Q3 2022 Archer-Daniels-Midland Co Earnings Call
To gas it for a variety of applications, including Bioplastics.
Both sustainability and food security are powering our growth in nutrition.
Including our continued investment in alternative proteins.
In Q3, we advanced several terminated propane enhancements and expansions, including an agreement with <unk> for the exclusive rights to process and commercialize a portfolio of proprietary ingredients derived from their ultra high protein soybeans.
Each of these investments is aligned with global trends.
And each demonstrates how we are advancing new avenues of growth across all three of our business segments.
Slide five please.
Our strategic work remains focused on two pillars productivity and innovation.
As we discussed at our global Investor Day last December we are targeting $1 $1 billion in benefits from our productivity efforts.
Which improve our long term return profile, while helping us mitigate the impact of market forces, including inflation.
Strong returns means focusing on both the numerator and the denominator.
Is why around the globe our team is continuing to identify opportunities to monetize assets and optimize working capital as part of our $1 billion challenge.
As of last week, we had realized cash generation in excess of $1 billion from this initiative.
On the numerator side, we're investing in new technologies to enhance our efficiencies.
Last quarter I highlighted the operational transformation of our corn facility in Marshall, Minnesota and.
And discuss how we hoped to emulate the success more widely across our production footprint.
We are now advancing our ambitious plan to install enhanced automation.
More sophisticated control systems, and the increased use of analytics and more than 50 production facilities globally.
With further expansion possible as we evaluate and size the opportunities.
These investments will enable us to unlock capacity improve reliability and enhance safety.
We are currently evaluating partners to support us in this important work.
Which we intend to execute in a phased approach focusing on eight to 10 facilities per year.
We anticipate investing more than $1 billion over this period and.
And we expect double digit returns on these investments.
We are seeing in margin.
We'll be updating you on our progress towards these goals and other productivity efforts on upcoming calls.
Next slide please.
Turning to innovation.
Sustainability is a driving force of both of our purpose and our growth strategy.
And one Great example is the scaling up of our regenerative agricultural efforts.
Regional AG practices include copper cropping improved nutrient management and conservation tillage.
The environmental and climate benefits associated with region.
Can include greenhouse gas emissions reductions increased soil carbon sequestration.
Water quality improvements and biodiversity promotion.
With global scale, and a value chain that reaches from 220000 farmers to customers ranging from multinational CPG to startups ADM has a unique opportunity to lead in this area.
I already mentioned, our strategic partnership with Pepsico, which we believe is truly groundbreaking in scope and long term vision.
We're working with other partners as well.
For example in the spring, we announced an agreement with the National Fish and Wildlife Foundation that includes a commitment of $20 million to sign up more region <unk> acres.
And we're partnering with farmers business network to make their Gradable farm management platform available asset <unk> technology enabler for our North American farmer base.
We've signed about 750000 unique regain AG acres in the U S. So far this year.
We expect this number to grow with every passing year.
These programs are getting us closer to farmers and closer to our customers.
And we anticipate that within the next five years.
Our annual operating profit impact from this work will reach more than $100 million.
While continuing to help lead our industry to a more responsible and sustainable future.
While we're on the subject of sustainability.
I am very proud of the sum of all of the good work we've done in this arena is being recognized.
Just yesterday ADM was included on the Investor's business Daily annual list of 100 best ESG companies.
And in July <unk>.
Environment and energy leader magazine recognized our Illinois based indicators carbon capture and storage partnership asset top project for energy and environmental management.
Okay.
We posted a new update on our website that details our progress in advancing our stripes 35 goals.
Including our commitment to reduce our scope III <unk> III greenhouse gas emissions, 25% by 2035.
And because <unk> 35 is in the end of our sustainability journey.
Update includes our aspiration to work towards net zero emissions by 2050.
We'll have more to say about these as we continue to evaluate and develop our path forward.
Now I would like to turn the call over to Vikram to talk about our business performance.
Thanks Juan.
Slide seven please.
The AG services and oilseeds team deliver delivered substantially higher year over year results.
AG services results were significantly higher than the third quarter of 2021.
Short crops in South America supported U S exports driving improved volumes and margins in North American origination.
Which had significant negative impacts from hurricane either in the prior year.
Better margins in global Ocean freight driven by good execution amid dynamic global trade flows our better results in global trade.
South American origination saw improved volumes and margins driven by increased farmer selling in addition to higher volumes through our export facilities.
Crushing results were significantly higher with margins driven by resilient global demand for both meal and oil.
Strong rapeseed margins in EMEA, driven by robust oil demand and continued market dislocations along with positive impacts from an insurance settlement helped drive improved results.
North American soy crush margins continued to benefit from renewable diesel demand.
Also net positive timing effects in the quarter were about $175 million as compared to the approximately $70 million in the prior year quarter.
Positive results were partially offset by lower crush volumes, including impacts from idled facilities in Ukraine and Paraguay.
Refined products and other results were higher year over year in a strong margin environment for both refined oils and biodiesel.
Robust performance in global refined oils was driven by healthy demand and elevated refined oil margins amid supply chain disruptions equity earnings from Wilmar were much higher versus the third quarter of 2021.
Looking ahead to Q4, we expect <unk> to deliver much better results in the fourth quarter of 2021, we.
We expect continued strength in crush margins to more than offset the adverse impact of low water conditions on U S export volumes.
Slide eight please.
The carbohydrate solutions the team delivered significantly higher results versus the prior year quarter.
The starches and sweeteners subsegment, which includes ethanol production from our wet mills delivered much improved year over year results amidst steady global demand for sweeteners and starches.
<unk> core products, including continued robust demand for corn oil as well as effective risk management drove higher execution margins in North America.
Wheat milling had a strong performance delivering improved volumes and margins to meet healthy demand for flower.
In EMEA, the business delivered solid volumes and margins and manage through a dynamic energy environment to drive stronger results.
Our bio solutions platform continued its upward trajectory with 29% year over year revenue growth year to date.
Vantage corn processors results were substantially lower ethanol margins were pressured by higher industry inventories lower domestic demand and elevated corn costs.
In addition, the prior year's results included contributions from the now sold Peoria facility.
Looking ahead, we expect the fourth quarter of this year for carbohydrate solutions to be significantly significantly lower than the fourth quarter of last year.
Demand and margins for sweeteners and starches in flour should remain healthy, but ethanol margins are expected to be substantially lower than last year's historic highs.
On slide nine.
The nutrition business continued to outpace the industry with Q3 revenue growth of 10% on a reported basis and 16% on a constant currency basis.
Third quarter adjusted operating profit was similar to last year, and 7% higher on a constant currency basis.
Profit was impacted in the quarter by the significant strengthening of the U S dollar and demand fulfillment challenges as the rapid growth in customer demand exceeded our operational capacity.
We are prioritizing unlocking capacity in the face of some persistent supply chain bottlenecks.
Year to date performance remains very strong, including 20% revenue and 19% op growth on a constant currency basis.
And our portfolio of acquisitions from 2021 continues to deliver above our acquisition models.
In this quarter human nutrition results were higher than the third quarter of 2021 strong demand for plant based proteins as well as solid performance in tax rates drove continued growth in specialty ingredients.
Flavors results were impacted by adverse currency translation effects and EMEA, partially offset by continued strong demand growth in the region.
Demand fulfillment challenges in North America, and lower demand in APAC, driven partly by the Lockdowns in China also negatively impacted results.
Health and wellness was lower versus the prior year, which included higher income from this fiber fermentation agreement.
Animal nutrition results were down versus the prior year quarter Pet results were lower in Latin America on lower volumes, partially offset by strong volumes and margins in North America.
Software animal protein demand affected feed volumes.
Looking ahead, we expect the fourth quarter for nutrition this year to be higher than the fourth quarter of 2021 with continued strong demand in human nutrition more than offsetting adverse currency effects.
We expect nutrition full year op growth to be between 15, and 20% on a constant currency basis.
Slide 10 please.
Other business results increased from the prior year quarter higher short term interest rates drove improved earnings in ADM Investor services, partially offset by increased claim settlements in captive insurance.
In the corporate lines unallocated corporate costs of $251 million were higher year over year due primarily to performance related compensation accruals higher operating and project related costs and higher costs in the company as centers of excellence.
Other corporate was favorable versus the prior year, primarily due to higher results from foreign currency related hedge activity.
Net interest expense for the quarter increased year over year on higher interest rates.
The effective tax rate for the third quarter of 2022 was approximately 16%.
We still project full year corporate cost to be about $1 $3 billion and we still expect our adjusted tax rate to remain in the range of 16% to 19% next slide please.
Year to date operating cash flows before working capital of $4 $7 billion are up significantly versus $3 $1 billion over the same period last year.
Our net debt to total capital ratio is about 24% and we have available liquidity of about 11 2 billion.
We are continuing to invest in the business with $841 million in capital expenditures and have returned capital to shareholders with $677 million in dividends and $1 2 billion in share repurchases through the third quarter, which reflects the completion of the one.
Stock buyback announced last quarter.
And with our enhanced financial flexibility and in line with our balanced capital allocation framework, we plan to repurchase an additional $1 billion of shares by the end of 2023 subject to other strategic uses of capital one.
Thank you Vikram slide 12 please.
So to recap.
Our team delivered another outstanding quarter.
Thanks to our execution and the advancement of our strategy.
We are well positioned to end 2022 strong.
Last quarter, we said, we were expecting full year earnings higher than $6 50 per share.
Based on where we are today, we know clearly expect to exceed $7 per share.
Looking ahead there are several externalities that we are monitoring going into 'twenty two 'twenty three.
We anticipate ongoing resilient demand for our products.
Strong crush margin environment.
The positive outlook for starches, and sweeteners and a continuation of our growth trajectory in nutrition.
There is also significant uncertainty in the global economy and geopolitical environment.
We expect to carry our strong momentum into the first quarter of 2013.
And beyond that we are confident that our scenario planning and execution will give us the ability to effectively manage through a dynamic environment.
We're also going to continue to benefit from our strategic work and will continue to deliver on those priorities throughout 2023.
Well advanced productivity initiatives to improve operations and processes optimize costs and enhance efficiencies.
We will drive innovation, expanding and creating new growth engines across our entire business portfolio services analysis carbohydrate solutions and nutrition.
And well advanced dosage strategic objectives as.
As we always have alongside our teams exceptional day to day execution delivering for our colleagues consumers customers and our stakeholders.
With that operator, please open the line for questions.
Thank you.
Linda.
Just a question star one on your telephone keypad.
Please ensure your unmated locally when asking your question.
Our first question for today comes from Ben <unk> from Stephens, Inc. Your.
Your line is now open.
Hey, Thanks, good morning, everybody.
Good morning, Matt.
So I wanted to ask about your process volumes in the quarter.
You cited lower crush volume utilization and the Ukraine as well as <unk>.
Wei.
Could you talk a little bit about what you would expect your go forward process volumes to look like and is the lion's share of the decline in oilseeds processed year over year that 10% decline is that from those two regions were there any other contributing factors.
Yes.
Yes, Thank you Ben.
As you know we had lower volumes.
Part of that coming from Europe in soy and rape, we had some adverse weather.
And some logistical constraints constraints in Europe in terms of navigation and some of the rivers.
We also have a reduction in South America in soy crush because of Paraguay shut down mostly because of lack of beans.
We have also some reductions in North America due to canola seed availability and certainly we have we're Ukraine.
<unk> crush facility down.
As you know since our last March.
So we have 850 facilities around the world as you know.
We deal with logistics with adverse weather manpower issues like like every company out there so.
That's what.
What's.
The decline in volumes at this point in time some of those one off issues subside I mean, we will see those volumes coming back to normal rates.
Thank you our next.
Our next question comes from Ben Theurer of Barclays.
Your line is now open.
Yes, Thank you very much and good morning become congrats on the results.
To follow up on nutrition as you've talked about some of the logistic bottlenecks that you plan to overcome could.
Could you elaborate a little more in detail what those issues are and what you may have to do in terms of investments to get this right and then.
Also aligned with that what is actually youre kind of FX assumption because he has stretched the constant currency terms commentary on the outlook for the fourth quarter. So just to understand a little bit the regional breakdown as well on what what FX headwinds, we should expect them to have a short term period, just given the euro.
Thank you.
Yes, Thank you Ben.
Listen as Victor mentioned in his commentary we are exceptionally proud of.
The team is generating demand.
Our value proposition in nutrition continues to resonate and attract customers.
Our pipeline has never been bigger than our growth.
Growth rates continue to be our win rates continue to be off the chart. So the problem with that is that it catches up with your production pretty quickly and although we have plans to expand those some of the supply chain issues in delivery equipment, sometimes don't play exactly in our favor when you.
Look at where it is specifically dose issues have impacted us. The most this has been in flavors.
I would say.
And.
Mostly in North America, but some of that in Europe on the other hand, the facility that we inaugurated last European route in China has suffered from lack of volumes because of the lockdowns due to COVID-19 restrictions in China, So I would say.
We have.
A little bit upset in the sense that we couldnt bring all of that demand that we have generated into the P&L and certainly those things are to a certain degree in our under control and as you can imagine everybody in the company is driving very hard to bring extra capacity as you know on the last quarter or a couple of quarters ago, We bought FIFA.
Precisely to alleviate a little bit that of course, we're using contract manufacturing. So we are pulling everything but in a very tight environment with also some shifting of demand based on consumer demand customers are shifting some of that demand our ability to react promptly to that given the high growth rates.
Caught up with us in the quarter.
There is a lot of capacity coming for next year.
So first of all this is an upside for next year, hopefully we are going to be able to fulfill that demand next year, but there is also expansions. If you think about we have a new line in soy protein. We also have the bio police expansion in Valencia, we have pet dine expansion coming up.
So the business is it has a long.
List of organic growth capacity that will come to help next year, but again its all the progress.
A strong successful sales and marketing organization driving.
Yes.
Double digit growth rates.
And then on the FX side.
Just a reminder for everyone right in 2020, we grew operating profit of 37% in 2021 nutrition profit was 20%. If you look at the FX over that two year period. It was almost flat went up one year went down the other year, but the European part of our business EMEA and we referenced this in our global Investor Day revenue contribution.
From Europe is about 40% of the human nutrition side and about 20% on the animal nutrition side, and Thats getting bigger because of the Nevada. So consequently, given the profitability there and the significant move in the dollar. This year, we thought it's appropriate to highlight the growth on a like for like basis, which basically means on a constant currency basis.
It's a it's a significant strengthening of the dollar that basically call that call at this hour and the and the underlying growth in the European region.
Thank you. Our next question comes from Adam Samuelson from Goldman Sachs. Adam Your line is now open.
Yes.
Yeah.
Okay.
Okay.
Please go ahead.
Alright.
Hello.
Hello, Alex maybe maybe we skip to the next question maybe I'll then come back later.
And we will move on our next question comes from Tom Palmer of Jpmorgan Your.
Your line is now open.
Good morning, Thanks for the question.
I wanted to ask on the barge delays on the Mississippi River does it have much effect on your business.
As we look towards the fourth quarter.
Is it if there is impact should be mainly think about it being in AG services or just given the diversity of your business are there offsets to consider.
Yes.
Yes of course, we have an unprecedented situation.
Especially in the lower Mississippi River.
Reduce the volume of exports for AG services in North America, as it's going to be a negative impact in our services North America of course, Doug.
Part of that is because of soy and we're going to lose that volume in the corn side, we're probably going to extend the window of exports from North America into the first quarter. So part of the offset is youre going to see that in.
In the first quarter.
I think also part of the offset is South America will be able to export more of we had a large <unk>.
Quarter in South America of course.
And youre going to see that and then normally what we notice we expect to happen because we've seen it before is when you export less from North America, our destination marketing, sometimes get a little bit of a bump in margin the products and destination become naturally more valuable if your window was part of the year.
Originally the strategy of going into destination marketing and then the other impact is that asset as beans have now are exported and modest not that much demand local values come down local basis come down and done may be a boost for crush.
It may be able to crush lower price beans, or maybe eventually lower price corn carbohydrate solutions. So we see some puts and takes so probably negative for the North America AG services on wholesale maybe neutral for AG services and positive overall, maybe for Derek.
Okay.
Thank you. Our next question comes from Ken Zaslow from Bank of Montreal, Ken Your line is now open.
Hey, good morning, guys.
Thank you good morning.
Just a couple of questions. One is can you give a little bit more color on AG services and oilseeds.
Outlook as well as carb guidance I know, you said significantly up and significantly lower.
Parameters to that and then can you also talk about your nutrition outlook.
Your supply chain.
Repair demand is there do you think that your long term growth algorithm is intact.
And I'll leave it there and I appreciate your time as always.
Okay. Thank you Ken.
Yes, let me address maybe the outlook of our services and also Q4, so first of all.
There is a dynamic environment, but very positive environment. The teams continue to manage exceptionally well and demand continues to be very robust. So as we go forward.
Q4, again in AG services, I, just mentioned and maybe a little bit lower for North American exports, but that will be offset for other things that I explained in the question before so we still expect significantly better results in the in the Q4.
Barring any big Mark to market.
That's our expectation at this point in time crush margins continue to strengthen that's on the strength of.
Feeding animals around the world, but also on the.
Extra demand for oil from older renewable green diesel biodiesel around the world.
We expect.
<unk>.
Continued strength in global trade in destination marketing assigned explained before I would say the business at this point in time is.
It's hitting in all cylinders, so I would say the three parts of the business will be robust into <unk>.
Bigger than last year sort of thing maybe vikram can give a little bit an update on the other two yes. So on carbohydrate solutions you are right. We did see a significantly lower but if you look at the two independent parts.
Sweeteners and starches, we continue expect that to be strong we are seeing robust volumes and margins.
Obviously that the corn oil benefits, we are seeing some net corn costs are attractive as well as margins continue to be attractive. The issue is on ethanol last year. If you remember, we actually had $1 plus ethanol margins. This year, we clearly do not anticipate margins to be that high we still expected to be healthy given.
Continued strong gasoline demand.
Discount that ethanol has versus our book as well as the reasonable inventory levels. So it's really the ethanol side that is going to drive the.
Significantly lower performance in carbohydrate solutions Q4, the Q4.
On the nutrition side.
Yes.
<unk> said, we are working at prioritizing unlocking capacity, we anticipate much of that to get unlocked over the course of 2023 and on a constant currency basis. We continue to expect growth going forward to be in that 15 plus percent range, it's important to highlight constant currency.
Because that that part of the business in Europe , as I mentioned is becoming bigger and bigger and Thats clearly an and currency is not something we can control and important therefore for us to call that out.
Thank you.
Next question comes from Steven Haynes of Morgan Stanley Steven Your line is now open.
Hi, guys. Thanks for thanks for taking my question I, just wanted to ask on Brazil.
Brazil, China.
Corn export agreement and see if we could get a little bit of color on any impact you think you'll see on your businesses and.
If you can just kind of remind us of how big your export origination footprint is in Brazil versus North America. Thank you.
Yes.
Good morning so.
The first thing you need to understand is we are living in a very tight global corn environment. So if you put yourself in.
The fruit of China, China finds itself with lower production lower domestic production of corn, but we certainly higher fit demand.
Lower borrowing and sorghum imports so naturally it will have to import more corn. So in my mind, they're just building option origin optionality.
Again.
You have still a linear effect in Argentina, so theyre planting less corn, there certainly our less checkup here yields for corn in North America, we're going to be lower and of course, they sold with the uncertainty of Ukraine ability to exports.
I think that from a Chinese perspective. This is nothing more than just risk management and expanding open up another optionality of course, we are a large exporter in from South America as well, we have a very robust services business in Brazil, and I'll remind you we are the largest exporter of corn from Argentina.
So as always we will offer black Sea, we will look for North America will offer Brazil, and we will offer Argentine origins to China. So that's longer.
Demand remains tight.
We will see a lot of activity within the trade flows because naturally people want optionality.
Okay.
Thank you. Our next question comes from Rob Dickerson of Jefferies.
Your line is now open.
Great. Thanks, so much.
I guess, just first question kind of a broad question.
There are a number of times.
You certainly commentary upfront.
Should be ongoing momentum kind of going into 2023, and it sounds like more specifically kind of key.
Q1.
If we think about kind of the general macro backdrop right all the tailwind that are benefiting the business.
And maybe this is all done down for some but not for me.
Maybe you could just kind of touch on what what could be some drivers that could loosen.
The overall tightness in the supply chain.
As we get through next year.
A follow up.
Okay. So let me talk a little bit as I said, we are.
Finishing a very strong 2022 and that will get us into a strong with good momentum into 2023.
What are the things that we're seeing because of course, I mean is difficult place to prognosticate. These days, but we anticipate ongoing resilient demand for our products. We have not seen maybe with the exception of some tiny businesses in animal nutrition, we have not seen a deceleration of demand across ADM.
At this point in time.
We foresee also strong crush margin environment.
On the two legs, we have a strong pork and poultry feeding demand across the world and we see tight soybean oil stocks in RGD and biodiesel demand that continues to be strong and growing.
We see as Vikram expressed before a positive outlook for starches and sweeteners. We have finished some of our contracting and we see the volume and we see the margins.
Holding noticed slightly expanding there and we see a continuation of our growth trajectory and nutrition when I when I talk about the pipeline that's the business in which we have the biggest visibility into the future because these are projects that.
Sure.
Barring any <unk>.
<unk> issues, we will bring to the P&L. So I will say that that is what what's.
Give us some positive momentum a positive expectations two industry you have to remember also that we dealt with a lot of.
Weather issues logistical issues with the release of the river, whether there is a fair rate gains with many.
Many issues and we had as I explained before some manufacturing volumes impact here and there we expect that all to be corrected and to be potentially plus into next year and as I explained in the nutrition question, we have new capacity coming on stream. We have we are expanding by a police.
Probiotics capacity by a factor of five we are bringing a new line for plant based proteins in soya protein, we are expanding our <unk> capacity. So.
We are bringing a lot of new capacity to bear because we have the pipeline too.
To actually transfer them into profit so.
So from where we can see here and again in a very uncertain world is we have good very good momentum going into 2023.
Thank you. Our next question comes from Steve Byrne of Bank of America, Steve. Your line is now open.
Thank you I'd like to better understand this.
Regenerative.
Will you have for 100 million of operating profit in five years.
Would it be reasonable to assume that that's.
<unk> 10 million acres of $10 an acre operating profit is that kind of where youre thinking and maybe more broadly.
Do you see the value here more on generating.
Great.
That has been produced in some kind of sustainable way I E. The CPG customer of yours would be willing to pay a premium for that green.
Or do you see this as really.
The generation of carbon credits.
That could be sold on various exchanges welcome your thoughts on that.
Yes. Thank you very good question.
And that is very close to our heart and tied to our strategy.
The region Act programs and acres are certainly high demand.
We have made public one announcement.
We have been working on what we call the differentiated bushel, if you will for like three or four years already and.
ADM naturally sits in a unique place in the value chain.
And we have the global scale to drive improvements in agriculture, and we have the ability to tie both the farmer with the CPG companies.
So this is a privileged position.
We are working very hard to simplify the process.
For the farmer and as you described there are many ways to potentially create value here when we thought about the differentiated bushel one is as you describe it.
Actually we've seen more evidence of that theres going to be premium priced four bushels that are grown or metric tons that are grown in a certain way and I think that the whole society is looking for that is looking for agriculture to actually do their part in creating a more sustainable world. One is that the second and.
That's the way, we're working with SBA with the grade level and all that is to simplify the collection of data on all of that in the preparation we are working with the government on that on the protocols to be able to have carbon offsets.
One credit based on that so it's a little bit of both.
The economics that you described are not as simple as $10 per ton or whatever but but to a certain degree that they are also not that much more complicated than that we just have a portfolio of different accounts and different contracts and they are all slightly different but it is conceptually aligned to what you describe is converting more acres.
Signing more acres, that's where we leverage the relationship we have with farmers globally. ADM has 220000 farmers portfolio in the world that we are engaged in discussing these of course the customers the farmers will embrace this.
Yes.
Well as they see more demand for these that's why it's important to have the CPG companies aligned to this and that's why.
We make these agreements because of course.
Farmer will generate the production.
In order to satisfy the demand so both lines need to grow together. So again I think we are.
Leveraging our incredible <unk> partner network, and the desire of CPG companies and consumer in general to see.
Bushels or metric tons grown in a differentiated way so we're pretty excited about the future of this.
Yeah.
Thank you. Our next question comes from Eric Larson of Seaport Research Partners. Your line is now open.
Thank you and thanks for taking my question congratulations on a good quarter everyone. Thank you Eric.
Okay.
Yes.
So the question I have is.
As.
And thank you for all your region comments one.
It's pretty dear to our heart to result.
I'm looking forward to even having more discussions on that.
The question I would have this morning is could you give us a little more detail on the situation.
<unk> in Ukraine.
You folks are seeing were hearing that there are only.
The only able to plant enough.
Two week this year to even week kind of their own domestic needs for next year. It seems that maybe Ukraine is going to be an even smaller.
A contributor to global exports.
On the oilseeds and.
In grains next year I guess, it's just hard to get all the information put together could you just share some thoughts on what you see.
In that region of the world.
Yes. Thank you.
And also it gives me an opportunity to.
To emphasize.
The message, we send to our employees in Ukraine too.
For the strength in <unk>.
<unk> is doing everything possible to make their lives.
Variable as possible through all of these hopefully.
One day, we will be talking about the rebuilding of Ukraine, and all of them coming back to their land. So.
<unk>.
Listen we've been involved.
More than 650 employees, who have been deeply involved in that.
Vast majority of them are in their jobs in there in their in their positions right. Now so we've been able to export from Ukraine and the industry has worked together with governments and third.
Through this corridor agreement, we've been able to.
In September to reach the same level of exports almost.
Ukraine used to have last year. So about 7 million tons October is starting with a little bit more of wrinkles. If you will.
We are having an issue which is this joint.
Group that is supposed to inspect the vessels has been a little bit overwhelmed by the number of vessels that we have so they are adding more people to that group in order to continue to move material, we need to move materials around like 100 vessels people would take in the queue right now we need to.
Take that material out because.
Storage in Ukraine is becoming full and then there's going to be a harvest and we need to be able to use the storage to harvest the material and to store the material there. So.
My point towards this is dynamic.
<unk> continued to be a very dynamic environment.
Certainly there are still selling in the area, sometimes keeping some of the soybean oil.
Obviously the oil.
Tanks, if you will so.
This is not an easy area in the middle of that of course, Ukraine.
Ukraine is trying to plant as you described difficult to judge a number I mean, our estimated that maybe 30% less.
But it's difficult to make the calculation because some territory are now claim to be in Russia in control. So it's difficult for us to know.
Even when data.
Are put together if you will if that counts.
The planting that Russian controls, a return or not so I would say.
It's a little bit difficult to make prognostications.
So wheat.
Thankfully, Australia has a good crop.
He has a rain a lot in Australia. So.
That's the positive of the anemia, hopefully we start now with the rain because they need to harvest and we don't want damaging to the harvest India also has declared therefore, some inventories and can come to the world to help co.
Situations certainly more difficult maybe there is a strong demand we are in coarse grains in the tightest inventories in the world that we have in seven years.
So I think that will be complicated as I said, Argentina has planted like 10% of the FERC score because of incredible drought there. So.
So I think that.
At this point in time, the U S will be a big supplier of corn for the world.
On Sun oil.
I think the world adjust a little bit more to present in different blends of different noise.
But of course, the oil environment is tight because of all the renewal green diesel and biodiesel. So I would say, maybe with a little bit better, but corn and tunnel will be difficult if.
If we start with the corridor. So hopefully now November 19, the corridor gets extended.
Everything we hear at this point in time, there may be an objection here or there, but nothing significant that could derail. This so we're still counting the corridor.
We will continue to functional hopefully with a little bit more efficiency as we appoint more inspectors.
With the joint Committee.
Okay.
Thank you. Our next question comes from Robert Moskow of Credit Suisse. Roberts. Your line is now open.
Taiwan Vikram.
I was hoping you give a little more color.
On the outsized performance in AG services in the quarter. I mean this is this is the strongest third quarter I think I've seen from ADM in many years.
And it's not what I would have expected given the challenges on the Mississippi River.
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These factors that you mentioned the short crop in South America.
The better margins in Ocean freight.
Can you can you give us kind of some sizing as to what were the biggest factors for the outperformance.
And also was there any kind of positioning benefit from your.
From how you hedged your grain in the quarter.
Okay.
Yes.
So it was a great performance a few describe very proud of the team.
Traditionally our Q3's hub lower volumes because.
We are getting out of the end of the.
Of the season and waiting for the next harvest.
And this time is I think given the short South American crop.
We've been able to move more volumes, especially exports in North America exports were down Q3 to Q2, but not down as much as maybe you see in other years. The same has been a little bit for origination volumes and when exports go go we have benefiting our transportation business.
So our barges on hold up also do not forget its not just North America, but there's also the global nature of the global trade have done.
Spectacular performance and I think we have benefiting ocean.
Great.
Very good quarter from that perspective, and also destination marketing destination marketing that we started four or five years ago. I don't remember exactly has continued to grow volumes.
Expanding margins so.
That I would say is.
What created this great services.
Q3, so great performance by the team.
Okay.
Thank you. Our final question is from Adam Samuelson from Goldman Sachs. Adam Your line is now open.
Yes can you hear me now.
Yes, hi, sorry about the technical issues earlier.
So a lot of ground has been covered today I wanted to maybe come to capital allocation and the balance sheet.
And first just to clarify on repurchase because you did a very sizeable amount of buybacks in the third quarter. The incremental $1 billion was over the next five quarters did I understand that right from the from the earlier comments and then just more broadly.
One victory, but any way to frame capex over into 2023 kind of because you've got a lot of capacity actions underway just help frame kind of the internal investments and relatedly.
Help us think about maybe the M&A optionality.
In the current marketplace, especially with with rising interest rates that might put some more working capital strain on on smaller smaller players in the market. Thank you.
Yeah, Adam Thanks for the question.
In terms of the share buybacks, yes, we as you rightly noted we did execute in diabetes.
And since we announced it in the buyback in Q2.
Forward Youre right in terms of the additional buyback that is anticipated to be completed over the next five quarters through the end of 2023, but I also want to emphasize partially getting to one of your questions that we see a rich pipeline of opportunities even on the M&A side than it is.
As always our responsibility to continue evaluating that and if we find the right.
Right acquisition with the right set of capabilities at the right price, absolutely, we would divert potential cap or two that in lieu of buybacks, but absent that we anticipate to complete this by the end of 2023.
In terms of Capex, we had signaled about $1 3 billion for this year, we remain on track to be around that maybe slightly under and we anticipate that similar level of spend to continue over the next couple of years as well given the significant need for adding capacity as Juan mentioned.
But also some of the additional high return projects, we see on the horizon, such as the analytics and digital automation of our facilities. So we see rich opportunities to reinvest in the business as well as potentially explore more M&A. One other point, that's very important of highly.
And this really underscores our emphasis on driving returns, which is not just focusing on the profitability, but also on the asset on the denominator is $1 billion challenge even in the face of this outstanding performance this year.
Teams are rigorously focused on reducing the assets deployed to produce that profit and $1 billion challenge, we've actually anticipated to we've actually got.
Cash on hand as of last week of $1 billion. That's one noted so I think it's important to note that we are very focused on driving returns and hence that 13% that we are very proud off we achieved in <unk>. So I'll pause there.
Thank you we have no further questions for today, so I'll hand, it back to Megan Britt for any further remarks.
Okay.
Thank you for joining us today, please feel free to follow up with me. If you have any other question.
Good day, and thanks for your time and interest in ADM.
Thank you for joining today's call you may now disconnect.
[music].
Sure.
Okay.