demand and lower input costs.

Vantage corn processors or VCP, which includes our dry no ethanol results was slightly higher versus the prior year pro forma results.

Effective risk management combined the lack of severe weather impacts seen in the first quarter of 2019 helped offset weaker industry ethanol margins caused by significantly decreased demand.

To bring that transition to bridge the transition this quarter under the prior segmentation of carbohydrate solutions the old starches and sweeteners would have reported about $160 million of operating profit.

In the bio products sub segment would have reported about negative $92 million of losses.

Including the $50 million of negative mark to market impacts, which would have been split roughly equally between the two sub segments.

We have also include a pro forma 2019 restatement of carbohydrates solutions in the appendix to this presentation.

Slide 10 please.

Nutrition continues its growth trajectory with record results.

Our human nutrition business, formerly known as W. ESI delivered strong performance and growth across the broad portfolio, including flavors specialty ingredients and health and wellness.

Increased sales revenue in North America, and EMEA flavors continued sales growth in alternative proteins and additional Bioactives income helped drive improved results.

As one mentioned earlier, we did see higher demand some human nutrition areas as a result of new wins as well some pantry loading effects.

Animal nutrition is improved year over year results were driven by a strong performance from the old via.

Good volumes and margins in feed additives.

And solid sales and pet care.

The prior year quarter also had been negatively impacted by about $10 million in upfront purchase price adjustments related to Neil will be.

Amino acids were negatively impacted by a year over year decline in the global pricing environment.

No prices were directionally improved over Q4 of 2019.

We're also very pleased that we met our knee, albeit synergy targets more than two years early.

Our forward look includes some uncertainty as the impacts from the cobot Nike pandemic continues to reverberate through the global economy.

Despite this uncertainty has one indicated earlier, we remained focus on the drivers under our control and we're on track to deliver to that target range of controllable benefits this year.

Now turning to the second quarter.

Directionally.

First AG services in Oilseeds, we expect segment results to be lower than Q1.

Subject to mark to market impacts.

As AG services seasonally normalizes.

Crush margins have come off the highs in.

In the RPL business has some headwinds on near term demand.

In carbohydrate solutions, we expect the second quarter to be slightly bedded in Q1 of this year, but much lower than the year ago quarter as ethanol industry demand in margins continued to be a negative driver in food service demand negatively impact start negatively impacts starches and sweeteners.

For nutrition, we feel confident that the business will continue to advance to another calendar year of 20% plus growth.

Now please turn to slide 11, and I'll turn it back over to one.

Thank you Ray.

I spoke a lot at the beginning of the cold So I'll just close by saying this.

Encoder forward existence is the believed that food is fundamentally.

The sustained purse fulfills us on fuels, our well being.

Today.

Our role in providing for that leave it's more critical than ever.

All of our teams are put in a safety first let's say support the global food supply chain.

We are meeting need that have changed dramatically in just the last few months.

I will be there to continue to provide the tradition to the world as we emerge from this challenge.

I have never been proud there to be part of this team and this company and they never been more confident about our ability to meet the challenges of today and tomorrow.

With that Jack Please open the line for questions.

Certainly at this time, if you'd like to ask a question. Please press star one please limit yourself to one question.

And gaming with Stephens Your line is open.

Yes, thanks, good morning, everybody.

One of them.

I want to ask a question I'll start with crushing I appreciate the color that you all gave.

Two part question line, if you could quantify what the mark to market impact was for the quarter and then too.

When we look at the data relative to what we can track the result in the quarter.

For quite a bit lower than we would've expected and I'm wondering perhaps there is something we can't track, whether its basis or some sort of utilization dynamic and and the facilities.

That limited a your ability to generate.

In a little bit higher gross margins any color that you can provide to elaborate on on what's happening there would be helpful.

Yeah. Let me then let me start Ben and then a rate can touch on the mark to market.

So I think what what what happened what you'll see in the first quarter is that.

The been market was supported basically by Chinese fine simply by a while the mill buys you is impacted by demand issues. So you'll see a cash margins in being this.

They are.

[music].

They tend to track both crash, but this quarter they impact of soybean basis.

The ability of the farmer to hold the beans increase impacted our margins so margins are down year to year.

By about a $15.

But on so so I think that desk glut.

What explains the situation of course.

We have expectations that the over at all.

Temporary adjustment of the shift in demand will subside, though some of these.

Some of our customers love it because this adjustment, but I think in North America that with the biggest impact if you will see being cash only been base has higher metal values.

Being a little bit soft due to lack of them on improved service with regards to the mark to market I think vacant provide some morgan.

On the Mark to market impact as I indicated last year. If you recall, we had some very favorable mark to market impacts both $75 million.

This quarter, we Didnt I didn't highlight anything on the call because it was not material, but if you recall that we we entered the quarter with a fairly large balance in terms of deferred gains.

But what happened as you know as is the board crush actually went up during the course of March right and so therefore, we actually had mark to market losses, there and so when do you actually taking account of deferred gains coming into the quarter end to end the mark to market the new Mark to market losses that we talk as board crush went up in netted out to be fairly immature.

Well I mean, just Opex you know, it's there's really not meaningful in terms of the overall results there.

Do you want to remind you is actually in your supplemental information that at the end the first quarter, we still have about $80 million of deferred gains that will be recognized as we kind of move through the rest of the year. There. So hopefully that will help you in terms understand where that where the mark to market currently stands.

It does thank you my second question is related to the starches sweeteners business appreciate the bridge back to a apples to apples result.

And I appreciate the Twoq commentary I'm curious.

When you think about the cobot operating environment, the stronger demand for containerboard stronger demand for packaged foods consumption.

Netted against weaker demand for foodservice do you think this environment is is net positive or negative for starters and sweeteners and then the big move down that we've seen that corn costs, while I realize you all hedge a significant component of your costs, there how impactful as that business.

Yeah, I wouldn't say as we look of the demand for Ah Starches sweeteners, Ben we see that.

The demand was strong for us at least in January and February So I think that Oh, we saw some decline in demand in March but not that significant we see we saw more significant demand decline in April.

Over the last two weeks and I'm talking about mostly sweeteners and starches over the last two weeks, we have seen orders pick up bucket little bit again, so maybe there is a little bit more.

Energy into foodservice markets around the world right now.

So I would say from that demand of sweeteners and starches, we're gonna see a bigger impact in second quarter to that maybe we sold during the first quarter of course, the second quarter, we have less of a mark to market corn oil issues and we will continue to enjoy some of the brokers they operational improvements were strong.

The they improvement going on or European operations were stronger than merely has a very good quarter and we're going to have some as you said a lower net corn cost of all Dod so, but when do you take all that the puts and takes with a slower demand would probably see a slight.

Improvement versus Q1 into Q2, but not the significant.

Okay. Thanks, good luck.

Thank you Evan.

Robert Moskow with credit Suisse. Your line is open.

Hi, Thanks.

Hey, you know there's increased consumption of food at home.

Is it your your message here is that that only partially offsets.

A decline from consumption of food away from home.

And I guess that flows through.

Vegetable oils starches sweeteners.

Maybe talk a little bit about the impact on on animal care also maybe there was a pull forward into first quarter, but does that is that that that's the big food consumption message that you have here.

Rob I think that.

It depends on the business and our exposure to foodservice versus retail. So if you go to the million business Amelie business had a very good.

First ordered and we had good demand everywhere in the world if you'll see the nutrition business I have less exposure to foodservice was.

Very strong quarter, it and that continues to grow.

So I would say it they'll have said depends.

On your mix when we go to things like for example, the corn oil corn oil goes more to retail so we sold but sort of them on tour for things like chips on the other kind a soybean oil goes to load. So foodservice. So we see a little be the weakness there when we talking about foodservice we.

Thing, though that but normally we saw the trough.

Oh, you know in in the late late late April that maybe they order there. So the beginning for the beginning of May and we started to see over the last two weeks since becoming a little bit better. So I think we are a little bit more optimistic as some of the economist started to reopen we started to see that we have the benefit will be.

And that globally competitive, we see that pandemic evolving from east to west.

So are we seeing already foodservice is in Asia, you know getting back to maybe 70% to 80% of where they used to be of course more much more or so the liberties and takeouts and things like Dod than actually in Rome and gross dining.

But we see a little bit that's come back. So again I think you should think about for ATM. They impact has been more in foodservice is north America in terms of oil because even package oils in Europe, and South America Sans South American Euro Catholics impact to foodservice, we have been a little bit motor.

Bust on.

The last point of your question the already guardedly anymore. The today show.

I would only among the three show with the.

With the acquisition up they all of your has become very global Liberty Ics very much a diversified into many many applications.

Business sub segments. So we saw strength on that then we expect a lot of that the strength to continue North America as being more impacted.

And ER and yes, we are going to see some of that reduction trees in North America throw it in the second quarter multi media. Please on your Douglas.

Okay, and then a follow up if I could you know there's been a lot I don't have news flow about liquidations in a U.S. livestock.

It sounds like a temporary thing.

And what point does that become a risk to domestic soy meal demand here in the U.S. and you have any outlook on that.

Yeah of course that.

Hey, this is unfortunate old old this impact that cobiz, because being having India. So many people and so many industries.

And when we look at the when we look at the demand for soybean meal with everything that's happened of course is gonna be lower than we have anticipated before.

But I think when you need to think about this is a temporary adjustment in most of our customers are shifting as quickly as possible from what sort of is still retail deskpro is gonna be a there is still a strong demand in the retail area and we started to see much more they increase so.

China imports from the United States in terms of four componentry and that will help maybe able to our most so to access surveyed the access surveyed that the demand for soybean meal. So medium term, where a constructive I think in the into short term we need to go through these.

Volatility or customers shifting there they are partnering with Sunday, we will have to go through that probably in Q2.

Okay. Thank you.

No one combo.

Ben Kallo with Baird. Your line is open.

[music].

Hi, Thanks for taking my questions are.

Two questions just want to kind of going back to a lot for your talk.

After the Q4 results could you just talked about maybe just generally you know how you view the market going forward and your level of visibility.

Your better or worse.

And then could you just talked rather nutrition business, because I think it gets lost curve and all.

Other parts of the business.

The rig significant improvements or just.

He said the there's the growth will continue next year, but could you just talk more depth about how we should take.

Margin expansion.

The different trends are driving the business I know you've put love investments so.

Just just reminding us.

How we should think about that business, especially in.

Yes, this unchartered territory, but how that holds up.

There's a lot there with perforation.

Oh, that's alright, thank you, but so let me start with koby the Hell I see the world now versus how I saw the last time, we spoke.

First of all I'm.

Well done and also a little bit surprised how well we managed to keep their operations going through all these have you will have told me there will be running more than 800 plants around the world Cup or would the minimum on staffing with the people in court in teen and running the rest of the company of remotely I mean I think is.

Testament of the resilience of the ATM people business model. So I'm very proud of that second I think fundamentally.

We remain very confident because first of all we hit the ground. Ronnie this year that almost ahead of schedule in most of our improvements remember, we called four or 500 to 600 million dollar so.

Self-help here and that's I said in my remarks, we are the through 25% up they are we probably 30%.

Accomplish their so so happy with Dod I'm happy with where executing and they all have yet we achieved the synergies two years ahead of schedule. So so the team is clicking on all the boxes that they would promise to shareholders and then unto the board that we were going to do in terms of demand you know I'm I'm not.

Finally, a little bit more relaxed because we are in the food in the city, we're blessed with that and there is the same number two miles how they're eating so so I would roll of fees in the world continues to be as important as before we need to go through this shift it and this shift benefits some businesses and.

And I'm creates a.

You know short term disruptions in some other business, but the fundamentals the fundamental impact of Cobi in the first quarter was to the carbohydrates solution business in terms of ethanol.

There was some biodiesel, but biodiesel north American navigate the better South America and.

In Europe looks a little bit 40, more impacted in terms of biodiesel, but I would say the big impact with scarp solution in ethanol and and that this is something that a you know it was a very big impact because we want to come in Norway. The in a situation of high inventories and the industry has negative margin is already bye.

And we got into that Thunder, but you'll see us again, focusing on why why we can control Dan So what do we need the crashed for example, we have adjusted crush margins in North American Crusher rates in operating rates in North America, two to two or two to have said that the little bit that the short term.

Issue on demand that we're having and we took the difficult decision uptake two of the Diamond style.

In North America, so so I see I see fundamentally the demand being sold it for US margins are still good margins and I still see.

All the things said that the business has been under manipulating because being focused on keeping in all cylinders I'm going a little bit ahead of schedule less of near or below the 500 to 600 million and the readiness efforts.

When you are talking about nutrition, I said two older what investors over the last year only half that they've been supporting us sort of all day investment facing nutritionals and nutrition have not been showing that in the piano. Because this was organic growth that we have.

Some you know growing pains into some of these assets as you build them and you have defined as them but.

But when you see when you see no, but starting to help and he is well we predicted before it's all those wins all that innovation. We always said we have our value proposition is resonating with our customers. We had that that line was a little bit LASG by all the study.

Gross I was coming now all that organic growth peacekeeping there the p. analysis, because these investments southern maturing and you're gonna see that then we grew 23% profits last year. We are growing we're gonna grow on other north of 20%. This year you see wf aside.

During this so take nail via an animal nutrition out for a minute since the first quarter, it's a little bit effect of a strange comparison, because we acquired this last first quarter. So.

But if you take w. FSRU w. emphasize.

Hasn't grown Ernie is up 28% into first quarter. So we continue a little bit the wisdom of 23 that we deliver last year them flavors started growing up revenue was 7.8%. So so we feel pretty good about that business. It's a very diversified business and if anything we're experiencing called it would.

People that come back from these pandemic like we've seen in Asia.

People come back with the more we dining hands focused on health and they then the importance of call. It the nutrition floor. There for they are well being so we've seen the probiotics I wear health <unk> Wellness Center segment is up like a 24% income.

So revenue because.

The sale. So those products are sold humans is has been there has been thoroughly reemphasized by all this garbage so.

We think that we're in the right segments. We think we have the right rather than make so we feel very bullish about continue this performance Florida.

For the nutrition business.

Thank you.

Let's take one more if I can.

The ranges on capital allocation.

Yeah.

You know how are you looking out just because I'm sure there's some distress.

Businesses out there that could fit into your portfolio. So has that started to happen yet or.

This is you have bigger fish to Fry, Oh, or how do we think about that but it is just from an acquisition for 30.

Yeah from a from a cap allocation perspective, as you know that this year, we are focusing further deleveraging the balance sheet to get towards our low twos target range in terms of no debt to EBITDA at the same time as you point out me there could be you know opportunities out there and we're always looking at opportunities out there. So.

So nothing nothing clear right now, but ER I think we'll just keep an open or keep our ears and eyes open, but I got priority at least in the near term is to get our balance sheet into a a little bit lower in terms of the leverage position.

Thanks, Chris.

Thank you Evan.

Tom Simonitsch with Jpmorgan Your line is open.

Good morning.

Uh huh.

I'd say, just given the food and fuel demand can you comment on the outlook for biodiesel demand and production relative to their expectations for this year and there's never a potential for a double negative freight the energy cut U.S. production and for CGI tax credits or or those credits just embedded in the margin structure.

I think on biodiesel demand, what we're seeing Tom is.

In Europe, or we're actually seeing more of a hit in terms of our biodiesel demand part part of it just simply due to the fact that as you in Europe passenger cars actually use diesel a lot introduced in addition to commercial vehicles. So when you have to shelter in place orders come in for Europe, Bob It really negatively impacted the demand environment over there.

Well, what's interesting in United States, we actually have not seen that that drop off in fact in the early part of the corner, we actually saw strong demand for diesel because as you know.

Trucks, the trucking industry were actually running very very hard in order to keep the warehouses supplied and as airlines kind of shut down a lot of the goods actually start moving on on the truck front. So so we've seen on on the bio diesel front, which is tied to the really diesel demand that United States actually has held up reasonably well.

In terms of our block our biodiesel pocketing, we've got at a lot of Valerie sold out into the second and third quarter. So we feel good about.

You know this part of the business actually holding up right now.

<unk>.

Hi, guys how fun, that's the classification on the the railway tax credits.

You noted that the cost of acquiring this tax credits reduced your pre tax profit. He just confirm that all those associated costs are recognized in the same quarter as the tax benefit.

Yes, I can confirm that again on a GAAP statement its into cost of goods sold on the management State men. So you can look at the other charges line in that four Mount and if you look in the appendix you can see all that information there like the $73 million of tax credits fully reflected in the other Chargers line of of the management statement there.

That's great and just one last one from me if you could maybe just give us some more color around the a negative mark to market in corn oil auditing I've seen that for say.

Why are we saying that this quarter.

Yeah, you're right I've never really talked about mark to market on corn oil before in par earnings calls and and frankly the last time, we actually saw this was about 10 years ago. So what happened was as ethanol plants slowed down around the country.

Then as you know corn oil as a byproduct of out of ethanol production. So we actually saw a reduction in terms of supply of corn oil at the same kind as one indicated earlier, we actually saw a significant demand for flight snacks like chips, so they're actually demand for corn oil actually went up and so we actually is.

Start seeing a divergence between soybean oil prices in corn oil prices, which I guess historically track very closely with one another.

And so as corn oil prices and this really occurred started occurring at the end of March as corn oil prices moved up.

We have a for block of sales contracts in corn oil in some of those sales contracts are actually index. The bean oil right and that's just because of history in terms of how how these prices have colitis. So when we actually mark the book at the end of March for the fourth sales contracts that were index to being a while we actually have to take up.

Mark to market loss on that now I do expect as I indicated in my comments that part of this mark to market impact you know should reverse it could reverse as we kind of move through the year I'll do the two factors one with higher corn oil prices that means the co product credit will actually go up.

As we kind of move through the year, which means net corn costs are compared to where we were at the beginning the year should actually come down.

Then secondly, as as we move through the year as ethanol production actually you know starts ramping up due to gasoline demand are returning and as the shelter in place orders come off and maybe chip and start to come back off a little but then you should actually start seeing a historical correlation start returning back again, so that to me.

And why I I feel that had some kind of moved through the next 12 months probably in the back half a year I should expect for half of to make the mark to market to come back in the form other lower net corn costs or mark to market reversals as one anything I think pretty second quarter I do expect I expect that the negative mark to market to kinda, it's not going to be the same magnitude 50 million.

We may have some slightly slightly negative mark to market in the second quarter as well in carb solutions.

Thanks, Ray I'll pass it off.

Ken Zaslow with Bank of America Montreal Your line is open.

Hey, good morning, everyone.

Okay.

And just a couple of quick ones on the vegetable oil side are you still making favorable spreads or have they gone to negative and is there any thoughts of maybe you're pulling back capacity or anything like that has definitely yes.

Well as I've said before we have adjusted crush in North America little bit so we'd run card in the first quarter ER and ER and then at the end of a large we oh, we adjusted gosh into April a little bit. So so when one building on that.

In in the unless I said before I think that soybean oil mostly has to being affected thing they're all side in North America has been a lot at biodiesel impacting the other places, but package oils as being a more robust in the other two Gilbert.

Yes in Europe, so somebody.

And can you also take us around the world or the crush margins in Europe.

China, Canada, holding up better than that of the U.S. and if so what do you attribute that to.

Yeah, I think I think in Europe are largely as a are you know.

25 to $35 per dawn, so so a little bit better.

I'm not saying that.

A couple of things.

Argentine crush is still not that nothing major a threat to Europe or it.

Maybe six to wait a few weeks you know when the product off all the harvest started hitting the shores of Europe, maybe and then I think that.

Having them meet in meat is seen in very good demand in Europe for all that retail issue and did the retail segment and a leap bunkers in Europe has smaller plants. So I think that they they have fewer people in all that plan. So the issue of.

Maybe a copy of the spreading them on workers comp being less of an issue there they show in Europe or hasn't been though of course, the the biodiesel as Ray mentioned before biodiesel is use more for passenger transportation in Europe, So that will absolutely shutdown.

And.

So we we adjusted the rate to some of those plans at the moment, where we are running as much a soy crush as we kind of course, given or what advantages. There Brasil margins are moderating the 15 to 25.

Dollars picked on.

There you know the big farmer selling demand for four or four oil has been for package always has been good I wear.

And then biodiesel we've been able to two are moving up by at least so they are in Brazil is tied to economic activity and.

Let's look at Bussinger track the passenger car, they're in and we've been able to much more to that the domain as demand for me because I continue to be pretty strong most of our customers. They are not exporting a lot of their meat to China, so that demand being very strong guidance that you know other.

And that one announcement of a plan through with some issues.

In poultry.

We could go all the plan so our customers have been running.

Brazil. So so so far so goes impressive so I would say or one of the big things that you that we notice this this quarter.

In terms, so close soybean oil hasn't been.

Great benefits of Crabbing global trade desk, I actually working together to facilitate that we continue to crush car because basically they took care of Oh, the oil exporting not oil and do you see the one of the benefit to the combination between the I've started this is business.

And always hit business is that the global trade works either to place a little bit more from North America meal into export markets or a lot of the oil.

In into the export markets. So our plans can continue to have that has been very beneficial to us.

It is my last question is well we are finally get.

I.

Consolidation, where a reduction of number of players in ethanol is this a.

An event that to really change that.

Structure of the ethanol.

Industry or is it one of those you'll see a a production Todd everybody goes down then it just kind of rebound how do you think about that and I'll leave it there. Thank you.

Yeah, Ben Yeah. Okay. That's a good question I think I think it depends on probably the duration of piece of this situation.

Then the them the industry's working at the lowest production.

Rates ever.

And I think that we sold more than 70, plus and going down.

And for somebody to have last before it depends on how long it takes for that plan to be down.

After a few months things started becoming complicated than maybe fewer of those plans will be able to come back. So it depends how quickly margins rebound, but I would say it or if there is a prolonged activity or low gasoline prices on margins.

Continued to be down for a while I think that you would see you would see some players and outcome in buck whether that that's enough to restructure the industry or you know, it's probably a toll automatic question, Dan that's I guess.

I guess to ER to answer at this point.

Great. Thank you very much.

Heather Jones with head of research your line is open.

Hi, Thanks for taking the question.

I never run out time, so I'll just do just quickly has your corporate expense outlook changed at all given the deterioration economic outlook.

No no Heather I know, we were a little lower in the first quarter, but a lot of the initiatives that we announced in our in our fourth quarter call in terms of our our business transformation, we have not slowed that down.

In fact, the old one argues that these business transformation initiatives are actually very very important you know for the long term a baby and so we have not a we have not dilute it from those particular strategic initiatives. There. So the guidance that we provide to you in the fourth quarter for the calendar years remains in place.

I think the only thing that's changed in terms of below line is like interest expense.

I think that with the additional long term debt that we put onto the balance sheet you should expect pie our net interest expense probably be similar to where we were last year.

Okay. Thank you for that and then warn you had mentioned that you guys moderated your crush rate coming into Q2 lately I've been hearing multiple report that Dino whats been oil storage in the U.S. has become.

Constrained and so just wondering if he can walk us through that and.

How serious it is and if so you know our for is further moderation gonna be required.

Yeah, I think that during the first quarter.

So with that with yes, just in March when when we saw the decline in ER in economic activity around the world a dozen became a limiting factor for krausz. It was like you know do you have an offset the you have a a house for for soybean oil.

As I said, we have been good that using our integration to make that soybean oil disappeared and keep keep crush margins up.

Of course.

You know the longer they do stake.

You know inventories and start to pick up another everybody have the same ability to place those are those things with us and and Theres a lot of people fighting for liquid storage. These days in North America, So, but I would say I think we're comfortable with the level of adjust.

Men in bidding in production that we have at this point, we adjusted about five percentage points I'm not saying for now that that's good.

So we don't foresee more at this point.

And as I said before has everything that we started to see clear yeah, I'm talking about ATM, specifically I wasn't sure about what's going to happen for the rest of the into stable, but that's I said you know, we we have that benefit of that integration with a global trade.

But I would say over the last week and two weeks us China started to reopen.

On us Europe prepares to reopen and I knew some cases they have done so.

We started to see a little bit more activity and I don't know if people are replenishing the pipeline to the in preparation for the summer or a lot.

But but all of those kind of a pickup a little bit over the last two weeks in Germany for radian.

That's great color. Thank you so much.

Okay.

As a reminder, please limit yourself to one question Vincent Andrews with Morgan Stanley. Your line is open.

Hi, Thanks for taking my question after the hour and I'll keep to one could you just remind us how the the way we used to call W. FSR, how that business did during the last recession or in economic slowdowns in general I'm just thinking once we get pass code that there's really still going to be a recessionary environment for you know who knows how long, but a lot.

Enough so any any help there would be it would be great.

Yeah, well or.

You know we didn't have a W. Aside from the last recession, so it's difficult to compare.

But I think it's a good question in the sense that.

The business is a relatively less exposed to foodservice or done or that maybe other segments that we have in the company.

And that is very very diversified because the systems and the labels and the pantries. So growth that goes into almost every product whether it's a food or beverage. So I wouldn't say printed with assistance in that point I think that the thing that.

We are watching very careful because there's no does much the absolute them on which we feel comfortable at where where they may be softer in previous score. If any was in Q1 may maybe there is some adjustment to pantry filling but I think where we are we are seeing is oh, where I work.

When rates or whatever related to place new new orders or bring new products has been strong I would ability to provide the existing sales for existing products to existing customers have being good.

And I think there what we may see because we saw that in Asia is that a little bit of deceleration in innovations in foodservice hits in the first order because logically companies they focus more on the liberty or pickups or or or E. Commerce. They tend to emphasize the traditional.

Okay. So you know you're never going to go too, but to a foodservice restaurant and northern takeout something you you're normally go to something that you know so we've seen a little bit that decline I've got started to come back slowly, but that probably will be the shift that shifted they may be that we sell board of existing products than the proportion we used to sell off in nobody.

Products. So we think that they impact of the recession, maybe a little bit of a delay in the introduction of why wouldn't you problems.

Thank you very much.

Thank you Vince.

Michael Piken with Cleveland Research your line is open.

Yeah, Hi, also limit it to one question on if you could just talk a little bit about that kind of what's happening down in Brazil with the port infrastructure and you know obviously a lot of talk about how they're managing cover 19 or what else differently, but that how are your operations by now there are you seeing any put back ups and I know you had to fight on farmer selling being pretty good budget deal.

Overall state of the AG economy down in Brazil would be great.

Yeah, I would say listen the team identified of course, a very early or potentially a boards could be a week fall into him in in terms of the they called me the issue and you know we took all came up precautions to make sure that that was not the case or whatnot impact though.

And I would say at this point in time, we have no issues in terms, so being able to being able to load.

Then my being a little bit up an extra costs here or there, but nothing nothing material that that we should worry about.

In Argentina, there has been a little bit though.

Even in the face to be honest. So when I said, we were preparing because we were to prepare for the big export market because of course, China has a lot of appetite then I'm Brazilian farmer selling so we saw that flow what are going to have higher volumes, which we saw those higher volumes and we see it even even during Q2, so I would say.

Given that they are working in exceptional volumes that performance has been a stellar because to be honest minimal disruptions. Some disruptions in Argentina, because that bought another anybody's Betty loading water. So we have to move some of the loads to buy a blank a little bit boarding day in day Ocean side of the gun.

But but also there we'd be we've been looking well already we changed the ports. So I would say and then even even there around the world Romania had the record exports on the ports were there as well. So I think there will be happy where we'd be happy there in terms of Hello.

I see Brazil agenda.

You know this cobiz. The I think may is gonna be a tough month.

It goes we are fighting this to a these two streams on one side the economy of the social pressure to come back to work.

And that that the people basically need.

For for their livelihood and then B.

The number of cases, just isn't going up and I think that their ability to control that.

Makes me a little bit worry about engender held situation in Brazil in the in May but.

But other than that I would say or so far maybe daily was this segment. There has been impacted the most from our customers perspective, but for the rest the so far the business for us has been a strong.

Vincent Anderson with Stifel. Your line is open.

Thanks for sneaking me in.

Just quickly on yoga.

I was hoping you can break out the improvement in the quarter between one the synergies obviously, the $10 million a adjustment from last year, a broader revenue improvement and then maybe any seasonal factors just.

For the purpose of framing what the new baseline of earnings power should be for that business or equal.

Yeah. The it's a it's a I'm not sure I have the breakout the D.C., but.

Let me say the solar wind, but didn't know via the way you need to think about it is because it's very diversified geographically I'm very diversify into different sub segment. So it's a I don't want to goes into a long explanation, but I think the important thing if you remember when I see when a when we acquired in the.

Yeah, what I said.

Then they owe via story.

It's actually a margin up story. So he was very complimentary to aid yeah from a geographical perspective on the businesses perspective, but it was a large enough story and and although I wear business. The 90 Monday attrition was about 9% to beat the marginal sale, so it'll get worried about the.

There will be a business was lower than Dod and then I would I were expectation was to.

Start moving up that business in two or three.

He faces and I'm happy to report that a.

Margins are improving in the all the us. So we described so we went from the large enough about a 6.5% to about 9% into Q1. So it's a business that is starting to get closer to our first the or did you know goal of about 10% and then we.

No we were planning to go into into the lower teens. So so it's a business that.

Okay. So many segments and so many geography Sunday at old recovered in differentially I'm being impacted differently. So I don't think that the Q1, yes, it's a very acutely some very good quarter for us to go into a lot of.

Analysis into the future because again, we have all these economies there is a lot of southeast Asia that this peerless impacted.

By quarter and of items. There is China. This coming back there isn't Brasil that hasn't been impacted there is Mexico that it's been impact is right now that its north America that this more impacted so.

I think that second quarter will give us maybe a better better time to make this analysis, but the business will continue to improve that we have rate revisiting the synergy numbers of goes up that we achieved the.

The 50 million euros start to get that we set for ourselves. So so we're still are there still gonna be growth rate positive growth rate, the still gonna be increasing EBITDA margin, though sales.

Just the market at this point in time is to fluid to develop they all go to yourself right now.

That's fair enough. Thank you very much.

And our final question comes from line of Adam Samuelson with Goldman Sachs.

Ah. Thank you everyone. Thanks for squeezing in.

Hi, I laugh person on AG services.

We haven't talked a lot on this call just thinking about the outlook over the balance of the a high with what looks to be a much bigger U.S. supply corn potentially being a just given the planted acreage and velocity demand in ethanol and just wanted to get your sense of the outlook in Atlanta.

Business is actually improving probably more second half weighted but.

Because of used today relative to where you might have been two months ago.

Yeah I think.

Go ahead.

I think we're actually encouraged in terms of AG services in terms of how they started out in the first quarter Im very strong results Tom.

We're also encouraged like the planning estimate United States are actually fairly strong too so it'd be quite of improvement in terms of the acreage this year compared to last year, where it was negatively impacted by weather. So we should actually have some you know assuming a weather holds up into planning gets and we should actually have a very good crop up both corn and soybeans.

As we kind of go through this year in United States I think the big variable Adam is gonna be the China in the phase one deal as one indicated we're very encouraged in terms of China coming in the first quarter to buy.

Frankly, a whole host portfolio of agricultural products, you got sorghum, you got wheat.

Got you know corn and in some soybeans all so right now so we're very encouraged in terms of what China is doing right now in terms of agricultural purchases and all the signals that were getting from both the U.S. side in the China side is that there will be executing their agricultural a portion of phase one.

Consistent with what they they talked about so we think as we kind of move through the year.

That that China will be increasing the amount of purchases of U.S. agricultural products. So you are seeing that significantly in terms of animal proteins.

For meat chicken means that the year over year purchases by China are in the area X, 300% higher in terms of pork and big numbers in terms of pulled screen in beef as well, but in terms of soybeans, yeah, we're still thinking that for the year. It could be 30 to 35 million metric tons of purchases.

I'm United States.

As we move through the year and that's going to be very supportive in terms of the AG services business, particularly in the back half with a year here. So so overall I have to say that were very constructive if trying to buys buys corn. In addition to soybeans, that's going be extremely constructive and then the area the other variable.

That's why I mentioned is that ethanol as part of the phase one deal is being viewed as part of the agricultural basket in terms of purchases so as China moves towards honoring the $36 billion of agricultural purchases or it's very possible that ethanol will enter the picture, particularly in the into fourth quarter now [noise].

All right going on from Us up again, thanks, so much.

I will now turn the call back.

Okay.

Thank you for joining us today slide 12 note some upcoming investor event, which will in which we will be participating as always please feel free to follow up with me. If you have any other questions have a good day and thanks for your time and interest in ATM.

This concludes the ATM first quarter 2020 earnings conference call. We thank you for your participation you may now disconnect.

[music].

[music].

Ladies and gentlemen, thank you for standing by and welcome to the.

First quarter 2020 earnings conference call.

All lines have been placed on to listen only mode to prevent any background noise. As a reminder, this conference call is being recorded now like to introduce your host for today's call Victoria, Delaware, Vice President Investor Relations for Archer Daniels ATM.

Mr. Only work you may begin.

Thank you Jack good morning, and welcome to 80, M. <unk> first quarter earnings webcast.

Starting tomorrow, a replay of today's webcast will be available at 80 M Dot com.

For those following the presentation. Please turn to slide to the company's Safe Harbor statement, which says that some of our comments the material constitute forward looking statements that reflect management's current views estimates of future economic circumstances industry condition company performance and financial result.

These statements and materials are based on many assumptions and factors that are subject to risks and uncertainties.

It had been provided additional information in its reports on file with the FCC concerning assumptions and factors that could cause actual results to differ materially from those in the presentation and you should carefully reviewed the assumptions and factors in our FCC report.

To the extent permitted under applicable law 80, and assumes no obligation to update any forward looking statements as a result of new information for future events.

On today's webcast, our chairman and CEO, one the Seattle will provide an overview of eating actions and operations in the current situation our plans for the teacher and our view of market condition.

Our Chief Financial Officer, Ray Young will review financial highlights in corporate result, as well as the drivers of our performance.

Well then share some closing comments.

Afterwards, I'll take your question.

Please turn to slide three I will now turn the call over to one.

Thank you Victoria.

Thank you everyone who is joining us.

I hope everyone listening is staying say telling folks it.

We said, obviously extra ordinary times, so I'd like to take a little time today to shared with you might sold well pretty important topics.

First.

Hey, Jim is working to protect our teams how we're continuing to grow by nutrition to the world.

Second how we're thinking about that we're starting to see a long term plans.

This unique times.

Sure.

Beautiful, the near and medium term demand and part of into the market conditions.

Let me start, but youre, putting my thanks to our global team I'm partners.

More than eight hundreds facilities, so simple stores flotation assets around the globe.

If you didn't call it seemed to first quarter not only contained a word operations, but in some areas set production records.

These men and women are supporting their global short supply chain because something done.

Mediums you'd been video so people, who don't know read yet I need a pretty big.

We are grateful for that commitment.

Oh sensipar their colleagues here being enabled by our word I team to work remotely I know show when their flexibility and ingenuity to give the rest of our business running this mostly.

Just a month ago, where we're having discussions about whether we'd be able to hub. This earnings call when I wouldn't northpark walked Italy schedule or whether we should be let you a week or more.

Thanks to our global business services I T I'm, probably not show teams, we closed our where to Q1 books or what ready to hub. This gold would you have today.

They took those 38000 colleagues and you can see why that's up to date.

Maybe I missed continuing to full field work purpose by providing nutrition around the globe without any significant operational interruptions, you do Colby 19 outbreaks.

Or not I'm grateful to be part of these are great team.

Well all of our what ATM colleagues, who are listening on this call.

But I wouldn't be our achievements as well.

I will leadership team is doing everything we can to support our colleagues.

Circumstances change fast so every morning.

<unk> I would have cross functional leadership team has met to review the global situation.

Valuate, new risks and make timely this is shows to protect our teams and our business.

We put in place strict guidelines to protect our employees cycle instructors from an act in troubled with strict shows early in the year.

Could it be called focus on enabling social this doses you know what production facilities.

Two ongoing remote work.

When colleagues do develop symptoms, we helped throttle calls will be signed to protect them and others, who might have come in contact with them as well that supports continue we do hope operations.

This includes paid leave before all colleagues do you wouldn't require quite anything periods, where necessary to support where necessary to support them and their families.

So far all your relatively small number it afraid you haven't called except tested plus.

Tragically.

We did software that were first cobiz related fatalities two weeks ago.

I would've thought or with everyone who has been personally impacted by these disputes.

I would ATM colleague Emergency fund this available at 14 members, who are facing that caught on the car ship due to the crisis.

That's through a de Emcares, we have committed funds on other resources to support a there was in communities around the World War, serving on the front line into fight against copied and 18.

We also late summer early this it shows you noted that the strengths I need the EMS position during goes we're sure to be a challenging operational uneconomic and vitamin.

For example.

Over the balance sheet has historically been a source of strength is what ATM.

And in March we further enhanced our cash position not reduce or what exposure to short term credit market risks.

By issuing $1.5 billion in turn that.

We are taking other actions, including reducing capital spending to reflect practical limitations in this embodiments in December <unk>, well is still completely thrushes necessarily to one thing that were facilities in the same truck product good order.

Sounds good it because it's been a district promotion.

Our team is delivering.

I will first quarter to adjusted earnings per share was 64 cents.

Adjusted segment operating profit was 600 I was 43 million.

I would have trailing fourth quarter adjusted otherwise see was 7.6 person.

Our performance is a testament to our team's ability to fulfill our where to critical role in the global food supply chain.

Deliver results to our shareholders, despite incurring equally challenging circumstances.

Let's turn to slide four.

If you can see even amid this global challenges. We're also continuing their wear to work to ensure the ATM remains strong and buy in the years to come.

We are not slowing down in our commitment to the liberty not we're starting to ship, noting that where to focus on the business drivers on that our work on throat.

What actions to improve the company.

I'm proud that even if I were seeing what's keeping our operations running under difficult circumstances.

They also made great progress had been seem to strategic imperatives, we've defined this year.

With accomplishments like improving capital efficiency next there to be since I always seats.

But as you know where centre of expertise structure within your global supply chain organization.

The Liberty no not wouldn't lvs synergies more than two years ahead, the hardware to target.

And we continued to a bus readiness, which she answered program began.

I looked $920 million seemed run great benefits on an annual basis.

All told same store where themes great work, we have a cheap about 30%. If I were 500 to 600 million entire to get things start to get that improvements for 2020.

And we continue to feel good about the beat you know what a goal by the end of the year.

What else are ensuring we live up to where would it could it the cold rolled assist the word no justify what a company, but off the natural resources that thought or bitel due out where business I know where future.

In 2011, we announced our where 15 by 20 plus.

Which we committed to 30 units improvements in energy use.

Hello, gossip michels water and waste to landfill bite when you're doing.

We met each of those goals hit those because.

This year, we were proud to on deals even more ambitious commitments.

To reduce or what upsold greenhouse gas emissions by 25% I know what energy intensity by 15%.

The next 15 years.

Finally.

I'd like to talk a little bit above that would have you if the markets and our future.

With major western economies shut down.

Encouraged by the actions many nations heartache into contain the spread gabi 19, and enabled and eventual recovery.

Hello, Doug recovery unfolds.

Where and at what pace, if something would be money doing very carefully.

And what precise predictions at this point so difficult third if your ways. We can cut their go to <unk> some of that market in Bucks were seeing.

We saw a short term acceleration in demand for something products, such a flower or staples packaged goods that we provide slave course on ingredients for.

Consumer slowed a bit their pantry senior bonds to stay at home orders.

Many of these products have reach or will reach saturation point, and we expect them out and to normalize.

Then there are products that have been impacted us a direct result of their bodies national or local stay at home orders.

But again nothing close we find that was what foodservice, that's where the biofuels like ethanol and biodiesel.

As you know.

The difficult decision last week I had the tool if I were dry mills I made continued low gasoline demand.

We would expect to see some of these demod build but came to us economies reopened.

There will be a significant body ability, depending on when and how those will be openings will occur.

We're also seeing volatility in marketing them vitamins for certain commodity products as a markets constantly and we have always global supply and the button balances do you have to worry about <unk> <unk>.

One key element, where following closely here the phase one trade agreement with China.

Saying goodbye now for U.S., having a culture of products by China, So far this year, which could bode well for future purchases into back half of the or.

Equally importantly, I would go but footprint gives us continued country. That's you know what I'm really to support global trade flows of food and agriculture products.

Then that are the changing behaviors with my child the longer term in Bucks.

For example in the food market, we're seeing a back to basics approach.

I just saw your comfort foods snacks, and the stapler goods, while consumers are staying home.

We're seeing consumers increasing their purchases online, which impacts the month for industrial start just used to make cardboard.

We're seeing on increasing interesting products to support health and wellness.

That aren't many unknowns, what we do know however.

He said the transformation that they didn't help them that taking over the last several years, there's no helping ensure that were well equipped.

People to whatever that were to customers require or whatever the world needs.

We build up I worked brother before.

What footprint, our wedding novation and that would agility.

And we're planning for the future.

For example, but we thought about the potential for longer term changes in Calgary, all interact with each other.

Our team launched better choice innovation sessions with customers in order to ensure that we can continue to meet their needs.

We are didnt immune from some of the negative effects of the Pandemics any cycling on me called out.

We're confident in the ability of what a great team to continue to provide nutrition around the globe.

Now Ray will take us through our business performance before I come back to offer so I would find those comments before we go to Q Sundays rape list.

Thanks won a good day everyone.

Please turn to slide lives.

I like to start by echoing ones, thanks to our ATM colleagues around the globe.

We're fortunate to have this team and very grateful for their dedication.

As one mentioned adjusted EPS for the quarter was 64 cents up from the 46 cents in the prior year quarter.

Excluding specified items adjusted segment operating profit was $643 million.

Our trailing four quarter average adjusted ROI C was 7.6%.

Higher than our 2020 black up 5.75%.

In our trailing fourth quarter adjusted EBITDA was about $3.5 billion.

The effective tax rate for the first quarter 2020 was approximately a positive 4% compared to an expense of 26% in the prior year.

The favorable current quarter rate was due primarily to the impact of U.S. tax credit signed into law in December.

Including railway maintenance tax credits.

Tax credits, primarily benefit our business partners in are substantially passed onto them through the prices of goods and services, we negotiate to support their respective businesses.

That maintenance expense is reflected in the cost of goods sold line of our GAAP statements and then the other charges line in the management's statements.

Looking ahead, we're now expecting effective tax rate to be in a range of 13% to 15% before any discrete tax items.

We generated about $800 million of cash from operations before working capital for the year higher than 2019.

Return of capital for the first quarter was about $315 million, including about $110 million, an opportunistic share repurchases that will offset dilution for the year.

We finished the quarter with a net debt to total capital ratio of about 29%.

Alan from 32% a year ago.

Capital spending for the quarter was about $200 million.

As one said in view of a more challenging environment to execute capital projects. For example, due to social distancing consideration, we're reducing our capital spending plans.

We expect spending for the year to be closer to $800 million down from our initial guidance.

We will continue to advance projects and invest in maintenance necessary to run our operations safely and effectively of course, but some discretionary projects will be put on hold.

Next slide please.

Over the past several years, we have been diversifying our sources of funding, particularly working capital funding so as not to be relying on any one source.

These new sources of funding code year olds, CP facilities, you engineer national receivable securitization facilities infrastructure trade financing facilities.

In March we added to this diversification by putting in place at U.S. inventory financing facility.

As it became apparent that the cold that 19 situation could disrupt capital markets. We put in place additional global credit facilities as well as issued $1.5 billion of term debt in order to minimize little more risk of our commercial paper program.

The term debt whats rate at solid single eight.

In addition, we have been approved for the federal reserves commercial paper funding facility, which would serve as an additional backstop to our U.S. commercial paper facility.

As a result at the end of March we had cash and marketable securities of $4.7 billion in available untapped global credit facilities, a $5.9 billion.

The $4.7 billion of cash is much higher than the normal billion dollars that we would normally carry.

As it precaution due to dislocations in the short term credit markets. We saw in the month of March.

In future quarter ends you should expect us to carry significantly lower cash balances as we now have the other liquidity facilities in place.

We also had $5.6 billion of readily marketable inventories, which if needed we could sell very quickly and turned into cash.

When taken together, we feel confident that we will be able to comfortably whether any prolonged downside economic scenarios and continue funding all of our financial in capital spending obligations, including dividends in the foreseeable future.

Please turn to slide seven.

Other business results were slightly down year over year.

Future Commission loss provisions were partially offset by improvements in captive insurance operations.

In the corporate line unallocated corporate costs of $189 million were slightly higher year over year, principally due to continued investments in 18 business transformation.

Other charges increased due to the rare will make the expenses die referred to earlier that we funded on behalf of your short line Railroad.

And which had an offsetting credit in tax expense.

Partially offset by improved worn hedging results on intercompany funding.

Net interest expense for the quarter was lower than last year benefiting from lower average borrowing costs from liability management actions taken in late 2019.

Effective January Onest, we decided to discontinue LIFO inventory valuation method of accounting and the copper results include delightful quite up $91 million or 12 cents per share due to the reversal of delightful reserve balance.

Please turn to slide eight.

The AG services in oil <unk> team did a great job to deliver strong results.

AG services results are more than doubled versus the first quarter of 2019, which has negatively impacted by high water conditions in North America.

Excellent performances in destination marketing instructor trade finance drove extremely strong results in global trade.

Robust farmer selling in Brazil drove higher year over year origination volumes and margins, which were partially offset by weaker results in North America.

Crushing results were lower than the prior year period.

The team delivered high overall crush volumes, including a two one record for soy crush.

Execution margins were solid built with old that hi realized margins in the first quarter of 2019, which benefit from the short crop in Argentina.

The prior year quarter also benefit from about $75 million of positive timing impacts.

Refined products and other results for a higher versus the first quarter of 2019.

Higher margins in both bio diesel and refined oils in North America for offset by lower biodiesel margins in EMEA.

Do you not showing results were significantly improved versus the prior year period as our improvement actions continued to strengthen that business.

Well my results were significantly higher year over year due to stronger performances in tropical and oilseeds and grains.

Slide nine please.

Carbohydrate solutions results were lower than the first quarter of 2019.

As a reminder, starting this quarter, we are reporting different sub segments within this business.

The new starches and sweeteners sub segment, including wet mill ethanol results was down year over year.

Largely due to about $50 million in negative mark to mark impacts on for sales of corn oil.

Much of what could reverse over the balance of the year.

Absent those impacts results were higher due to improved manufacturing cost driven in part by improved improvements made at the Decatur complex last year.

Strong results in wheat milling as customers Phil Pantries.

And improved performance in conditions in EMEA.

Including stronger demand and lower input costs.

Vantage corn processors or VCP, which includes our dry mill ethanol results was slightly higher versus the prior year pro forma results.

Effective risk management combined the lack of severe weather impact seen in the first quarter of 2019 helped offset weaker industry ethanol margins caused by significantly decreased demand.

To bring that transition to bridge the transition this quarter.

Over the prior segmentation of carbohydrate solutions.

The old starches and sweeteners would have reported about $160 million of operating profit.

And the bio products sub segment would have reported about negative $92 million of losses.

Including the $50 million of negative mark to market impacts, which would have been split roughly equally between the two sub segments.

We have also include a pro forma 2019 restatement of carbohydrates solutions in the appendix to this presentation.

Slide 10 please.

Nutrition continues its growth trajectory with record results.

Our human nutrition business, formerly known as W. F. S. I delivered strong performance and growth across the broad portfolio, including flavors specialty ingredients and health and wellness.

Increased sales revenue in North America, and EMEA flavors continued sales growth in alternative proteins and additional Bioactives income helped drive improved results.

As one mentioned earlier, we did see higher demand and some human nutrition areas as a result of new wins as well some pantry loading effects.

Animal nutrition has improved year over year results were driven by a strong performance from the Olivia.

Good volumes and margins in feed additives.

And solid sales and pet care.

The prior year quarter also had be negatively impacted by about $10 million in upfront purchase price adjustments related to knee Olivia.

Amino acids were negatively impacted by a year over year decline into global pricing environment.

They'll prices were directionally improved over Q4 of 2018.

We're also very pleased that we met our knee, albeit synergy targets more than two years early.

Our fourth law includes some uncertainty at the impacts from the Cobot Nike pandemic continue to reverberate through the global economy.

Despite this uncertainty as one indicated earlier, we remained focus on the drivers under our control and we're on track to deliver to that target range of control what benefits this year.

Now turning to the second quarter.

Directionally.

First AG services in Oilseeds, we expect segment results to be lower than Q1.

Subject to mark to market impacts.

As AG services seasonally normalizes.

Crush margins have come off the highs.

In the RPL business had some headwinds on near term demand.

In carbohydrates solutions, we expect the second quarter to be slightly better than in Q1 of this year, but much lower than the year ago quarter as ethanol industry demand in margins continued to be a negative driver in food service demand negatively impact start negatively impacts starches and sweeteners.

For nutrition, we feel confident that the business will continue to advance to another calendar year up 20% plus growth.

Now please turn to slide 11, and I'll turn it back over to one.

Thank you Ray.

I spoke a lot at the beginning of the calls so I just close by saying this.

The go forward existence is the believed that food is fundamentally.

The sustained plus full field test of fuel is how well being.

Today I.

I would roll in providing for that need it's more critical than ever.

All that word theme surplus safety first let's say support the global food supply chain.

Right and it didn't need that have changed dramatically in just the last few months.

I will be there to continue to provide the tradition to the world as we emerge from this challenge.

I've never been probably are there to be part of this thing.

This company and they never been more confident about or whatever related to meet the challenges of today and tomorrow.

With that Jack.

Open the lines for questions.

Certainly at this time, if you'd like to ask your question. Please press star one please limit yourself to one question.

Dan Marino with Stephens Your line is open.

Yeah. Thanks, good morning, everybody.

More of that.

I want to ask a question I'll start with crushing I appreciate the color that you all gave.

Two part question one if you could quantify what the mark to market impact was for the quarter and then too.

You know when we look at the data relative to what we can track the results in the quarter.

We're quite a bit lower than we would've expected and I'm wondering perhaps that are something we can't track, whether its basis, where some sort of utilization dynamic and and the facilities.

That limited.

Our ability to generate.

In a little bit higher crush margins any color that you can provide to elaborate on on what's happening there would be helpful.

Yeah, Let me, let me start Ben and then outbreak and touch on the Mark to market Uh Huh.

So I think what what what happened what you'll see in the first quarter is that.

The bidding market was supported basically by Chinese fine simply by a while the middle buys you was impacted by them on issues. So you'll see a cash margins in being this.

They are.

[music].

They tend to track both crash, but this quarter they influx of soybean basis.

The ability of that hardware to hold debate is increasing but that that weren't margins. So margins are down year to year.

By about a $15.

But on so so I think that desk glut.

What explains the situation of course.

We have expectations got the overall pinpoint already adjustment of the shift in demand was subside, though some of these are some of our customer.

But I think getting North America, that's the biggest impact if you will see being cash only been basis by made advisors.

In a little bit so you have to lack of them on their books or.

With regard to the Mark to market I think like and provide some logan.

[music].

On the Mark to market impact as I indicated last year. If you recall, we had some very favorable mark to market impacts both $75 million.

This quarter, we didn't I didn't highlight anything on the call because it was not material, but if you recall that we we entered the quarter with a fairly large balance in terms of deferred gains.

But what happened as you know as is the board crush actually went up during the course of March right and so therefore, we actually had mark to market losses, there and so when do you actually taking account of did for gains coming into the quarter end to end the mark to Mark the new Mark to market losses that we talk is more crush went up the netted out to be fairly immature.

Well I mean, just open next you know, it's there's really not meaningful in terms of the overall results there.

Do you want to remind you is actually in your supplemental information that at the end the first quarter, we still have about $80 million of deferred gains that will be recognized as we kind of move through the rest of the year. There. So hopefully that will help you in terms to understand where the where the mark to market currently stands.

It does thank you.

Second question as it related to the starches sweeteners business appreciate the bridge back to a apples to apples ruble.

And I appreciate the Twoq commentary I'm curious.

When you think about the cobot operating environment, the stronger demand for containerboard stronger demand for packaged foods consumption.

Ah netted against weaker demand for foodservice do you think.

This environment.

As is net positive or negative for starters and sweeteners and then the big move down that we've seen that corn costs, while I realize you all hedge a significant component of your costs there.

How impactful as that business.

Yeah, I wouldn't say as we look of the demand for Ah start to so sweet than ours, Ben we see that.

The demand was strong for us at least in John you already have it already so I think that.

We saw some decline in demand in the March but not that significant we see we sell more significant them on a decline in April.

Over the last two weeks and I'm talking about mostly sweeteners and starches over the last two weeks, we have seen or there's pickup buck a little bit again, so maybe 30, so little bit more energy into foodservice markets around the world right now.

So I would say from that demand the sweeteners and starches, we're going to see a bigger impact in second quarter to that maybe we saw in the first quarter of course, the second quarter, we have less of a mark to market corn oil issues and we will continue to enjoy some of the brokers they operational improvements were strong.

The they improvement on a European operations, where a strong Miller has a very good quarter.

I'm going to have some bus you said no weren't that corn cost the whole Dod so, but when do you take all that the puts and takes with a slower to them on we'd probably see a slight improvement versus Q1 into Q2, but not the significant.

Okay. Thanks, good luck.

Thank you Evan.

Robert Moskow with credit Suisse. Your line is open.

Hi, Thanks.

Hey, you know there's increased consumption of food at home.

Is it your your message here is that that only partially offsets.

A decline from consumption of food away from home.

And.

That flows through.

Vegetable oils starches and sweeteners.

Maybe talk a little bit about the impact on on animal care also maybe there was a pull forward into first quarter, but does that is that that that's the big <unk> consumption message that you have here.

Rob I think that.

It depends on the business and I would exposure to foodservice versus retail. So if you go to the million business the middle of business had a very good.

First ordered and had a good demand everywhere in the world. If you see that nutrition business I have less exposure to foodservice was.

Very strong quarter done that continues to grow.

So I would say <unk>.

They have said depending.

On your mix when we go to a thinks like for example, the corn oil corn oil goes more to a retail so we saw a little bit sort of the montral pools things like chips on the other tightened a soybean always goes to a lot. So foodservice. So we see a little do the weakness there when we spoken about foodservice.

Thing, though that probably we saw the trough.

Oh, you know in in the late late late April may be they order there so they get it towards the beginning of May and we started to see over the last two weeks since becoming a little bit better. So I think we are a little bit more optimistic at some of the economist started totally open we started to see that we have the benefit they'll be.

And the global competitor, we see that button that make up old being from east to west.

So are we seeing already full service you see in Asia, you know getting back to maybe 70% to 80% of where they used to be of course more much mode on the liberties, and takeouts and things like Dod than actually even grown and girls dining.

But we see a little bit that's come back. So again I think you should think about for AG and they like us being more in foodservice is North America has done so oil because even package oils in Europe on South America Sands, South America, Europe has less impactful foodservice, we have been a little bit motor.

Boston.

Well the last part of your question with regard to blame anybody the today show.

I would only muzzle three show with.

A with the acquisition up they all of your has become very global them Caredx very much a diversified into many many applications.

Business sub segment. So we saw sprang from Dod and we expect a lot of that the strengths to continue North America has been more impacted.

And and yes, we are going to see some of that a reduction in trees in North America throw it in the second quarter multi media.

Okay, and then a follow up if I could you know there's been a lot.

Hello about liquidations in a U.S. livestock.

It sounds like a temporary thing.

And what point does that become a risk to domestic soy meal demand here in the U.S.

You have any outlook on that.

Yeah of course that ER.

I mean, it's unfortunate the old all this impact a copy of kids being having indeed, so many people and so many industries.

And when we look at the when we look at the demand for soybean meal with everything that's happened of course is gonna be lower than we have anticipated before.

But I think when you do need to think about this is at them CODI adjustment in most of our customers are shifting as quickly as possible from what sort of is still retail desperate old is gonna be that there is still a strong demand in the retail area and we started to see much more they could do so.

China imports from the United States in terms of forward Composedly and that's a little help me the Otas and also to access survey the access surveyed the demand for soybean meal, So a million therms, where a constructive I think in the in the short term we need to go through these.

Volatility or customers shifting there they are popping the Sunday, we will have to go through that probably in Q2.

Okay. Thank you.

It comes up.

Ben Kallo with Baird. Your line is open.

Oh.

Hi, Thanks for taking my questions. So two questions just want.

Going back to a lot from your talk.

Before results could you just talk about maybe just generally how you view the market going for and your level of visibility.

Your better or worse.

Good.

And then could you just talked about the nutrition business, because I think it gets loss curves and all.

The other parts of the business.

The rate significant improvements there. It's just there I know you said the there's the growth will come to next year, but could you just talk more adept at Bell we should think.

Margin expansion.

Different trends are driving the business.

So I think the just just remind us.

How we should think about that business, especially.

Yes, this spot charter territory, but how that holds up.

I know, there's a lot there thank you.

Alright. Thank event. So let me start with Koby, that's how I see the world now versus how do I saw is the last time, we spoke.

First of all I'm, a put out there and also a little bit surprised how well we managed to keep their operations going through all these if you will have told me that we'll be at running more than 800 plants around the World Cup.

With minimal stuffy and with the people in court and teen and running the rest of the company of remotely I mean, I think is testament of the resilience of the ATM people them business model, so very proud of that.

Second I think fundamentally a we remain very confident because first of all we hit the ground. Ronnie this year that almost ahead of schedule in most of our improvements remember, we called four or 500 to 600 million dollar so.

Self-help here and that's I said in my remarks, we are the through 25% of the year, we'd probably 30%.

Computerish there so so I'm happy with Dod I'm happy with where executing in may or may be a we achieved the sooner just two years ahead of schedule. So so the team is clicking on all the bulk says that that would probably still should hold or send them on to the board that we were going to do in terms of demand you know I'm I'm norm.

Maybe a little bit more relaxed because we had in the food in the city, we're blessed with that that there is the same number of miles how they're eating so so I will roll fees in the world continues to be less important than before we need to go through this shift.

This shift benefit some businesses and and creates a.

You know a short term disruptions in some of their business, but the fundamentals the fundamental impact also cobiz in that first quarter was to the carbohydrate a solution business in terms of death I know that there was some biodiesel, but biodiesel north American that'd be great they did better or something.

America and.

In Europe looks a little bit 40, more impacted in terms of biodiesel, but I would say the big impact plus GARP solution in ethanol then.

That is something that a you know.

It was a very big getting but because we weren't coming okay. The in a situation no high inventories and the industry has negative margin is already by the time, we got the into that Thunder, but you'll see us again, focusing on weight why we can control Dan So what do we need the crashed for example, we have adjusted crush margins in North America.

Sure rates in operating rates, you know somebody's got to two who are due to offset that the little bit that the short term issue on the Monday, where hobby and we took the difficult decision uptake tool and die style.

In North America, so so I see I see fundamentally the demand being sold it for US margins are still good margins and I still see.

All the things of that business has been under my leadership team because being focused on keeping in all selling there so I'm going to little bit ahead of schedule less up near or below the 500 600 million.

The readiness exports.

When you are talking about nutrition, I said to all of what investors over the last year on behalf that they'd been supporting us sort of all day investment facing they'll do show.

No finish and have not been showing dived into PML. Because this was sort of gotten good old if that we have some some you know growing pains into some of this often you build them and you have to find those them but.

But when you see a when you see now let's start getting to help and he's well we predicted before it's all those wins all that the innovation. We always said we have our value proposition is resonating with our customers. We had that that line walk a little bit LASG by all these sort of gotten.

It could also what's coming now all that don't have gotten it could own peacekeeping that they'd be analysis, because this investment southern maturing and you're going to see that then we grew 23% profits last year. We are growing that we're going to grow another north of 20%. This here you see wf aside.

Indeed, so take nail via an animal nutrition out for the minutes is the first quarter two so little bit of it off a strange come bodies. Some because we acquired this last first quarter. So, but you could think w. FSRU w. emphasized.

Hi, good all erroneous up 28%.

First quarter, so we can thing or a little good. The reason was 23 that with the LIBOR last year them flavor started growing up the revenue was 7.8%. So so we feel pretty good about that business. It's a very diversified business and if anything we are experiencing called it with people that come back somebody's pandemic like we've seen in Asia.

Yes, you said people come back with a more we then it sounds foreclosed on health and then the importance of quality at nutrition before they are pulled they are well being so we've seen that probiotics I wouldn't health Wellness Center segment is up like a but 20.

<unk> per se that himself revenue because the sale. So those products are sold humans is that's being there have been thoroughly ria plus size by all this garbage so.

We think that we only in the right segments. We think we have the right, but other than make so we feel very bullish about continue this performance Florida.

For the nutrition business.

Thank you.

Let's take one more if I can.

The ranges on capital allocation.

Oh it.

How are you looking out just because I'm sure there's some distress.

Businesses out there that could fit into your portfolio. So has that started to happen yet or.

This is your bigger fish to Fry, Oh, or how do we think about though.

As for with acquisition for fishing.

Yeah from from a cap allocation perspective, as you know that this year, we our focus and further deleveraging the balance sheet to get towards our low twos target range in terms of no debt to EBITDA at the same time as you point out me there could be you know opportunities out there and we're always looking at opportunities out there. So so nothing.

Nothing clear right now, but I think we'll just keep an open keep our ears and eyes opened but again priority at least in the near term is to get our balance sheet into a a little bit lower in terms of the leverage position.

Thanks, Chris.

Thank you Evan.

Tom Simonitsch with Jpmorgan Your line is open.

Good morning.

Other income.

I'd say, just given the food and fuel demand can you comment on the outlook or by diesel demand and production relative to their expectations. This year and is there potential for a double negative grade the M. A C cut U.S. production and full GAAP tax credits or whether its credits just embedded in the margin structure.

I think on biodiesel demand, what we're seeing Tom is.

In Europe.

We're actually seeing a more of a hit in terms of our biodiesel demand part part of it just simply do the fact that as you in Europe passenger cars actually use diesel a lot introduced in addition to commercial vehicles sold when you have to shelter in place orders come in for Europe up it really negatively impacted the demand environment over there as.

What's interesting in United States. So we actually have not seen that that drop off in fact in the early part of the quarter, we actually saw strong demand for diesel because as you know.

Trucks, the trucking industry, you actually running very very hard in order to keep the warehouses supplied and as airlines kind of shut down a lot of the goods actually start moving on to truck front. So so we've seen on on the bio diesel front, which is tied to the really diesel demand that United States actually has held up reasonably well no.

In terms of our block our biodiesel Falkland, we've got it a lot of Valerie sold out into the second and third quarter. So we feel good about you know this part of the business actually holding up right now.

Hi, guys helped fund the classification on the the railway tax credits the nature of the that the cost of acquiring this tax credit is reduced to a pre tax profit. He just confirm that all those associated costs are recognized in the same quota as the tax benefit.

Yes, I can confirm that again the on a GAAP statement its into cost of goods sold on the management State men. So you can look at the other charges line and that full amount and if you look in the appendix, you'll see all that information there that the $73 million of tax credits fully reflected in the other Chargers line of of the management statement there.

That's great and just one last one from me if you could maybe just give us some more color around the negative mark to market corn oil auditing I've seen that.

For say.

Why are we saying that this quota.

Yeah, you're right I've never really talked about mark to market on corn oil before in par earnings calls and frankly, the last time, we actually saw this was about 10 years ago. So what happened was as ethanol plants slowed down around the country.

Then as you know corn oil as a byproduct of Oh affecting all production. So we actually saw a reduction in terms of supply of corn oil at the same time has won indicated earlier, we actually saw a significant demand for fried snacks like chips. So they're actually demand for corn will actually went up and so we actually is.

Part seen a divergence between soybean oil prices in corn oil prices, which I guess historically track very closely with one another.

And so as corn oil prices and this really occurred started occurring at the end of March as corn oil prices moved up.

We have a for block of skills contracts in corn oil in some of those sales contracts are actually index. The bean oil right and that's just because of history in terms of how how these prices have qualified so when we actually mark the block at the end of March for the fourth sales contracts that were index to being a while we actually had to take up.

Mark to market loss on that now I do expect as I indicated in my comments that part of this mark to market impact should reverse it could reverse as we kind of move through the year.

Due to two factors, one with higher corn oil prices that means the coproduct credit will actually go up as we kind of move through the year, which means net corn costs are compared to where we were at the beginning the year should actually come down.

And then secondly, as as we move through the year as ethanol production actually you know starts ramping up due to gasoline demand I, returning and as the shelter in place orders come off and maybe chipped in and start to come back off a little but then you should actually start seeing a historical correlation start returning back again and so that's one.

Reason why I I feel that as you kind of moved through the next 12 months probably in the back half the year I should expect about half of to make the mark to market to come back in the form other lower net corn costs or mark to market reversals as one entity I think pretty second quarter I do it's probably expect that negative mark to market to kinda, it's not going to be the same magnitude 50 million.

But we may have some slightly slightly negative mark to market in the second quarter as well in carb solutions.

Thanks, Craig I'll pass it on.

Ken Zaslow with Bank of America Montreal Your line is open.

And everyone.

Okay.

And just a couple of quick ones on the vegetable oil side are you still making favorable spreads or have they gone to negative and in is there any thoughts of maybe he'll pulling back capacity or anything on that how has that playing out.

Well I said before we have adjusted crush in North America little bit so we'd run card.

The first quarter ER and then at the end of a large we oh, we adjusted gosh into April a little bit. So so when one building on that anywhere in the unless I said before I think that soybean oil mostly has to being affected thing.

As side in North America has vein, Florida biodiesel impacting the other places, but package oils as being a more robust in the other to deal with a focus in Europe. So somebody.

And can you also take us around the world or the crush margins in Europe.

China, Canada, holding up better than that of the U.S. and if so what do you attribute that to.

Yeah, I think I think in Europe or margins. How are you know, but 25 to $35 per dawn, so ah so a little bit better.

I'm, not saying that a couple of things that.

Argentine crush is still not that nothing major a threat to Europe.

Maybe six to wait a few weeks you know when the product or for the heart of this started hitting the shores of Europe, maybe and then I think that covering that made me is saying im very good demand in Europe for all that retail issue.

Did that retail segment, and a week bunkers and Euro Cup smaller plants. So I think that they have fewer people in all that plan. So the issue of maybe a coffee this putting them on workers comp being less of an issue there they show in Europe or hasn't been though of course the.

The biodiesel as Ray mentioned before biodiesel is you a smaller for Bussinger transportation in Europe, So that will help to looking to shutdown.

And I'm.

So we we adjusted the rate to some of those plans at the moment, where we are running as much a soy crush us weakening of course, given or what advantage. There Brasil margins are moderating the 15 to 25.

Dollars picked on.

There you know the big farmer selling the mine for for for oil has been for package always has been good.

Oh, we're.

And then bio they said we've been able to who are moving up by at least so they are in Brazil is tied to economic activity.

Let's look at Bussinger track the passenger car they are doing and we've been able to bond dashboard that the domain as demand for me because I continue to be buddies at all or most of our customers. They are not exporting a lot of they are meet the China, so that demand being very strong gathering.

You know other than that one announcement off at Blanca with some issues.

In poultry.

We could go all the plan so I would customers have been running.

But I feel so so so far so goes impressive so I would say or one of the big things like do you that we note is this a this quarter.

In terms, so close soybean oil it hasn't been a great benefits of copying the global trade desk I've, Charlie working together to facilitate that Weve continued to cut our Chicago because basically they took care of Oh, the oil export industry oil and do you see the way.

The benefit till the combination between the I've started this is business and always hit businesses.

The global trade works either to place a little bit more from North America meal into export markets or a lot of the oil.

In into the export markets. So our plans can continue to crop that has been very beneficial to us.

It is my last question is well we are finally get.

He.

Consolidation or a reduction of number of players ethanol is this a.

An event that could really change that.

Structure of the ethanol.

Industry or is it one of those you know you'll see a a production costs everybody goes down and then it just kind of rebound how do you think about that and I'll leave it there. Thank you.

Yeah, but yeah, okay, and that's a good question I think I think it it depends on but over the duration of piece of this a situation.