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

Explicit Guidance:

• FY2026 Adjusted EPS: Raised to a range of $5.50–$5.80 (up from prior $5.15–$5.60), driven by Q3 performance and Q4 outlook.
• FY2026 Capital Expenditures (CapEx): Expected range of $1.2B–$1.3B (down from prior $1.3B–$1.5B).
• FY2026 45Z Tax Credit Benefit: Net benefit raised to approximately $350 million (up from $250 million), with an implied run rate of ~$100–$125 million per quarter.
• FY2026 Q4 Expectations: Implied EPS of $1.17–$1.47 (3Q was $1.77), reflecting seasonality in ethanol/flavors and the non-recurring nature of Q3 insurance releases.
• FY2027 Outlook: No specific numerical guidance provided; management expects full-year 2027 to be "somewhere in the ballpark" of 2026, with biofuel margins and nutrition growth remaining favorable.
• Dividend: Continued quarterly dividend (379th consecutive quarter); future increases not quantified.
• Buybacks: Resumed opportunistic repurchases; no specific volume guidance given beyond "selective" bolt-on M&A.
• Net Leverage Ratio: Year-end 2026 target remains 1.5x.

Business-Segment Outlook:

• Ag Services & Oil Seeds (AS&O):
  • Q4 & FY2026: Expects constructive biofuels environment and strong YoY growth; assumes China continues purchasing North American soybeans. Q4 historically seasonally strong for Ag Services.
  • Crushing: Strong soybean meal demand and constructive North American biofuels margins expected to persist into 2027; South American crush margins remain pressured by delayed Brazil biofuel policy.
  • 2027: Expects biofuels demand and margins to remain favorable similar to H2 2026; supply chain disruptions expected where assets and team performance will be key.
• Carbohydrate Solutions:
  • Ethanol: Strength in margins (including policy incentives) expected to continue offsetting softness in liquid sweeteners.
  • Precision Fermentation: Viewed as a medium-to-long-term driver (2–3 years to profitability, 5–10 years to meaningful impact); targeting annual operating profit uplift of $80M–$100M over time in Nutrition (specifically natural colors).
  • Carbon Capture: Columbus facility capacity to capture/store >800,000 tons of biogenic CO2/year; initial credit issuance expected by end of 2026; financial impact for 2027 currently unquantified due to nascent market.
• Nutrition:
  • Q4 2026: Seasonally low period for flavors; ramp-up of Decatur East plant expected to continue through Q4; inflation in input costs to be navigated.
  • FY2026 & 2027: Expects good YoY growth in 2026 and continued growth in 2027; correction for Q3 2025 insurance recovery shows 13% YoY growth. Flavors and Animal Nutrition driving strength.
  • Strategic JV: Joint venture with CJ for Decatur amino acid facility to establish a cost-competitive, reliable U.S. source of fifth-grade amino acids (lysine) amid global market pressures.

Market and Competitive Outlook:

• Biofuels Policy: RBO (Renewable Fuel Standard) finalized in March 2026 driving high domestic demand; expectations of multi-year biofuel policies in Brazil. Management views biofuel demand as structural, not transient.
• Trade Flows: Continued expectation of soybeans to China and corn to Europe/Mexico; global production (corn/wheat) potentially lower but manageable via existing assets and agility.
• Competition: No significant price collapse anticipated in crush margins through 2027; industry not yet producing at levels to match RBO obligations, sustaining strong soybean oil/meal demand.
• Sweeteners: Contracting season ongoing; no "cliffs" in contracts; business maintaining grind share despite volume volatility.

Macro / Industry Outlook:

• Interest Rates: Management expects interest costs to rise YoY in the 2027 environment; rates will influence capital allocation prudence.
• Geopolitics/Trade: Monitoring geopolitical, policy, and trade environments; no expectation of fundamental U.S. policy shifts regarding biofuels despite midterms, citing long-term societal demand for energy and agriculture support.
• Inflation: Input costs remain a headwind for Nutrition, though partially offset by operational improvements and portfolio actions.
• Supply Chain: Supply chain disruptions anticipated; ADM views itself as positioned to capitalize on these dislocations due to global footprint.

Strategic Initiatives:

• Precision Fermentation: Leveraging existing fermentation assets to scale animal-free proteins (chicken/lamb for pet food, egg-white, whey alternatives); de-risked via owned feedstock (dextrose) and integration.
• Capacity Expansion: Announced de-bottlenecking and expansion of existing domestic crush and ethanol facilities in North America (high-return projects).
• Sustainability/Decarbonization: Expansion of carbon removal market via Columbus, Nebraska facility; sequestered ~1M metric tons YTD 2026.
• Cost Savings: Enterprise-wide program targeting $500M–$750M; on track to achieve targets with momentum continuing into 2026.
• AI & Automation: Deployment of AI and data analytics to drive innovation and operational decisions; modernizing facilities to reduce unplanned downtime.

Risks and Headwinds to Outlook:

• Market Volatility: Future mark-to-market and timing impacts are unpredictable and excluded from guidance; results may fluctuate based on commodity price direction at period-end.
• Policy Risks: Reliance on RBO and international biofuel policies (e.g., Brazil delays); potential political shifts could impact policy clarity, though management sees long-term durability.
• Operational Risks: One plant in Nutrition experiencing unplanned downtime (ramp-up expected in Q4); inflation in specific input costs.
• One-Time Items: Q3 included ~$40–$50M non-recurring insurance reserve release; no repeat expected in Q4.
• Emerging Markets: Nascent status of voluntary carbon removal market introduces uncertainty to financial impact timing.

Management Tone on the Future:

• Confidence: High confidence in execution and "constructive" market environment; raised guidance for the third time in the year.
• Outlook: Optimistic for 2027, expecting fundamentals similar to H2 2026; view 2026 as a foundation for continued growth.
• Strategic Focus: Emphasis on "control what we can control," capital efficiency, and disciplined allocation to high-return projects (de-bottlenecking vs. greenfield).
• Caution: Hedges regarding interest rate rises, potential 2027-specific variables not yet visible, and the non-recurring nature of 2026-specific tailwinds.

Miscellaneous:

• New Leadership: Jeff Rowe appointed EVP & COO in August; focus on world-class manufacturing, innovation (AI/biology), and targeted organic investment.
• Shareholder Returns: 379th consecutive quarterly dividend; resumed opportunistic share repurchases ($360M in Q3).
• Wilmar Investment: Equity earnings of $77M in Q3 (up 38% YoY).