Q4 2020 Bunge Ltd Earnings Call
Thanks, Gary and welcome to the <unk> fourth quarter 2020 earnings release and conference call.
All participants will be in listen only mode.
After todays presentation, there will be and opportunity to ask questions should you need assistance. Please signal a conference specialist by pressing the star key followed by zero. Please.
Please note. This event is being recorded I would now like to turn the conference over to Ruth Ann lives here and please go ahead.
Thank you and myself and thank you for joining us this morning for our fourth quarter earnings call before we get started and I want to let you know that we have slides to accompany our discussion. These can be found and the investors section of our website at bunge dot com under events and presentations reconciliations of non-GAAP measures to the most directly comparable GAAP financial.
Actual measures are posted on our website as well.
I'd like to direct you to slide two and remind you that today's presentation includes forward looking statements that reflect <unk> current view with respect to future events financial performance and industry conditions as well.
Forward looking statements are subject to various risks and uncertainties, but he has provided additional information and its reports on file with the SEC concerning factors that could cause actual results to differ materially from those contained in this presentation and we encourage you to review these factors on the call. This morning are Greg Heckman, <unk> Chief Executive Officer.
And John <unk>, Chief Financial Officer, I'll, now turn the call over to Greg.
Thank you Roxanne and good morning, everyone.
Turning to slide three you'll see the agenda for today's call.
I'll start with some highlights of our 2020 accomplishments and look into 2021 before handing over to John Who'll go into more detail on our outstanding performance and outlook.
And then share some closing thoughts before opening and one for your questions.
Let's start with an overview of the year turning to slide four.
We have to begin any discussion around 2020 performance with a big congratulations and thank you and the entire bunge chain.
And we started the transformation and a specific plan for turning the company into the highly functioning successful organization, we all know and can be.
The team has embraced the process driving operational performance optimizing our portfolio strengthening our financial discipline.
And they did it during one of the most challenging environments in recent history.
Thanks for the teams and crumbled focus and adaptability and this is our strongest performance on record to date.
Moving on our positive earnings trend over the last 24 months.
So as we go through our results for the year Youll see the power and the new pumps one of the significant changes we made was transforming our operating model to improve visibility and speed to act.
As a result, the commercial and industrial teams are better coordinated and helping us to maximize our assets and.
And 2020 outside of Argentina, we.
We processed record volumes and soy and soft seed crush and our commercial teams ensured our plants had supplies they needed and our industrial teams reduced unplanned downtime at the facilities by.
And by more than 30% year over year, and soy and approximately 20% year over year and soft seeds.
This improved capacity utilization and brought immediate financial benefits without any significant additional use of cash.
Just one example of how this more global approach and has improved our network efficiency.
And we're also better able to capitalize on market and customer opportunities and they rose throughout the year.
As Covid Lockdowns changed consumer eating habits, we quickly adjusted our production to help some of the world's leading brands continued to keep their products on store shelves.
We also work closely with our foodservice customers as they continue to adapt to the changing demand patterns.
This agility is also critical as we continue to look and how our vital work can be done more sustainably.
And we're proud to me and the industry leader and protecting the environment and areas, where we operate.
We are a leading supplier of certified deforestation free soy from Brazil.
And as we work to reduce greenhouse gas emissions and our operations.
We're converting more facilities over to wind and solar power.
For instance, our corn and soybean processing plants and chances run on wind today, and we recently announced and DLT use renewable energy at our Fort worth Texas packaging facility.
As we look at our assets, we've now announced all of the significant portfolio optimization actions. We originally identified.
These major changes behind us, we can now shift our focus to continuous improvement and growth opportunities and.
And the immediate future, we know that Covid will still be with us.
Continue to remain focused on our top priority and protecting our team and their families and communities.
Our global and regional Covid crisis teams continue to meet regularly to make sure our operations have the resources and tools needed to keep our employees safe. So we can continue to serve our customers.
Now, let's turn to our results on slide five.
With our strong team and unmatched platform, we've created a resilient model from moving forward.
This quarter and the full year really highlight and the earnings power of that platform.
We benefited from improving trends throughout the year, and we're able to move quickly to capture the opportunities presented themselves and markets around the world.
During the year, we saw demand led markets higher volumes volatility and prices.
And with our platform and operating model, including our industry, leading risk management, we captured upside well above our earnings baseline.
And the fourth quarter agribusiness benefited from a better than expected market environment, with particularly strong results and our north American operations, driven by higher oilseed crush and elevation margins.
And edible oils, we realized exceptional margins and our Brazilian consumer business and also benefited from increasing demand from biodiesel and South America, and renewable diesel and the U S.
We continue to innovate and deliver solutions that benefit our customers on both ends of the supply chain consumers and farmers and agree.
Great example of this is care about shape, a substitute for cocoa butter, we launched and the fourth quarter of sustainably sourced ingredients, but also benefits the communities and Africa, where we source Shay.
2020 also demonstrated the power of our approach to risk management.
There will always be volatility in this industry, but our approach to risk management allows us to capture the upside of that volatility and protect against most of the downside.
While we won't always manage it perfectly. This approach is what makes our model unique and powerful.
The strength will be critical as we look ahead into 2021.
Many of the conditions that helped drive our success in 2020 remain in place today.
And we don't have clear visibility into the second half of the year.
And while we don't expect all of the conditions that exist and in 2020 to repeat in 'twenty and 'twenty one we do expect.
To deliver adjusted EPS of at least $6 per share.
Our team will be closely watching the key factors that could impact our forecast.
<unk> changes and demand crop production and a post COVID-19 recovery.
And with that I'll hand, the call over to John and walk through the financial results in detail and we will then close with some additional thoughts on 2021.
Thanks, Greg Good morning, everyone, let's.
Let's turn to the earning highlighted in slide six.
Our reported fourth quarter earnings per share were $3 74, compared to a loss of <unk> 48, and the fourth quarter of 2019.
Adjusted EPS from $3 five from the fourth quarter versus $1 69, and the prior year.
Our reported results included a net gain of 59 <unk>.
Primarily related to a previously announced sale of our Brazilian margin and mayonnaise assets as well as the impact of and indirect tax credits related to the favorable resolution of a tax claim.
For the full year 2020 earnings per share were $7 71.
First the loss of $9 34 and 2019.
Adjusted full year EPS was $8 30.
Versus $4 76 from the prior year.
Adjusted core segment earnings before interest and taxes, or EBIT was 637 million and the quarter versus adjusted EBIT of $467 million and the prior year, driven by strong performances, and our agribusiness and edible oils segments.
Agribusiness closeout and excellent year with a very strong fourth quarter.
Higher oilseeds results were primarily driven by soft seed processing, where earnings were higher and all regions driven by robust veg oil demand and record capacity utilization.
So a processing results were in line with the prior year as improvements in our North American and Asian operations were offset by South America and Europe.
And grades higher results were primarily driven by our North American operations, which benefited from strong export demand and exceptional execution of logistics.
Results also benefited from favorable risk management, and optimization and our global trading and distribution business.
And South America earnings decreased largely due to lower origination volumes as farmers and accelerated sales earlier in the year and respond to the spike and mobile prices.
Edible oils finished off what turned out to be an excellent year with very strong results of $113 million up $38 million compared to last year, primarily driven by higher margins and our consumer business in Brazil, as a result of tight supply and strong demand.
Higher results in North America were largely due to increased demand for renewable diesel sector and higher contributions with our key customers.
Results were also higher and Asia, driven by lower costs.
Earnings declined in Europe, due to lower margins.
And milling low results in the quarter were driven by North America, which was impacted by lower volumes and margins as well as the loss of earnings from our Rice milling operation, which was sold during the quarter.
Results in South America were in line with last year as higher volumes were offset by lower margins.
Fertilizer also had a strong quarter with results from $32 million similar to 2019, finishing off a very strong year.
Total adjusted EBIT for corporate and other for the quarter was comprised of a negative $81 million from corporate and $2 million from either.
This compares to a negative $95 million from corporate and negative $60 million from other from the prior year.
The decrease and corporate expenses during the quarter was primarily related to the timing of performance based compensation accruals and the prior year.
The increase reflects and prior year impact of our beyond meat investments.
Results for our 50 50 joint venture with BP benefited from higher year over year average ethanol prices in local currency as well as improved industrial efficiency.
Earnings and in fourth quarter of last year benefited from lower depreciation due to our Brazilian sugar and bioenergy operations being classified as held for sale.
For the quarter and year ended December 31, 2020 income tax expense was $97 million and $248 million, respectively, compared to $16 million and $86 million respectively from the prior year.
The increase in income tax expense during 2020 was primarily due to higher pre tax income.
Adjusting for notable items the effective tax rate for the year was just under 17%.
The effective tax rate was lower than our prior forecast primarily due to earnings mix.
Net interest expense of $66 million was slightly higher than our prior forecast due to increased short term borrowings to support higher commodity prices and volumes.
Let's turn to slide seven.
Here you can see our positive earnings trend adjusted for notable items and some timing differences over the past four years, reflecting the execution of our strategy to drive operational performance optimize our portfolio and strength and financial discipline.
Slide eight compares our full year 2020, adjusted SG&A to the prior year.
We achieved underlying addressable and SG&A savings of $50 billion toward our savings target of $50 million to $60 million is established and our June business update.
While we are pleased with our progress we recognize a portion of the savings will accelerate due to COVID-19 related restrictions such as reduced travel.
However, we are confident we will return to pre pandemic levels as we've all learned to operate differently and we will continue our focus on further streamlining the business.
The net increase of $90 million and specified items reflects a significant increase and performance based compensation accruals due to our improved financial performance. This year slightly offset by other items, such as inflation and the impact of foreign currency fluctuations.
Moving to slide nine.
For the full year 2020, or cash generation, excluding notable items and mark to market timing differences were strong with approximately $1 9 billion of adjusted funds from operations.
Cash flow generation enabled us to comfortably fund our cash obligations over the year and apply retained cash of $1 $1 billion to reduce debt.
Slide 10 summarizes our capital allocation of adjusted funds from operations.
After allocating $254 million to sustaining capex to include maintenance, environmental health and safety and $34 million preferred dividends and we had approximately $1 6 billion of discretionary cash flow available.
Of this amount and we paid 282 million and common dividends to shareholders invested $111 million and growth and productivity Capex and bought back $100 million of our stock.
As shown previously the remaining cash flow and approximately $1 1 billion was used to strengthen our balance sheet and support of our credit rating objective of Triple B double B W. Two.
Moving on to slide 11, and $1 1 billion and retained cash flow offset a portion of our $3 1 billion of cash outflow this year for working capital.
As a result net debt rose by $2 2 billion over the course of the year.
The growth and working capital primarily reflects an increase and readily marketable inventories, resulting from higher commodity prices and our deliberate decision to increase volumes to optimize earnings potential.
This slide shows our availability under our committed credit lines remained largely unchanged, leaving us with ample liquidity as we enter 2021.
As you can see on slide 12 at the end of the fourth quarter only 9% of our net debt was used to fund uses other than readily marketable inventories and this compares to 17% last year.
Please turn to slide 13.
For 2020, adjusted ROIC was 15, 9% or nine three percentage points over Rmi adjusted weighted average cost of capital and six 6% and.
Up from nine 7% and 2019.
Our ROIC was 12, 2% or six two percentage points over our weighted average cost of capital of 6% and well above our stated target of 9%.
The widening spread between these return metrics reflects how we have been effectively using merchandising rmi as a tool to generate incremental profit.
As a reminder, we have adjusted these return metrics to exclude the impact of changes and foreign exchange rates on book equity as of year end 2018.
We believe this provides a clear picture of our economic performance from the management actions, we've taken over the past two years.
Moving to slide 14.
Here, you can see our cash flow yield trend, which emphasizes cash generation measured against our cost of equity of 7%.
For the year ending December 31, 2020, we produced cash flow yield of nearly 26% up from 13, 4% at year end 2019.
Please turn to slide 15, and our 2021 outlook.
As Greg mentioned in his remarks, taking into account the current margin environment and forward curves. We expect full year 2021, adjusted EPS of at least $6 per share.
And agribusiness full year results are expected to be down from 2020, primarily driven by lower contributions from royalty processing and origination primarily in Brazil.
While we are not forecasting the same unique environment or magnitude of opportunities that we captured during 2020, we do see some potential upside to our outlook, resulting from strong demand and tight commodity suppliers.
And edible oils full year results are expected to be comparable to last year.
Our results and the North American business, driven by recovery and foodservice and increased renewable diesel demand are expected to be.
We offset by lower results and our consumer business in Brazil.
And milling full year results are expected to be in line with last year.
And fertilizer full year results are expected to be down from a strong prior year.
The non core full year results and our sugar and bioenergy energy joint venture are expected to be positive contributor driven by improve sugar and Brazilian ethanol prices.
Additionally, the company expects the following for 2021.
And adjusted annual effective tax rate and the range of 20% to 22% net.
Net interest expense and the range of $230 million to $240 million.
Capital expenditures and the range of 20, 425 to 475 million and depreciation and amortization of approximately $415 million.
With that I'll turn things back over to Greg for some closing comments.
Thanks, John.
Turning to Q&A I want to offer a few closing thoughts.
We set ambitious goals for bunge transformation.
And we can see the results from the changes we've made.
Now that we've completed the majority of the actions. We originally laid out we're able to focus on continuous improvement and growing the business across the cycle as we move forward.
As we did in 2020, we're going to be leveraging our platform and the operating model. We've put in place and look for the opportunities ahead of us as we work effectively to capture the upside and minimize the downside.
Looking over the longer term we remain.
Cited about the structural shift, we're seeing and the consumer demand for food feed and fuel.
<unk>, we're focusing on four primary areas of growth.
Oilseed processing and origination.
Renewable feedstock for Biofuels.
Plant protein ingredients and plant lipid ingredients, which is our specialty fats and oils.
And with our global platform culture of innovation and Oilseeds leadership. We believe we are in a unique position to benefit from those trends.
The leadership team and I are incredibly proud and the entire bunge team's continued focus on execution.
And while 2021 will surely present different challenges and opportunities and <unk>.
<unk>, we have the right platform and I look forward to continuing to work together to maximize bogeys full potential.
And with that we'll open the call to your questions.
We will now begin the question and answer session to.
You ask a question you May press Star then one and your kitchen.
If you are using a speakerphone. Please pick up your Ken said before question Keith.
To withdraw your question. Please press Star then queue at this time, we will pause momentarily to assemble our roster.
And first question today comes from Ken Zhang from Bank.
Montreal. Please go ahead.
Hey, good morning, everyone.
And again.
My first question is you've talked about your cost structure and that you are able to improve and less.
Yes.
Downtime and if I can just use it relative to the $5 number and not that I believe the five domino's, but just using and as the baseline.
How would you say the cost structure and a reduction of the cost structure has improved that $5 number in terms of.
The improvement relative to where you started out a year ago.
Well I'll, let John talk to the number but let me, let me clarify a little bit when we talk about running the assets some of the differences and it's made Ken I mean, I can't say enough on how the industrial and commercial teams and the coordination I mean, we're really I should say sweating the assets.
The focus on getting the right quality there of course driving yields.
Look at and commercial.
The industrial team, having those assets up and ready to run by reducing our unplanned downtime and you look at the commodity commercial coordination and reducing the commercial downtime.
And that's that's all capacity utilization that youre seeing so that's even before cost improvements and then the.
And managing the planned downtime to the right times and the year to make sure that we capture the highest margin times and that where we're doing our turnarounds or maintenance and those lower times and that's one and we even see some additional opportunity and focus here into 2021. So just the way that that we're operating I think even.
And you start talking about the systemic changes, we're making and cost are really important and I want to really give credit to the team.
Yes, Ken Force specifically.
One of the things we look at obviously as variable cost per metric ton and we saw improvement this year.
A little under $1 a ton.
Overall part of that was FX related benefit, but but I'd say overall, we believe roughly 30 around $30 million and benefit just on the variable cost side here year over year due to improved efficiency on that side and then on the fixed side, we made some some improvement there as well not not as much but.
That's an area, it's going to be a strong focus here heading forward.
Would you say that would be at least relative to your baseline number or is that a <unk> <unk> improvement or is it a tencent can you put in and there is some sort of framework and.
And then I have one fundamental question.
Yes, I would say that we.
We have a little bit and that built into our $5 baseline, we're probably a little ahead of schedule on that but I'd say it's.
Probably maybe 10 15, and I don't know that it would be any more and that yet.
And keep pushing on it.
Yes, Ken.
And if you think about the self help on the five versus the six baseline we're on track there I'd.
I would say that.
Foods.
And on track there what improvement.
And we'll probably see and <unk> will probably be offset by lower BDC on the edible oils side, but it's really around better crush margins on both soy.
And soft.
It's really the difference between the baseline.
$5 and what we're calling on it at least six for next year those are the big drivers.
And then my second question is the.
The renewable diesel what I'm seeing and the edible oils margarines that edible oil or oil is actually training ahead of the cash and dean oil market and definitely understand and know that do you think thats driven by the renewable diesel side of it and does that seem sustainable and is that completely included and how youre looking at the forecast just because of that.
Something that to me is is <unk>.
<unk> and how to look at the.
Yes.
And renewable diesel impact on both crush margins as well as your edible oils business and I'll leave it there.
Yes, let me start by saying that this renewable diesel demand is structural right. This is this is going to be long term that being said.
And we only saw a little bit of the effect of that in 2020, we'll really see that starting to come online and feel that effect in 2021 in 'twenty and we had tightening balance sheets globally on oil.
And a lot of that was driven around palm.
And a little bit with Sun and the and the Black Sea and then of course, what's been going on with with Argentine crush.
But we'll really start feeling the demand from the renewable diesel capacity coming on.
Here in in 2021, and with the investments that are being made yeah that is and as a structural shift that is multi year.
And we're look we're glad to be basic and all of our global oils, because there's no doubt with what's coming and the shift in demand there.
But there will be re formulation happening with the different oils and they can use on the renewable side. The food industry has always been one that has.
<unk> been able to reformulate basis on price and functionality. So there will be a lot of re formulation and change and dislocation going on.
And frankly, being basic and and all the oils, including the tropical oils Bunge portfolio and has really made for this and to help our customers be successful. So we're looking forward to working with them and helping them win.
Great. Thank you.
The next question is from.
And then.
Okay.
Hey, good morning, everybody.
And one of them.
I'm going to start by asking about the Capex guidance.
Up year over year, but still lower than historical Capex spend one is this a more reasonable run rate around the capital intensity of the business and.
Two.
Within that kind of midpoint of $4 50 for Capex.
And what are the priorities line, where do you see the highest return projects within the portfolio.
And do you see that evolving over time.
Yeah. Thanks, Ken I think I think the way to look at it for this last year. Our Capex was the lowest it's been and many years and so that was indicative early.
Covid impact on the growth side, the spending that we had on maintenance around $250 million on maintenance and safety health Environmental I think thats, a pretty good benchmark on the maintenance side and it.
Generally it has been historically around $250 million a year.
Where we really spending was down was on the growth and productivity side and we do expect that to expand here in 2021, which is why we're providing guidance more to your point the midpoint of $4 50, which I think is more indicative of our ongoing rate and <unk>.
And specific areas, where we're going to focus and Greg touched on kind of the four key areas for us where we're really going to focus going forward.
Core oilseeds business continuing to maintain our our strong position there globally.
And with the renewable diesel.
Opportunities out there, we do expect to allocate some capital to that area.
And plant based protein and an area that we've been spending some time and we have some projects and the pipeline there as well and then under plant limits or our specialty fats and oils business.
As well and so we have a lot of the pipeline and the <unk>.
<unk> kind of a guideline for us now, but it is going to be based on the opportunity number could be higher and the opportunities are better and then beat our hurdle requirements, but if we don't find enough good projects and we won't spend the money so but I think right now that's a pretty pretty good cash.
One other thing I'd like to say about as we make those capital decisions.
One big thing that's changed really is around <unk>.
Discipline.
<unk> and looking at the alternatives that we have and so.
And remember, we're adding up and looking at all of the opportunities at the global level Theres no allocation regionally or by business. So every business is competing for that capital we've added discipline around.
Looking at and scenario analysis, and stress testing and stressing all the assumptions and our projects and that we're really comfortable when we put long lived capital to work and then by having the different areas that we've talked about where we see.
The growth opportunities of course, and our and our core business and.
And the oilseed crushing specialty fats and oils, but these are these are big trends that are definitely and place here on renewable diesel and non plant protein and so that allows us to be very thoughtful and make choices, where the returns are right and the risk profiles right. We don't have to we don't have to reach and take chances.
On projects that don't make sense.
Okay, great understood.
And my second question is a little bit more near term oriented fundamentals, obviously, we've got a delayed soybean harvest out of Brazil and.
Delayed planting and the Sabrina and corn crop.
We've seen continued strong corn volume year to date from China, How do you think about how the first quarter and first half and this year and look like between U S and South America origination business.
And then if you could just tie that into what youre seeing and in terms of how that's impacting.
The overall global crushing business and I would say, China gross margins come in on lack of soybean availability for U S Board crashes.
And as weakened as we go out along the curve what should we be mindful of and this kind of unusual trend transitory period.
Sure I think.
So the first thing is this isn't going to solve itself with one drop in South America or even two.
And two crops with the South American crop and then the North American crop. So yes, you've hit on the key things here, we've got to get the.
And the crop harvested and Brazil gets a subpoena.
Our planet and we need.
And that to be a good crop, we need Argentina and continue to.
To finish up strongly and then we'll see the fight for acres in North America, and we need to see that crop get planted and and develop appropriately. So these balance sheets have really tightened up in the last year and theyre going to stay that way and that's been good for.
Margins throughout the entire global system and so we expect to continue to see that here as we work through 2021.
As you say on the on the processing front.
The market is sending the different signals right and sending the signal now that we need some of the crush in Argentina.
And we need Argentina to run a little bit harder this year.
And provide some of that supply that the market needs to get back into balance.
And we don't know exactly how it will play out, but what we do know and I'm really glad we've got the global footprint that we do have and the team that we've got running it and so we're looking forward to the challenge and the opportunity.
Okay. Congrats on 2020, good luck in 'twenty and 'twenty one thank you very much.
Hello.
From.
Net.
Yeah.
Yes, thanks, good morning, everyone.
Good morning.
So I guess my question is going to be around the 'twenty 'twenty, one outlook of $6, plus and I guess I'm trying to think about it.
And on a year on year basis, a little bit maybe differently from Ken coming from that $5 baseline perspective. So you did 830.
Adjusted in 2020, and I believe that included about 50.
Of.
FX related losses, and sugar and the first half of the year.
If I look at the food and ingredients business is kind of the base sugar tax interest and then.
And everything but agribusiness.
Net.
Neutral maybe slightly net negative so kind of your year on year baseline is.
And the adjustments and FX piece, maybe 50 ish and so if that's true.
To get to the $6, you're getting you're implying 500 or so million.
Decline and EBIT and agribusiness and I'm, just trying to make sure I'm thinking about kind of the year on year drivers of the bridge and just help us frame kind of the range of outcomes within agribusiness, because that seems like a pretty steep fall for a market environment that.
We will obviously be somewhat different than last year, but again some of the underlying tightness and demand drivers that had benefited us. So it seem to be very much and tax I'm, just trying to reconcile that a little bit.
Sure.
Yes.
I think what what you said and edible oils is correct what were seeing we don't expect the consumer and the BDC part available us to be as good this year.
We think that'll be more than offset by the foodservice and the <unk> side.
The business. So that's about scratch and then while we definitely entering 2021 with some some excellent momentum.
We see a better start here to Q1, and the start we had and and what we can see.
Last year at this same time for Q1 and 2020.
And we don't have the visibility to the balance of the year.
And the other thing.
And to think about is we did see.
We talked about our platform really benefits from dislocation.
Higher prices higher volumes higher volatility.
And we definitely saw that in 2020, we also saw a marketing pattern with the move and the real.
And the way the south the Brazilian farmer marketed.
That would be hard to imagine.
That's not happening the same way and we doubt that will happen and the same way so part of it.
Setup of the market part of it is the market has made a move to these higher prices and higher volatilities.
And as making some adjustments so while the overall environment definitely better than we've seen for years.
We don't have full visibility into the second half and it would be hard to recreate kind of everything to happen the way it and in 2020, but I'll tell you. We're we're optimistic I feel way better about making the call of at least $6 at this time this year.
And then the call we were making which was lower for 2020 at the same time last year. So look we are optimistic we feel good but.
We are also measured and there's a lot of moving pieces and Adam I'd just add.
I think you were you were really close on your pieces and the one thing that you didn't mention.
A tax rate this year of about 16, 5% and then were call and guidance for 2021 and between 2022%.
And that would have been a bit of an impact as well.
Yes, no that's okay. That's helpful.
And then I guess the <unk>.
Second question is just thinking on the capital allocation front.
And it really has two parts one with the net debt balance ryzen and given the opportunities and readily marketable inventory.
Is there opportunities and maybe more of your net debt is actually long term and nature is there an opportunity maybe to get the cost of that down if you bring that maturity.
Little bit more matched the duration of the liability.
And and second and just thinking about kind of the opportunities for more offensive capital allocation and kind of how we should think about maybe share and share repurchases figure into that mix. This year. Thank you.
So from a from.
And from a debt standpoint, and we've been spending a lot of time looking at the right right mix and the right duration of our of our debt portfolio. I think we've been able to for example in August when we issued our $600 million and bonds and August it was it just.
And we're one 5% with lowest with different printed on bonds and so they're thinking about the long term.
It's a really favorable and the near term to lock in long term at the same time, we have all of the debt capacity that we've added here in Q4 and after Q4 has all been short term in nature. So we are still trying to sort out the right balance there going forward.
And based on just the current environment and also what we expect over maybe over the next five to 10 years. So.
We will continue to look at that I think that we feel pretty good about our net debt cost today, but as we go forward here and look at some of our maturing debt and the next couple of years, we're going to look and what are the long term range versus short term and.
There is a chance to take some risk out of refinancing obviously, if you take some day out longer but we haven't we haven't come to the final conclusion on that yet.
In terms of allocation of capital.
And just as a reminder, our.
Our main priority right now and <unk> ratings.
Back to where we want them, we've been committed to investment grade credit rating. We are there with S&P, but we're we're notch below with Moody's and Fitch, where we'd like to be.
So we continue to make sure that our capital policy and our capital allocation.
We will fit into that objective first and foremost, but then once we get beyond that we really look at three buckets. One is our dividend and we haven't raised our dividend and and almost three years will be three years and may. So we like we do every year, we talked to the board and our May Board meeting about the dividend and our policy and we will revisit that this year.
And take a hard look at it.
And secondly, we always want to look for good growth opportunities and.
And I mentioned pipeline and I think we've got a good pipeline of opportunities across.
Our <unk> segment for.
Focus areas they have to make sense for us to do them and if they don't we wont and then ultimately share buybacks are always on the table.
And so that's part of the mix and I think about dividends growth capital and share buybacks will be assessing all of that together as we go forward.
Okay, I really appreciate all that color I'll pass it on and thank you.
Thank you.
Our next question.
Right.
Thank you Michael.
Thanks.
Thanks, Good morning, everyone.
Hey, good morning, Tom.
And I just ask what are your assumptions around crush margins in 'twenty and 'twenty, one relative to the historical 34 to $34 a ton soy and $40 a ton and soft seed margins you highlights and key.
And how did your 2020 margin and shape up against those historical averages.
Yes, so we ended up finishing the year at $40 on a comparable basis to the $34.
In the in the model for soy at the $5 baseline and.
Right now we're looking at.
So being a couple of dollars better than the $34 baseline.
Of course, not much visibility and the second half, but we.
We don't expect it to be as good.
As this year.
And what we realized.
With our execution around the footprint, we realized better than market.
But we're expecting it to be better than the than the 34, and we'll see how it rolls out here quarter and time.
And on the subsea side.
Softwood was strong last year, and we expect it to be a little bit better than baseline as well.
Okay. Thank you and then just one quick one if you wouldn't mind elaborating on that week, Q4 margins and he'll smacked and milling.
And just really timing I didn't think it was a little bit of everything.
No.
No big problem overall of course, we sold the <unk>.
Hold rice.
Would you be part of out of the milling.
And of course, we had the Brazilian eval and then we had a little bit lower volume there and I guess you are asking us we had lower volumes are and the U S were really the driver and then we've continued to struggle down in Mexico, and some of that is volume and some of that's mix as well.
And some of our pre mixed business.
Thanks, very much I'll pass it on.
Thank you.
Okay.
Thank you.
True.
Hey, good morning, everybody and congrats first of all and the strong results.
Good morning, Thanks, Ben.
Two questions. So one just to stay along the crush business can you share and outlook on the Brazilian crush I mean, just to understand a little bit worried they were heading to what your expectations are and what it means and comparison to the U S.
And the commentary was it was more of a general piece, but to dig into a little bit into the Brazilian situation right now that would be my first question.
Yes.
Currently spot margin, the thirties, and Brazil, but it's been been very volatile down there and of course.
And so part of Thats, Argentina continues to be constricted and running at low values.
Well, we will expect Brazil to stay strong here in the first half and then the key that we're really watching on the second half is going to be on the being export demand.
Okay.
And then just coming back and and you've mentioned about the whole opportunities and and the outlook on renewable diesel.
Tying in a little bit the question around Capex and what you've been doing on the portfolio reshaping clearly youre gearing up more to be.
Well go out to actually add new businesses.
Drive price margins here. So just in the light of that how should we think about capex into the business of renewable diesel where do you see opportunities and how does this combined to the potential sale of what you now say non core sugar and bioenergy, but you still give the guidance for next year. So shall we think that's just kind of.
Keep on because it's been doing well and you take the cash for Capex or is that and additional potential source of funding going forward.
Yes, let me take renewable diesel here in North America first look the first things. We will do is of course, we're working with those and those new customers and net new demand and helping to get.
To get them supplied as they bring those plants up.
The thing is of course, we will look the cheapest capacity and the highest returning projects, we add or debottlenecking at our existing facilities and of course.
<unk> been looking at those projects. So we'll do those thats only incremental demand.
Incremental volume to meet that demand.
Those are low risk high returning projects. So of course, we will we'll do those and then we'll work with the customers backwards and we analyze the market and.
See where those investments make sense, but the first things will probably be around logistics around tankage and maybe.
Something and array and and our refineries to free up capacity.
So we're going to be we're going to be very thoughtful and.
So a lot of discipline, which this industry needs to do is.
Being thoughtful about how we serve this growing demand and that is structural and there's going to be in place.
And then as far as sugar and bioenergy team is doing a great job down there.
<unk> got a great partner and BP.
Seeing the overall environment improve down there and both ethanol and sugar prices and the global balance sheets, there so that looks like.
A good a good outlook for that that doesn't change our long term plans there which.
At the appropriate time.
We will exit that business and reinvest the proceeds back into the balance of our portfolio.
Perfect, that's very key and well. Thank you very much and congrats again and good luck for 2021. Thank you very much.
Our next question is from Vincent Andrews with Morgan Stanley. Please go ahead.
Okay.
And this is Steve Haynes on for Vincent.
Just wanted to ask a quick question in regards to the six dollar guidance and.
Alright did a really good job and 2020 and.
And in terms of risk management limiting the downside but.
And still being able to to cash and a very.
Attractive operating environment. So can you help us think about how you how you're positioned I guess.
For the first half versus kind of the underlying.
And kind of earnings opportunity within crushed.
Yes.
And as you know crush generally.
This is kind of the closing quarter is where you have got the majority.
Hedged up.
With the with the outlook the markets, usually crush margins inverted and not as much visibility upfront. So.
We continue to look at.
Look and the opportunities and think about how we believe that we need to position those assets to manage those earnings at risk, which as you know.
And of our Maniacal focus we continue to stay focused on and.
Ensuring that we're managing that as earnings at risk.
Based on the environment, we're in and.
And the earnings power of the asset base and.
We like the environment and we like the momentum coming in with Q1 starting out stronger.
It's a little different world and then we've seen here for a for a few years and where.
Glad to be glad to be doing it with this team.
Okay. Thank you.
This concludes our question and answer session and wed now like to turn.
And the conference back over to Ruth Ann Wisener for any closing remarks.
Thanks for your interest and banking and joining the call today. If you have further questions feel free to reach out.
Okay and is now concluded. Thank you for attending today's presentation you may now disconnect.