Bunge Global SA (BG) Earnings Call Transcript & Summary

Greg, thank you so much for taking the time to be with us today. Over the last couple of years, I've talked about your 30 years of experience in agriculture, energy and food processing industries in my introduction. I think it's fair to say that investors have a greater appreciation for you as Bunge's CEO. As in less than 3 years, you've engineered the greatest turnaround I've seen in my 20-year career. We've implemented a wholesale strategic initiatives and actions that enable Bunge to better realize its potential in a favorable or volatile operating environment. Specifically, you transform Bunge's operations across every facet of its businesses, including its portfolio mix, operational execution, risk management and capital allocation. Now you've even begun to deliver on arguably the most difficult part of the journey, maintaining the growth trajectory. We're happy to have you with us and grateful for your opportunity to gain greater insight in how you will continue to guide Bunge's future direction.

With that, let me just open it up very basically and say, it seems like, from our perspective, business seems to be going pretty well. Can you talk about how business is going, how things are going, just to kind of ground us in how we're thinking of Bunge?

Sure. Sure, Ken. As always, thanks for the kind comments, and great to be here. Number one, I can't say enough about the team. They continue to execute at a very high level. And overall, the fundamentals and the global S&Ds have remained solid. As we've been discussing with the team, like many times before, we've -- where we've turned things around. Now we get to the fun stage, right? As we move from the fix, which, during the fix, it is about growing earnings and improving the underlying earning power of the business to grow off of, but [ nowhere ] to the growth. And that means expanding our footprint and expanding our capabilities. So after 2 years of reorganizing, rightsizing the portfolio, getting the balance sheet where we want it to be, it does really feel good to be entering the growth phase.

Let's just take a step back and think about the discussion of ESG has clearly accelerated over the last couple of years. How does Bunge actually fit into the ESG picture? Do you think of ESG largely as risk mitigation or growth or a combination? How do you think about the 2 of those complementing each other?

Yes. Well, first, the discussion -- boy, the acceleration has been unbelievable. I mean, 3 years ago, we got an occasional question about sustainability. And today, it's a regular part of the dialogue. People want to understand what our efforts are, what progress we're making. And that's all of our key stakeholders, whether it's our investors, our customers, our employers -- our employees, who are very excited about what we're doing. But they want to understand how we're enhancing our sustainability efforts and then continue to disclose our process and our progress. And sustainability is not new to us. We're definitely proud of how we've integrated sustainability into our everyday decision-making process. And as attention to ESG grows among all of the stakeholder groups, we think we're really well positioned to meet the new expectations for the sustainable products and services. And we feel that we can really help drive change where we operate. And as far as whether it's a risk or growth opportunities, it's both. Historically, it was only risk mitigation, right? But the future's definitely about the growth opportunity, and it's happening across the entire value chain. If you look at the -- our areas of focus, right, improving our processing and origination capabilities. Well, that's serving not only the renewable feedstocks, which continues to grow in the good -- with the goods and the services around that, But it's also our traditional food and feed customers who want lower CI products. And that's going to be changing the way that we do things along the value chain. It's working very collaboratively hand in glove with them. And it's changing the way that we work with the producer back at the farm gate. And whether that's going to be regenerative ag, developing cover crops, a variety of changes, and that's all developing. And I think what we really love is our focus on this space. And we've got the focus. We've got the footprint, and you've seen us be able to stay nimble and agile and move to take advantage of this change. And that also is in the plant lipids. Our plant lipids portfolio, the fact that we're basic in all the oils and then with the acquisition of Loders Croklaan, right? We added palm and shea and coking capabilities. So we've got the full slate of oil. So whether that is our customers that are growing their plant-based products portfolio, and these play a huge role, but that also gives us the ability on customers that are reformulating because of the change in oil availability and oil prices and our ability to help them be successful. And that becomes another growth avenue where we can absolutely do the bolt-on acquisitions or the tuck-ins there. And then the plant-based protein, there's definitely that demand trend is in place. And that's one that there's not much M&A to do. That's one that it will take time. We're working with the customers and building backwards, and you'll see us making the investments there around brownfield or greenfield because that creates that value over time to serve that customer base in the hand and glove, the way the lipids and the plant proteins work together. But along all of those chains, right, we're working with those customers. There it's all more of a climate-friendly agribusiness and food systems in the way we execute that growth.

Last month, Bunge actually announced a new science-based target to reduce Scope 1 and 2 greenhouse emissions by 25%. And Scope 3 greenhouse gas emissions by 12% by 2030. You're also looking to seek to target the 1.5-degree Celsius as well. So that's pretty sizable change -- so what prompted you to take this initiative? What gives you the comments that you're going to be able to take steps forward to actually execute on this? And where are you in the process? Again, this, I think, is a big step for Bunge.

Well, it is. And we're very proud of what we're doing there. I mean we've long held ourselves to industry-leading initiatives to reduce emissions and make our operations more sustainable. So with the announcement of our science-based targets, we're accelerating those efforts to reduce the greenhouse gas emissions in our own operations and throughout the entire supply chain. So we wanted to make sure that we had ambitious but realistic targets, and they're bound within a reasonable time line. So those science-based targets will hold ourselves accountable, and we'll transparently show the progress all along the path to our stakeholders and our peers.

And how do you balance the short-term initiatives versus the long-term targets by the time some of these targets are here? The current management team may not be around here, but yet you want to hold yourself to some sort of viable short-term targets. How do you balance it to? And how do you hold yourself accountable?

Well, I might go a little bit further on the science-based targets. Since 2008, we had targets to reduce our greenhouse gas emissions per metric ton of production in our operations, and we've been making a meaningful progress. But in 2020, we decided, should we establish these science-based targets? And so we validated where our current emissions footprint were, and we made the decision on what things that we could do around the reduction strategies and identify the interventions that we need to make those science-based target commitments. And for Scope 1 and 2, the enhancement is going to be around our facilities and pursuing low-carbon electrical sources. So that will be a big key to driving meeting those targets. But for Scope 3, the new commitments are aligned with the long-standing efforts we've had to eliminate deforestation throughout our supply chains by 2025. And that will result in much lower Scope 3. And so that's where we talked about we'll promote regenerative farming practice. We'll emphasize decarbonization in our shipping and logistics, and that will also help us meet our goals. So look, we've got till 2030 to meet those science-based targets, but our short-term actions are what are going to help us get there. And that's why our 2025 94-station commitment, that will be a -- result in a significant drop in the Scope 3 value chain emissions, which is at least 5 years ahead of our science-based time line. And so for long-term growth, we've added that climate lens to everything we do. So whether that's new organic investments or our M&A activity to make sure that as we grow as a company, we continue to meet those stakeholder demands for more sustainable products and services.

You are one of the few companies that we cover that have linked sustainability to loans and debt. How are you performing in the area of sustainability-linked loan? What were the criteria? How meaningful is this for you guys? Is there checks and balances? How do we think about that?

Yes. It's -- it was very important when -- that we wanted to link those to our loans. We gave it a lot of thought. We worked with our lender group, and we agreed on the 5 KPIs that relate to our long-term ESG objectives around carbon emissions and deforestation-free soy and palm supply chains. And so we're pleased with our progress with those ESG objectives at the firm level. And looking ahead, we continue to maintain a meaningful link between our capital structure and our ESG goals. They remain anchored by our commitment to lower our carbon emissions over time and our industry-leading commitment of the deforestation-free supply chains by 2025. Now as our strategy continues to evolve, like it recently did with the announcement of the science-based targets, we'll periodically recalibrate that framework and our capital structure to reflect the evolution. But there's teeth in it, right? If we don't make those, the cost of borrowing goes up. And we also have created that accountability with our own teams. And because those targets are ambitious and realistic, but we wanted to align them, and they've always been aligned against our individual objectives, but now we've aligned them in 2021 with company-wide ESG targets. And so not only our climate sustainability, but our diversity aspirations as well, and they're tied into the business performance portion of the annual incentive plan. So if we don't meet those targets, it impacts the financial incentive of around 6,000 of the participants in our annual incentive plan. So that's creating alignment, and it's a company-wide focus and further accountability toward making sure we achieve those strategic objectives. So very proud about that. And of course, we continue each year to report out on our progress against those commitments through our public reports and our annual report so the stakeholders can see how the evolution of that progress continues.

Great. Now talking about other type of targets. You -- your $11.50 EPS for 2021 full year outlook, when I think about relative to the mid-cycle baseline of $7, how much of that move from $7 to $11.50 is internal improvements? How much is operating improvement? And how much within that could potentially be structural?

Well, there's no doubt that a good environment provides us the opportunity to show what this great team and this network of assets are capable of doing. We manage these supply chains to meet customer needs and adjusting to the fluctuations in demand from COVID. Immediately, the lockdowns, the switch from food service to food processors, and ultimately, here, the environment that's driven by this uneven global recovery. So proud of how the teams remained agile and navigated all these shifts. And then even when we had something completely unforeseen thrown at us, like Hurricane Ida, again, the team rallied to minimize the impact of that. So I think that shows a lot of that structural. It is the underlying business. And then you dig in a little more, and you see that we're setting high watermarks across a number of key operating metrics, whether it's reducing plant downtime, higher capacity utilizations. And all those things are critical that when the margins are good, that these plants are up and ready to run. And so we're really proud of the 8 straight quarters of increased year-on-year earnings. And to be clear, I think you know, Ken, that the market environment wasn't year-over-year better in each of those quarters. So while that operating environment's definitely contributed to the strength in our results, I can't say enough about the team and how that they have delivered these results in the environment.

Okay. What -- so would you say some -- so it sounds like some of the internal improvements should stick with us longer term. And I know you haven't changed the $7 number. But there is something within that $7 to $11.50 that is actually happening on an internal basis and not just simply, hey, we've got a good crush margins.

Definitely. That's very fair. I mean, remember, when we set that $7 earnings baseline, that's really was an earnings framework, right, for mid-cycle. Because as the crush margins can change, we wanted people to have their framework and how to think about that, and then we adjust for the current environment. And so as we've seen a better crush environment, of course, we've communicated that, as we've seen a better environment and capacity utilization here of the refineries in North America as well as the refining overages, and we've communicated that we even expect that to continue for the next couple of years. So it's a -- it was built off of that kind of trailing 4 years in the most recent 12 months to set the framework. But you've always got to think about it is an earnings framework? And how is that current environment? And then things like the soy crush -- that there's some structural improvement really driven by our operating model, where the soft crush is really more of a structural shift higher there. And that's what we're seeing with the demand for oil as well as the food demand. And as we've indicated, we expect that to continue at higher-than-historical baseline averages than what we've seen in soft. So it's a dynamic environment, but we've seen, no doubt, a broad-based improvement across all areas of our business, including distribution and really all the areas that we optimize our physical and financial flows.

Yes. The worst 4 words an analyst can say is, this time is different, right? But when you're using the last 4 years as the proxy for crush environment, at what point do you say, hey, the history is really not really what the outlook is? I mean, again, we don't have to go through each of the crush margins. I'm not looking to do that. But on a framework, I think you're looking at 34% to 36% is kind of what it is, and we're at 59%. And for softseeds, it's 48% to 52% is your framework, and we see European above 70%. So like -- And I'm not trying to push you into it, but how do you -- at what point does history not become the proxy and that you somehow have to develop a different framework to say, "Hey, this is really not the past." And I don't know how you think about that, but how do you frame that? Does that make sense?

No, absolutely. And when you look externally, as we drop off the history and add the newest history, right, that changes the average. And then as we continue to look at going forward, we look at the replacement cost of what soy and soft crush plants' cost to build. As you know, right now, costs are higher. It is difficult to build. It will be 2.5, 3 years before we see new supply come on to help meet some of this new demand. And then as we talked about, we look at what structural changes are happening in the industry from a demand standpoint. That's definitely made any impact on soft margins and that continues to stay in place, as well as on soy, and then evaluating internally what we're able to continue to deliver from our own changes internally on how we operate and the footprint that we're operating.

There's always a lot of discussion on renewable diesel. Everybody is kind of like getting their own there from the oil side, but I think there's more caution or a thought process on soybean meal. Can you talk about how you think about soybean meal demand over the short term and longer term? And then how is lysine and wheat playing into the soybean meal picture in the short term? How does China commercialization of hogs impact demand longer term? Is there a balancing act? Is it -- is there something structural going on? Is it just, hey, nice to have, and we'll see how it goes? How do you think about that? How do you frame that?

Yes. Look, history has proven the soybean meal demand is resilient, right? It's the most efficient source of protein. We expect to continue to work into feed due to the favorable economics, and it will continue to contribute to growth in livestock production. Now recently, we've definitely seen a pickup due to the shift back to more traditional feed formulation of corn and soy, and that's due to that better feeding economics than wheat as we've seen wheat rally. And we've all seen some lower inclusion of lysine and synthetics, where prices have been relatively high. So that's been favorable as well. And then the soybean meal consumption in China this year, that was impacted by wheat feeding early. But as wheat has rallied, we've now seen that situation improve, and it's reverted back to more traditional formulations of corn and soy. And then long term, with China, they're definitely going to benefit from the increased commercialization that we saw on their entire hog production system. And that's going to bring more of what is a scientific and efficient approach to feeding, which then is beneficial for soybean meal long term as well and inclusion rates.

Is that worth a certain 100 points of basis points of demand? Is there any way to dimensionalize that? Or it's just too not clear yet to see how much that really does change the demand picture for soybean meal over a period of time? Is it more of -- so to me, I think that's structural lysine, and we will come and go. And unfortunately, that's my job as an analyst to see how. But the structural side of it, how do you see that?

I think we definitely see the structural side of it there. We saw as they rebuilt the hurdle. We saw how quickly soybean meal demand increased. And I think that showed the commercial provisions and we are more used to in other parts of the world. But that also does make them very efficient on reformulating. We saw that when the government release some wheat, and then we worked into the ration. But again, as it's switched back, it's showing that the demand is there and that, that structural shift and be able to feed meal at the right inclusion rate. So that's in place. I think we need more history to kind of figure out what the percentage uptake will be. But if you see how crush margins have -- as ASF has continued to recover -- you've seen the crush margins improve on the back of that meal demand. So it's definitely being fit.

Great. And then just going back to this refined oil profit, look, you started $300 million, you moved to $390 million. Now we're at a run rate of $600 million. How do you assess how long these refined oil margins will stay at these levels? What is the longevity of it? Is it structural? Is it just kind of temporal? And then if new renewable diesel capacity comes online, does that change the equation? Or does it extend the duration? It just seems like something that we've not seen, at least, I've done this for 20 years, I really haven't seen these types of margins in refined oil. It seems like a new revenue driver or a profit driver. Just trying to figure out the ratio.

Yes. The most significant contributor definitely has been the increase in demand from the renewable diesel industry. And so you take that dynamic and, then along with the increase in demand globally from foodservice, as we've seen the recovery, right, right? And then you take the backdrop of what's a relatively tight veg oil supplies globally, and that's due to the smaller-than-expected growth of palm oil production and a smaller rapeseed canola production. So you're going to wrap all that together. Now what -- that's what we're seeing now. So what do we see looking ahead? We expect the current run rate to be sustainable, at least into 2023, as additional renewable diesel capacity comes online. However, I think we've taken a pretty conservative in our baseline assumptions. We're going to assume that, over time, the renewable diesel industry -- that they'll build some pretreatment capacity, and that will reduce the refining premium. Now we have assumed that those margins will revert back to historic average, but that we will run the refineries at higher utilization. But that's yet to play out, right? That's going to be the economics of where pretreatment is built and how much. And it isn't just economics. There's also of where it's best to manage the refining process and some of the byproducts of that. But look, based on the conversations that we're having, and our conversations are definitely weighted more heavily with all the major energy companies, we've got a sense they're absolutely moving forward with their renewable diesel investments. And look, renewable diesel addresses an important part of their commitment to decarbonize their footprints. At the same time, it's providing a growth opportunity. So they've talked to us about -- this is a part of the levers that they've got to pull for the next 10 to 15 years to meet consumer needs. And they're getting those requests from consumers today on the renewable diesel, but they also expect sustainable aviation fuel and marine to follow. So this is going to be really interesting as it continues to develop, but those investments are getting put in place and that demand is going to be there.

Great. We talked about this a little bit, right, in my intro is, look, you've gotten to the point of growing your earnings now. You're starting that evolution. You indicated -- when you think about the $7 EPS number and, again, its framework, there's 4 parts that you have not -- or 4 capital investments that have not been included. And if there's a way to put some structure around this, and what it actually means is you got the strengthening of the oilseed platform, growth in refined and specialty oils, increased participation in renewable feedstocks and plant-based proteins and leveraging technology to drive efficiencies. How do we put this together? I'm on the outside trying to figure out how much capital -- what does this all mean? Is this bolt-on? Is this -- does this -- it's just hard to contextualize exactly what this all means. And there are good strategic points, but is there a way to put a little meat on the bone on this?

Yes. You're right. The $7 mid-cycle baseline, again, that earnings framework, it doesn't include any of the growth initiatives. So -- and it does not include any of the deployment of cash. So that's Bunge as it sits today. So as we talk about, as we move from the restructuring work, we start to shift to growth. So how do we do that? So look, this team that we brought together, we've used this game plan successfully many times, right? You've got to run the right network or a platform of assets. You've got to have the right operating model, and you got to have the right people. We've done that, right? You fix the underlying business, and then we get maniacally focused externally, and that's on pulling every growth lever. So when I said organic, brownfield, greenfield, M&A of all shapes and sizes, those are all open to us, and we'll let the numbers drive where we should go. Of course, the M&A will be get to the ground more quickly. The debottlenecking will get the ground more quickly to the earnings. The brownfields or greenfields, those take some time before you start to see the contribution of those. But if you look at the refined and specialty oils platform, as we talked about, we've got the ability now to margin up some of the things that we did is commodities before. None of them are big, but they're all in our adjacencies, right? So the lecithins and the tocopherols and some of the things that we're doing in infant nutrition also work in plant nutrition -- or I'm sorry, work in senior nutrition and sports nutrition. We continue to move the ball on all those things. And as we make those progress, those are all places that fit for organic investment and/or bolt-on acquisitions. And on the plant protein side, one, we're serving that with lipids is one of the customer areas that we're serving. So we're enjoying that growth in plant proteins on the lipid side, but we also have invested in our Creative Solutions Center to be able to work with not only our lipids, but our plant proteins and work with customers to put those products together. And some of those products up to 85% are lipids and plant proteins in the product. So as we work with those customers backwards, many of those names you know today on the existing CPGs and some of those on the disruptors and the new customers, helping them because they're worried about long term when they see their own demand forecast that they're going to have enough supply. And so as we look at that, we've looked at -- we've made some minority investments to get us access to some technology. We've looked at some bigger M&A, but things have traded at very high prices. We're going to stay disciplined. And so we think we'll probably create value there by doing something on the brownfield or greenfield side, when it makes sense and to grow with those customers over time. So the plant protein will be a longer build. We'll enjoy that in the lipids now, we'll enjoy the plant protein piece later. And then the biggest that we've talked about is really around our biggest business, which is supplying renewable feedstocks, and not just the products but the services. And that can look a lot of different ways, right? We talk about debottlenecking, adding capacity to our current asset base. We talked about the JV with Chevron, where we've got a great partner there that we're able to kind of open books, look at all the opportunities going forward on that platform. The first thing we announced, of course, was we're going to do a brownfield expansion there to basically double the capacity that is afforded by the 2 assets that are going into that joint venture. And then we'll begin to look at a number of opportunities with them and possibly others that could take us from developing all of the things that are going to be important to meeting the demand on the renewable diesel side and on renewable fuels, and that will be developing cover crops. It may be building pretreatment at one of our refineries or at a different location, to develop the lowest cost model to source all of these other low CI feedstocks. Because there will be some different flows in how those work and blended into corn oils or assimilated with those to get leverage of the logistics of soy or canola oil. And we think that those are places that we've absolutely got a right to play. And with a partner like Chevron, we're excited about those things developing over time. So the one thing that we know, the velocity of change and the amount of change that we're seeing in this industry is kind of like nothing before. I'm not sure we've ever seen it in our careers, and we just think, with our footprint and our operating model and our focus in this space, we're in the best position to take advantage of that, to serve the customers on both the food, the feed and the fuel because they're all trying to lower their CI score, and that will take us working all the way down the value chain, including with our farmer customer at the production lever to change practices and to create regenerative bag.

Do you think we'll start to see the returns or some sort of growth initiatives come to fruition in 2023, 2024, or 2024, 2025. Like when do you think we'll start to see some of the capital going to use that's actually being -- getting a return? How far out? Because I know you had to first fix the organization so you didn't invest that aggressively. And I'm assuming you're now investing.

Yes, you'll definitely see it in '23, '24. I expect you to hear more from us in '22. But Ken, as you know, we will always provide more color on the specifics at the right time when things are ready to be announced. But you know as well enough by now to know we don't provide forecast based on hope.

All right. I appreciate that. What is the implication? How much flexibility do you have with cash deployment given some recent credit upgrades?

So I think we'll continue to use our same framework, right, on cash generation deployment. We absolutely -- remember, it's not in the $7 baseline. And then when we think about priorities, number one is always maintenance sustaining CapEx, right? So ESG, safety, keep our assets in good operating condition. Second is our dividend. And we usually review that around our annual meeting in May. And then after that, we allocate capital to whatever we think is the best use. And that even includes buybacks, of course. We bought $100 million back -- of shares back in Q3. And then the fact that we are BBB and equivalent with all 3 agencies now, which was our target, we're proud of that, and that gives us a lot more flexibility. But even having that additional firepower from our cash earnings and our credit ratings, it doesn't change our process, it doesn't change our focus, and we continue to allocate capital at the best returning areas.

Okay. What -- any update on the sugar asset? It's probably worth a whole hell of a lot more than it was a couple of years ago. What is the process to that? And how do you think of it? Because I feel like we're starting to get to the point where we should be hearing some information about this.

Well, we definitely believe that's the case, that it's worth knowing. I want to thank the team down there, which has just done a great job coming together, the Bunge and BP teams. They've turned that business around. You've seen it in our year-to-date results. It's been a nice contributor to earnings, and I want to thank the team for that. But there's no change in our intention to exit the business. It will take some time. We're going to be thoughtful about how we do that, probably likely selling our interest is going to be the best course to get the right value. And there's a limited set of buyers. So we'll be thoughtful and patient about how we do that. But meantime, the business is performing well and doesn't pose the same magnitude of risk it did in the past. We definitely have completed all of our original portfolio actions that we called out with the strategic review. And I want to say, look, we're going to continue to assess the portfolio for continuous improvement and how we create the most value. And for example, recently, we made the decision on the selling of the Mexico milling assets. So we'll never be done, but the original program is done.

And would you think -- is there more portfolio refinement to do?

Look, I think we're never done. We're always going to challenge the least strategic and lowest returning parts of our asset base and challenge the teams to make them more strategic, make them a better fit, make them higher returning. So that's how you drive these ROICs up. You've just got to never settle. We're going to make every change we can in the operating company as well as in the functions to continue to improve how we execute.

So just thinking about the sugar sale again. Once you get the capital, you'll have more cash than you could possibly know what to do with it, right? I mean you can't spend cash not quickly. Is there -- would there be an associated repurchase program associated with that extra cash? Would you just let it sit on the balance sheet? Or do you already have a plan, hey, we can spend $1 billion plus, and we can deploy that quickly. It just seems like a lot of money and, again, a high-class problem, good problems to have. But this is still something that you have to think about. How do you -- how do you conceptualize that?

It is a great problem, and we spend a lot of time talking about it, and we continue to develop a number of great projects and great alternatives. But we're never -- we've got a lot of flexibility here. We're never going to go away from our discipline around capital allocation and the thought process of how we do it. We're never going to have -- as John says, we our CFO says we're never going to have hot money that makes us lose our discipline on our capital allocation. So stay tuned, but we love the flexibility that it provides to be in this great position.

Would it be associated with a share repurchase program? Or is it -- that would be too ambitious and you'd have to be more?

Everything is on the table because with your -- whatever we do, we'll have to justify it with you.

Not me. Never. Never thought I'd ever say it is, but are you actually concerned with your -- and I remember having this conversation with you about return on invested capital. But are you concerned about how high your return on invested capital is? And does it create more entrants into the market? And does that create sort of challenges going forward as well? We've always -- for the history of time, we always talk about lower return on invested capital and there's a flip side of it as well. So I didn't know if you're seeing new entrants coming in. And how do you think about your return of capital?

Look, like we were just talking on the continuous improvement, we're always going to continue to try to drive our returns as high as we can and absolutely focusing on the things that we can control. So now as far as what others are going to do, look, we're tracking all the projects that are announced, we'll track the ones that actually get built. We don't think those 2 lists will be the same at the end of the day. Look, if you look at the -- what it takes from a timing and the permitting, the ordering equipment, the costs around equipment, the cost around labor, it's not easy. The economics of building a plant and these are long-lived assets, right, where you build these plants and that they're going to make a return long term, they're a tough analysis for us. And we've got a big global network, and we can build and execute on this as quickly and as a lower cost as anyone. So remember, none of this new capacity is going to be online for 2.5, 3 years to start to make a difference in the S&Ds. But we're going to look through the cycle. These are long-lived assets, and we're going to be thoughtful as we talked about. We've got a great partner in Chevron. But we looked at that and said, look, these assets that when we expand. And when we announce where we're going to expand, it's going to be on the water so that we've got the option for that meal to go to the domestic market as well as the export market and help balance supply and demand. And we're also thinking about the changes that have to happen in the flows to meet this new demand, and that's going to create opportunities in the change in oil flows, the change in meal flows. And then thinking about where capital needs to be long term by continent. And this is a great part of being this global footprint that we have and that we make sure that we maintain the lowest-cost global footprint for the long term. And that makes sure that we're best positioned not only for the great part of the cycle, but the more demanding part of the cycle, so that we've always got the installation of what the industry running at average margins because we'll have the best cost footprint. So look, it's definitely complex, how all this new demand is going it's a global challenges that are coming to meet it, but we want to make sure we've got the right assets in the right locations and the right partners and we're excited to have the focus on this.

And are you worried about how people are building what you don't think all of it's going to come to fruition? Is that kind of how you're thinking?

So worry about, lot of it that needs to be built, and we don't think it's all going to come to fruition. But we hope people are being thoughtful and understand the real cost things and how the economics will work being land-based versus being on the water and -- it's not an easy -- they're not easy answers.

And I don't get this question a lot, to be totally honest with you, it's always something that I always keep on the back of my head because -- but as I have seen the history is, how do you think Argentina plays into a long-term picture? And how do you assess the opportunities and risks associated with that?

The one thing operating in Argentina, we always have it built into our models and how we think about it for the long term when we make decisions. But look, Argentina ran very hard, much harder in the first half of the year, and margins stayed good globally. And they slowed down in Q3 and then, global margins, increased and that kind of a reflection of the lower exports. So that Argentine supply is needed to support the global demand. Longer term, it's going to run, and we factor that into our baseline. In fact, that in all the investment decisions. And look, before we make any investments, we always run those assumptions through a variety of scenarios, ensure we're considering the full scope of risks, that we've got them in at the appropriate magnitude. We make sure we're not overestimating the opportunity. And that's a big part of, I think, the new Bunge is that we're driving that discipline not only in the day-to-day operations but about our investment decisions for the long term to make sure that we're creating value.

Yes, you mentioned on the call, many global supply challenges -- I think many companies are not finding them as many in, by your context, of saying many, obviously, you guys being able to negotiate the supply challenges. Can you talk about how these global supply challenges either benefit or penalize you and how you navigate them or how you're positioned to navigate them?

Sure. Overall, it's probably been neutral to slightly positive. And that's the fact that Bunge is really built to help manage global market dislocations and challenges. We're kind of a little bit built for managing these challenges. We're definitely being impacted by disruptions and labor shortages, just like our peers and like other industries. But I'll tell you, the global network of ports, facilities, the team's deep expertise in managing all these logistics, there's inherent optionality, right? There's -- they're still in moving physical things. There's the optionality in a global network that provides that flexibility that others in the industry don't have. And that's why we've been able to meet customer needs and, frankly, grow with customers during a tough time because others don't have the optionality and the capability that we have. And look, we're also excited about continuous improvement, right? Digital is a huge opportunity as we see it, and it's across our entire business. If you look at Vector in Brazil, it really changed the way we book all of our truck freight and internal project. And now we've stood that up as its own company, and that will create value. You got Covantis around making ocean shipping more efficient. That was an industry solution that we participated in. And then things like AI, which you never thought would come to this industry, right? We've got it in our plants, and you've got cameras involved and you've got sensors. And we're identifying problems before they happen, which ends up improving efficiencies and improving yields. So it's really changing. Digital is really going to change the face of this 200-year-old company, the cost structure and the things that we can do. And then last, I'd say that the change of our operating model, from regional to the global value chains, getting the incentives aligned, it's just generated such efficiency gains in time and money. But we just don't have the wasted effort negotiating internally, we've completely aligned our goals and priorities. And we focus externally at customers on both ends of the value chain. I'll say, Ken, without making these internal changes, I'm absolutely convinced we wouldn't have been able to generate the results we've achieved over the last 3 years. And we did that. If you remember the backdrop of what we knew when we started the journey was a trade war and then we added ASF on and then we added COVID. So I just couldn't -- I couldn't be more proud of the team and what we may have been able to accomplish.

Is it fair to say, this is a good -- just as there doesn't seem to be any near-term obstacles that keep you -- preventing you from making your expectations and keeping you on your path of growth, and then you have the capital behind you to seek opportunities. Is that a fair assessment of what you're trying to get across today?

I think that's very fair. I think we have been on a great run. I think we have taken the team, and we have moved from the fix at stage and grow earnings to now grow capabilities and footprint as we put those earnings to work. We've got the team focused on that. We are almost resource constrained. We're seeing so many opportunities, but we're not going to lose our discipline. And we feel that we're just uniquely positioned, Ken, for the world that we're operating in today for these new sources of demand that we're seeing around sustainability, around renewable feedstocks, around plant proteins. And we've got this focused network of assets and people that are going to help our customers and the industry go through what we believe is going to be, when we look back, it's going to be one of the biggest periods of change we've seen in a long time and maybe ever in these industries, and we are really excited about what it means for Bunge.

With that, with 22 seconds, I think we'll end it there. Greg, as always, I really appreciate it. Thank you very much.

Ken, thanks for your time. Appreciate the opportunity. Thank you.