Q1 2024 Bunge Global SA Earnings Call
Operator: Good day, and welcome to Bungee's First Quarter 2024 Earnings Release and Conference Call. All participants will be in a listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then 1 on a touch-tone phone. To withdraw your question, please press star then 2. Please note, this event is being recorded. I would now like to turn the conference over to Ruth Ann Wisener. Please go ahead.
Good day, and welcome to <unk> first quarter 'twenty 'twenty four earnings release and conference call.
All participants will be in a listen only mode.
Should you need assistance. Please signal a conference specialist by pressing the star key followed by zero.
After todays presentation, there will be an opportunity to ask questions.
To ask a question you May press Star then one on a touchtone phone.
To withdraw your question. Please press Star then two.
Please note this event is being recorded.
I would now like to turn the conference over to Ruth Ann why Sir. Please go ahead.
Ruth Ann Wisener: Thank you, Operator, and thank you for joining us this morning for our first quarter earnings call. Before we get started, I want to let you know that we have slides to accompany our discussion. These can be found in the Investor Center on our website, at bungee.com, under Events and Presentations. Reconciliations of non-GAAP measures to the most directly comparable GAAP financial measure are posted on our website as well. I'd like to direct you to slide two and remind you that today's presentation includes forward-looking statements that reflect Bunge's current view with respect to future events, financial performance, and industry conditions.
Ruth Ann Wisener: Thank you operator, and thank you for joining us this morning for our first quarter earnings call before we get started I want to let you know that we have slides to accompany our discussion. These can be found at the Investor Center on our website at Bunge dot com under events and presentations reckon.
Ruth Ann Wisener: Reconciliations of non-GAAP measures to the most directly comparable GAAP financial measure are posted on our website as well.
Ruth Ann Wisener: I'd like to direct you just want to remind you that today's presentation includes forward looking statements that reflect buggies current view with respect to future events financial performance and industry conditions. These forward looking statements are subject to various risks and uncertainties, but he has provided additional information in its reports on file with the SEC concerning.
Ruth Ann Wisener: These forward-looking statements are subject to various risks and uncertainties. Bunge has provided additional information in its reports on file with the SEC concerning factors that could cause actual results to differ materially from those contained in this presentation, and we encourage you to review these factors. On the call this morning are Greg Heckman, Bunge's Chief Executive Officer, and John Neppl, its financial officer. I'll now turn the call over to Greg.
Actors that could cause actual results to differ materially from those contained in this presentation and we encourage you to review these factors.
Ruth Ann Wisener: On the call. This morning are Greg Heckman, Buggies, Chief Executive Officer, and John <unk>.
Gregory A. Heckman: Chief Financial Officer, I'll, now turn the call over to Greg.
Gregory A. Heckman: Thank you, Ruthanne, and good morning, everyone. I want to start by thanking the team for delivering another quarter of strong results, which reflect continued focus and great execution. We're off to a good start in 2024 amid a more balanced market environment than we've experienced over the past year. The team's capabilities and our global platform again demonstrated that we can navigate shifts in supply and demand with agility and speed. Our focus remains on delivering great value to all stakeholders while investing to strengthen our business so that we can provide customers with solutions not only today but over the longer term.
Gregory A. Heckman: Thank you Ruth Ann and good morning, everyone.
Gregory A. Heckman: I want to start by thanking the team for delivering another quarter of strong results, which reflect continued focus and great execution.
Gregory A. Heckman: We're off to a good start in 2024 amid a more balanced market environment than we've experienced over the past few years.
Gregory A. Heckman: Our team's capabilities and our global platform again demonstrated we can navigate shifts in supply and demand with agility and speed.
Gregory A. Heckman: Our focus remains on delivering great value to all stakeholders, while investing to strengthen our business. So that we can provide customers with solutions not only today, but over the longer term.
Gregory A. Heckman: We are making excellent progress on integration planning for the announced combination with Vitera. We're very pleased with how well the teams are working together, and our confidence in our ability to hit the ground running on day one has only strengthened as we've moved through the planning process. We still expect the transaction to close mid-year, and we continue to engage with the relevant regulatory authorities as we work toward gaining the remaining approval.
Gregory A. Heckman: We are making excellent progress on integration planning for our announced combination with by Terra.
We're very pleased with how well the teams are working together.
Gregory A. Heckman: And our confidence in our ability to hit the ground running on day, one and has only strengthened as we've moved through the planning process.
Gregory A. Heckman: We still expect the transaction to close midyear and we continue to engage with the relevant regulatory authorities as we work toward gaining the remaining approvals.
Gregory A. Heckman: We progressed on other growth projects that will improve our ability to supply the renewable fuels market.
Gregory A. Heckman: We progressed on other growth projects that will improve our ability to supply the renewable fuels market. We announced a strategic partnership with Repsol, a global multi-energy company in Spain. And we broke ground on our previously announced oil seed processing switch plant in Destrehan, Louisiana, with our joint venture partner, Chevron.
We announced a strategic partnership with Repsol, a global multi energy company in Spain.
Gregory A. Heckman: And we broke ground on our previously announced oilseed processing switch plant industrial hand, Louisiana with our joint venture partner Chevron.
Gregory A. Heckman: We also successfully commissioned our state-of-the-art edible oil refinery in India, enabling us to more efficiently serve our food customers in a growing region. Now, turning to our results. We delivered another solid quarter, driven by strong performance across our core business. We also saw good results in our non-core sugar joint ventures. In addition, since we reported the fourth quarter, we have repurchased $400 million of Bunge shares, making meaningful progress against the repurchase plan we outlined following the announcement of the VITERA transaction.
Gregory A. Heckman: We also successfully commissioned our state of the art edible oil refinery in India.
Gregory A. Heckman: US to more efficiently serve our food customers and a growing region.
Gregory A. Heckman: Turning to our results we delivered another solid quarter driven by strong performance across our core businesses.
Gregory A. Heckman: We also saw good results in our noncore sugar joint venture.
Gregory A. Heckman: In addition, since we reported the fourth quarter, we repurchased $400 million of bhangi shares, making meaningful progress against the repurchase plan. We outlined following the announcement of the VAT like Terra transaction.
Gregory A. Heckman: Looking ahead to the rest of 2024, our visibility into the back half of the year remains limited, and many of the dynamics we discussed last quarter remain in place. We're continuing to manage the evolving supply-demand environment in markets around the world, demonstrating the benefit of the work we've done to strengthen our business. Based on what we see in the markets and the forward curves today, we are maintaining our guidance for full-year adjusted EPS of approximately $9. I'll now hand the call over to John to walk through our financial results and outlook in more detail, and then we'll close with some additional thoughts.
Gregory A. Heckman: Looking ahead to the rest of 2024.
Gregory A. Heckman: Our visibility into the back half of the year remains limited.
Gregory A. Heckman: And many of the dynamics, we discussed last quarter remain in place.
Gregory A. Heckman: We're continuing to manage the evolving supply demand environment and markets around the world demonstrating the benefit of the work we've done to strengthen our business.
Gregory A. Heckman: Based on what we see in the markets and the forward curves today, we are maintaining our guidance for full year adjusted EPS of approximately $9.
I'll now hand, the call over to Jon to walk through our financial results and outlook in more detail and then we'll close with some additional thoughts.
Gregory A. Heckman: John.
John W. Neppl: Thanks, Greg, and good morning, everyone. Now, let's turn to the early highlights on Slide 5. Our report of first quarter earnings per share was $1.68 compared to $4.15 in the first quarter of 2023. Our reported results included an unfavorable mark-to-market timing difference of $0.94 per share and a negative impact of $0.42 per share related to transaction and integration costs associated with our announced business combination with Pitera. Adjusted EPS was $3.04 in the quarter versus $3.26 in the prior year.
Jon: Thanks, Greg and good morning, everyone.
Jon: Let's turn to the earnings highlights on slide five.
Jon: Our reported first quarter earnings per share was $1 68 compared to $4.15 in the first quarter 2023.
Jon: Our reported results included an unfavorable mark to market timing difference with 94 cents per share and a negative impact of 42 cents per share related to transaction and integration costs associated with our announced business combination with vitaros.
Adjusted EPS was $3.04 in the quarter versus $3.26 in the prior year.
John W. Neppl: Adjusted Core Segment Earnings Before Interest in Taxes, or EBIT, was $719 million in the quarter versus $756 million last year. In agribusiness, processing results of $411 million in the quarter were up slightly from last year, as higher results in Europe and Asia crush value chains were partially offset by lower results in North and South America. In merchandising, lower results were primarily driven by our global grains and oils value chains, where higher volumes were more than offset by lower margins.
Jon: Adjusted core segment earnings before interest and taxes, or EBIT or $719 million in the quarter versus 756 million last year.
Jon: In agribusiness processing results of $411 million in the quarter were up slightly from last year as higher results in Europe, and Asia crush value chains were partially offset by lower results in north and South America.
And merchandising lower results were primarily driven by our global grains, and oils value chains, where higher volumes were more than offset by lower margins.
Jon: Refining of specialty oils had a solid quarter, but down from a strong prior year. Our results in Europe were more than offset by lower results in North America and Asia.
John W. Neppl: Refiners Specialty Oils had a solid quarter, but down from a strong prior year, as higher results in Europe were more than offset by lower results in North America and Asia. Results in South America were in line with the last. In milling, higher results were driven by South America, reflecting improved margins in milling operations and a more favorable origination market environment. Corporate Another and Proofmarsh.
Jon: Results in South America were in line with last year.
Jon: In milling higher results were driven by South America, reflecting improved margins in milling operations and a more favorable origination market environment.
Jon: Corporate and other improved from last year the decrease in corporate expenses, primarily reflected the timing of performance based compensation.
Jon: Higher other results are related to Bunge ventures that are captive insurance program.
John W. Neppl: The decrease in corporate expenses primarily reflected the timing of performance-based compensation. Higher other results are related to Bunge Ventures and our captive insurance program. In her non-core sugar and bioenergy joint venture, higher sugar volumes and prices more than offset lower ethanol prices. For the quarter, reported income tax expense was $117 million, compared to $183 million in the prior year. The decrease was primarily due to lower pre-tax income.
Jon: And our noncore sugar and bioenergy joint venture higher sugar volumes and prices more than offset lower ethanol prices.
Jon: For the quarter reported income tax expense was $117 million compared to $183 million in the prior year.
Jon: The decrease was primarily due to lower pretax income.
Jon: The higher effective tax rate of approximately 32% in the quarter reflected a discrete tax adjustment related to the Argentine peso devaluation.
Jon: As a result, we have increased slightly the midpoint of the range of our estimated annual effective tax rate.
John W. Neppl: The higher affected tax rate of approximately 32% in the quarter reflected a discrete tax adjustment related to the Argentine peso devaluation. As a result, we have slightly increased the midpoint of the range of our estimated annual effective tax rate. Net interest expense of $66 million in the quarter was down slightly compared to last year, due primarily to average debt. Now, let's turn to slide six, where you can see our adjusted EPS and EBIT trends over the past four years, along with the trailing 12 months.
Jon: Net interest expense of $66 million in the quarter was down slightly compared to last year due primarily to average debt levels.
Jon: Let's turn to slide six where you can see our adjusted EPS and EBIT trends over the past four years, along with the trailing 12 months.
Jon: This strong performance reflects our team's continued excellent execution, while also delivering on a variety of initiatives to position the company for long term growth.
Jon: Slide seven details our capital allocation in the first quarter, we generated $514 million of adjusted funds from operations.
Jon: After allocating $101 million of sustaining Capex, which includes maintenance environmental health and safety.
Jon: We had $413 million of discretionary cash flow available.
Jon: Of this amount, we paid $95 million in dividends and invested $135 million in growth and productivity related capex and repurchased $400 million of buggy shares achieving our commitment to repurchase $1 billion of shares prior to the closing of our announced combination with vitaros.
John W. Neppl: Strong performance reflects our team's continued excellent execution, while also delivering on a variety of initiatives to position the company for long-term goals. Slide 7 details our capital allocation. In the first quarter, we generated $514 million of adjusted funds from operations, after allocating $101 million to sustaining CAPEX, which includes maintenance, environmental health, and safety. We had $413 million of discretionary cash flow available. Of this amount, we paid $95 million in dividends, invested $135 million in growth and productivity-related CapEx, and repurchased $400 million of Bunge's shares, achieving our commitment to repurchase $1 billion of shares prior to the closing of our announced combination with Viterra.
Jon: This resulted in the use of $217 million of previously retained cash flow.
Jon: Moving to slide eight at quarter end readily marketable inventory.
Jon: Rmi exceeded our net debt by approximately $4 billion.
Jon: Our adjusted leverage ratio, which reflects our adjusted net debt to adjusted EBITDA was two one times at the end of the first quarter.
Jon: Slide nine highlights our liquidity position.
Jon: At quarter end, we had committed credit facilities of approximately $8 $7 billion, which includes $3 billion that will become available to draw upon at the close of the Vitaros transaction.
Jon: Of the $5 $7 billion available to US currently all was unused at quarter end.
Jon: Riding us ample liquidity to manage our ongoing capital needs.
Jon: These amounts are in addition to $8 billion of term loan commitments that we have secured the fund the vitaros transaction.
John W. Neppl: This resulted in the use of $217 million of previously retained cash flow. Moving to slide eight, a quarter and readily marketable inventory, or RMI, exceeded our net debt by approximately $4 billion. Our adjusted leverage ratio, which reflects our adjusted net debt to adjusted EBITDA, was 0.1 times at the end of the first quarter.
Jon: Further as part of our capital structure planning, we recently doubled the size of our CP program from 1 billion to $2 billion.
Jon: Please turn to slide 10.
Jon: For the trailing 12 months adjusted ROIC was 17, 7% well above our Rmi adjusted weighted average cost of capital of seven 7%.
Jon: Roy She was 13, 9% also well above our weighted average cost of capital of 7%.
Jon: Moving to slide 11.
Jon: Trailing 12 months reproduced discretionary cash flow of approximately $1 $9 billion and a cash flow yield of 16, 9%.
John W. Neppl: Slight nine highlights are liquidity positions. At quarter end, we had committed credit facilities of approximately $8.7 billion, which includes $3 billion that will become available to draw upon at the close of the VITERA transaction. Of the $5.7 billion available to us currently, all was unused at quarter end, providing a sample liquidity to manage our ongoing capital. These amounts are in addition to $8 billion of term loan commitments that we have secured to fund the VITERA transaction. Furthermore, as part of our capital structure planning, we recently doubled the size of our CP program from $1 billion to $2 billion. Please turn to slide 10.
Jon: Please turn to slide 12, and our 2020 for outlook.
As Greg mentioned in his remarks, taking into account first quarter results. The current margin environment of forward curves. We continue to expect full year 2024, adjusted EPS of approximately $9.
Jon: Note that this forecast excludes any pending transactions that are expected to close during the year.
Jon: In agribusiness full year results are forecasted to be similar to our previous outlook and down from last year, primarily due to lower results in processing, where margins remain compressed in most regions.
Jon: And refining of specialty oils full year results are expected to be similar to our previous outlook and down from the record prior year, reflecting a shift in supply environment, particularly in the U S.
John W. Neppl: The trailing 12 months adjusted ROIC was 17.7%, well above our RMI adjusted weighted average cost of capital of 7.7%. ROIC was 13.9%, also well above our weighted average cost of capital of seven. Moving to slide 11.
Jon: In milling full year results are expected to be similar to our previous outlook and up from last year.
Jon: And corporate another full year results are expected to be similar to our previous outlook and up from last year.
And noncore full year results in our sugar and bioenergy joint venture are expected to be in line with our previous outlook and significantly down from last year, reflecting lower Brazil ethanol prices.
Jon: Additionally, the company expects a falling for 2024.
John W. Neppl: For the twirling 12 months, we produced discretionary cash flow of approximately $1.9 billion and a cash flow yield of 16.9%. Please turn to slide 12 in our 2024 outline. As Greg mentioned in his remarks, taking into account first quarter results, the current margin environment of 4 occurs. We continue to expect full year 2024 adjusted EPS of approximately $9. Note that this forecast excludes any pending transactions that are expected to close during the year.
Jon: And adjusted annual effective tax rate of 22% to 25%.
Jon: Net interest expense in the range of $280 million to $310 million, which is down from our previous expectation of 300 and $330 million.
Jon: Capital expenditures in the range of 1.2 to $1 $4 billion, and depreciation and amortization of approximately $450 million.
Jon: With that I'll turn things back over to Greg for some closing comments.
Gregory A. Heckman: Thanks, John.
Gregory A. Heckman: Before turning to Q&A I want to offer a few closing thoughts.
Gregory A. Heckman: As we look ahead, we remain confident in our team's ability to capture opportunities as we work to find solutions allow us to even better serve the needs of customers at both ends of the value chain farmers Indian consumers.
John W. Neppl: In agribusiness, full-year results are forecasted to be similar to our previous outlook and down from last year, primarily due to lower results in processing, where margins remain compressed in most areas. For Refinance Specialty Oils, full-year results are expected to be similar to our previous outlook and down from the record previous year, reflecting a shift in the supply environment, particularly in the US. In milling, full-year results are expected to be similar to our previous outlook and up from last year.
Gregory A. Heckman: We're proud of the work we've done to strategically position our business with the increased efficiency of our global platform.
Gregory A. Heckman: Our combination with by Terra will help us further accelerate our diversification across customers assets geographies and crops, providing us with more optionality to help address the world's food security needs.
Gregory A. Heckman: This combination will also enhance our role as a bridge between growers and in consumers to.
Gregory A. Heckman: To adapt and prioritize new sustainability practices that produce low ci products, well, bringing value back to the farm.
John W. Neppl: Incorporate another full year, results are expected to be similar to our previous outlook and up from last year. In non-core, foliar results in our sugar and bioenergy joint venture are expected to be in line with our previous outlook and significantly down from last year, reflecting lower Brazil ethanol prices. Additionally, the company expects a falling fall in revenue for 2020, meaning an adjusted annual effective tax rate of 22 to 25 percent. Net interest expense in the range of $280 to $310 million, which is down from a previous expectation of $300 to $330 million. Capital expenditures in the range of 1.2 to 1.4 billion dollars, and depreciation and amortization of approximately $450 million.
Gregory A. Heckman: For example, we recently announced.
Gregory A. Heckman: The $20 million investment in Brazil to more than double our regenerative bag program to 600000 hectares.
Gregory A. Heckman: The investment would be used to pay premiums to farmers and will also financed supervision of free technical assistance precision agricultural tools and measurement technologies that help producers adopt techniques to reduce emissions.
Gregory A. Heckman: In the Southern U S. We also successfully established a commercial pilot of winter canola hybrids and partnership.
Gregory A. Heckman: With Chevron and court T Viagra science.
Gregory A. Heckman: These crops have environmental and soil health benefits similar to cover crops and can be an additional source of revenue for growers.
Gregory A. Heckman: Also helping meet sustainability requirements of our customers.
Gregory A. Heckman: We're committed to a significantly growing the program for the 2025 harvests.
Gregory A. Heckman: I continue to be impressed by the innovation collaboration and commitment of the buggy team as we work together to deliver on our critical mission to provide a central food feed and fuel to the world.
John W. Neppl: With that, I'll turn things back over to Greg for some closing comments. Thanks, John.
And with that we'll turn to Q&A.
Speaker Change: We will now begin our question and answer session.
Gregory A. Heckman: Thanks, John. Before turning to Q&A, I want to offer a few closing thoughts. As we look ahead, we remain confident in our team's ability to capture opportunity, as we work to find solutions that allow us to even better serve the needs of customers, at both ends of the value chain, from farmers to consumers. We're proud of the work we've done to strategically position our business with the increased efficiency of our global platform.
Speaker Change: To ask a question you May press Star then one on interest to unfold.
Speaker Change: If you are using a speakerphone please pick up your handset before pressing the keys.
Speaker Change: It's at any time. Your question has been addressed and you would like to withdraw your question. Please press Star then two.
Speaker Change: At this time, we will pause momentarily to assemble our roster.
Speaker Change: Yeah.
Speaker Change: The first question today comes from Adam Samuelson with Goldman Sachs. Please go ahead.
Adam L. Samuelson: Yes, Thank you and good morning, everyone.
Adam L. Samuelson: Good morning, Greg.
Adam L. Samuelson: So John Greg Johnny I guess, the first question just thinking about the first quarter results in the context of the whole year and an unchanged outlook.
Gregory A. Heckman: Our combination with Viterra will help us further accelerate our diversification across customers, assets, geographies, and crops, providing us with more optionality to help address the world's food security needs. This combination will also enhance our role as a bridge between growers and end consumers, to adapt and prioritize new sustainability practices that produce low-CI products while bringing value back to the farm. For example, we recently announced a 20 million dollar investment in Brazil to more than double our regenerative agriculture program to 600,000 hectares.
Adam L. Samuelson: Would you characterize.
Adam L. Samuelson: The whole word kind of environment for the balance of the year is actually weaker than what you had been looking at three months ago or would you just.
Adam L. Samuelson: View this as a.
Just appropriate level of conservatism given limited forward book and kind of where the curve sits today and kind of with that can you just maybe.
Adam L. Samuelson: Give us your view on well she'd processing margins just around the world.
Adam L. Samuelson: Okay.
Speaker Change: Yeah no.
Speaker Change: No.
Speaker Change: We are you know, we really don't see it differently. What you know what we talked about last time of course, when we talk about the approximately nine for the year was really kind of seeing it 50 50 between first half and second half, which we continue to see what we did see was a little stronger Q1.
Gregory A. Heckman: The investment will be used to pay premiums to farmers and will also finance the provision of free technical assistance for seasoning agricultural tools and measurement technologies that help producers adopt techniques that reduce emissions. In the southern U.S., we also successfully established a commercial pilot of winter canola hybrids in partnership with Chevron and Cortiva Agroscience. These crops have environmental and soil health benefits similar to cover crops and can be an additional source of revenue for growers, also helping meet the sustainability requirements of our end customers.
Speaker Change: And some of that will come out of Q2, So Q2 will be a little bit softer, but we still see the haves. It's about 50 50 and still see that the year of the same at at approximately nine.
Speaker Change: And then as far as its current crush as you kind of.
Speaker Change: Walk around the World. If you look at soy you know the set up right now.
Speaker Change: Farmers of course are responding to lower prices as we get more in balance on supply and demand.
Speaker Change: There was one of those lower prices by being you know pretty stubborn about about selling so you've got higher.
Speaker Change: You know farmer retention and.
Speaker Change: You know that's kind of what happens as you try and transition for multi years of higher prices. So the market is going to vary spot not only for the farmers on selling but the buyers right. The buyers of the finished products have now been paid to wait to buy in the spot prices have moved lower.
Gregory A. Heckman: We're committed to significantly growing the program for the 2025 harvest. I continue to be impressed by the innovation, collaboration, and commitment of the Bungie team as we work together to deliver on our critical mission to provide essential food, feed, and fuel to the world. And with that, we'll turn to Q&A.
Speaker Change: And the other transition that of course, we're seeing is you've got a.
Supply chain that really distressed is off so as people pull down inventories as they're not really holding those safety inventories anymore.
Speaker Change: So, Brazil and Europe, you know have recently improved as we came through Brazil, a harvest and saw a lot of origination in and with you now.
Operator: We will now begin our question and answer session. To ask a question, you may press star then 1 on your touch-tone phone. If you are using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been answered and you would like to withdraw your question, please press star then 2. At this time, we will pause momentarily to assemble our roster. The first question today comes from Adam Samuelson of Goldman Sachs. Please go ahead.
Speaker Change: The little pushes origination we have seen improved I've been around you know FX change.
Speaker Change: And the pace of harvest at the end there in Brazil, so that that did help Brazil and Europe.
Speaker Change: Argentina.
Speaker Change: We are expecting those margins to pick up later in the year.
Speaker Change: They've been a little better here as we got started on harvest, but that'll really be as the producer.
Speaker Change: Watches the government what happens as far as devaluation in Argentina, and then any other government programs and as we see the the farmer marketing's there that'll that'll be the key on the margins are U S has been okay in the nearby.
Adam L. Samuelson: Yes, thank you. Good morning, everyone. [inaudible] So, Greg, John, I guess the first question is, just thinking about the first quarter results and the context of the full year and an unchanged outlook, would you characterize the forward kind of environment for the balance of the year as actually weaker than what you had been looking at three months ago? Or would you just view this as an appropriate level of conservatism given limited forward book and kind of where the curves sit today, and kind of with that, can you maybe give us your view on oil seed processing margins just around the world?
Speaker Change: The curves definitely are weaker into Q2, and three and then kind of as usual expecting and new crop Q4, the curves get better.
Speaker Change: And then China crush margins continue to be volatile kind of similar story as you heard last year.
Speaker Change: Spot has held up okay, but very very little price discovery forward. So.
Speaker Change: The team has been doing a nice job of managing through that and then why soft seeds are down versus last year, but there is still good in Europe and in North America, and that's really led by the strong oil leg.
Gregory A. Heckman: Yeah, no, we, you know, we really don't see it differently. What, you know, what we talked about last time, of course, we talked about the approximately nine for the year was really kind of seeing it 50-50 between first half and second half, which we continue to see. What we did see was a little stronger Q1. And some of that will come out of Q2, so Q2 will be a little bit softer, but we still see the halves. It's about 50-50, and they still see the year the same at approximately 9. And then, as far as current crushes go, you kind of walk around the world.
Speaker Change: And pretty good supply of seats. So that's kind of how we see things setting up right now.
Speaker Change: If I can just pick up on that last point on the on the oil leg and I'd just love to get your view on.
Speaker Change: Renewable diesel demand for vegetable oils as feedstock versus other waste fats and oils.
Speaker Change: It does seem like.
Speaker Change: Supply of waste fats in particular out of it.
Speaker Change: Asia had been accelerating pretty meaningfully.
How are you looking at our D feedstock demand kind of over the balance of the year and how does that start to transition into 25 with the implementation of the 40 times the credit in the U S.
Speaker Change: Yeah, and I might start at a slightly higher level on the oil. If you look at Palm you know some of the benefit on the strength in the Salt Daus coming you know Paul I'm from a supply has really been flat and so that that growth in palm supply has stopped about domestic demand has continued to grow so the XP.
Gregory A. Heckman: If you look at soy, the setup right now, farmers, of course, are responding to lower prices as we get more imbalanced between supply and demand. They're responding to those lower prices by being, you know, pretty stubborn about selling. So, you've got higher farmer retention.
Speaker Change: Notable.
Speaker Change: Volume's up palm have been going down globally, so that that from a high level. Some of the support for oil and then to get more more specific to your question.
Gregory A. Heckman: And, you know, that's kind of what happens as you transition from multi-years of higher prices. So, the market has gone to a very low spot, not only for the farmers who are selling but the buyers, right? The buyers of the finished products have now been paid to wait to buy in the spot as prices have moved lower. And the other transition that, of course, we're seeing is you've got a supply chain that really takes the stress off of you.
Speaker Change: Around yes indeed.
Speaker Change: In in North America, Yeah. It has not been quite as tight in North America as we've seen the low Ci feedstocks, primarily U C O be imported into the U S. So one of the things that we did talk about in the past is we believe that there wasn't enough supply for that.
Gregory A. Heckman: So as people pull down inventories, they're not really holding those safety inventories anymore. So Brazil and Europe, you know, have recently improved as we came through the Brazil harvest. I saw a lot of origination and with, you know...
Speaker Change: Food market as well as the fuel market and that the market would do its work by adding capacity.
Speaker Change: And importing.
Speaker Change: You know Tom the to go into food as we saw switching as well as seeing other low Ci feedstocks in U C O be imported so I think we've seen that and you've seen.
Gregory A. Heckman: So the little pushes of origination we have seen improve have been around the FX change and the pace of harvest at the end there in Brazil. So that did help Brazil and Europe, as well as Argentina.
Speaker Change: What we're continuing to process you don't record amount of vegetable oils into the fuel market.
Speaker Change: We've seen a little softer as the yard D margins are not as good and the big influx of of.
Gregory A. Heckman: We are expecting those margins to pick up later in the year. They've been a little better here as we got started on harvest, but that'll really be as the producer watches the government, what happens as far as devaluation in Argentina and then any other government programs. And as we see farmer marketing's there, that'll be the key to the margins. The U.S. has been okay in the nearby. The curves definitely are weaker into Q2 and 3, and then, as usual, expecting a new crop in Q4, the curves get better.
Speaker Change: The U C O. So we've got you know 1.4 billion gallons coming.
Speaker Change: Online here in 24, so we're still on track to have 5 billion gallons.
Speaker Change: In 'twenty five.
We've got one more new plants are up and running we expect another plant to come up in Q T Q2 on Rd and then.
Speaker Change: Another plant in Q4, so there is demand coming here later in the year.
Speaker Change: Adam I would just say this is John in terms of 45 Z. You know things are still in process. There I think we're optimistic that the veg oil certainly have a meaningful role going forward, but there's still a few things under as you know under review. So we're like everyone watching that closely I think.
Gregory A. Heckman: And then China, you know, crush margins continue to be volatile, kind of a similar story as you heard last year. Spot has held up okay, but there is very, very little price discovery forward. So the team has been doing a nice job of managing through that. And then why soft seeds are down versus last year, but they're still good in Europe and in North America. And that's really led by the strong oil leg and pretty good supply. So that's kind of how we see things sitting up right.
Speaker Change: The logical follow on to that will be where the RVO levels get reset in the future because clearly the industry has found ample supply for Archie M. P D and ultimately SaaS. So we're hopeful that the.
Speaker Change: E P a sees that as well.
Speaker Change: Yeah.
Speaker Change: I'll pass it on thank you.
Speaker Change: You bet. Thank you.
Speaker Change: The next question comes from Ben <unk> with.
Stephen: Stephen Please go ahead.
Good morning, everyone.
Ben: My bad.
Ben: I wanted to follow up on Adam's question around the guidance and focus on kind of the level of visibility that you expect to have through the year.
Gregory A. Heckman: I'd just love to get your view on renewable diesel demand for vegetable oils as feedstock versus other waste fats and oils. It does seem like... How are you looking at R&D, and feedstock demand over the balance of the year, and how does that start to transition into 2025 with the implementation of the 45Z credit in the U.S.?
Stephen: Recognizing we're in a more balanced market environment.
Stephen: Is the byproduct of that.
Stephen: Visibility is inherently.
Stephen: Reduced through.
Stephen: Through all points of the year are there key milestones and triggers as we move through the year that might enhance your visibility into the back half of the year and if so maybe gives us some insight into what those things are and when you expect to have that visibility.
Gregory A. Heckman: Yeah, and I might start at a slightly higher level on the oil. If you look at palm, you know, some of the benefit on the strength in the soft oil that's coming, you know, palm from a supply has really been flat. And so growth in palm supply has stopped while domestic demand has continued to grow. So exportable volumes of palm have been going down globally, so that from a high level is some of the support for oil. And then to get more specific to your question, around S&D in North America.
Stephen: Yep.
Speaker Change: Correct, where there's definitely less visibility into this year than we than we've had for a couple of years. So not much at all kind of beyond three months.
Speaker Change: I think that'll change as well.
Speaker Change: We see the the farmer behavior as things kind of sort out in.
Speaker Change: And send the signals whether that's the progress of the North American crop that then changes the the marketing behaviors of the farmer here in North America as they think about that next crop coming off and rolling their stocks and from a marketing.
Gregory A. Heckman: Yeah, it has not been quite as tight in North America as we've seen the low CI feedstocks, primarily UCO, be imported into the U.S. So, one of the things that we did talk about in the past is we believe that there was enough supply for the food market as well as the fuel market, and that the market would do its work by adding capacity and importing, you know palm to go into food as we saw switching as well as seeing other low sea ice feed stocks in UCO be imported so I think we've seen that and you've seen how we're continuing to process you know record amount of vegetable oils into the fuel market We've seen it a little softer as the RD margins are not as good and the big influx of the UCO.
Speaker Change: As we see the subpoena crop come off in Brazil, and again, the farmer, making decisions about what they're storing what they're moving the logistical challenges.
Speaker Change: And coordination in Brazil, and then in Argentina, It will be the producer who's been marketing, the corn and holding soybeans, which is a pretty historical and in Argentina, you've got a new regime in place there and the government So where do you see what government programs and if theres a evaluation so.
Speaker Change: It's a you know it'll be it'll be an interesting year definitely use it is a year of transition.
Speaker Change: The markets as they as they get more in balance on that supply and demand and the others being the end consumer right as well you continue to see the.
Gregory A. Heckman: So we've got, you know, 1.4 billion gallons coming online here in 24, so we're still on track to have 5 billion gallons by 25. We've got one new plant up and running. We're expecting another plant to come online in Q2 on RD and then another plant in Q4. So there is demand coming here later in the year. Adam, I just...
Speaker Change: The consumer what we hear from our customers to trade down to private label and store brands from the brands and then we're finally seeing a little less traffic in foodservice, where they'd been more of a switch to <unk>.
Speaker Change: In seeing that slow down a little bit and finally seeing a shift back to eating at home.
John W. Neppl: Adam, I just want to say, this is John. In terms of 45Z, you know, things are still in process there. I think we're optimistic that that Veg oil will certainly have a meaningful role going forward, but there's still a few things under, as you know, review. So we're, like everyone, watching that closely. And I think, you know, that the logical follow-on to that will be that we're at an RVO level to get reset in the future because, clearly, the industry has found ample supply for RD and PD and ultimately SAF. So we're hopeful that the EPA will see that as well.
Speaker Change: So you know everyone's kind of finding.
Speaker Change: Finding their way here on the on the supply and demand side, but let's.
Speaker Change: It feels like we're starting to get it get it sorted out and we'll see how these crops. You know finished getting harvested in the southern hemisphere in and how we get our get the crop planted how it progresses in the northern hemisphere.
Speaker Change: Very good makes sense.
Speaker Change: John you've made a lot of progress on the share repurchase program, a $400 million of stock repurchased during <unk>, a $1 billion in the last three quarters I believe your goal was to repurchase half of the $2 billion in stock to expected to repurchase by middle of 'twenty 'twenty four given that you're ahead of schedule a bit does that.
Speaker Change: We pull forward the timing of the $2 billion repurchase or we pause here in the short term, what's your expectation to the best you can communicate around the cadence of the remaining buyback activity.
Operator: I'll pass it on. Thank you. You got it. Thank you.
Benjamin Shelton Bienvenu: The next question comes from Ben Bienvenu with Stevens. Please go ahead.
Gregory A. Heckman: I want to follow up on Adam's question around guidance and focus on kind of the level of visibility that you expect to have through the year. Given that we're in a more balanced market environment, is the byproduct of that that visibility is inherently reduced through all points of the year? Or are there key milestones and triggers as we move through the year that might enhance your visibility into the back half of the year? And if so, maybe give us some insight into what those things are and when you expect to have that visibility.
Speaker Change: Yeah.
It's it's going to really depend a little bit on on how things progress on the <unk> transaction and timing around that but I think it's possible we could pull some of that forward I think it's hard to commit to that today because with with the closing of the deal as you know we've we've got a target target leverage ratios, we like to make sure we.
Speaker Change: At the close of that transaction.
Speaker Change: And we've got other projects in play today as well.
Speaker Change: Capex, but as you know we've always got a pipeline of M&A stuff going on so.
Gregory A. Heckman: Yeah, you're correct. There's definitely less visibility into this year than we have had for a couple years. So not much at all going to be on three months. I think that'll change as we see farmer behavior as things kind of sort out and send signals, whether that's the progress of the North American crop that then changes the marketing behaviors of farmers here in North America as they think about that next crop coming off and, you know, rolling their stocks in from marketing.
Speaker Change: We'll watch it closely it's an important part of the allocation and we'll keep looking for opportunities here as we go forward, whether it's before or after the close of the transaction.
Speaker Change: Okay best of luck. Thanks.
You bet.
Speaker Change: The next question comes from Salvator Tiano with Bank of America. Please go ahead.
Salvator Tiano: Good morning, So first of all I wanted to ask about camera does I guess the announcement yesterday about the their view that the transactional but there'll be able to come back because I think they said.
Gregory A. Heckman: As we see the Safrina crop come off in Brazil, and again, the farmer making decisions about what they're storing, what they're moving, the logistical challenges, in coordination in Brazil. And then in Argentina, it will be the producer who's been marketing the corn and holding the soybeans, which is pretty historic. And in Argentina, you've got, you know, a new regime in place there in the government. So when you see what government programs there are and if there's evaluation.
Salvator Tiano:
Make any full procurement on the west side of town.
Salvator Tiano: In Western Canada that I'd be called bad people on the eastern side protect the production of a.
Speaker Change: I can I'll, let neel so given their I guess their view that he spoke a little bit firstly about what are the main storms here in what could be.
Speaker Change: How can be seen by the transaction timeline and also what are the potential outcomes to resolve these issues either a chance that you may have a you can get away with divesting nothing or do you have to negotiate with them.
Gregory A. Heckman: So it will be an interesting year. It definitely is a year of transition for the markets as they get more in balance between supply and demand. And the other, the end consumer as well. You continue to see the consumer, what we hear from our customers, trade down to private label and store brands from the brands. And then we're finally seeing a little less traffic in food service, where there's been more of a switch to QSRs, and seeing that slow down a little bit, and finally seeing a shift back to eating at home.
Speaker Change: I'll provide some remedies.
Speaker Change: Yeah, I, probably like it might start kind of at a at a higher level.
Speaker Change: We are pleased with the progress we're making I mean, if you look we got a file and a little 40.
Speaker Change: Jurisdictions and you know 28 of those are issued unconditional clearances at this point of the remaining 13 of course, we've got some of the big ones U S, Canada, Brazil, China and do you remember Argentina is a post closing review.
Speaker Change: So while you know overall, we don't Ah Ah.
Gregory A. Heckman: So, you know, everyone's kind of finding their way here on the supply and demand side, but it feels like, you know, we're starting to get it sorted out, and we'll see how these crops finish getting harvested in the Southern Hemisphere and how we get the crop planted and how it progresses in the Northern Hemisphere.
Speaker Change: Exactly when we will get the green light, but we sure haven't seen anything that indicates any material risk to the economics of the deal from a Canada specific look it's good that that step of the regulatory process is completed.
Speaker Change: And the competition Bureau report you know as you look through it you know the good news and there is they had no concerns with much of what we're doing on the grain purchasing side. The meal sales at ports are the majority of our refined and special oil product sales. So on where there were concerns in topics raised and we look forward to.
Benjamin Shelton Bienvenu: Very good. It makes sense.
John W. Neppl: John, you made a lot of progress on the share repurchase program, $400 million of stock repurchased during one queue, and a billion dollars in the last three quarters. I believe your goal was to repurchase half of the $2 billion of stock you expected to repurchase by the middle of 2024. Given that you're ahead of schedule a bit, does that mean we pull forward the timing of the $2 billion repurchase, or do we pause here in the short term? What's your expectation, as best you can communicate, around the cadence of the remaining buyback?
Speaker Change: Discussing those in greater detail.
Speaker Change: And we'll be happy to get them to engage as we have been with all the regulators as they raise concerns so.
When you boil it down you know at the end of the day. This transaction is good for Canada, right, well, we'll be more efficient and resilient.
Speaker Change: Throughout all of our supply chains.
Speaker Change: You know markets arent getting any easier well will continue to maintain Canadian leadership in AG and food and we'll be able to increase our capacity to invest and continue to provide thousands of Canadians with good job. So feel a feel good about where we're at and it's just you know, it's we don't really see any need for.
John W. Neppl: It's going to really depend a little bit on how things progress on the Vitera transaction and the timing around that, but I think it's possible we could pull some of that forward.
John W. Neppl: I think it's hard to commit to that today because, with the close of the deal, as you know, we've got target leverage ratios that we'd like to make sure we hit at the close of that transaction. And we've got other projects in play today as well, not only CapEx, but, as you know, we've always got a pipeline of M&A stuff going on. So, we'll watch it closely. It's an important part of the allocation, and we'll keep looking for opportunities here as we go forward, whether it's before or after the close of the transaction. Okay.
Speaker Change: For remedies in Canada.
Speaker Change: It would be too early to speculate on that but we look forward to engage on the details.
Speaker Change: Okay perfect.
Speaker Change: And I also wanted to ask about the the Cabo crops that you mentioned, but.
Speaker Change: The trial just winter went very well I'm, just wondering at which point do you think.
Speaker Change: <unk> started commercializing these products and actually start seeing some benefit to the bottom line.
Speaker Change: And Oh, you know, what what's kind of the thinking with regard to vehicles like how could things type of a product to monetize.
Benjamin Shelton Bienvenu: Okay, that's a lot. Thanks.
Operator: The next question comes from Salvator Tiano with Bank of America. Please go ahead.
Speaker Change: You broke up right at the beginning was the question on winter canola.
Salvator Tiano: Good morning. Personally, I wanted to ask about Canada's announcement yesterday about their view that the transaction with Vipera would be anti-competitive. I think they said negative for procurement on the western side of Western Canada and anti-competitive on the eastern side for the production of canola oil and meal. Given their view, can you talk a little bit firstly about what are the milestones here and how this could impact the transaction's timeline? And also, what are the potential outcomes to resolve these issues? Is there a chance that you can get away with divesting nothing, or do you have to negotiate with them and provide some?
Speaker Change: Yeah exactly.
Speaker Change: Okay, Yeah look.
Speaker Change: Look we were we were in the trial phase running the pilots on winter canola and we've been very pleased with the producer reaction. We've been pleased with the the production and the performance of the winter canola and so the plan now will be to scale that up in the.
In the coming campaign and.
Speaker Change: And as we get visibility to the the uptake by the producer and our ability to scale that up then we'll eventually get to the point.
Speaker Change: You know to be able to talk about any any.
Speaker Change: Any impact to the to the financials, but it is a little bit early for that.
Speaker Change: Great. Thank you very much.
Gregory A. Heckman: Yeah, I probably might start kind of at a higher level. We are pleased with the progress we're making. I mean, if you look, we have a file in a little 40 Jurisdictions, and 28 of those have issued unconditional clearances at this point. Of the remaining 13, we've got some of the big ones, U.S., Canada, Brazil, China, and the EU. If you remember, Argentina is a post-closing review.
And you know that the winter canola and the cover crops. So my dad those of course, we're building those programs toward.
Speaker Change: Just to serve destrier hand, and our expansion there in the Gulf. So that's a little bit off in the future as well. So we've got a little bit of time as we build that capacity.
Speaker Change: The next question comes from Steven <unk> with Morgan Stanley. Please go ahead.
Speaker Change: Yeah.
Steven: Hi, Thanks for taking my question.
Steven: Earlier, we kind of talked a bit about the oil side of the equation was just wondering if we could.
Gregory A. Heckman: So while overall, we don't know exactly when we'll get the green light, we sure haven't seen anything that indicates any material risk to the economics of the EU. From a Canada-specific point of view, it's good that that step of the regulatory process is completed and that the Competition Bureau report, as you look through it, the good news is that they had no concerns with much of what we're doing on the grain purchasing side, the meal sales at ports, and the majority of our refined and special oil product sales. So, on where there were concerns and topics raised, we look forward to discussing those in greater detail.
Steven: Come back to the meal side of it there's some more crush capacity coming in the U S. This year.
Steven: As your comments before Argentina, and potentially kind of.
Steven: More of a factor in the global market. So how are you thinking about both you know kind of domestic inclusion and yeah export opportunity for meal.
Speaker Change: Thank you.
Speaker Change: Thank you so far here in 'twenty for soybean meal demand appears pretty good I mean, the lower prices are doing their work and I think you called it out there and seeing a higher inclusion.
Speaker Change: The other thing that feels like profitability for the animal segment has bottomed and and as profitability gets better.
Speaker Change: Probably expect some expansion there right now global animal numbers are stable when you look at pork and poultry together, they're roughly flat.
Gregory A. Heckman: And we'll be happy to engage, as we have been with all the regulators, as they raise concerns. So, when you boil it down, you know, at the end of the day, this transaction is good for Canada, right? We'll be more efficient and resilient throughout all of our supply chains. You know, markets aren't getting any easier. We'll continue to maintain Canadian leadership in agriculture and food, and we'll be able to increase our capacity to invest and continue to provide thousands of Canadians with good jobs.
Speaker Change: You know with poultry up maybe a little in pork down a little bit and then if you look globally. The hog margins really are up in all regions.
Except China.
Speaker Change: And the poultry margins are better so.
Speaker Change: I feel like the the meal demand is okay. There you did talk about Argentina and of course, you know last year. The rest of the world had to make up for Argentina, when it didn't run.
Gregory A. Heckman: So, feel good about where we're at, and it's just, you know, we don't really see any need for remedies in Canada. It would be too early to speculate on that, but we look forward to engaging on the details.
Speaker Change: As that crops harvested in the farmer.
Speaker Change: It starts to sell and liquidate the crop we expect to run harder in Argentina. This year and so it will perform better.
Speaker Change: And that May come at the expense of some other areas, which could possibly be.
Salvator Tiano: I also want to ask about cover crops. You mentioned that the trial this winter went very well.
Speaker Change: You know in Europe, so it will be some tradeoffs, but.
Speaker Change: That's what we showed in the last few years is that's the beauty of our global platform is that we can adjust and maximize where the margins are as we run our system and serve our customers.
Gregory A. Heckman: I'm just wondering, at which point do you think you can start commercializing these products and actually start seeing some benefit to the bottom line? What's the thinking with regard to the economics? How could this type of product be monetized?
Speaker Change: Thank you.
Speaker Change: Yeah.
Speaker Change: The next question comes from Tom Palmer with <unk>.
Gregory A. Heckman: You broke up right at the beginning. Was the question about winter canola? Yes, exactly. Okay, yeah, look, we were in the trial phase running the pilots on winter canola, and we've been very pleased with the producer reaction. We've been pleased with the production and the performance of winter canola, and so the plan now will be to scale that up in the coming campaign. And as we get visibility into the uptake by the producer and our ability to scale that up, then we'll eventually get to the point to be able to talk about any impact on the financials, but it's a little bit early for that.
Thomas Hinsdale Palmer: Please go ahead.
Thomas Hinsdale Palmer: Good morning, Thanks for the question.
Thomas Hinsdale Palmer: I wanted to just ask on the second quarter you did note, maybe a little bit of incremental softness just what's driving that in particular is in certain segments, we should be thinking about or certain regions, where maybe it's come down a bit.
Thomas Hinsdale Palmer: Yeah, Tom This is John.
John: If you look at the.
John: When we cadence a quarter, it's kind of 60% 40% for the first half we ended up a little bit more tilted towards Q1 versus Q2, but largely the the makeup of the quarter hasn't really changed so much in total and even by segment, it's been more of timing and so, whereas we saw a little bit over delivery.
In Q1 across merchandising.
John: And and processing, we're seeing a little bit of softness in Q2 and those two items. So really more of a view on that some of that was timing, it's always hard to predict that but.
Gregory A. Heckman: Thank you very much. And, you know, the winter canola and the cover crops, I might add, those, of course, we're building those programs toward to serve Destrehan and our expansion there in the Gulf. So that's a little bit in the future as well. We've got a little bit of time as we build that capacity. The next question comes from Steven Haynes with the Morgan Family. Please go ahead. Hi, thanks for taking my question.
John: We will see a little bit based on our current forecast, we'll see a little bit down in and processing merchandising in Q2 versus Q1, I think everything else will hold hold fairly steady you know and there's still time here. We're only we're only right at the end of April. So we've got we've got a couple of months here yet to see how things shake out.
Speaker Change: Understood. Thank you and then maybe we could just kind of shift over to <unk>, where you do expect a little bit of an uptick.
Operator: The next question comes from Steven Haynes with the Morgan Family. Please go ahead. Hi, thanks for taking my question.
Speaker Change: With a quarter ago.
Speaker Change: What's really driving that is there visibility.
Steven Kyle Haynes: No, thank you. So far here in 24, soybean meal demand appears pretty good. I mean, the lower prices are doing their work, and I think you called it out there: higher inclusion. The other thing, it feels like profitability for the animal segment has bottomed, and as profitability gets better, we probably expect some expansion there. Right now, global animal numbers are stable.
Speaker Change: At this point that that really guides that and then is there any.
Speaker Change: Read through I guess is that it is maybe the environment being improved and later this year that they kind of pulls into 'twenty five.
Speaker Change: Yeah, I'd say a couple things on on Q4 of course is historically in North America.
Speaker Change: You know if you look at where our planted acres are you assume that soybean crop.
Speaker Change: Gets grown <unk>.
Speaker Change: New crop coming off.
Gregory A. Heckman: When you look at pork and poultry together, they're roughly flat, with poultry up maybe a little and pork down a little bit. And then if you look globally, the hog margins are really up in all regions except China, and the poultry margins are better, so I feel like the meal demand is okay there.
Speaker Change: And also with the amount of stocks U S producers carrying you know them.
Speaker Change: Marketing coming up as close to that new crop being harvested and then the new crop harvest and then the other like we talked about.
Speaker Change: The a lot of Yuko has put pressure.
Speaker Change: On.
Speaker Change: The oil market here in North America, well with those imports that's not as.
Gregory A. Heckman: You did talk about Argentina. Of course, you know, last year the rest of the world had to make up for Argentina when it didn't run, as that crop's harvested by farmers. We expect to run harder in Argentina this year, and so it will perform better, and that may come at the expense of some other areas, which could possibly be in Europe. So there will be some tradeoffs. But I think that's what we've shown in the last few years. That's the beauty of our global platform is that we can adjust and maximize where the margins are as we run our system and serve our customers.
Speaker Change: Economical at this point while at the same time, you know you've got another plant coming up on the R&D side in Q2, and then another plant in Q4.
Speaker Change: So got to feel like that could be constructive.
Speaker Change: For oil demand as we get out there in Q4, and then we talked a little bit earlier about just.
Speaker Change: Globally overall with palm fairly tight that's what's been supported for.
Speaker Change: Oils globally. They asked and these are pretty tight everywhere outside of North America, and especially with the pull on the on the soft oils.
Speaker Change: Alright, thanks for all the detail.
Speaker Change: Yeah.
Operator: The next question comes from Tom Palmer with Citi. Please go ahead.
Speaker Change: The next question comes from Heather Jones with Heather Jones Research. Please go ahead.
Thomas Hinsdale Palmer: Good morning. Thanks for the question.
Heather Jones: Good morning, everyone.
Heather Jones: Good morning.
John W. Neppl: I wanted to just ask about the second quarter. You did note maybe a little bit of incremental softness. What's driving that in particular? Are there certain segments we should be thinking about or certain regions where maybe it's come down a bit?
Heather Jones: I want to stick with oil demand.
Heather Jones: Greg you mentioned about Chinese Yuko and yeah, it seems like that.
Heather Jones: Harvest closed and also you have soybean oil.
Heather Jones: Seems to be trading at unusually.
Heather Jones:
John W. Neppl: Yeah, Thomas, John, you know, when we cadence the quarter, it's kind of 60%, 40% for the first half. We ended up a little bit more tilted toward Q1 versus Q2, but largely, the makeup of the quarter hasn't really changed so much in total, and even by segment, it's been more of a timing issue. And so, whereas we saw a little bit of over delivery in Q1 across merchandising and processing, we're seeing a little bit of softness in Q2 in those two items. So, really, more of a view on some of that was timing.
Out of whack relative to historical values smelters of palm oil and canola and animal fats and so just wondering if you think there's an opportunity for somebody to price itself back into feed rations or will that take a longer period.
Speaker Change: No I think one of the things that we have seen from our our food customers is as prices have come back the programs. We're working on with them are really driven around driving volume now whether it's.
Speaker Change: New products or product enhancements, so, whereas we saw when we had kind of the inflationary all the projects, we're really focused around cost reduction they're now looking at driving volume. The other thing is with the profitability on the animal side.
Speaker Change: We may see more fat come back into the to the feed rations as well. So we think we could you know.
John W. Neppl: It's always hard to predict that, but based on our current forecast, we'll see a little bit down in processing merchandising in Q2 versus Q1. I think everything else will hold fairly steady, and there's still time here. We're only right at the end of April, so we've got a couple months here yet to see how things shake out.
Speaker Change: One thing historically, we know lower prices are generally good for demand I think you're on the right track is how quick will we see it kick in but I think we will get some support.
Speaker Change: From both the food and feed markets.
Speaker Change: Okay, and then I have a two part question I was just wondering how you are thinking about the full year and like you noted there's visits there's little visibility beyond three months.
Speaker Change: But when you're thinking about the full year, how are you thinking about the magnitude.
Thomas Hinsdale Palmer: understood. Thank you.
John W. Neppl: And then maybe we can just kind of shift over to 4Q, where you do expect a little bit of an uptick consistent with a quarter ago. What's really driving that? Is there visibility at this point that really guides that? And then is there any read through, I guess, of that as maybe the environment being improved later this year that kind of pulls into 25?
Speaker Change: The Argentine crush for the year and I ask because you mentioned that you think.
Speaker Change: Our U S a.
Crush margins should be okay.
Speaker Change: And just wondering what you think.
Speaker Change: With Argentina come into the market with increased meal flows.
Speaker Change: And then several new plants coming online in the next few months. Just wondering do you do you think those margins are going to be looked at by the oil side and just how you're thinking about how they all.
John W. Neppl: It's a couple things about Q4, which, of course, is historically in North America. You know, if you look at where our planted acres are, you assume that soybean crop gets grown, and you've got a new crop coming off. And also with the amount of stocks the US producer is carrying, you know, the marketing coming up as close to that new crop being harvested, and then the new crop harvest. And then the other things we talked about. The lot of Yuko has put pressure on. [inaudible] Globally, overall, with POM fairly tight, that's what's been supported for, you know, oils globally. The S&Es are pretty tight everywhere outside of North America, and especially with the pull on the soft oils.
Speaker Change: Hi, there.
Speaker Change: Yeah. Its I think there'll be you know a little bit of a of a balance right of course, we've we've put all this in our outlook are currently but some of what we talked earlier with.
Speaker Change: Animal profitability, a little bit of an uptake on the meal demand side.
Speaker Change: You know from some expansion on the animal side.
Speaker Change: And then we've got you know on the oil side, we talked about palm situation from a tightness some demand growth on on feed and food side from the from the lower price.
Speaker Change: And then Rd, continuing to come on and then the other is seeing whether these other low ci feedstocks at what pace. They can continue to be competitive we don't know if some of that was.
Speaker Change: You know where their stocks being pulled down and they really can't compete at the same pace or you don't the other thing is remember the big picture is that everyone's trying to take carbon out of their liquid fuels supply chain globally.
Thomas Hinsdale Palmer: All right, thanks for all the details.
Operator: The next question comes from Heather Jones with Heather Jones Research. Please go ahead.
Heather Jones: Good morning, everyone.
Heather Jones: Good morning. Um, I want to go.
Speaker Change: There are projects going on.
Speaker Change: Kind of a round globally. So some of the low Ci feedstocks that have been moving around the globe as projects get developed than demand.
Heather Jones: I want to stick with oil demand. So, Greg, you mentioned the Chinese Yuko. And, yeah, it seems like that is disclosed, and also you have soybean oil that seems to be trading at an unusually high price relative to historical values relative to palm oil and canola and animal fats. And so just wondering if there's an opportunity for soy to price itself back into food rations or will that take a longer period?
Speaker Change: <unk> develops in country or incontinence. So these flows are constantly changing so we do expect it to be you know continue to be pretty dynamic on the oil side and we're really glad we're operating from a global footprint, both on meal and oil.
Speaker Change: Right alright. Thank you so much I appreciate it.
Speaker Change: Thank you.
Speaker Change: Your next question comes from Ben here.
Ben: Barclays. Please go ahead.
Gregory A. Heckman: I think one of the things that we have seen from our food customers is as prices have come back, the programs we're working on with them are really driven around driving volume now, whether it's new products or product enhancements. So whereas we saw when we had kind of the inflationary period, all the projects were really focused around cost reduction, they're now looking at driving volume. The other thing is that with profitability on the animal side, we may see more fat come back into feed rations as well.
Ben: Yeah. Good morning drag John Thanks for taking my question just wanted to follow up on just capital allocation. I mean, obviously, we have we have to buy churro pending but I know you have a bunch of other projects are pending in terms of growth investments productivity increases and increased et cetera can you update us.
Ben: S too for the Capex for this year, which still seems obviously somewhat elevated what are like some of the projects you have out there and when do you think they're going to be a relative playing playing a relevant role after contribution to the current results of just just around that a framework that would be my first question. Thank you.
Gregory A. Heckman: So we think we could, you know, the one thing historically we know lower prices are generally good for demand. I think you're on the right track. It's how quick we see it kick in, but I think we'll get some support from both the food and the feed market.
Sure: Sure Yeah.
Sure: So.
Sure: Ben as you know we've got a number of projects obviously go on.
Sure: Globally.
Sure: Greg mentioned that Krishna plant, which is a relatively small one that was commissioned here recently, but.
Heather Jones: Okay, and then I have a two-part question, so I was just wondering how y'all are thinking about the full year, and, as you noted, there's little visibility beyond three months. But when you're thinking about the full year, how are you thinking about the magnitude of Argentine crush for the year? And I ask because you mentioned that you think Crush Margins should be okay. I'm just wondering what you think. With Argentina coming to the market with increased meal flows and then several new plants coming on in the next few months, just wondering, do you think those margins are going to be lifted by the oil side and just what are you thinking about how those all interplay?
Sure: In addition to the desk your hand.
Sure: Plant expansion that we announced a groundbreaking finally on that a few weeks ago.
Sure: We've got.
Sure: The other ones that we've been we've mentioned Morris town S. P C plant and more sand, Indiana underway, our course or our greenfield oil specialty oils plant in the Netherlands.
And in Rotterdam or in Amsterdam, specifically that's underway.
And barge unloading expansion and the port industrial hand that that's going to complement the the expansion industrial hand up the facility.
Sure: Those are and then of course recently, we have the Avondale plant acquisition that we're also working on an expansion project. There. So those are some of the bigger things on the Capex side.
Gregory A. Heckman: Yeah, I think there'll be, you know, a little bit of a balance, right? Of course, we've put all this in our outlook currently, but some of what we talked about earlier with animal profitability, a little bit of an uptake on the meal demand side from some expansion on the animal side. And then we've got, you know, on the oil side, we talked about the palm situation from a tightness perspective, some demand growth on the feed and food side from the lower price, and then RD continuing to come on.
Sure: Because all of those are really underway other than other than the debt.
Sure: The completion of accretion out of the rest of those really are in process and Avondale.
Sure: Spansion will probably come online a little sooner, but the rest of those are really we're talking really 2026 before those are commissioned a those are all multiyear builds and so we're still very optimistic about the progress there they're all they're all on track and things are looking good but it is going to be probably late 'twenty six before those are up and running.
Sure: And then of course, we have C. J select sitting out there on the M&A side that we announced previously that we're hoping to close yet later this year, whether that happens before or after the vitol ideal yet to be seen but but that's progressing as well.
Gregory A. Heckman: And then, you know, the other thing is seeing whether these other low CI feedstocks can continue to be competitive. We don't know if some of that was because their stocks were being pulled down, and they really couldn't compete at the same pace. Or, you know, the other thing is, remember the big picture is that everyone's trying to take carbon out of their liquid fuels supply chain globally. There are projects going on around the world.
Okay, perfect very clear and then my second question.
Sure: Within agribusiness merchandising how are you.
Speaker Change: You think about the cadence of merchandising because it feels like it was a little softer into the back half of last year and kind of stabilize now into into <unk> actually improved sequentially. So as we think about it in the onset within your guidance with acquisitions being down and you said pretty much predominantly driven.
Gregory A. Heckman: So, some of the low CI feed stocks that have been moving around the globe as projects get developed, then demand develops in-country or in-continent. So, these flows are constantly changing. So, we do expect it to be, you know, continue to be pretty dynamic on the oil side, and we're really glad we're operating from a global footprint both on meal and oil. All right, thank you so much.
Speaker Change: Why the processing side is it fair to assume that the annual kind of cadence and what you have to like one queued up which basically gives you more or less the same levels of last year, but then within merchandising is that a good way to think about this as more stable now or whatever puts and takes to that business.
Heather Jones: Right. All right. Thank you so much. I appreciate it.
Speaker Change: Yeah.
Speaker Change: It's always a tough one but right now I'd say, we're expecting to be fairly on track with where we were a year ago and merchandising in total we were off to a as you pointed out sequentially. Good start versus Q3 Q4 of last year right now where you know we pulled some of that forward from Q2.
Operator: The next question comes from Ben Theurer with Barclays. Please go ahead.
Benjamin M. Theurer: Good morning, Greg, and John. Thanks for taking my question. I just wanted to follow up on just other capital allocation. I mean, obviously, we have Bitero pending, but I know you have a bunch of other projects pending in terms of growth investments, productivity increases, etc. Can you update us as to, for the CapEx for this year, which still seems obviously somewhat elevated, what are some of the projects you have out there, and when do you think they're going to be playing a relevant role as to contribution to the current results? So, just around that framework, that would be my first question.
Speaker Change: So we still called the first half you know I'll say relatively modest but a good start and we'll see if we've got a couple of months here to go so there's always opportunity and then the second half of the year.
Speaker Change: We feel like there.
Speaker Change: Should be some opportunity out there I don't think we're at all overly aggressive in our view for the year, it's pretty like I said, it's pretty consistent with a year ago was just gonna be timing quarter to quarter.
Speaker Change: Yeah.
Speaker Change: Okay. Thank you very much.
Speaker Change: The next question comes from Andrew tragic BMO. Please go ahead.
John W. Neppl: There are many people out there. Yeah, And so, Ben, as you know, we've got a number of projects, obviously, going on globally. Greg mentioned the Krishna plant, which is a relatively small one that was commissioned here recently. But in addition to the Destrehan plant expansion that we announced a groundbreaking for finally on a few weeks ago, we've got the other ones that we've mentioned, the Morristown SPC plant in Morristown, Indiana, underway. Of course, our Greenfield oil, specialty oils plant in the Netherlands, in Amsterdam, specifically, that's underway, and the Barge Unloading Expansion in the port in Destrehan that's going to complement the expansion at Destrehan at the facility.
Andrew: Hey, good morning, excuse me good morning, Thanks for taking the questions I know, we've talked a lot about the soybean oil side, but I just wanted to go back to that.
Andrew: One more time and I guess I'm, just trying to think about outlets from.
From a demand perspective, given you know the market seems to be investors seem to be a little bit concerned about inclusion and in renewable diesel as a feedstock moving forward. So I guess my question is more on the export side do you see the opportunity for the U S to become a more meaningful soybean oil export or later this year.
Andrew: You talked about the tightness on vegetable oils globally outside the U S. So.
Andrew: Do you view that as an opportunity with with South America becomes more of a line or any other outlets from a demand perspective globally as you as we think about soybean oil supply demand.
John W. Neppl: Those are, and then of course, recently we have the Avondale plant acquisition that we're also working on an expansion project there. So those are some of the bigger things on the CAPEX site. Because all those are really underway other than the... Completion of Krishna.
Andrew: Yeah, but you know the the U S does have the ability to switch quickly I mean, if you think about it you know prior to our D. We held the residual stocks for the world and we're there to export as the world needed it and called on an oil from the U S and then.
John W. Neppl: The rest of those really are in the process, and Avondale expansion will probably come online a little sooner, but the rest of those are really, we're talking really 2026 before those are commissioned. Those are all, you know, multi-year builds, and so we're still very optimistic about the progress there. They're all, they're all on track, and things are looking good, but it is going to be, you know, probably late 26 before those are up and running.
Andrew: As we were you know building capacity.
Andrew:
Andrew: On the on the crush side as well as building capacity import other oils and other low is low Ci feedstocks right. We we pulled stocks down and then drove drove imports into North America. So I think when you think about the U S. It will continue to be probably the most dynamic on the oil side to help.
John W. Neppl: And then, of course, we have CJ Selecta sitting out there on the M&A side that we announced previously that we're hoping to close later this year. Whether that happens, you know, before or after the Viterra deal is yet to be seen, but that's progressing as well.
Andrew: Balance things globally. So again glad we're operating from a from a global platform and are able to see those different shifts and be able to respond to help serve our customers an imbalance.
Andrew: You know our crush margins, depending on where we're going to run to maximize those but should be a should be a pretty pretty dynamic a year and then of course you know we continue to see strong demand in India I don't think I mentioned that but you know that's one of the other other keys on the oil side as well.
Benjamin M. Theurer: Okay, perfect, thank you. And then my second question, within agribusiness retailing, how do you think about the pace of retailing? Because it feels like it was a little softer into the back half of last year and kind of stabilized now into one queue, actually improved sequentially. So as we think about it in the onset within your guidance of agribusiness being down, and you said predominantly driven by the processing side, is it fair to assume that like the annual kind of cadence and what you have is like one queue that would nicely get you to more or less the same levels of last Is that a good way to think about it? Is this more stable now?
Andrew: Okay.
Speaker Change: Got it Okay. That's helpful and then.
Speaker Change: I guess I just wanted to ask you about the crush capacity expansions that have been announced but announced over the last several years. Obviously when those announcements were made for a number of players that the margin environment was much stronger so I guess.
Speaker Change: Do you see risk that some of those plants don't get built as the margin environment has gotten a little bit more compressed a not so much for.
Speaker Change: Folks like yourself that have you know you know this.
Speaker Change: The end market demand built in but I guess I'm just curious if you're hearing that or do you think there's risk that some of those that capacity doesn't ever come online.
John W. Neppl: Or whatever puts and takes to that. Yeah, that's always a tough one.
John W. Neppl: Yeah, that's always a tough one. But right now, I'd say we're expecting to be fairly on track with where we were a year ago in merchandising. In total, we were off to, as you pointed out, a sequentially good start versus, you know, Q3, Q4 of last year. Right now, we're, you know, we've pulled some of that forward from Q2. So we still call the first half, you know, I'll say relatively modest, but a good start.
Speaker Change: Okay.
Speaker Change: When I look at it through our lens I mean things.
Speaker Change: Things definitely got more expensive to build for a period of time and that's why we slowed down our industrial project.
Speaker Change: Did the did the work and we're patient to get the cost down before we did build that now we're building a switch plants. We're building it out of port to help draw.
John W. Neppl: And we'll see. We've got a couple months to go. So there's always opportunity. And then the second half of the year, we feel like there's, you know, should be some opportunity out there. I don't think we're at all overly aggressive in our view for the year. It's pretty, like I said, it's pretty consistent with a year ago, it's just going to be timing quarter quarter.
Speaker Change: Drive export economics.
Speaker Change: The economics on the meal side, where we're at a port.
Speaker Change: And in a location, where we can receive domestic oilseeds, whether that's gonna be and being a switch brant, whether that's gonna be soy or whether that's gonna be winter canola, whether that's gonna be a cover crop as we as we develop things like cover kras or if it makes sense to import seeds, where at the port and have the ability to do that we're also doing a brownfield site. So.
Speaker Change: We have lower cost.
Operator: The next question comes from Andrew Strelzik with BML. Please go ahead.
Speaker Change: [laughter] and we're plugging it into our global network now I will tell you.
Speaker Change: We are really glad that we're doing that so personally.
Andrew Strelzik: Hey, good morning. Excuse me. Good morning.
Speaker Change: Wouldn't want to be a standalone plant or building a standalone plant today, just as a as an investor we like where our position is and I guess, that's what we're doing is being very thoughtful where we put capital in the ground that's going to exist for decades is that we're putting into place that continues to improve our global.
Andrew Strelzik: Thanks for taking the questions. I know we've talked a lot about the soybean oil side, but I just wanted to go back to that one more time. And I guess I'm just trying to think about outlets from a demand perspective, given, you know, the market seems to be, investors seem to be a little bit concerned about inclusion in renewable diesel as a feedstock moving forward. So I guess my question is more on the export side.
Speaker Change: Footprint.
Speaker Change: For our cost position for the long term.
Speaker Change: Andrew maybe I'd just add there that you know as you could imagine we watch that fairly closely in those projects that were well underway are going to continue and get completed.
Andrew Strelzik: Do you see the opportunity for the U.S. to become a more meaningful soybean oil exporter later this year? You talked about the Titan on Vegetable Oils Globally Outside the U.S. So do you view that as an opportunity with as South America comes more online or any other outlets from a demand perspective globally as we think about soybean oil supply and demand?
Speaker Change: But really anything that was that was proposed or early stages. We've seen a number of those put on hold at least for now and I think the expectation on our part would be that you know with where we are today in a margin environment that those same could probably not get done unless things change.
Speaker Change: Great. Thank you very much.
Gregory A. Heckman: Yeah, the, you know, the US does have the ability to switch quickly. I mean, if you think about it, prior to RD, we held the residual stocks for the world, and we were there to export as the world needed it and called on oil from the US. And then as we were, you know, building capacity on the crush side as well as building capacity to import other oil and other low CI feedstocks.
Speaker Change: Okay.
Speaker Change: Okay.
I would like to turn the conference back over to Greg Hackman for any closing remarks.
Gregory A. Heckman: Just like to thank everyone for joining us today and for your interest in bogey.
Gregory A. Heckman: We look forward to speaking with you again soon so they have a great day.
Gregory A. Heckman: That's helpful.
Gregory A. Heckman: Okay.
Gregory A. Heckman: Right, we pulled stocks down and then drove imports into North America. So I think when you think about the US, it will continue to be probably the most dynamic on the oil side to help balance things globally. So again, glad we're operating from a global platform and are able to see those different shifts and be able to respond to help serve our customers and balance. And, of course, we continue to see strong demand in India.
Gregory A. Heckman: Okay.
Gregory A. Heckman: [music].
Andrew Strelzik: Got it. Okay, that's helpful. And then... You know, I just wanted to ask about the CRUSH capacity expansions that have been announced over the last several years. Obviously, when those announcements were made for a number of players, the margin of error was much stronger. So I guess. Do you see a risk that some of those plants don't get built as the margin environment has gotten a little bit more compressed? Not so much for folks like yourself that have the end market demand built in, but I guess I'm just curious if you're hearing that or if you think there's a risk that some of those, that capacity doesn't ever come on.
Gregory A. Heckman:
Gregory A. Heckman: Yeah.
Gregory A. Heckman: [music].
Gregory A. Heckman: When I look at it through our lens, I mean... things definitely got, you know, more expensive to build for a period of time. And that's why we slowed down our industrial end project, did the, you know, did the work.
Gregory A. Heckman: Yeah.
Gregory A. Heckman: And we're patient to get the cost down. Before we did build that now, we're building a switch plant; we're building it at a port to help drive export, you know, economics on the meal side. We're at a port. And in a location where we can receive, you know, domestic oil seeds, whether that's going to be, and being a switch plant, whether that's going to be soy, or whether that's going to be winter canola, or whether that's going to be a cover crop as we develop things like cover crops, or if it makes sense to import seeds, we're at the port and have the ability to do that.
Gregory A. Heckman: [music].
Gregory A. Heckman: We're also doing it at a brownfield site, so we have lower costs, and we're plugging it into our global network. Now, I will tell you, we're really glad that we're doing that. So personally, I wouldn't want to be a standalone plant or build a standalone plant today just as an investor. We like where our position is, and I guess that's what we're doing is being very thoughtful where we put capital in the ground that's going to exist for decades, so that we're putting it in a place that continues to improve our global footprint and our cost position for the long term.
John W. Neppl: Andrew, maybe I'd just add there that, you know, as you could imagine, we watch this fairly closely, and those projects that were, you know, well underway are going to continue and get completed, but really anything that was proposed or early stages, we've seen a number of those put on hold, at least for now, and I think the expectation on our part would be that, you know, with where we are today in the margin environment, that those things could probably not get done unless things change.
Gregory A. Heckman: Okay.
Gregory A. Heckman: Yeah.
Gregory A. Heckman: Yeah.
Gregory A. Heckman: Uh huh.
Gregory A. Heckman: Yeah.
Gregory A. Heckman: [music].
Gregory A. Heckman: Okay.
Gregory A. Heckman: [music].
Andrew Strelzik: Great, thank you very much.
Gregory A. Heckman: This concludes our question and answer session. I would like to turn the conference back over to Greg Heckman for any closing remarks.
Gregory A. Heckman: I'd just like to thank everyone for joining us today and for your interest in Bungie. We look forward to speaking with you again soon. So, have a great day. The conference is now concluded. Thank you for attending today's presentation.
Gregory A. Heckman: Yeah.
Gregory A. Heckman: [music].
Operator: The conference is now concluded. Thank you for attending today's presentation. I now disconnect.
Steven Kyle Haynes: Steven Haynes, Andrew Strelzik, Steven Haynes, Steven Haynes, Steven Haynes, Steven Haynes, Steven Haynes, Steven Haynes, Steven Haynes, [inaudible] Steven Haynes, Steven Haynes, Steven Haynes, Steven Haynes, [inaudible] Sound Music Music Music Music Music Music Music Music Music Music