Archer-Daniels-Midland Company (ADM) Earnings Call Transcript & Summary

Hello, everyone. Thank you for joining us, and welcome to the ADM Q2 2026 Earnings Conference Call. [Operator Instructions] As a reminder, this conference call is being recorded. [Operator Instructions] I would now like to introduce your host for today's call, Kate Walsh, Director of Investor Relations for ADM. Ms. Walsh, you may begin.

Welcome to the first quarter of 2026 earnings conference call for ADM. Our prepared remarks today will be led by Juan Luciano, Chair of the Board and Chief Executive Officer; and Monish Patolawala, our Executive Vice President and Chief Financial Officer. We have prepared presentation slides to supplement our remarks on the call today, which are posted to the Investor Relations section of the ADM website and through the link to our webcast. Some of our comments and materials may constitute forward-looking statements that reflect management's current views and estimates of future economic circumstances, industry conditions, company performance and financial results. These statements and materials are based on many assumptions and factors that are subject to numerous risks and uncertainties. ADM has provided additional information in its reports on file with the SEC concerning assumptions and factors that could cause actual results to differ materially from those presented in these materials. Unless otherwise required by law, ADM assumes no obligation to update any forward-looking statements due to new information or future events. In addition, during today's call, we will refer to certain non-GAAP or adjusted financial measures. Reconciliations of these non-GAAP financial measures to the most directly comparable GAAP financial measures are available in our earnings press release and presentation slides, which can be found in the Investor Relations section of the ADM website. I will now turn the call over to Juan.

Thank you, Kate. Hello, and welcome to all who have joined the call. Please turn to Slide 4, where we have outlined this quarter's performance highlights. Today, reported adjusted earnings per share of $1.84 and total segment operating profit of $1.5 billion for the second quarter of 2026. Our trailing fourth quarter adjusted ROIC was 7.8%, and cash flow from operations before working capital changes was $1.8 billion for the first half of 2026. Total segment operating profit increased significantly compared to the prior year quarter, driven by several positive factors, including robust commercial and operational execution by our team a constructive biofuels margin environment, elevated global energy prices and momentum in Nutrition led by flavors and progress in Specialty Ingredients. Based on our first half performance and a constructive outlook for the second half, we are again raising our full year 2026 adjusted EPS guidance now to a range of $5.16 to $5.60, up from the previous guidance range of $4.15 to $4.70. As we look to the second half of the year, we are focused on continuing to deliver on our financial and operational commitments and that same discipline extends to how we allocate capital and return value to our shareholders. During the second quarter, we paid our 378th consecutive quarterly dividend, and we remain steadfast in our commitment to creating and returning value to our stakeholders. Please turn to Slide 5. The second quarter of this year was an important 1 for us, and the team once again delivered while progressing our 2026 priorities. I'll run through a few highlights. During the quarter, energy markets were supportive of North American biofuel margins following the finalization in March of the renewable volume obligations for 2026 and 2027. Additionally, Global energy volatility was also supportive of biofuel, including crush margins. Our business executed well across our asset footprint amid this constructive backdrop increasing global oilseed process volumes by close to 5% compared to the prior year period, driven by higher asset utilization. Our Services also delivered strong results in the second quarter. driven by the team strategically leveraging IBM's global asset network in a complex operating environment to deliver value across the agricultural supply chain. South American operations also benefited from the grain export terminal in Barcarena, Brazil returning to full operations along with increased soybean exports, which were supported by higher farmer selling. North American ethanol margins were robust in the second quarter as favorable economics incentivize higher domestic blend rates. Additionally, elevated global energy prices, coupled with lower U.S. corn prices, enabled U.S. ethanol to be price competitive globally, which provided a favorable U.S. industry-wide export backdrop. Our Nutrition business contributed to robust operating profit results this quarter. led by flavors and supported by progress at the caters and benefit from our portfolio actions in Animal Nutrition. Flavor sales grew across every key region, with particular strength in EMEA and we delivered a record quarter for flavors in Asia Pacific. To summarize, in ASO, our team executed well in a complex and volatile environment strategically leverage ADM's global asset footprint to drive margin and volume uplift in Ag Services, capture strong crush margins in a constructive biofuels environment and deliver nearly 5% crush volume growth year-over-year. In Car Solutions, ethanol production rose in a strong margin environment and we sequestered 337,000 metric tons of carbon this quarter. In addition, the team built on the momentum in the first quarter with continued improvement in both Human Nutrition and Animal Nutrition. The robust cash flow that our business generates funds our capital allocation and growth priorities. Our growth plan focuses on accretive targeted organic investments across our platform where we see the most compelling opportunities such as expanding domestic crushing and ethanol capacity at existing facilities. Given the strength of biofuel demand, we have identified 4 U.S. crush facilities for this first phase of expansion which together are expected to deliver a meaningful increase in our North American capacity. Additionally, we are building out precision fermentation capabilities and expanding our natural colors footprint to capitalize on the shift toward cleaner labels and higher plant protein reformulations already underway. Our growth plan is built upon the foundation of operating safely and responsibly. That commitment runs through everything we do. And I'm proud that 2 of our North American facilities were recently recognized by Workplace Safety Awards. Our recently inducted into Illinois manufacturing associations Hootan. That same commitment to our people shaped how we think about the world around us. While the commercial environment supported our results I will be remiss not to acknowledge the conflict in the Middle East and the escalation of between Russia and Ukraine. Our thoughts are with all those affected -- we have operations in Ukraine and the safety and security of our employees in the region remain our primary concern. While we expect any disruption to our Ecrenian operations to have a limited financial impact to EMEA, the region is an important contributor to global food security and further disruption to grain export was weighed on global grain stocks and increased food prices. As for what this means for our business, navigating global disruptions is not new to AGM, and we will remain focused on executing on our 2026 priorities and delivering on our long-term plan. Please turn to Slide 6 to discuss our long-term growth plans. We are making purposeful investments now in the platform set to drive the next phase of our growth. we have outlined before the next wave of value creations run through 5 distinct pathways that include a mix of near-term drivers already showing up in our results and longer-term opportunities that will keep scaling. Importantly, each sit in a market we know well, tied to customers' needs, we understand and with the infrastructure largely in place to deliver. I take a few moments now to highlight our Advanced Nutrition platform in more detail where we are developing innovative solutions as customers shift from artificial to natural ingredients, particularly in North America, where we believe we are well positioned to capitalize on this structural change in the food we eat. One of the more exciting near-term opportunity is the transition from artificial to natural colors. We believe this represents a total addressable U.S. market of roughly $1 billion in revenue, and our target is to capture $80 million to $100 million of operating profit for ADM over time. as we partner with our customers to launch new solutions. We have a well-established global colors business that helped bring similar solutions to our European customers over a decade ago. Our experienced team is well suited to provide a full suite of solutions to our customers as they navigate the complexities with color, flavor and functionality changes across products of various scales from craft to industrial scale production. Our natural colors pipeline has grown significantly year-to-date, with several notable customer wins. I highlight 2 contracts that we recently signed both to convert artificial red, yellow and orange shades to natural alternatives, 1 across a well-known packaged food line, the other in flavored beverages. These wins reflect the shift towards cleaner labels, we believe ADM is well positioned to capture and that will add durable recurring sales as the product reach store shelves. Natural colors represent just 1 of several growth engines built into our business. Together with the organic projects we're executing today, they build an enduring growth pipeline that is expected to compound over the years ahead. I want to close by recognizing the people who make all of this possible and to thank the ADM team for all their hard work and everything they do each day to strengthen our company. It is their commitment to executing on our immediate priorities while advancing our long-term strategy, that is the foundation of our success in a shifting global landscape. With that, I will hand it to Monish to walk you through our second quarter financials and full year outlook.

Thank you, Juan, and I wish you all a very good morning. Please turn to Slide 7. We AS&O segment operating profit for the second quarter of 2026 was $867 million, up 129% crore to the prior year quarter. Included in the second quarter results was around $100 million of net positive mark-to-market and timing impacts, led by a net positive impact in crushing, a modest net positive benefit attributable to Ag Services and partially offset by a net negative impact attributable to refined products and other of around $50 million. The Ag Services subsegment in the current quarter generated operating profit of $293 million, representing an increase of 159% compared to the prior year quarter. The increase was primarily as a result of strategically leveraging ADM's global asset network in a complex operating environment to deliver value across the agricultural supply chain. In addition, we benefited from improved performance in South America, partially as a result of the Brazilian export terminal in Barcarena, returning to full operation. For the crushing subsegment, operating profit was $363 million for the quarter, an increase of approximately $330 million from the prior year quarter as the business performed well in a constructive biofuels margin environment. The constructive margin environment was driven by higher domestic demand resulting from the RVO policy, combined with higher global energy prices. Additionally, crush results for the quarter include positive mark-to-market and timing impacts. Further, as Juan mentioned, manufacturing performance further improved year-over-year with global crush volumes increasing close to 5%. Additionally, soybean meal sales remained strong throughout the quarter, driven by elevated global demand for pork and poultry, which led to a record quarter for the U.S. and Brazilian soybean meal exports. Lastly, included in this quarter's results are insurance proceeds related to Decatur East of approximately $20 million. For the Refined Products and Other subsegment, operating profit was $151 million, down by 3% compared to the prior year quarter. The year-over-year decrease was largely attributable to net negative mark-to-market and timing impacts, driven by improved refining margins as a result of RVO and global energy volatility in North America and Europe. Margins were somewhat pressured in South America due to oversupply conditions. For our investment in Wilmar, equity earnings were $60 million for the quarter, down 22% compared to the prior year quarter. Turning now to Slide 8. For the second quarter, Carbohydrate Solutions segmenting operating profit was $411 million, representing an increase of 22% compared to the prior year quarter. In Starches and Sweeteners, operating profit was $326 million, up 7% year-over-year. Ethanol margin strength, including policy incentives drove the improvement. Strength in ethanol more than offset the ongoing pressure on liquid sweetener volumes and margins, which were most pronounced in North America. Further, starch demand stabilized during the quarter, while global beat milling volumes remain relatively stable in a more competitive environment. In the Vantage Corn Processors subsegment, operating profit was $85 million representing a $52 million increase from the prior year quarter as a con dry milling ethanol operations benefited from stronger ethanol margins, along with support from policy incentives and effective risk management. Overall, base ethanol EBITDA margins for the quarter were higher both sequentially and compared to the prior year quarter. Now turning to Slide 9. For Nutrition, segment revenues in the second quarter were $1.9 billion, down 5% compared to the prior year quarter and inclusive of foreign exchange gains. Human Nutrition revenue decreased by 4% against the prior quarter that included a $55 million benefit from a contract cancellation in health and wellness. Animal Nutrition revenue decreased by 6% year-over-year primarily reflecting our previously disclosed portfolio actions and the formation of the Aquilo's joint venture. Nutrition segment operating profit was $172 million for the second quarter, representing an increase of 51% compared to the prior year quarter. Human Nutrition operating profit was $139 million, up 51% compared to the prior year quarter, driven primarily by the growth in flavors. Progress with the Decatur east plant also contributed to positive year-over-year results. Animal Nutrition operating profit was $33 million for the quarter, up 50% and compared to the prior year quarter, primarily attributable to ongoing improvements and benefits from portfolio actions taken during 2025. Corporate expense declined year-over-year, driven by lower interest expense this year and the nonrecurrence of prior year impairment losses partially offset by higher performance-based compensation this year. Now turning to Slide 10 for the first half of 2026, ADM generated cash flow from operations before working capital of approximately $1.8 billion. Our net leverage ratio at June 30 was 1.6x our year-end net leverage ratio expectations remain at approximately 2x. Additionally, given the strength of our balance sheet, cash flow generation and leverage position we are evaluating a return to opportunistic share repurchases later this year. Now turning to Slide 11, where we have provided updated details regarding our 2026 outlook. Earlier today, as Juan mentioned, we've raised our outlook for 2026 adjusted EPS to a range of $5.15 to $5.6 up from the previous range of $4.15 to $4.70. In addition to our year-to-date performance, our raised guidance was based on 3 primary factors. First, we anticipate our team will continue delivering successfully against our plan through the balance of the year. Second, we expect the favorable margin backdrop across our crushing and ethanol businesses to hold throughout the second half of this year. And third, we expect Nutrition to continue improving operating performance while capturing growth opportunities. As a reminder, the fourth quarter is the seasonal low for our Flavors business. Additionally, our guidance [indiscernible] thus far with China well underway with executing on its commitment to buy 25 million tonnes of U.S. soybeans in 2026 for crushing an RPO, we expect the constructive biofuels environment to support strong growth year-over-year throughout the second half of this year further supported by the realization of the reversal of net negative mark-to-market and timing impacts that we are carrying from the first half of the year. As a reminder, we do not include new mark-to-market and timing impacts in our forward guidance. Additional adjustments could arise in future quarters depending on where commodity prices move. For Card Solutions, we expect strength in ethanol margins, including policy incentives to continue to more than offset the softness we are seeing primarily in liquid sweeteners. As a result, we are raising our net benefit from 45 to approximately $250 million for 2026, up from our prior expectations of approximately $150 million. Our year-over-year momentum for Nutrition remains intact with operating profit increasing primarily as a result of higher flavor sales, measured progress with decades and improvements in Animal Nutrition. In corporate, we expect cost to be higher than in 2025 driven primarily by performance-based compensation, along with continued investments in research and development and automation and digitization. And just a quick reminder on modeling incentive compensation. All incentive compensation adjustments are recorded in corporate during the year, with the impact to our operating segments occurring when the nonequity-related payments are made in the first quarter of 2027. As always, we continue to closely monitor external factors across the macroeconomic, geopolitical policy and overall trade environment with particular attention to the impact volatility could have on our second half results. We also continue to progress our enterprise-wide cost saving programs and remain on track to achieve our targeted aggregated cost savings of $500 million to $750 million over the 3- to 5-year period, which commenced in 2025. And I'll take a moment to highlight progress across the corporate functions in driving reductions in transaction costs. Just to give you a couple of examples, in finance, under an umbrella that we call frictionless finance, we have paired lean methodology with daily management to systematically reduce cost across our transactional processes. Accounts payable is a clear example. Daily management routines surface recuring friction in the invoice to pay cycle and the global shared services team has reduced cost per transaction by roughly 25% since the beginning of the year. Within Global Technology, we are consolidating to fewer core platforms, eliminating waste and resetting cost structures with our vendor partners. We are building deeper strategic relationships with fewer vendors and the global technology team also has line of sight to meaningful savings over the next few years while increasing investments in digital advancements and cybersecurity. In summary, the second quarter reflected strong commercial and operational execution by the team in a complex but constructive global trade and biofuels environment with solid growth momentum in Nutrition all of which contributing positively to results. We expect the second half of this year will represent more than half of our operating profit for 2026 with the potential for the third quarter to be higher than the fourth quarter largely dependent on how executed crush margins develop in the fourth quarter. In closing, I want to thank our ADM team members for the focus, discipline and execution they brought to this quarter. It is their hard work in delivering strong commercial and operational performance across all 3 segments and generating the cash flow that funds our priorities. This positions us well to raise our outlook and continue navigating a dynamic global landscape while delivering on our financial commitments and creating and returning value to our stakeholders. With this, I'll hand it back over to Juan.

Thanks, Manish. To recap, our second quarter results reflect a marked step-up in our earnings, driven by a constructive biofuels environment strong commercial and operational execution and momentum in Nutrition. That combination allow us to again raise our full year 2026 outlook. Beyond 2026, we have compelling growth engines already embedded in the business, the organic investment we're making across our platform and the 5 growth pathways we have outlined, including the natural colors opportunity I discussed today. We're excited about the strength of this organic growth plan, while we continue to be very disciplined with respect to bolt-on M&A. As we execute the journey ahead, we will remain steadfast in our commitment to creating and returning value to our stakeholders. And finally, before we open the call up for questions, I would like to welcome Jeff Road to ADM who will assume the newly created role of Executive Vice President and Chief Operating Officer, effective August 17. Jeff brings more than 30 years of experience driving growth, operational excellence and commercial success. He joins us from Syngenta, where he serves as CEO of 1 of the world's largest agricultural technology companies with more than 50,000 employees across over 90 countries, a fifth generation Illinois farmer Jeff is a proven industry leader whose appointment complements an already strong management team and build on ADM's momentum around driving innovation and delivering on our long-term growth plan. With that, we'll take your questions now. Operator, please open the line.

[Operator Instructions] Your first question comes from the line of Manav Gupta from UBS. Please go ahead.

Ongoing. Monish First, congrats on a very strong quarter and another guidance rates. You continue to surprise the Street on the upside. My question here is as I understand, sir, and you can let me know if the understanding is wrong, the reason you are moving ahead with some of these debottlenecking facilities at existing plants because the actual cost in dollars per tonne will be significantly less than if these were actually greenfield expansions. So by moving ahead with this brownfield expansions, your return on investment will be materially higher versus if these actually were going to be greenfield expansions. Could you actually talk about that a little.

Sure, Manav. And I will pass the congrats to the team. Listen, of course, we're always looking for opportunities to deploy capital wisely. As you know, our capital allocation, that's the priority, cost and growth part of the organic plan is the first 1 also with dividends. So as part of that, in crush, we've been expanding. We expanded last year in Brazil where actually capital intensity is -- capital is cheaper in Brazil to be implemented. So we expanded to, and we completed Overlandiathis year. In the U.S., we have identified 10 plants with potential for capacity unlocks when we look at the overall portfolio, the capital intensity is about 1/4 of what we will cost to build greenfield. So certainly very attractive opportunities. we have decided to have a phased approach to allow for off-ramps to see how the industry develops over time. So in this, what we call Phase 1, we have announced 4 of those 10 plants we are moving forward, which, of course, are the most attractive returns. That is still keeping within our range of CapEx from $1.3 million to $1.5 million at times when we find these opportunities that are very compelling, we might go a little bit higher than that. At times like last year, when we didn't find anything, we were a little bit lower than that. But nothing that it swings completely the range. This Phase I, although it's early on, it could be in the range of $100 million overall for the 4 plants. So it's not huge. So we feel very good about that. And as we are building this both in North America and Brazil because these are markets where there are strong domestic biofuels markets, and they are very favorable in terms of margins. We are also looking at potentially debottlenecks in ethanol that are driven mostly by our operational excellence efforts as we continue to drive yields and cost improvements in the ethanol plants, naturally, some of that yields some debottlenecking on that. So we're very good about the strength of our organic plan.

Anil just add to Juan's comments that the other benefit of this debottlenecking is manufacturing cost manner. And as you know, there's a lot of fixed cost in these plants. So the modern throughput, the average cost per unit comes down. So all that adds to a very good return in addition to the volume that we get.

Perfect. Well understood Monish. My second and a quick follow-up is, can you talk a little bit about the broad wind project. We see it as something which is a milestone for industrial decarbonization -- can you talk a little bit about that project and the benefits of that project?

Yes. We have a broad strategy of decarbonization. And that's a very important project to bring low carbon intensity energy and his team into the case. So is a large project. We continue to move forward with that. And as I said, this is 1 of the several elements that we have in our decarbonization path a reminder we've been leaders in carbon capture and sequestration that we started like 11 years ago in our wells we're pleased that I think we sequestered 337,000 tons of carbons in this quarter, up from 300,000 in the last quarter. . So again, it's just a multiyear program and continue to decarbonize and drive based on our sustainability trend that we have put together as part of the strategy about 10 years ago we continue to execute on the strategy and the plans as per schedule.

Your next question comes from the line of Heather Jones with Heather Jones Research.

Good morning. Congratulations on the quarter. I wanted to start with Ag Services. That was much stronger than I was anticipating. And given that the tensions in the Ukraine area of escalated if China continues there being purchased as you're assuming? Do you think Q2 is a high point for the year? Or could we have Q3 and Q4 look better than Q2?

Yes, Heather. A lot going on in the world, as you know. So we continue to price the team in Ag Services and the system we have at times like this is my experience over the last 14 years in ADM that the market rewards our footprint and our flexibility. And all the assets that we have, whether it's transportation and options for origination and destination marketing of offices are basically built to provide the resilience for all these environments in which our role is to make sure that food shows up, whatever it needs to show up at times of crisis or at times of disruptions, is when our team does better because we can flex much more all this ability and all this optionality that we have built in the model. So as you said, weather across the world is threatening some crops. I mean there are some issues right now with China, especially for corn and maybe wheat and rice, whether it has become too hot and too dry. Certainly, effectively, basically, Ukraine has ceased export through the sea. We've been hit several times whether it was our vessels and our terminals, and I think the whole industry is in the same pace. So very difficult to get cruise to come to pick up vessels. So I would say China continues to buy from the U.S. I think that China want to honor the commitment of 25 million tons of soybean this year. And certainly, there may be purchases of sort of going to borrowing later on that are less political maybe than corn. So I would say probably Ag Services will be slightly lower only for our own results in Q3 than it was but Q4, it will depend on some of how those exports come into the U.S. and how much can we build sorghum and core program on top of the soybean program that seems to be built in for the later part of the year. But the team continues to execute well, global trade results were higher in Q2 driven by very strong commercial execution, taking advantage of some favorable market conditions. We continue to have improved destination marketing margins in Asia and good grain trading results. So all in all, I think even our transportation run well, as ocean freight, but also domestic freight. So I would say all the elements have been having good execution and good performance.

Okay. a RPO, I understand biodiesel margins have been strong for obvious reasons. I was wondering if you could talk about the refining margin for veg oil's backdrop and how I believe those have been relatively weak. I'm just wondering how you expect that to evolve throughout this year as EU biofuel policies implemented, the RVO is fully implemented? Just I thought what are your thinking about that setup?.

[indiscernible] business we have there. So if you think about what will drive us to the higher side of the range I think our assumptions are that services benefits from China they've been buying around maybe 1 million tons per week they've been leaning North America coating is basically 90% lock at this point in time for Q3 still open for Q4 is about 30% and so a lot will depend on where we execute those margins in Q4. So we'll have to see we have a Card Solutions ethanol margin strength continue to offset the sweetener, the liquid sweeteners softness, if you will. And we continue to raise our full year guidance on 45 as the team continues to get more clarity based on implementing processes and operational enhancements, we continue to see ourselves producing more out of that. We had the previous estimate of about $150 million, we're talking about $250 million. So again, the team or some of the improvements in portfolio that we have done in Animal Nutrition. So overall, we feel good about the rest of the year and moving into with a good exit rate in 2016, moving into 2 but you have to consider, we are been attacking Ukraine, although it's not financially material for us, that could bring uncertainty in global food prices that could bring volatility. There is weather with a big potential Nine coming. There is still a conflict in the Middle East that every day swings oil prices depending on the statements of the leaders by $3 or $4. And remember that a lot of those increase in oil prices are hitting us as higher energy cost and higher packaging and A lot of things that nutrition is undertaking, and we're managing through. So a lot of external variables and as Monish always remind everybody, we don't forecast future mark-to-market. We expect that the accumulated mark-to-market will probably revert back in the second half, mostly in Q3. So Q4 will depend again on what level of crush margins we execute. But other than that, we feel very solid about it. And when we think forward, and if I can go a little bit further.

Perfect. That was very complete. And actually, on that 1 quick follow-up on pathways. So as you think about it. Globe. We did it before. We are prepared for this [indiscernible].