Q4 2024 Bunge Global SA Earnings Call
Speaker Change: Good day and welcome to the Bungie Global SA fourth quarter 2024 earnings release and conference call.
Speaker Change: Today, all participants will be in a listen-only mode. Should you need assistance during today's call, please signal for a conference specialist by pressing the star key followed by zero.
Speaker Change: After today's presentation, there will be an opportunity to ask your questions. To ask a question, you may press star, then one on your telephone keypad. To withdraw your question, you may press star, then two. Please note that today's event is being recorded.
Speaker Change: I would now like to turn the conference over to Ruth Ann Wisener. Please go ahead.
Speaker Change: Thank you, Operator, and thank you for joining us this morning for our fourth quarter earnings call. Before we get started, I want to let you know that we have slides to accompany our discussion.
Speaker Change: These can be found at the Investor Center on our website at bungie.com under Events and Presentations. Reconciliations of our non-GAAP measures to the most directly comparable GAAP financial measure are posted on our website as well.
Speaker Change: I'd like to direct you to slide 2 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. UND 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, Fungi's Chief Executive Officer, and John Neppl, Chief Financial Officer. I'll now turn the call over to Greg.
Thank You Ruth Ann and good morning everyone
Speaker Change: I want to start by thanking the team for their continued hard work and commitment in 2024.
Speaker Change: We've made good progress on a number of significant growth projects, while also advancing our work to build an even stronger bungee.
Speaker Change: Our team is prepared for the close of our business combination with Viterra.
Speaker Change: It seems that both companies have put in countless hours of planning to ensure a smooth integration so that our customers at both ends of the value chain, both farmers and consumers, see good continuity of service.
And we expect to close the transaction soon.
Speaker Change: You likely heard we received regulatory approval from the Canadian government last month.
Speaker Change: continue to engage in constructive conversations with the regulatory authorities in China while we work through the final stages of the asset divestment process in Europe.
Speaker Change: We're also in the late stage of the regulatory process for our acquisition of CJ Selecta.
leading manufacturer and exporter soy protein concentrate in Brazil.
We expect that transaction to close in the near future.
Speaker Change: In the coming weeks, we expect to close our announced partnership with Repsol to develop new opportunities to help meet the growing demand for lower carbon intensity feedstocks for the production of renewable fuels.
Speaker Change: This alliance is the first of its kind in Europe, and it furthers our long-term strategy to create alternative paths towards the decarbonization of agriculture and the role we can play in the liquid fuel supply chain.
Speaker Change: In October, we announced the completion of the sale of our sugar and bioenergy joint venture in Brazil to BP.
Speaker Change: As we've discussed, this streamlines our business and allowed us to expand our stock repurchases and authorization.
Planning for these large initiatives takes teamwork and cross-functional collaboration.
Speaker Change: The team's done a great job of running our day-to-day business.
We're also working on these strategic growth initiatives.
Speaker Change: In addition, we continue to return capital to shareholders through our share repurchases and our regular dividend.
Speaker Change: to repurchase a total of 1.1 billion dollars of shares in 2024, and share buybacks will continue to be an important part of our capital allocation strategy.
Shifting to our operating results.
We didn't close the year as expected.
Speaker Change: In particular, operating conditions have been challenging in South America and they continue to be in the fourth quarter. Fortunately, we're seeing things stabilize and expect to see significant improvement in the region in 2025.
After the VITERA transaction closes,
We expect to provide an outlook for the combined company.
Speaker Change: In the meantime, we are providing an outlook for the current bungee business.
Speaker Change: Forward visibility is limited, particularly at this point given the increased geopolitical uncertainty.
Speaker Change: Based on what we see in the markets and the forward curves today, currently expect full-year adjusted EPS of approximately $7.75.
Speaker Change: For that, I'll turn it over to John for a deeper look at our financials and outlook. John? Thanks, Greg, and good morning, everyone.
John Neppl: As Greg mentioned, the fourth quarter came in below our expectations.
John Neppl: This is particularly true in South America where the market environment has been challenging all year, impacting industry margins throughout the oil seed and grain value chains to include those of our joint ventures.
John Neppl: We also felt the impact of a declining margin environment in North America from biofuel rate uncertainty.
Now let's turn to the earnings highlights and slide five.
John Neppl: Our reported fourth quarter earnings per share was $4.36, here at $4.18 in the fourth quarter of 2023.
John Neppl: Awarded results include a favorable market timing difference of $1.25 per share and a net positive impact of $0.98 per share. Notable items are primarily related to the gain on the sale of our sugar and bioenergy joint venture, partially offset by transaction and integration costs associated with Bitero.
John Neppl: Adjusted EPS was $2.13 in the fourth quarter, which was $3.70 in the prior year.
John Neppl: Adjusted Core Segment Earnings Before Interest and Taxes, or EBIT, $548 million in the quarter.
Inclusive of a Ukraine business interruption insurance recovery, $52 million.
This is EBIT of $881 million last year.
John Neppl: In processing, Terrasoi offers results in Europe and Asia, but will offset by low results in North America and South America, as well as in European soft seeds.
John Neppl: Our merchandising results were driven by improved performance in financial services, friction freight, and global grains, only offsetting lower results in global orders.
John Neppl: We find, especially in Wales, more results in North America were primarily due to the combination of a more balanced supply and demand environment, and certainly related to U.S. biofuel policy.
John Neppl: The results in Europe, South America, and Asia were also down due to lower margins. The variances were much narrower.
John Neppl: In Milling, higher results in North America are more than offset by lower results in South America.
John Neppl: In corporate and other, increase in corporate expenses was primarily driven by lower performance-based compensation, various project-related expenses in the prior year.
John Neppl: Or other results related to our captive insurance and securitization programs at Bungie Ventures.
John Neppl: All results in NONCOR reflect only one month of income from the sugar joint venture that was on the sale.
John Neppl: The net interest expense of $62 million was down in the quarter compared to last year, reflecting lower net debt levels and interest rates.
John Neppl: Increase in income tax expense for both the quarter and full year primarily due to lower pre-tax income and earning specs.
testing for notable items and market-to-market timing differences.
John Neppl: The full year adjusted effective income tax rate was approximately 23% of the current and prior year.
John Neppl: Let's turn to slide 6 where you can see our adjusted EPS and EBIT trends over the past five years.
John Neppl: Your own performance, period, reflects a combination of favorable market environment and excellent execution by our team.
John Neppl: Recent trend indicates more balanced supply and demand, translating into less volatility and lower.
John Neppl: Slide 7 details our capital allocation. In the full year we generated approximately 1.7 billion dollars of adjusted funds from operations.
John Neppl: After allocating $451 million to sustaining CapEx, which includes maintenance, environmental health and safety, we had approximately $1.2 billion of discretionary cash flow available.
On this amount, we paid $378 million in dividends.
John Neppl: That's $925 million in growth and productivity related CapEx, about two-thirds of which related to our growth pipeline of large multi-year investments.
And we purchased $1.1 billion in Bundy shares.
John Neppl: $500,000,000 of those repurchases were from the $728,000,000 of cash proceeds received to date for the sale of our Sugar JV.
John Neppl: This resulted in the use of $444 million of previously retained cash flow.
We're going to slide 8.
John Neppl: We finished 2024 with total CapEx spend of approximately $1.4 billion, which was in line with our last forecast.
John Neppl: Moving ahead to 2025, we expect CapEx of 1.5 to 1.7 billion dollars, reflecting the continued investment in our ongoing multi-year greenfield projects.
John Neppl: This range is down from the preliminary estimate of 1.92 billion dollars we provided you previously.
John Neppl: reflecting our decision to not pursue some projects, as well as timing changes related to existing projects.
John Neppl: We continue to expect returning to a baseline run rate on CapEx level during the second half of 2026.
I think it's slide nine.
John Neppl: At year end, readily marketable inventories, or RMI, exceeded our net debt by approximately $2.3 billion.
John Neppl: Adjusted leverage ratio reflects our adjusted net debt to adjusted EBITDA was 0.6 times at the end of the formula.
Slide 10 highlights our liquidity position.
John Neppl: At year end, we had committed credit facilities of approximately 8.7 billion dollars, all of which were unused at the end of the year, providing us ample liquidity to manage our ongoing capital needs.
John Neppl: In addition, we had a cash balance of approximately $3.3 billion dollars accumulated in large part as a result of the $2 billion dollars cash proceeds from the U.S. public debt offering that we closed in September.
John Neppl: Our proceeds will be used to fund the cash portion of the VITERA transaction.
Speaker Change: In addition, a $6 billion term loan commitment, secured last year, is used to refinance my team's outstanding bank debt upon closing the transaction.
Please turn to slide 11.
The year adjusted ROIC was 11.4%, ROIC was 9.7%.
Speaker Change: Adjusting for construction in progress, a large multi-year project is not yet operating. Any excess cash on our balance sheet for the VITERA closing adjusted RYC would increase by approximately two percentage points.
and ROIC by approximately one percentage point.
Speaker Change: While returns have declined, it remained well above our adjusted weighted average cost of capital of 7.7%.
Moving to slide 12.
Speaker Change: In the year we produced discretionary cash flow of approximately 1.2 billion dollars, a cash flow yield of 11.1% compared to our cost of equity of 8.2%.
Return to slide 13, 2025 Outlook.
Speaker Change: As Greg mentioned in his remarks, take into account the current and macro environment in which we live.
Speaker Change: You expect full year 2025 adjusted EPS to be approximately $7.75.
Speaker Change: This forecast excludes the impact of announced acquisitions expected to be closed during the year.
Speaker Change: In agribusiness, all of your results are forecasted to be down from last year.
Speaker Change: Low results in processing, where improved performance in South America is expected to be more than offset by North American and European soft seeds.
Speaker Change: Results in merchandising are forecasted to be down slightly from last year.
Speaker Change: Find a specialty oils, and all your results are expected to be down from last year, merely driven by a more balanced supply and demand environment in North America.
Speaker Change: One for another, all your results are expected to be up from last year.
Additionally, the company expects a following for 2025.
Speaker Change: Just an annual effective tax rate of 21 to 25 percent.
Speaker Change: and interest expense in the range of $250 to $280 million.
Speaker Change: Capital expenditures in the range of $1.5 to $1.7 billion. Appreciation and amortization of approximately $490 million.
Greg Heckman: With that, I'll turn things back over to Greg for some closing comments.
Thanks, John.
Greg Heckman: So before we go to Q&A, I just wanted to offer a few closing thoughts.
Greg Heckman: positions us well to deliver on our critical mission connecting farmers to consumers to deliver essential food, feed, and fuel to the world.
Greg Heckman: We continue to see the benefits of our global operating model, our portfolio optimization work, our financial discipline as we navigate the cycles inherent in our industry.
Greg Heckman: With our culture of continuous improvement, our team continues to strengthen the business, both with the M&A work we talked about at the beginning of the call and our ongoing growth initiatives.
Greg Heckman: construction is going well on our large-scale projects. It will not only bring us new capabilities
Greg Heckman: will also allow us to more efficiently and sustainably serve our customers.
Greg Heckman: Group productivity is at the heart of investments at dozens of our existing facilities around the world.
Speaker Change: Strategic Use of Capital, Along with the Implementation of the Bungie Production System
enabling our teams to set new performance records.
each quarter.
We're also pleased with our performance on our sustainability priorities.
Speaker Change: took a major step forward in November. We became the first global commodity exporter capable of 100% traceability and monitoring of our direct and indirect soy purchases Brazil's priority regions.
Speaker Change: We are proud to reach this major milestone in our 10-year journey to achieve traceable and verifiable supply chains.
If you think about our business in 2025 and beyond...
Gardener's of how the macro environment evolves.
confident that our team has the experience
Skills and Agility to Navigate to Changes that Drive Performance.
Speaker Change: With the addition of ITERA, we'll be an even stronger bungee. Further diversification.
Assets, Geographies, and Crops.
Speaker Change: providing us with even more capabilities and optionality to help address the world's food security needs.
After that, we turn to Q&A.
Speaker Change: Thank you. We will now begin the question and answer session. As a reminder to ask a question you may press star then 1 on your telephone keypad. If you are using a speakerphone please pick up your handset before pressing the keys.
Speaker Change: If you would like to withdraw your question, please press star then 2. At this time, we will pause momentarily to assemble our roster.
Speaker Change: And today's first question comes from Manav Gupta with UBS. Please proceed.
Thank you.
Manav Gupta: Morning, Greg. Morning, John. My first question relates to the 2025 guidance.
Manav Gupta: What are the puts and takes, if you could get a little more details? And the reason for the question is that historically you start at a number and as the execution is better than expected, the number rises. I'm trying to understand what kind of conservatism is built into the guidance. And my follow-up, I'll ask it upfront also, is how are you accounting for the fact that there is policy uncertainty of 45Z? So how are you accounting for that in your annual guidance? Thank you.
Thank you for watching!
Speaker Change: Well let me start and John can follow up. So as we look at
John Neppl: At 25, we definitely are in an environment that has less visibility than normal with the trade disruptions and some of the uncertainty around U.S. biofuels. But what we did factor in is that really global oil supply and demand is pretty constructive, right? We've got less palm oil and less soft seed.
John Neppl: competing with Soy. So Soy is very competitive right now and it's taking a bigger share of global flows.
John Neppl: And we are seeing more global biofuel demand when you look at it in cobalt outside the U.S.
John Neppl: Soybean meal demand has been very good, and that's driven, of course, by the profitability in the animal protein. There's also less wheat with a little bit tighter supply and demand, so less wheat competing with soybean meal and less competition from mid-proteins.
and then in South America.
Speaker Change: really expect improvement in Brazil, so the industry in 24 fought
Speaker Change: The logistical commitments and take or pay, which really create a lot of demand on supply, which kind of hurt margins across the platform for the industry, those are exited in 24 and won't be fighting that in 25.
Speaker Change: And then, of course, Argentina, we've seen the export tax reductions and that economy continues to stabilize.
Speaker Change: So that'll that should drive a change in farmer behavior and farmer selling now We do expect lower margins in North America in Europe and of course as I believe John said, you know Vitera CJ select and share repurchases are not factored into 25
Speaker Change: I might just add there that, you know, relative to 45 Z and uncertainty around policy, we've got, you know, we're making the assumption today.
Speaker Change: US crush margins lower as Greg mentioned, but also you can expect refining premiums to be just more challenged, and 25 obviously, if we've got more clarity around policy and,
Speaker Change: If you get the right demand for soybean oil relative to renewable fuels, that should be helpful for refining premiums, but now we're making assumptions they'll be down considerably.
Thank you for the detailed response, I'll turn it over.
Speaker Change: The next question comes from Heather Jones with Heather Jones Research. Please proceed.
And thanks for the question
I guess we want to start with...
Thank you. Thank you.
Speaker Change: So, given that South America should be better next year as far as on take-or-pay and Argentina, I'm just wondering what is the offset that y'all are expecting that to be softer in 2025?
You're breaking up a little bit.
Speaker Change: During the beginning, Heather, if I got the question right, it was, as we see South America better, what are the offsets globally?
Yes, in merchandising specifically.
Oh, in merchandising specifically.
Speaker Change: pretty conservative and I think it reflects what we're seeing is a more balanced
supply and demand situation globally, really across grains and oilseeds.
Speaker Change: And as we've talked about, that is always the toughest to...
Speaker Change: to be able to predict from a timing and size of the magnitude of the opportunities.
Speaker Change: It would be hard to imagine that the situation will be more complex than we're dealing with right now and we expect things to kind of
Speaker Change: get more clear in the second half, the watch out on merchandising, you know, versus the opportunity really, because it does make it tougher for our
Speaker Change: suppliers, the farmers, as well as the consumers to plan in these uncertain times, so they may draw back and be a little bit more spot here in the first quarter, first couple quarters.
Speaker Change: We're driven primarily by lower flat price now versus a year ago, but those markets can get very dynamic depending on trade flows. As government policy gets more clear and trade flows could be impacted, that certainly may provide us an opportunity on the ocean freight side.
Speaker Change: The one supply and demand probably that's most to be watched probably is corn. That one's probably the tightest.
Speaker Change: And so if we did have some weather problems in corn production, that's one of the ones that could contribute to merchandising as we need to work to solve some problems globally.
Speaker Change: Okay, and then I don't know how much y'all can speak to this, but I just wanted to ask broadly, you're thinking on the VTERA acquisition and all, given
Speaker Change: The 45, the GREET model makes canola basically uncompetitive coming into the U.S., or at least not eligible at this time for credit, and just
Speaker Change: maybe a year ago and are you maybe able to offset some of those new negatives with greater synergies or a greater share repo or just how are y'all thinking about those puts and takes?
Speaker Change: I hope this policy is going to work out, but remember canola is very favored by the food industry as well as the canola meal has been very favored by the dairy industry. So that market will continue to go to a lot of the traditional demand.
Speaker Change: As you can imagine, obviously, we're watching what happens between the U.S. and Canada, because that could impact canola flows in the near term.
Speaker Change: That would last forever, you know, and this is a long-term thing.
Speaker Change: with whatever we need to deal with in the near term. But I think the long-term policy gets more clear. One thing is the market will adjust to that. And I think with the combination with VITERA,
Speaker Change: We should be in a better position globally to deal with whatever disruption might be created from polish your trade flows and changes
Perfect. Thank you so much.
Thank you.
Speaker Change: And our next question comes from Tom Palmer with Citi. Please proceed.
Speaker Change: Good morning and thanks for the question. I wanted to maybe just start off kind of framing the earnings guidance for 25 relative to the 850 mid-cycle outlook. I know it's a few years, it was laid out in 22.
Speaker Change: I appreciate interest expenses higher but share counts lower so I guess just looking at like the segment profit pieces could be maybe walk through expectations relative to that mid-cycle outlook.
Greg Heckman: Sure Tom, I'll take that and Greg you can jump in.
Greg Heckman: any other thoughts. But, you know, just a reminder, we put that together, you know, our most recent refresh was in the middle of 2022, which of course seems like an eternity.
Greg Heckman: Now, but, you know, overall, how we're thinking about it on the processing side.
Greg Heckman: Margins are pretty steady versus what we had assumed back in the mid-cycle, but volume is down based on our original model, really driven by three factors. One is Ukraine, who's obviously been impacted with the war, and so...
Greg Heckman: We sold our Russia business since that point in time, and then we're doing less tolling in South America, so volume is down in processing, but margin's fairly steady.
Greg Heckman: Merchandising side we assume lower volatility going forward. We had modeled about a hundred million a quarter in our baseline and you know looking at looking at the next year we're thinking somewhere in the 50 to 75 million dollars per quarter range so
Greg Heckman: You know obviously that can change pretty quickly depending on what happens in the markets, but that's how we have it in
Greg Heckman: And, you know, really driven by interest rates and more debt. And I'll get to the offsets in a second. And then on the sugar side, of course, we sold sugar. We had that built into the model. But offsetting the higher interest in sugar impact is more share buybacks. And, you know, we had originally in the model just assumed
Greg Heckman: That pay down with any excess cash, but of course we've allocated a lot of that to share repurchases. So repurchases have principally offset the loss of sugar earnings and the higher interest cost.
Greg Heckman: And then we do have some higher costs, you know, than what we had anticipated at the time, really driven by
in our original model.
Greg Heckman: And then finally, on the favorable side, all that is on RSO.
Greg Heckman: You know, we find, especially on the oil side, margins have been better than what we would have modeled in terms of at the time.
Greg Heckman: Assuming more of a baseline, you know, on the specialty side, we perform better, but also refining premiums have stayed stayed better than, you know, what we had anticipated in a mid-cycle. So that kind of wraps up the overall.
And probably just for mentioning...
Speaker Change: The board has mentioned the calendarization of 25 right now. So first half, second half at 40%, 60% and then Q1 versus Q2 on the first half would be 40%, 60%.
Speaker Change: Thank you. That was actually my next question. Maybe I'll just sneak one in quickly. Just on Zoterra, I guess, what's kind of the plan once it closes in terms of communication?
Speaker Change: Is the idea to update guidance just on the next earnings cycle? Would it be more proactive than that? And just any kind of initial thoughts on how we might maybe think about Votera swinging earnings. Thanks.
Thank you for watching!
Speaker Change: Yeah, I think, Tom, our plan right now is to update on the Q1 call. You know, obviously, it depends on timing of close because...
Speaker Change: We have a lot of work to do getting the commercial teams together and looking at the future, you know, we focused
Speaker Change: All the time and attention on integration and getting through regulatory, and of course, given the fact that we're not one company, the commercial teams are limited in communication, really limited to integration discussions and not what can we do together going forward.
Speaker Change: We're looking forward to getting those teams together to talk about future what we can do together And clearly our first order of business will be taking a recast of how we feel about the balance of 25 Post closed and then we'll share that as soon as we can
Speaker Change: In the meantime, we're excited about it. We know we're in a very cyclical business.
Speaker Change: The environment is different than when we signed the deal, but this is about the long-term. And we're just as excited today as the day we signed the deal, and know in the long run as we've
Speaker Change: It's going to give us that much more ability to manage.
Great. Thanks for such detailed answers, guys.
Yeah, do that.
Stephen Haynes: The next question is from Stephen Haynes with Morgan Stanley. Please proceed.
Hey, good morning. Thanks for taking my question.
Stephen Haynes: I wanted to ask on the VITERA regulatory process you mentioned.
Stephen Haynes: constructive comments with Chinese regulators. I was hoping if maybe you could provide a bit more.
Stephen Haynes: here on those discussions and then is it also I guess fair to assume that any back-and-forth between the US and China on tariffs hasn't hasn't changed anything with with those discussions. Thank you.
Speaker Change: I'd say we've had very productive discussions with the Chinese authorities and we can continue to respond to the questions and work through the process and we feel we're getting to the later stages of that. And then as far as some of the external factors that are going on in the world.
Speaker Change: Well, the one thing, Ongie, with our global footprint, as well as Viterra, with their global footprint, we've both had...
Speaker Change: Very good relationships with the China market, with our counterparties in China, with the regulatory authorities. And then these are decade-long relationships. And it's very important, right, to be able to connect that important demand in China.
Speaker Change: with the farmers, right? And that's what we do. That's vitally important to help farmers be successful and to be profitable and continue to grow, as well as it's important to China, you know, for their growing demand, that we can connect them to all the different origins around the world. So those...
Speaker Change: You know, those are long-term relationships and trust that's been built and we'll just work through the process. We've seen a lot of different cycles and a lot of different...
Speaker Change: situations in the world and relationships over those decades and expect to in the coming decades, which is why we're so excited about putting these two companies together.
Understood. Thank you very much.
Speaker Change: The next question comes from Salvatore Tiano with Bank of America. Please proceed.
Salvatore Tiano: Thank you very much. Firstly, I want to talk a little bit in more detail about the financial implications of the acquisitions that you're close to completing. So, firstly on Pytera, previously you had said that it most likely would be dilutive on year one and I want to see if you can put a finer point given that at this point we're close to the
Salvatore Tiano: to the completion and also if we have line of sight to year two or year three, whether this will be at this point dilutive or accretive. And on CJSELECT, I think numbers that have been floated previously, we're talking about perhaps
Salvatore Tiano: 60 million EBIT contribution which would be 30 cents CPS accretion on a full-year basis. Is this still the case?
I'll start with by Tara. You know,
Speaker Change: Out of the gate, it was going to be neutral to slightly positive on a pro forma basis after any consideration.
Speaker Change: capturing first-year synergies and share buybacks. Of course, we've done a bit of the share buybacks. We have $800 million remaining on that program, but I think look...
It's difficult to assess exactly.
Speaker Change: I will have an impact first year because we haven't gotten
Speaker Change: together to put a forecast together for 25. But again, we will provide that clarity as soon as we can on 25. And then really an outlook beyond there, we have to spend some time together and understand.
Speaker Change: How the businesses will work together and how quickly we can capture the commercial synergies. I think on the cost synergy side we feel very good about the cadence.
Speaker Change: We have but you know, it'll take time to get through the commercial side
Speaker Change: So we'll work on that. I think it's just gonna it's a big company. It's a lot of work
We'll provide that clarity as soon as we can.
Speaker Change: You know, with respect to CJ Selecta, you know, our general assumptions are largely intact.
Speaker Change: It's about a $600 million acquisition, and we expect mid-team returns on that business.
below world record.
Speaker Change: We definitely believe that it's going to be a very good acquisition on the long term.
Speaker Change: Thank you very much. And also I wanted to check a little bit on the capital allocation. So obviously you are being more aggressive with buybacks and offsetting the...
Speaker Change: with a dilution from the sale of the Sugar JV. How should we think a little bit about that for this year? And on CapEx, I think previously you had mentioned around 2 billion for 2025. So clearly it's trending lower. And is this just finding efficiencies, taking off some projects of the books or just being pushed back to 2026?
left on our commitment relative to VITERA.
Thank you.
Speaker Change: The original commitment was doing that within 18 months of close, and certainly that can come sooner, if it makes sense, and as we look at other sources and uses of cash, you know, we're always looking at buybacks as an option for any excess cash that we're generating.
With respect to the
Speaker Change: to the CAPEX estimate, nearly 1.9 to 2, and now we're down 1.5 to 1.7.
Speaker Change: driven really by kind of 50-50 between some planning pushing into early 26 and our decision to forego some projects that we had on the slate that we decided not to pursue. So, kind of a mix between the two. So, overall, I think
Speaker Change: So 1.5 to 1.7, we feel like it's pretty good estimate for next year, down $200 to $300 million from our original forecast.
Great. Thank you very much.
Thank you. Bye.
Speaker Change: And the next question is from Poran Sharma with Stevens, please proceed.
Thanks for the question.
Poran Sharma: Just wanted to hop on and get a sense of the take or pay. Just want to get some granularity here.
Poran Sharma: Now, you said you're expecting better results out of South America because you won't see as much of an impact. I'm just wondering, in 2024, did you see – was the impact
Poran Sharma: kind of centered around the first half or the second half or was it split evenly throughout the year?
Poran Sharma: Yeah, first I'd say it was a total industry impact that
Poran Sharma: fortunately affected margins not only in origination and crush, but in our exporting as well, and it was really something the industry struggled with all year.
Poran Sharma: Okay, they've accelerated a little in Q4 as the end of the year.
Poran Sharma: definitely, you know, approached and, you know, we felt it across our system in beans and corn, but definitely in our global corn business as well.
Got it. Appreciate the color there.
Guess I'm the follow-up.
scenarios. I know the situation is fluid now but
Poran Sharma: Just, you know, looking at past history, last time around Bungie South America business, at least the fundamentals were much better because it looks like...
Speaker Change: flows shifted over from China to South America. So just want to get your sense on the setup this time around. If you do get tariffs in place, do you expect to see as much of a benefit?
Speaker Change: in your South America business, if you could just help me understand the puts and takes there.
Yeah, one thing that I would...
Speaker Change: point out as you think about it, you know, versus the challenges in the trade war 2018, you know, Fungi is a very different company. The way we operate
Speaker Change: the global platform and the way that we've changed our operating model, I think we're
a much better position to react more quickly.
Speaker Change: 18, to today and what we'll be dealing with here in 2025. And the other, we're a little bit battle-tested when you think about some of the things that we've been...
Speaker Change: you know, challenge with whether it's African swine fever or geopolitical, you know, regional situations, COVID. So, and teams performed very well through all of those. I think we're in much better
Speaker Change: position from a capabilities and from a platform for the challenges that are in front of us.
See, I might just add that...
Speaker Change: Obviously, we're used to supplying China out of both North and South America, depending on the time of year.
Speaker Change: Harvest in the U.S., we supply a lot of beans out of the U.S., and then that shifts to Brazil or South America later in the year. And so it's very much a dynamic that we're used to. And so if trade policy affects trade flows, we'll be able to adjust to that accordingly.
Greg Heckman: given our experience and obviously working in China, as Greggie pointed out earlier, for decades.
Thank you. Thank you.
Greg Heckman: Look, our goal ultimately, right, is to connect those demand markets with the farmers and send the appropriate signals, right, for planting decisions that the farmers are making to be able to have, you know, the right crops and drive their profitability.
Got it.
Appreciate the color, guys.
Speaker Change: The next question comes from Ben Therv with Barclays. Please proceed.
Good morning, Greg, John.
Speaker Change: Some of the impact that you're expecting from a growth capex and be M&A versus share repurchases So I think we've discussed the M&A and share repurchase piece around it But could you maybe also elaborate just given the increased capex that you've been seeing and what you've been putting out? Already last year for this year and then that probably even going to carry over into first half 2026
Speaker Change: of what do you expect from that in terms of contribution as to your, um...
Speaker Change: Let's just assume it's still the same baseline. What would that be? What's that incremental earnings that you think that can come out of that CapEx as you roll over into then the second half of 26 and then beyond then to 2027 in a more normalized CapEx cycle, but with those assets being produced?
Speaker Change: Sure, so our baseline assumptions we built, our go-forward model, was really built around
Speaker Change: CapEx and M&A, small amount of M&A, mostly large CapEx, and those projects are, you know, largely on track. You know, timing's been a little affected by our weather and labor availability on a couple of them, but largely intact with our long-term
Speaker Change: impact maybe the near-term economics of those projects. And then CJ Selective, for example, is one of those projects that we had had on our radar screen back when we built the model. And that, hopefully, will close here soon.
Speaker Change: So I feel like, you know, we're largely on track on the on the growth side with what we modeled And we had anticipated that impacting about $2.50. So we we were expecting about $11 baseline
Speaker Change: All else being equal, we're in a baseline from $8.50 to $11. Now, obviously, what the environment's going to be like at the end of 2026, you know, when we largely expect these projects to be wrapped up.
Speaker Change: Anyone's guess at this point, but assuming, you know, a mid-cycle or relatively mid-cycle environment at that point, that's what we would expect our baseline to have reset to.
Speaker Change: Okay, perfect. And then just real quick as it relates to like the cadence, how to think about share buybacks. I mean obviously you've done about 1.1 billion now as of December, so that means there's still about 900 million missing which is within the Biterra deal. Is that still more likely now to happen post-transaction close or would you continue to buy shares even ahead of
Thank you for your time. Thank you. Thank you.
Speaker Change: Yeah, so we have $800 million left and, you know, while we haven't made any specific decision on when, but certainly it'll be...
Speaker Change: It will be opportunistic, we'll get it done. The cadence, we haven't really settled on when, but certainly we will. If it makes sense to do it sooner, we'll do it sooner. But if we have other reasons not to do it right away, we'll consider that.
We'll get it done, sure.
Okay. Perfect. Thank you. I'll leave it to you.
Speaker Change: Our next question comes from Tammy Zakaria with J.P. Morgan. Please proceed.
Thank you.
Hi, good morning. Thank you so much.
Speaker Change: So my question is on the disaster aid package for farmers that was, U.S. farmers, that was announced in December. I think they're getting assistance per acre for both corn and soybeans. So do you do you see any potential benefits of any of this?
Speaker Change: for any of your segments benefiting from this as the year progresses.
Speaker Change: I think it's a kind of a small impact to us overall what you know I think the upside and what's good is that farmers will have what they need to make the investment in this next crop in the seed and the inputs you know to plant the right crops and have the right productivity so
Speaker Change: It's good that they've got that funding and I think that support is positive and that should be good for production.
Speaker Change: Got it. That's helpful. And I wanted to follow up on that tariff question from earlier.
Speaker Change: I know it's still fluid, but there's a narrative that increased exports of more ag commodities out of the US into.
Speaker Change: Some of the trading partners, like China, could be a negotiating tactic under the current administration. So, given your footprint, how would that impact your outlook if, let's say, China promises to buy more from the U.S., maybe at the expense of South America?
Speaker Change: Yeah, one thing, we're very glad that we have a very balanced global footprint. So whether that's on the merch side or on the crushing
the OLC Processing side, we've been able to balance
a number of
Speaker Change: situations the last few years to continue to perform. It may create regional trade-offs, like in the U.S., where that would benefit export, and it may be slightly more challenging to crush, but then we would try to adjust elsewhere in our global system to respond to that.
Got it. Thank you. That's helpful.
Speaker Change: And our next question comes from Derek Whitfield with Texas Capitol. Please proceed.
Good morning and thanks for taking my questions.
The story which
Speaker Change: Starting with refining, we've seen the spread between RBD, SBO, and crude SBO collapse to historical levels, with the understanding that the majority of refiners are buying crude versus refined. Where should this market settle out once demand returns, as I can't imagine refining costs are less than two cents per pound.
Speaker Change: I guess I'd start by saying we all along said that as the pretreatment got built in renewable diesel, we expected to see some of the margin move from the refined into the crude. We've definitely seen that. So the crude will carry a bigger piece on the crush. We've got a little bit different footprint with our global specialty oils business.
Speaker Change: We've got a very good customer base that we've continued to help manage their challenges and grow with. We've got a nice balance between the QSR as well as the CPG and the food at home.
So, you know, our account mix has been favorable.
as we've seen some of the changes with the consumer.
Speaker Change: And then some of our specialty business on the oil side benefited from the tight cocoa butter supply as well as you remember we added a plant at Avondale and as we ramped that up in our capabilities here in North America on specialty oils.
Speaker Change: So, kind of all that rolls into when you see what our, you know, refined overages are. Probably got a little bit different package or portfolio than what someone who might just be a, you know, a North American player.
Derek I'd just add that
Speaker Change: All the storylines, a lot of it is about energy and crude versus refined oil.
The Energy Sector Resupply to Less Oil This Year.
Speaker Change: Not only as a percentage of our total book, but also just in actual volume, we provided less to the energy industry, just because demand has been...
Douglas Goldstein, Ph.D., is a professional financial advisor
Speaker Change: And we think demand for soybean oil, whether refined or crude, is good. You know, either way, we want demand for that product. But refining premiums has held in there pretty well. To Greg's point, it's been...
very resilient with the
continue to demand, any lasting demand from the food industry.
Speaker Change: And I think it's probably also worth mentioning, right, there is a big...
Speaker Change: biofuel install base that exists now. It's in place so as we work out
you know, the RVO and Workout45Z.
Speaker Change: There's a lot of demand there that could make a difference in a hurry, and, you know, we trust that the policy is going to get worked out, right? There's a lot of installed capacity. The money's already been spent. It's available today to run, and those facilities, whether it's traditional biodiesel,
Renewable Diesel or SAF, they're underutilized today.
And, you know, we get those policy rights, that's also...
Speaker Change: supportive to agriculture at the farm gate. That's supportive to the farmer, and we think we're going to get, you know, eventually get those dots connected, and we hope that'll be later here this year. But...
Speaker Change: That installed capacity base is there, and as John said, we've got upside on the amount of oil that we can provide when they're ready to go.
Speaker Change: Great. We definitely agree with that assessment as well. And then as my follow-up, I wanted to touch on 45Z. In your view, is there merit from a carbon counting perspective for canola to have a materially higher CI than SBO when you evaluate ag and processing practices?
Speaker Change: You know, look, I'm not a scientist, so it's hard to understand all the math that goes into it.
Speaker Change: You know, today it doesn't have a past. Obviously, the one we're watching more closely is winter canola, because we have
Speaker Change: program and think that obviously the scores there should be considerably different especially when you think about indirect land use.
Speaker Change: TBD. You know the policy did note that it was spring canola that they had assessed and so we're hopeful that they'll be reviewing winter canola and treating that differently. Today that's flowing to Europe because there is demand in Europe for winter canola seed.
Speaker Change: We have a program here in the U.S. that's growing. We'll see how things shake out. I mean, there's going to be a lot of conversation, certainly. But one thing we do know is that we'll be positioned to support wherever this stuff needs to go. And today, some of it's Europe.
Clearly...
Speaker Change: 45Z came out it's more favorable to soybean oil but we do think winter canola has a place as well as some of the other novel crops that we continue to work.
And I'd say what's encouraging is that we're seeing...
Speaker Change: You know, the players along the value chain work together with the policymakers to try to get, you know, the same set of facts for everyone to work together. So, whether it's the energy industry, the processing industry, the farm groups.
Speaker Change: You know, we are seeing everyone try to engage on the facts and we believe that that will be productive over the long term.
Perfect. Thanks for your time.
Speaker Change: The next question is from Andrew Strelzick with BMO. Please proceed.
Andrew Strelzick: Hey, good morning. Thanks for taking the questions. I had two questions. The first one...
Andrew Strelzick: about some of the near-term uncertainties that you've been discussing, and you have cash crush that looks pretty poor versus a crush curve that gets better throughout the year.
You know,
Andrew Strelzick: What's your degree of confidence, or how do you weigh the risk that maybe some of these uncertainties kind of linger beyond the first quarter? Is there a degree of confidence that this will be more confined to the quarter, or how do you balance those two in your outlook?
Andrew Strelzick: I'd say when you look at the calendarization, you know, that we put together with
Andrew Strelzick: delivering, you know, the 775, right? We talked about that's approximately, so you know, we see scenarios where that's got risk and upside, right?
Andrew Strelzick: We look at where we're at right now, you know, in the cycles of harvest. We've got kind of second quarter.
Andrew Strelzick: First quarter is going to be pretty tough. Second quarter we'll start to see some benefits from South America.
Andrew Strelzick: And then as we get in the second half of the year, of course, from North America, crops. So, I think that's reflected in that expecting 40% of our earnings in the first half. And it's even more reflected when you think about in the first half, we're only expecting of that 40% for 40% of that to be in the first quarter. So, that calendarization kind of shows.
you know, what we expect to...
and possible retaliatory measures.
Andrew Strelzick: So the point though, you know, benefit one region and we'll have to manage that from another region. The one thing that does, it makes planning tougher and it may drive not only farmers but consumers more into the spot.
Andrew Strelzick: That could make things, you know, delay a little bit more. So that'll be one of the, I think, factors to watch in 25.
I know we've talked a lot about mobiles but
Andrew Strelzick: Some additional certainty around where things are going to shake out from a renewable standpoint could have a significant impact on demand for soybean oil. Greg pointed out
The assets are there, the capacities are there.
Thanks.
Andrew Strelzick: And plants are significantly, they're significant, and they're able to take a significant amount of volume, soybean oil, when they're running in.
and Ash Williams.
Andrew Strelzick: It's a lot of hand-to-mouth right now on that side because people aren't...
I don't have enough conviction to put this platform on.
Andrew Strelzick: The other of course is watch the weather right now, it looks favorable for Brazil and how
Andrew Strelzick: The harvest should develop there. It's a little dry in Argentina, so we want to watch that closely.
Andrew Strelzick: And then, you know, remember, meat economics are very good, and the animal numbers are out there. Soybean meal, priced very well, less competition, you know, from wheat and from the mid-pros, and so we're at high inclusion rates.
on the on the meal side and then
Speaker Change: John spoke to the fact about there's a lot of biocapacity out there and regulatory clarity.
Speaker Change: is on the way, we hope, there in the second half.
Speaker Change: Uncertainty in the U.S. right? Brazil's got fuel of the future. They'll be moving up to B-15 on their way to B-20. Indonesia's talked about going for B-35 and on their way to B-40. And then Europe has put some more favorable
Speaker Change: regulation policy in place for SAF and started to move towards maritime. So there's a lot happening globally on the biofuels, continuing to kind of quietly develop demand and investments continue to move forward.
Speaker Change: Okay, that's super helpful, Culler. I appreciate that. And my other question, you know, I guess I'm, I appreciate we just got the 2025 guidance, but I'm trying to think about the earnings trajectory of this business over the next, I don't know, two or three years, next several years, and obviously this year has a lot of disruption, a lot of kind of rebalancing.
Speaker Change: and then you have, you know, everyone can make their own assumption on kind of the pro forma numbers with the Terran CJ Selective, but, you know, then you have synergies and you have, you know, returns on these capital projects and maybe less, a lack of visibility going forward. I mean, do you see 2025 as?
Speaker Change: an earnings base maybe on a pro forma basis that you should grow from over the next several years or kind of like a trough-ish type of number and you know maybe help us with with if there's any of the building blocks that I left out kind of how you think about the trajectory of the business over the next couple years. Thanks.
Let me start, the one thing would be yes.
We're excited about bringing...
Speaker Change: VITERA and Bungie together. But I'll tell you who's really excited are the teams, right? They're engaged and they're anxious. You know, we continue to be competitors, and so the commercial teams have not been able to do that planning.
Speaker Change: We're excited about the commercial synergies when we're able to get those teams together and start to do the work.
Speaker Change: as one bungee here into the future. So, you know, from that, that's part of where we are building off of. And then, you know, that will also provide the cash for us to continue to invest.
Great. Thank you very much.
Speaker Change: This concludes today's question and answer session. I would now like to turn the conference back over to Greg Heckman for any closing remarks.
Speaker Change: So thank you very much for joining us today. We appreciate your interest in Bungee and we look forward to speaking to you again soon. Have a great day.
Speaker Change: The following is a work of fiction. Any resemblance to real persons, living or dead, is coincidental and unintentional.
the the the the the the