Q3 2026 ADM Earnings Conference Call - ARCHER-DANIELS-MIDLAND CO

Financial Performance:

• Reported adjusted EPS of $1.77 for Q3 2026, a 92% year-over-year increase.
• Total segment operating profit reached $1.4 billion, up 64% from the prior year quarter.
• Segment operating profits: Ag Services & Oilseeds (AS&O) at $778 million (+105% QoQ); Carbohydrate Solutions at $470 million (+40% QoQ); Nutrition at $134 million (+3% QoQ).
• Cash flow from operations before working capital changes totaled $3 billion year-to-date.
• Net leverage ratio stood at 1.5x at end of September; capital efficiency focus led to a reduced capex guidance.
• Net benefits from 45Z biofuel tax credits raised to approximately $350 million for the full year 2026.

Guidance and Future Outlook:

• Raised full-year 2026 adjusted EPS guidance to $5.50–$5.80 (previously $5.15–$5.60), marking the third raise this year.
• Full-year 2026 capital expenditure guidance lowered to $1.2–$1.3 billion (previously $1.3–$1.5 billion) due to improved capital efficiency and project sequencing.
• Outlook for 2027 remains optimistic, expecting macro conditions similar to H2 2026 with favorable biofuels demand and margins.
• Anticipated Q4 seasonality includes lower volumes in ethanol and flavors, though AS&O and crushing margins expected to remain constructive.
• Long-term growth strategies include de-bottlenecking, automation, precision fermentation, and natural colors.

Business Segments and Product Lines:

• AS&O: South American soybean crush volumes hit a record; global crush volumes up 1.6% YoY; strong margins driven by North American biofuels policy (RBO) and global energy prices.
• Carbohydrate Solutions: Starches and sweeteners operating profit up 11% YoY; ethanol margins benefited from policy incentives and expanded 45Z program; sequestered ~300k metric tons of CO2 in Q3 (1M YoY).
• Nutrition: Revenue declined 4% YoY ($1.8B), driven by softness in wholesome ingredients and animal nutrition portfolio actions; however, animal nutrition operating profit grew 21% YoY, and flavors continued to gain market share.
• New Investments: Announced joint venture with CJ to combine Decatur, Illinois amino acid facility with CJ assets to secure U.S. supply; advancing precision fermentation for plant-based proteins (egg whites, whey, meat alternatives).

Market and Competitive Landscape:

• North American biofuels margins remain favorable due to the finalized Renewable Fuel Standard (RBO) and elevated global energy prices.
• China continues to purchase North American soybeans, supporting Ag Services demand; Ukraine export disruptions remain a factor for inventory valuation.
• ADM views the market structure as constructive through 2027, citing long-term biofuel policies in the U.S., Brazil, and elsewhere.
• Voluntary carbon market entry via Columbus, Nebraska facility aims to capture value from biogenic CO2 removal credits starting late 2026.

Risks and Challenges:

• Unplanned downtime at one Nutrition plant impacted Q3 results, though the issue is identified and under control.
• Inflation in certain input costs and ongoing market softness in liquid sweeteners and wholesome ingredients.
• Geopolitical instability and trade disruptions (e.g., Ukraine) affecting specific inventory and logistics.
• Potential interest rate increases expected to impact borrowing costs in 2027.
• Uncertainty regarding future biofuel policy beyond 2027, though management expects policy durability across administrations.

Management Commentary and Tone:

• Tone was highly confident, emphasizing strong execution in a complex environment and "flawless" quarterly results.
• New COO Jeff Rowe highlighted three focus areas: operational efficiency (reducing downtime), innovation (AI and precision fermentation), and targeted organic investment.
• CEO Juan Luciano reiterated commitment to capital discipline and returning value via dividends (379th consecutive quarter) and share repurchases ($360M in Q3).
• Management stressed that while 45Z benefits are significant, they are subject to market dynamics and do not include mark-to-market forecasts in guidance.

Analyst Questions and Answers:

• Macro & 2027 Outlook: Management expects 2027 to mirror 2026 fundamentals with strong biofuels demand, though specific one-time benefits may vary; continued investment in R&D and automation is planned.
• Crush Margins: Expressed confidence that crush margins will not collapse in Q4 or 2027 due to strong policy support and demand, despite some industry softness.
• CapEx: Lower capex guidance attributed to project sequencing and efficiency rather than reduced opportunities; 2027 CapEx expected to remain within the $1.2–$1.5B range based on growth priorities.
• Nutrition Headwinds: One-time insurance release in Q3 boosted prior year comparisons; Q4 expected to see seasonally low flavors but strong animal nutrition recovery.
• Precision Fermentation: Positioned as a multi-year growth pathway; expected to become profitable in 2–3 years and meaningful in 5–10 years, de-risked by existing assets and customer partnerships.
• Voluntary Carbon: Columbus facility capacity (800k tons/year CO2) is being certified; financial impact in 2027 to be determined based on nascent market development.

Other Key Points:

• Formed a strategic joint venture with CJ to enhance U.S. amino acid supply chain security.
• Executed opportunistic share repurchases of ~$360 million in Q3.
• Achieved significant progress on the enterprise-wide cost savings program, maintaining trajectory to meet the $500–$750 million target.
• Utilized AI and data analytics to enhance decision-making and customer solutions under new COO leadership.