Q3 2024 Bunge Global SA Earnings Call
Good day and welcome to the Bungi Global Essay 3rd Quarter, 2024, Arning Suleyze and Conquence Call. All participants will be in listen only mode. Should you need assistance? Please signal a constant specialist by pressing the star key followed by zero.
and the National Security Service.
Speaker Change: To ask a question, you may restar the one on your telephone keypad. To withdraw your question, please restar the two. Please note the event is being recorded. I would now like to turn the conference over to Ruth and Wifener. Please go ahead.
Speaker Change: Thank you operator and thank you for joining us this morning for a third quarter earnings call. Before we get started, I want to let you know that we have slides to accompany our discussion. This can be found at the Investor Center on our website at bungy.com under events and presentations.
Speaker Change: Consolations of our non-gap measures to the most directly comparable gaps in our website as well.
Speaker Change: I'd like to direct you to slide two. And remind you that today's presentation includes forward-looking statements that reflect Bungie's current view with respect to future events, financial performance and industry conditions.
Speaker Change: These forward-looking statements are subject to various risks and uncertainties.
Speaker Change: 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.
Speaker Change: On the call this morning are Greg Heckman, Bundy's Chief Executive Officer, and John Neppl, Chief Financial Officer. I'll now turn the call over to Greg.
Greg Heckman: Thank you, Ruth, and good morning, everyone.
Greg Heckman: Our team delivered a strong third quarter, thanks to their ability to react quickly to shifting market dynamics to capture opportunities as they emerged.
Greg Heckman: Our focused approach to leveraging our global platform enabled us to serve our customers at both ends of the value chain.
Greg Heckman: farmers and in consumers.
Greg Heckman: Thank you.
Greg Heckman: We're making great progress on integration planning for our announced combination with Viterra.
Greg Heckman: The teams are working well together, confirming our confidence that we will be a more complete
Greg Heckman: as one combined company.
Greg Heckman: Their commitment will ensure that we can effectively serve our customers.
Greg Heckman: from day one.
Greg Heckman: We also continue to engage with the relevant authorities as we work toward gaining the few remaining regulatory approvals.
Greg Heckman: Since our last call, we received conditional clearance from the European Commission.
Greg Heckman: and we're well in the process of meeting the conditions.
Greg Heckman: Conversations in the other jurisdictions are constructive. We do not see any issues that would materially impact the economics of the deal.
Greg Heckman: We expect to close the transaction later this year, early 2025.
Greg Heckman: In addition to progressing on the Viterra transaction, we also completed other strategic priorities, including closing the sale of our interest in our non-core sugar and bioenergy joint venture in Brazil to our partner BP.
Greg Heckman: Turning to our results.
Greg Heckman: We delivered another quarter of solid adjusted EBIT.
Greg Heckman: We exceeded our expectations for the quarter. Great execution by the team led to stronger results in our core segments.
Greg Heckman: Similar to the second quarter, we saw shifting margin environments across the globe, with improved margins in some regions offsetting more muted conditions in others.
Greg Heckman: Since we reported the second quarter, we repurchased 200 million dollars of Bungie shares, making progress against the repurchase plan we outlined following the announcement of the Biterra transaction.
Greg Heckman: Looking ahead, many of the same market dynamics remain in place, which we expect to continue for the rest of the year.
Greg Heckman: Based on what we see in the markets and the forward curves today, we can now expect full-year adjusted EPS to be at least $9.25.
Speaker Change: With that, I'll turn it over to John for a deeper look at our financials and outlook.
John Neppl: Thanks, Greg, and good morning, everyone. Let's turn to Irving's highlights on slide 5.
John Neppl: Important third quarter earnings per share is $1.56 compared to $2.47 in the third quarter of 2023.
John Neppl: Reported results include an unfavorable market-to-market timing difference of 16 cents per share and negative impact at 57 cents per share, primarily related to transaction and integration costs associated with our announced business combination with Bitero.
John Neppl: Adjusted EPS was $2.29 in the third quarter versus $2.99 in the prior year.
John Neppl: Adjusted Core Segment Earnings Before Interest in Taxes, or EBIT, was $561 million in the quarter versus $735 million last year.
John Neppl: In agribusiness, processing results of $291 million in a quarter were down from last year. Higher results in South America and European soy crush were more than offset by lower results in North America, European soft seeds, and Asia.
John Neppl: In merchandising, high results were driven by improved performance in our financial services, ocean freight, and global oils businesses, more than offsetting low results in global grades.
John Neppl: Thank you.
John Neppl: Refinement specialty oils performed well but down from a strong prior year as higher results in Asia were more than offset by lower results in North and South America.
John Neppl: Results in Europe were in line with last year.
John Neppl: Milling slightly higher results in North America were more than offset by lower results in South America for high raw material cost pressured margins.
John Neppl: Corporate and other improved from last year. The increase in corporate expenses was primarily driven by lower performance-based compensation.
John Neppl: Our other results were largely related to bungee ventures in our captive insurance programs.
John Neppl: In our non-coherent sugar and bioenergy joint venture, higher sugar and ethanol volumes were more than offset by higher operating costs and lower ethanol prices.
John Neppl: Low results also reflected foreign exchange translation losses on U.S. dollar denominated debt in the quarter compared to translation gains in the prior year.
John Neppl: The first nine months of the year, reported income tax expense was $236 million compared to $495 million in the prior year.
John Neppl: The increase was primarily due to lower pre-tax income.
John Neppl: And an interest expense of $94 million in the quarter was in line with last year.
Speaker Change: Let's turn to slide 6 where you can see our adjusted EPS and EBIT trends over the past 4 years along with the trailing 12 months.
Speaker Change: A strong performance over the period reflects a combination of favorable market environment and excellent execution by our team.
Speaker Change: The recent trend reflects more balanced and less volatile markets translating into lower earnings.
Speaker Change: Slide seven details our capital allocation. Year-to-date we generated approximately 1.3 billion dollars in adjusted funds from operations.
Speaker Change: On this amount, we paid $287 million in dividends, invested $592 million in growth and productivity related CapEx, about two-thirds of which relates to our large multi-year greenfield investments.
Speaker Change: and repurchased $600 million in Bungie shares.
Speaker Change: This resulted in the use of $491 million of previously retained cash flow.
Speaker Change: Based on our current progress on our Greenfield projects, we now expect that we will end the year toward the higher-end capex range of 1.2 to 1.4 billion dollars, or slightly above.
Speaker Change: Moving to slide 8, at quarter end, Readily Marketable Inventories, or RMI, exceeded our net debt by approximately $2.8 billion.
Speaker Change: Our adjusted leverage ratio, which reflects our adjusted net debt to adjusted EBITDA, was 0.5 times at the end of the quarter.
Speaker Change: and others, and I'm really excited to be here. It's a really great honor. Thank you. Thank you. Thank you. Thank you. Thank you. Thank you. Thank you. Thank you. Thank you. Thank you. Thank you.
Speaker Change: Slide 9 highlights our liquidity position. At quarter end we had committed credit facilities approximately 8.7 billion dollars, all of which was unused at the end of the quarter. Providing a sample liquidity to manage our ongoing capital needs.
Speaker Change: In addition, we had a cash balance of $2.8 billion, accumulated in large part as a result of $2 billion of cash proceeds from the U.S. public debt offering that we closed in September.
Speaker Change: These amounts, in addition to $6 billion of term loan commitments that we had secured last year, will be used to fund the MITERRA transaction.
Speaker Change: Please turn to slide 10.
Speaker Change: In the early 12 months, adjusted ROIC was 13.8 percent, well above our RMI adjusted weight and average cost of capital of 7.7 percent.
Speaker Change: OIC was 11.3 percent.
Speaker Change: While returns have declined from recent highs, they remain well above our weighted average cost of capital, 7%.
Speaker Change: We need to slide 11.
Speaker Change: In a total of 12 months, we produced discretionary cash flow of approximately $1.4 billion, and a cash flow yield of 12.3% compared to our cost of equity of 8.2%.
Speaker Change: Please turn to slide 12 in our 2024 outlook.
Speaker Change: As Greg mentioned in his remarks, taking into account year-to-date results, the current margin environment and foreign curbs, and the loss of income due to the sale of our ownership in the Sugar JV, we now expect full year 2024 adjusted EPS to be at least $9.25.
Speaker Change: In agribusiness, all your results are forecasted to be up from our previous outlook, reflecting the better-than-expected third quarter, but down compared to last year.
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Speaker Change: We find, especially in oils, four-year results are expected to be up from our previous outlook, but down compared to last year's record performance.
Speaker Change: Milling full-year results are expected to be down from our previous outlook reflecting the lower than expected third quarter but up from last year.
Speaker Change: Incorporating other four-year results are expected to be similar to our previous outlook.
Speaker Change: In non-core, four-year results are expected to be down considerably from our previous outlook due to the lower than expected third quarter and the loss of income from the sale of our ownership in the Sugar JV, which closed on October 1st.
Speaker Change: Additionally, the company currently expects a following for 2024.
Speaker Change: Adjusted annual effective tax rate in the range of 22 to 24 percent.
Speaker Change: Net interest expense in the range of $285 million to $305 million.
Speaker Change: Capital expenditures in the upper end of the range of $1.2 to $1.4 billion and depreciation and amortization of approximately $450 million.
Speaker Change: With that, I'll turn things back over to Greg for some closing comments.
Greg: Thanks, Jim.
Greg: So before turning to Q&A, I wanted to offer a few closing thoughts.
Greg: Looking ahead, what impresses me most is our team's commitment to day-to-day execution along with continuous improvement.
Greg: We've done a lot of hard work to strengthen our business and operations so that we can continue to provide quality products and services to our customers at both ends of the value chain.
Greg: We're always looking for additional opportunities to get better.
Greg: We've spent significant capital improving the facilities and operations across our outstanding global footprint, and our team is making sure those investments pay off in improved efficiency and reliability.
Greg: For instance, our U.S. plants had the best soy crush performance for a crop year ever, and we continue to run at high utilization rates.
Greg: We also reached year-to-date record volumes in global rapeseed crushing and refining.
Greg: In the quarter, we broke ground on the expansion of our Palm and Specialty Oils facility in Avondale, Louisiana that we purchased last year.
Greg: This facility, which has multi-oil capabilities,
Greg: builds on our ability to provide specialty oils to our food customers in North America and is already exceeding our initial performance expectations.
Greg: We're excited to further grow operations in this location that has significantly improved our reach across North America.
Greg: In today's often complicated global environment, strengthening all areas of our business is more important than ever.
Greg: Our combination with VITERA will further accelerate our diversification across assets, geographies, and crops, providing us with more optionality to help address the world's food security needs.
Greg: While we always look for opportunities to improve, we are well positioned to deliver on our critical mission of connecting farmers to consumers to deliver essential food, feed, and fuel to the world.
Greg: And with that, we'll turn to Q&A.
Speaker Change: Thank you. We will now begin the question and answer session. To ask a question, you may press star then 1 on your telephone keypad.
Speaker Change: If you are using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star then 2.
Speaker Change: First question comes from Andrew Stelzik with BMO. Please go ahead.
Andrew Stelzik: Hey, good morning. Thanks for taking the questions. I guess I wanted to start on...
Andrew Stelzik: Good morning. I just wanted to start on Crushed Margins.
Andrew Stelzik: There's been a lot of concern in the market throughout this year on what would happen with crush margins, but the curve is only strengthened, at least for the U.S. for the rest of this year and also 2025.
Andrew Stelzik: You know, I guess the question is how are you thinking about crush margins from here in terms of durability?
Speaker Change: and the ability to capture that margin of strength. I don't know if there are offsets in other regions, excuse me. And then the press release says that you passed through the 3Q processing strengths to the guidance, but I didn't know if you made any changes to your assumptions for the fourth quarter.
Speaker Change: Let me start and John can fill in.
Speaker Change: demand is good. So we've got livestock economics have been good really everywhere except China where you know chickens been good but pork is bigger has been the laggard.
Speaker Change: and so you know very supportive on meal demand and then soil oils is competitive globally and some of the support there of course is palm but just overall good demand.
Speaker Change: And so we've seen you know Europe
Speaker Change: Good demand and part of that's lower soybean meal shipments out of South America. Brazil you've seen a little bit of slow or spot farmer selling and working through some of the logistical commitments down there.
Speaker Change: Argentina's been, you know, margin challenged, but the margins have been good enough to cover fixed costs, so we've seen Argentina crushing, even with farmers continuing to retain their ownership, kind of waiting for the next round of policy incentives.
Speaker Change: And then the U.S. continued to improve on strong soybean meal demand, and part of that has been
Speaker Change: Less flows out of Argentina, but it's been, you know, our own big soy crop.
Speaker Change: And then I touched on China, which, you know, the margins have been very volatile there, really driven by softer and weak demand.
Speaker Change: So, that's what we've seen carry in, and I don't think, as usual, we don't see a lot of visibility beyond the first half, but right now, demand feels pretty good for meal and oil.
Speaker Change: Yeah, and Andrew, maybe just to touch on the outlook for Q4 and whether we've had any changes, I think.
Speaker Change: that, you know, really the only couple of things I'd mention there. One is when we looked at, if you look at the overperformance in our core business in Q3, we think we probably pulled a little bit of earnings out of Q4, just given the market and customers and uncertainty around EUDR. We think maybe we pulled maybe 15 cents out of Q4 into Q3. And then the other one, of course, was with the sale of sugar. We probably took about 15 cents of earnings out of our Q4 forecast.
Speaker Change: Okay, that's helpful. And then, you know, I guess if I zoom out, and I know you're not giving 25 guidance at this point, and obviously a lot of work to do around acquisitions and buybacks going forward as well, but if I just look at the base business,
Speaker Change: you know, at current levels, I guess, Crush appears to be above the baseline. You see the Refine continues to hold in better. So I guess just from a high level, how would you frame the setup into 2025, I guess, relative to maybe the normal type of year for Bungie? Thanks.
Speaker Change: And I was kind of specifically speaking to soy, I probably should mention soft is probably the one area that what we've seen the last few years on the soft seed side, we've got you know a lot of weather impacting the Black Sea in European.
Speaker Change: son and right production so
Speaker Change: That's not only, you know, hurt margins, but...
Speaker Change: You've got no idea
Speaker Change: farmer who's going to be very spot there with a smaller crop.
Speaker Change: Now, in Canada, we also are seeing canola margins continue to be good, but they're off from the higher margins we enjoyed in the past, and some of that's due to a smaller crop. So, you know, our soft seed crushing is a smaller business, but that's definitely softer than what we've seen in the last few years, so that would be part of the offset to the positive environment we're seeing in soil.
Speaker Change: Yeah, I think, Andrew, in terms of the baseline, how we think about that in 25, I would say, you know, we've been
Speaker Change: http://thevenusproducts.com
Speaker Change: So, you know, that one, we'll see what kind of volatility we get in the markets and opportunity. And then, of course, we're taking sugar now out of our baseline, but with what we expect to do on share buybacks relative to sugar, that should be in that neutral to slightly positive.
Speaker Change: Great. Thank you very much.
Speaker Change: The next question comes from Salvatore Tiano with Bank of America. Please go ahead.
Salvatore Tiano: Yes, thank you very much. I want to ask a little bit about your customers on the fuel side.
Salvatore Tiano: And specifically, firstly, there was an article earlier this week on Bloomberg about how you and some other... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ...
Salvatore Tiano: and the big crossers are actually slowing down. So I've been purchasing and crashing volumes because you're going to see less.
Salvatore Tiano: purposes from your fuel customers. So if you have any comments on that and your strategy there, what you're seeing in terms of demand in Q4 and perhaps in Q1 as the tax credit landscape changes, and also what other feedback you have, I guess.
Salvatore Tiano: On the other hand, one will float.
Salvatore Tiano: one of the major customers.
Salvatore Tiano: on the fuel side has mentioned that they're using higher CI score feedstocks right now before they make a more major switch in Q1 to lower CI feedstocks. So what are you seeing there? What are your thoughts on this and the risk it poses for next year?
Speaker Change: Sure, yeah, let me divide that into a couple pieces. Let me talk first about the Bloomberg article. We did see that, and that is not accurate.
Speaker Change: We, you know, continue to have our purchases from farmers.
Speaker Change: is very strong. In fact, if you compare this marketing year, it's higher than the last several years. So, that just wasn't accurate.
Speaker Change: As far as the fuel demand and the customers, we do have some uncertainty.
Speaker Change: here in the U.S. And I might start at a high level and finish with the U.S., but while we had a lot of lack of clarity around U.S. policy, globally things feel better, right? You got Brazil talking, you know, they put in the law and the fuel of the future.
Speaker Change: So, we're seeing them move from B14 here in 24 to B15 in 25, and moving towards B20 in 2030. So, they'll go up 1% annually. You've got Indonesia that just went from B35 and committed to go to B40.
Speaker Change: And then in Europe,
Speaker Change: There's some support put in place now for SAF and maritime fuels, and some of those have UCO caps, which will then lead to veg oils as well.
Speaker Change: and the switch from.
Speaker Change: a Blender's credit to a producer's credit, an uncertain RBO. What we've got out there, we've got billions of dollars of assets that are proven technology in the ground on traditional biodiesel, renewable diesel, and even some SAF.
Speaker Change: that's running at really low capacity utilization because we haven't got all the policy and the incentives right yet. And we remain positive that that'll get worked out, right? Because one of the things that the policy makers said they wanted to see is to make sure that we could...
Speaker Change: The market works.
Speaker Change: and we've been able to provide for that industry. So, you know, we remain positive that that will get worked out over the next year and that'll be positive for demand from the fuel sector, from the renewable feedstocks here in the U.S.
Speaker Change: If I may just follow up, I guess technically with a new credit landscape, if someone can only use lower CI feedstocks, they would fully go away from soybean oil, but the main issue is...
Speaker Change: obviously logistical and supply challenges. So do you have any views on the supply and the supply restrictions and limitations for tallow and used cooking oil and you know how much essentially of the feedstock mix this could be next year or the next few years?
Speaker Change: You know, I think I would start again with if you look over the last few years, the market works and so
Speaker Change: We've seen the low C.I. feedstocks as well as the vegetable oils, and as policy shifts, it finds its place to the right demand on the globe.
Speaker Change: there is more demand coming than any one feedstock can address.
John Neppl: Salvatore, this is John. I, you know, when you look at
Speaker Change: 45 Z of course we were hoping that would get that would get finalized this year it may it may spill into Q1
Speaker Change: A big part of that now is pushed from...
Speaker Change: you know, agricultural groups in the U.S., particularly farmers, to even the playing field, and maybe provide either preference for U.S.-based supply or restrict the import of yucca and tallow and other, other
Speaker Change: feedstocks, that could have a pretty big impact on the farm economy, depending on the decision that's made.
Speaker Change: And obviously, we just want the U.S. farmer to have an even playing field.
Speaker Change: You know, and we think that's important to get that right in the upcoming finalization of 45Z, but that will certainly drive how much foreign feedstocks come into the U.S.
Speaker Change: And, you know, it could be similar to last year. I don't know that, you know, it's hard to predict whether it'd be more than last year, but certainly.
Speaker Change: If the changes come that I think the farming groups are hoping for and I think we think is fair, you know, it'll certainly provide some tailwind for the products that we that we supply the industry.
Speaker Change: Thank you very much.
Speaker Change: Next question comes from Tom Palmer with Citi. Please go ahead.
Tom Palmer: Good morning and thanks for the question. I wanted to just ask on Zaterra and thanks for the update on unexpected timing. Just on the business's recent results, does it affect at all how you look at the longer-term earnings power for the business?
Tom Palmer: or should we look at kind of the details you laid out last summer as still largely holding? Thank you.
Speaker Change: Absolutely not. We still have the confidence in this combination.
Speaker Change: A great fit. They are not in the same place as we are.
Speaker Change: as we've had a chance to work on some of the integration planning, seeing, you know, that great team that they've got and seeing how these teams are working together, and they are.
Speaker Change: as excited I think as all of us are to get this deal closed so we can all work together because it's just so much that we can't do at this at this point in the you know at this point in the process so we're excited about what it means for the long term this is going to give us
Speaker Change: A lot of alternatives and ways to grow and to continue to serve our customers in a very differentiated way, and that's customers that are both into the value chain.
Speaker Change: And, Tom, I'd maybe just add, you know, while we're a little disappointed that things have taken this long to close,
Speaker Change: It has given us time to continue. We haven't stopped and just sat and waited. We've been continuing to fine-tune our planning.
Speaker Change: doing some things now that we would have maybe done after closed.
Speaker Change: of course, Synergy Capture. You know, we're focused on the things we can control around this transaction.
Speaker Change: And ultimately, the market environment will be what it is as we move forward. But in the long run, we think this is a hit.
Speaker Change: Okay, thank you for that. And then just one topic that had come up in previous quarters, and you did touch on it earlier, was just the lack of farmer selling in South America, I think, and how that's maybe
Speaker Change: You know, there's offsets that maybe hurts margin in South America, but does seem to be helping, you know, soy crush margins as we look at Europe and North America. Just any thoughts on the pace of farmer selling? Is there a point where that should really pick up as we move towards maybe this new harvest in the first half of 25? Thanks.
Speaker Change: Yeah, we think that you probably are right. It'll be in the first half of 25.
Speaker Change: One is the South American farmer, you know, gets a better idea in Argentina of how policy will shake out Even if somebody communicated here in 24, there's not much of the year left
Speaker Change: to probably make much of a difference here. So I think first half 2025 will be key on that. And then in Brazil where we've got...
Speaker Change: You know, some good rains and planting is really accelerating down there. I think you feel like we'll see another big crop there.
Speaker Change: in South America, and I think that will give some confidence to the producer. And then here in the U.S., of course, we're harvesting a real big bean crop right now, and so as we get to the end of that...
Speaker Change: We'll see how the producer, they never like a lower prices than prior year, but ultimately you've got to make some decisions and manage some risk, and we'll see that I think start to move here in the first half of next year.
Speaker Change: Thank you.
Speaker Change: The next question comes from Manav Gupta with UBS. Please go ahead.
Manav Gupta: Good morning. My question is on your growth CapEx. You're obviously spending on your growth projects. Help us understand what's the progress over there. When are the key start-up dates for these growth projects? When do you expect them to come online and start making a material contribution to the EBITDA?
Speaker Change: Yes, so we have four, you know, four key large projects underway today and I think that, you know, 2025 will really be the biggest year in terms of
Speaker Change: spending CapEx on those as those projects, you know, move toward finalization. I think realistically
Speaker Change: on those projects we're looking at.
Speaker Change: late 24, or I'm sorry, late 25 commissioning to early 26. So not probably a lot of impact on 25 results, just given the fact that you've got to work, you've got to.
Speaker Change: You've got to work through commissioning and bugs as you get these plants up and going.
Speaker Change: So I think really we'll start to look for first half of 26 for these to start contributing.
Speaker Change: and expect all of them to be kind of running by second half.
Speaker Change: And so second half of 26 is really how I'd see, you know, the...
Speaker Change: the addition to earnings from those projects from a run rate perspective. And then, you know, and then of course, once we complete those projects toward the end of 25, early 26, then we'll start to see a more normalized CapEx level back after 26 and beyond.
Speaker Change: Perfect. My follow-up here is a little bit, you also mentioned this that although the deal has been delayed a little, it's given you more time to plan. So help us understand now when Dwightera does close, do we expect some of those synergies to be realized?
Speaker Change: earlier than expected, how has the timeline of moving the deal allowed you to plan better as you close on it?
Speaker Change: Yeah, it's really been around, you know, the, I'll say the organizational design and
Speaker Change: getting things ready and right for day one, you know, with no disruption. Unfortunately, despite the extended timeframe, we still cannot get together commercially. And so.
Speaker Change: and I think we feel like a lot of the...
Speaker Change: A lot of the uncertainty sometimes it can happen right after close. We're addressing that stuff now so that we have, you know, people have focus and confidence the day we close a transaction and lower our risk of any kind of disruption.
Speaker Change: in the day-to-day, but, you know, again, unfortunately, we have not been able to accelerate the commercial planning side, which is really where we think the long-term opportunity is.
Speaker Change: Thank you so much.
Speaker Change: The next question comes from Heather Jones with Heather Jones Research. Please go ahead.
Speaker Change: Thanks for the question.
Heather Jones: I had a question on, good morning, I had a question on bean oil and meal, but starting with bean oil.
Heather Jones: So given the biofuel policy uncertainty we've got in the U.S., demand for bean oil could be very depressed in Lake, T4 and T1, and I was just curious if you think their export demand could be strong enough to offset that given
Heather Jones: Soybean oil's attractive price relative to palm and rape. And also, do you see any potential logistical constraints to the U.S. handling that magnitude of exports?
Speaker Change: Yeah, I think you've got that right.
Speaker Change: The U.S. was always holding the residual stocks prior to some of the biofuels demand the last few years. We held the residual stocks for the world, and we did export as it was needed. So as the market's calling for that, I think we're in good position to do that, and that's one of the...
Speaker Change: One of the things that we feel good about on the oil demand side globally.
Speaker Change: So when we look to 25, I was wondering if you think there's room for additional sizable increases in ration inclusion, you know, assuming that pricing is relatively attractive.
Speaker Change: Yeah, soybean meal demand has been very good, and it's...
Speaker Change: You've got us mid-proteins around, you've got a wheat crop that's not as competitive for feeding on the wheat side.
Speaker Change: And you've got the other, if you look historically, when meal gets cheaper, people like to feed it. They like feeding meal and when they can, when the numbers work.
Speaker Change: and the animal.
Speaker Change: Profitability is up, which is the situation we're in right now. We see the inclusion rates go up, and I think that's
Speaker Change: the demands that we have seen this year.
Speaker Change: in the U.S. and globally, so we kind of expect that to continue there into 2025.
Speaker Change: much past the first half, but that's what we see right now. And Heather, I would just add that I think one of our strengths on the commercial side is our ability to market meal globally, and we actually market today more meal than we produce ourselves. So we've got a team that's very steeped in
Speaker Change: the experience of marketing meal globally and and as things change in this market demand, you know, times and flows, I think our team is usually right on top of that.
Speaker Change: And if I could sneak in a clarifying question. So you guys probably have as good a visibility as anyone into...
Speaker Change: feed profiles globally. I mean could we could we see a situation in 25 where we have an increase in inclusion rates as much as we did this year? Like I mean I don't know if we're near a cap like or could we see another sizable step up?
Speaker Change: I think.
Speaker Change: You've got to continue to watch how it sets up versus the competing. And what we do know right now is less wheat feeding, less mid-proteins.
Speaker Change: got some smaller seed crops, you know, you don't make as much meal in the soft crush, but you've got, you know, Europe and Black Sea with some smaller seed crops. So.
Speaker Change: some less meal there. So yeah, it's all part of the factors that are setting up the current situation we've got, which has been constructed. And we've all seen it in the numbers.
Speaker Change: Okay, thank you so much.
Speaker Change: The next question comes from Stephen Haynes with Morgan Stanley. Please go ahead.
Speaker Change: Hey, good morning. I maybe just want to ask a kind of follow-up question on the refined side of things. I think there was a comment before to an earlier question about
Stephen Haynes: being resilient and better than baseline in 2025. I think you're still kind of quite a bit above baseline where we are right now, so can you kind of help frame I guess what a bit better looks like and how we should how we should be thinking about it next year?
Speaker Change: Thank you.
Speaker Change: Thank you.
Speaker Change: or that business, and as you pointed out,
Speaker Change: And we've been performing above that.
Speaker Change: In our portfolio and and what we've seen on the food side plus probably a little bit more resilient demand and on energy I think we feel like we were sad. It's hard today to predict
Speaker Change: Walter.
Speaker Change: I think we have to get a better handle on where things are headed from a policy standpoint. You know, these things around 45Z and RVO and things like that could have an impact.
Speaker Change: Thank you.
Speaker Change: certainly on even the refining versus crude piece of it, but
Speaker Change: But ultimately, we feel pretty good about that business being on probably more solid footing than it's ever been in total. When you look at the specialty side and that refined piece, obviously the refining again, the energy piece of that, we did expect to moderate, but we've been very pleased with the food demand.
Speaker Change: Thank you for the color. And then just on the meal side of things, there's been a bunch of capacity that's kind of come on in the U.S.
Speaker Change: This year our understanding is that it's not kind of fully running yet. It takes some time to kind of hit that run rate
Speaker Change: Is the market kind of feeling the impact of this yet, or how should we think about it as even more supply is expected to come on in 2025, and there's some projects slated for 2026, yourself included?
Speaker Change: Yeah, how should we be thinking about the market's ability to, I guess, absorb the excess meal going forward?
Speaker Change: It's a very global market. We market more than we produce.
Speaker Change: continue, you know, to make investments. We've made investments in our P&W asset to be able to handle meal here in the U.S. and get it to export. So I think the investments will continue to be made to connect the supply to the demand globally.
Speaker Change: And, you know, you said, as you said, those plants, they don't, they're not like flipping a light switch. They do come on and so they kind of get dovetailed into the demand and price does its work around the inclusion rates. So we think, you know, the market, the market will do its work.
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Speaker Change: And maybe I'll just add one thing, Stephen. Greg mentioned the PNW, where we're adding some capacity for export of meal. We're doing the same in the Gulf, so we have...
Speaker Change: Our big project, of course, our expansion with Chevron in the Gulf of Destrehan, our adjacent export terminal, we're expanding the capacity of that to handle more meal to be exported from the U.S. So we've anticipated this for, you know, two or three years.
Speaker Change: These projects are well underway, moving along, and we'll be as well positioned as anybody to get this stuff out in the market where it needs to go internationally.
Speaker Change: Okay, thank you, appreciate it.
Speaker Change: The next question comes from Ben Truer with Barclays. Please go ahead.
Ben Truer: Good morning, Greg, John, thanks for taking my question.
Speaker Change: Good morning.
Ben Truer: So just a few things to clarification. So I think you said there's a 15 cent impact on the loss that you need to book for the bioenergy, the disposal. Was that something that you expected to happen in 3Q and now it's just moved into 4Q for that implicit downgrade of that 15 cents? So that would be question number one. And then just question number two related to the the timing of WITERA and the pending approvals.
Ben Truer: Can you remind us which are the big jurisdictions that are still pending right now?
Speaker Change: I'll start with Sugar and Greg can talk about VITERA timing. So we didn't, we had we had a forecast in for the full year for Sugar because we really didn't know when this was going to actually close.
Speaker Change: The Q3 was simply underperformance, so we didn't have a good Q3 in sugar as we highlighted. And then Q4, we lost about 15 cents of earnings that was in our prior forecast because of
Speaker Change: selling in closing on an AWC1, but we left that in there until we actually had certainty around close. So that's just reflective of the lost earnings for Q4.
Speaker Change: And of course, as I mentioned, you can see the results for Q3 that we're well below where we expected.
Speaker Change: Overall second half probably down 35 cents, I would say, between Q3 and Q4 from what we had originally expected.
Chris Trugger: Chris Trugger
Chris Trugger: and the Cooler the Cooler business, you know, stepping up and covering that in the second half so it's a better quality of earnings. We like the way it happens.
Speaker Change: Well said. And then on the ending approval... And then on the regulatory...
Speaker Change: The regulatory, since the last time we were all together, of course, we got the EU conditional approval.
Speaker Change: We've got to do some asset sales in Poland and Hungary, so we're working through that process currently and making good progress.
Speaker Change: In Canada, you may have seen there's a new transport minister there. We're engaged with them and making great progress addressing all the questions and closing out the issues. We expect that to be in, you know,
Speaker Change: the relative near term, and then the other, of course, is in China. And we continue to work with the Chinese authorities. We have very productive discussions and able to respond to all their questions. So again, you know, field of that should be hopefully here in the near term.
Speaker Change: And lastly, look forward to getting the regulatory approvals done, as we said.
Speaker Change: In no scenario, we don't see anything that would be material to the economics of the transaction.
Speaker Change: and we just cannot wait to put these two great companies together and get these teams to work. Everybody is excited and feels like we've got our hands tied behind our back here and can't wait to get to the next stage.
Speaker Change: Okay, and then Argentina, I mean, obviously that's a post...
Speaker Change: post-close approval process.
Speaker Change: There was some news just recently about an Argentine soy exporter that you were planning to take over and that got kind of blocked out of bankruptcy.
Speaker Change: Have that any consequences on how you think about the post-close approval process in Argentina?
Speaker Change: No, not at all. We, of course, have been in Argentina a long time. We work closely with the authorities there. It's an important operation for us.
Speaker Change: The appeals, just part of the process, the legal process down there, we weren't really surprised by it. It's kind of a technical issue and, you know, we'll continue to work through the process. But no, we've always thought about those processes working in parallel.
Speaker Change: Okay, thank you.
Speaker Change: This concludes the question and answer session. I would like to turn the conference back over to Greg Heckman for any closing remarks. Please go ahead.
Greg Heckman: Thank you. So thanks again for joining us today and we appreciate your interest in Bungie. I want to just close by thanking the team one more time for their dedication.
Greg Heckman: You know, our performance is a testament to the quality of our people and the culture that we've built here at Bungie. And it's allowed us to execute on our day-to-day business, to maintain a relentless drive for continuous improvement, and to make great progress on the integration planning. I'm really as excited as ever about the future of Bungie and what we're going to be able to accomplish together with Viterra.
Speaker Change: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.
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Speaker Change: A film by Gregory Heckman Written by Gregory Heckman Directed by Gregory Heckman Director of Photography Gregory Heckman Music by Gregory Heckman Produced by Gregory Heckman Produced by Gregory Heckman Written by Gregory Heckman Director of Photography Gregory Heckman
Speaker Change: This film was made with the support of the U.S. Department of State and the Federal Government of the U.S. This film was made with the support of the U.S. Department of State and the Federal Government of the U.S. This film was made with the support of the U.S. Department of State and the Federal Government of the U.S. This film was made with the support of the U.S. Department of State and the Federal Government of the U.S.
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Speaker Change: A film by Gregory Heckman Written by Gregory Heckman Directed by Gregory Heckman Cinematography by Gregory Heckman Edited by Gregory Heckman Music by Gregory Heckman Produced by Gregory Heckman Cinematography by Gregory Heckman Edited by Gregory Heckman Music by Gregory Heckman Edited by Gregory Heckman