Bunge Global SA (BG) Earnings Call Transcript & Summary

Good morning and welcome to the Bunge Limited Investor Call. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Ruth Ann Wisener. Please go ahead.

Good morning and thank you, everyone, for joining us. Before we get started, I want to inform those of you who may not have seen it in the press release this morning that we have prepared a slide presentation to accompany today's discussion. It can be found in the Investors section of our website under Events and Presentations. I'd like to direct you to Slide 2 and remind you that today's presentation includes forward-looking statements that reflect Bunge's current views with respect to future events, financial performance and industry conditions. These forward-looking statements are subject to various risks and uncertainties. Bunge 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. Please review the cautionary statement and additional information legends on Slide 2. Participating in the call today are Greg Heckman, Bunge's Chief Executive Officer; and John Neppl, Bunge's Chief Financial Officer. On this morning's call, Greg and John will walk you through the details and rationale for the transaction before opening up the call for Q&A. I'll now turn the call over to Greg.

Good morning and thank you for joining us today. As you saw in the press release we issued earlier this morning, we're very pleased to announce that we've signed a definitive agreement to combine Viterra with Bunge to create a premier agribusiness solutions company. Built to address some of the most pressing needs of the 21st century across food, feed and fuel. Three points to sum up how we think about this combination and why we believe our 2 companies are such a great fit from both a strategic and financial standpoint. First, we're bringing together 2 highly complementary businesses. It's simply just a great, great strategic fit and it gets us where we wanted to go faster, better and with less risk. The combination diversifies Bunge's existing footprint with Viterra's grain handling and logistics network. At the same time, it expands Bunge's origination capabilities in key regions and across a range of crops where we're currently underrepresented, while connecting Viterra's grain handling operations, to value-added capabilities and additional downstream markets. Second, it enhances our ability to meet the demands of increasingly complex markets. Over the past few years, we've seen how important a globally balanced footprint can be, especially in times of supply chain disruption. With greater diversification across assets, geographies and crops, we're creating a platform with enhanced efficiencies, connectivity and capabilities across value chains. This also provides more optionality that will allow us to better serve the needs of farmers and end customers regardless of the market environment. Importantly, with increased direct farmer origination, we'll be able to expand Bunge's industry-leading work to support sustainable and transparent value chains and expand it much more broadly and rapidly. This includes promoting sustainable practices in global food production such as origination transparency, low-carbon product streams, full end-to-end traceability across major crops and the acceleration of regenerative agriculture to reduce GHG emissions. And third, the combination brings together 2 world-class management teams with track records of value creation, supported by the industry's top-tier talent across each business. Our leadership teams have deep industry expertise across commercial and industrial operations and M&A integration. Following the closing, they'll be laser-focused on executing to capture the significant upside from the compelling financial profile of the combined company, including achieving the significant operational and network synergies we've identified. We know each other well and respect the skills and assets across our platforms. So we'll hit the ground running once the transaction closes and I'm confident we'll take full advantage of merging these 2 great companies. We expect the transaction to be accretive to year 1 earnings and continued to improve with the realization of synergies. Now I want to be clear, while there will always be cost savings, when you bring 2 companies like these together, the opportunity in this transaction is not based on reducing headcount. The fact is, access to talent in our industry is at a premium and one of the big drivers of value with this combination is what we can do with these 2 talented teams running this diversified business. In short, we believe the combination will have a greater ability to generate significant cash through the cycle, which will support both growth and returns to shareholders. Turning to the next slide. You'll find a brief overview of the transaction terms and structure. Viterra is primarily owned by 3 shareholders: Glencore, CPP Investments and BCI. As part of the merger agreement, the shareholders will receive approximately $6.2 billion in Bunge stock and $2 billion in cash. Bunge will assume $9.8 billion of Viterra debt which is important to note, is associated with $9 billion of highly liquid readily marketable inventory. The 3 Viterra shareholders will become significant owners of Bunge, holding approximately an aggregate 30% of the combined company. This is a testament to their strong belief in the incredible value creation opportunities ahead of us. In fact, because they're so supportive of what we can do with this platform, all 3 wanted a significant part of their consideration in stock, which is reflected in the terms of the agreement. In addition, we've authorized a $2 billion share repurchase to enhance the deal's accretion and John will cover this in more detail. I'll continue as CEO of the combined organization and John will continue in his role as CFO. We're also pleased to announce that David Mattiske will join the Bunge executive leadership team in the role of Co-Chief Operating Officer. The initial Board will be comprised of 8 representatives from Bunge and 4 representatives nominated by Viterra shareholders. With that, let's do a quick refresh on both companies and dig a little deeper on why we think this is such a great strategic fit. Looking at Slide 7. As you know, Bunge is a global leader in oilseeds processing and refining, with a strong presence in the U.S., Brazil and Europe. While we have an industry-leading direct origination presence in South America, we have a modest presence in other key regions. Our differentiated operating model leverages full value chains with commercial alignment across regions and we generate robust cash flow through the cycle, which in turn supports a strong balance sheet and shareholder returns. We're an industry leader in sustainability with strong commitments to safety and the communities in which we operate. Turning to the next slide. Our global platform of crush, refining and port assets enables us to connect farmers to end customers, delivering essential food, feed and fuel as well as value-added services and specialty oils, fats and proteins. Moving on to Slide 9. For those unfamiliar with Viterra, the company is a leading agricultural supply chain company. It has an extensive footprint of infrastructure and logistic assets in major crop origins in the U.S., Canada, Australia, Europe and Argentina. Viterra is also a leading seaborne merchant that has successfully developed extensive direct origination capabilities with farmers in many key origins, as well as a strong presence in key demand markets, supplying over 125 countries with agricultural products. While smaller in softseeds than Bunge, it does have an attractive softseed crush assets in Europe and Canada and is a leader in soy crush in Argentina. And similar to Bunge, Viterra has robust earnings and cash generation profile. On Slide 10, you can see the evolution of Viterra. Over the past 4 decades, it evolved from a regional grain trading company to more recently, building its global agricultural network, largely through value-enhancing expansions, including the addition of Gavilon in 2022. Slide 11 provides a high-level overview of Viterra's facilities and capabilities, which as you can see, highlights the company's grain handling and merchandising strength. It also contrasts well with Bunge's assets, again, highlighting the complementary nature of our 2 businesses. Turning to Slide 12. As I noted earlier, the combination accelerates our existing growth strategy and does so while diversifying our business in 3 critical ways, across geographies, origination and crush and crops. All of which ultimately enhances our ability to deliver food, feed and fuel solutions to farmers and consumers. Now let's look at Slide 13. In short, bringing our assets together creates a complete global footprint to process and supply oilseeds and grains. We're creating a company with enhanced crush capabilities, with a fully integrated global origination presence, deeper and broader connectivity with additional offerings for farmers and consumers and enhanced network benefits for customers from greater diversity, connectivity, efficiency and insights across value chains. Looking at Slide 14. I want to take a moment to highlight what I mean by complementary by focusing on a few regions. In Canada, Viterra's origination and export capabilities will support the combined crush capabilities. In the U.S., Viterra's broad origination and logistics footprint will supply Bunge's crush and export capabilities. While Bunge has some origination activity at our crush and milling facilities, our presence outside of these locations is relatively small and insufficient to fully supply our ports and destination crush assets. This transaction changes that and positions us to further expand with increased solutions for farmers. In South America, the transaction will allow us to integrate both companies' crush and origination footprints. Our relative strength in Brazil and Viterra's in Argentina and importantly, will expand our leading work to ensure transparent and deforestation-free supply chains. Let's dig a bit deeper into the benefits of the diversification. And on Slide 15, you can see it by the numbers. Bunge is more heavily weighted to processing and downstream which includes our value-added services from crush to specialty fats and oils and milled products. And looking at Viterra, while it has a processing business, its focus is in merchandising and handling. Combining the businesses creates a company with a more balanced business and opportunity for growth. Turning to Slide 16. It's operational balance and flexibility. With a balanced global footprint and stronger direct origination across key origination markets, we'll have greater optionality in managing seasonal cycles, weather and other risks, increasing our ability to provide solutions for end customers in any environment. And importantly, direct origination means we're closer to the farmer which will accelerate our ability to provide solutions to help them improve yields and manage risk and advance sustainability efforts, including developing low carbon product streams and traceability. Slide 17 highlights a similar point from the perspective of diversification across crops. Together, we'll augment our oilseed strength with greater depth in wheat, corn, barley and rapeseed in major origin markets. And the broader range of crop gives us similar benefits related to sustainability and our relationships with farmers and end customers. Turning to Slide 18. One of the things that gets us really excited about this transaction is what it sets us up to do. Over the past several years, we've seen the impact of significant pain points in today's agri food value chain, including food security and resilience, market access and the increasing demand for sustainable food production. We've already been innovating to develop solutions to address these challenges. But the combination of being closer to farmers and the additional resources that this combination brings will allow us to increase our investments. We expect to build more flexibility into our value chains, develop more scalable risk management tools, enhance our digital and data platforms and continue developing our lower CI products and solutions. This in turn will benefit our stakeholders. Now on Slide 19. Supporting lower carbon initiatives and sustainable agriculture is critical to modern farming. It's both the right thing to do and it allows us to better provide the lower carbon intensity products, our food, feed and fuel customers want. We believe this combination will position us to be the preferred partner of farmers and end-customers to accelerate our carbon solutions. Bunge has an over 20-year track record of leadership and sustainability in our sector. We were the first among our peers to establish a non-deforestation commitment. We implemented SBTi-validated targets covering all 3 Scopes and have recently embarked on the next stage of our journey by creating a climate transition plan. In addition, we've been expanding our work to encompass not just regenerative agriculture, where we have initiatives underway in the Americas and Europe but the development of novel seeds and cover crops that produce new revenue opportunities for farmers with a sustainable crop rotation. This is not only a win for farmers but also for end-customers and us. We also continue to develop and process plant-based fuel feedstocks to increase volumes of low carbon solutions beyond just soy and canola. This combination accelerates these efforts, including growing and strengthening our connectivity with farmers, because collaboration with them is essential to make meaningful reductions in GHG emissions. Looking at Slide 20. Again, we strongly believe this transaction will deliver value for all our stakeholders. I've already spoken about the benefit to farmers and consumers. For employees, I want to reiterate, this is a combination of 2 highly talented teams who share a commitment to excel at each of their organizations and who will benefit from greater career opportunities with enhanced global reach and resources. On a broader scale, our communities benefit from the combination from the scale-up of sustainable agriculture, expansion of transparency and traceability in supply chains and expansion of our programs that demonstrate our shared commitment to human rights. Turning to Slide 21. We believe this transaction will also deliver significant value for shareholders. I'll let John walk you through these in more detail. But at a high level, we anticipate achieving run rate operational synergies in the third year after completion and we have a clear line of sight into additional network synergies. We expect the combination to be accretive in the first full year following the close of the transaction. And strong cash flow production will enable the new company to invest in future growth and deliver attractive returns to shareholders over the long term. The share repurchase authorization, when completed, will enhance accretion to adjusted EPS of the combined company. I'll now turn the call over to John, who will discuss the terms and financial benefits of the combination in more detail.

Thanks, Greg and good morning, everyone. Please go to Slide 22. Greg has already touched on a number of these points but I'd like to highlight a few additional items. Immediately following the close of the transaction, Bunge shareholders are expected to retain approximately 70% ownership, while Viterra's shareholders, Glencore, CPP Investments and BCI will retain minority interest. Viterra's shareholders have agreed to a lockup period and advance sale agreements and will not participate in the $2 billion share buyback plan authorized by the Bunge Board. We intend to commence repurchases as soon as we are able to be back in the market pending trading restrictions and market conditions. Upon completion of that authorization, which we expect to be no later than 18 months post transaction close, the Viterra's shareholders are expected to collectively own approximately 33% of the combined company. The company's global operational headquarters will be located in St. Louis, Missouri and Viterra's current headquarters in Rotterdam will be an important commercial location in the future of the combined company. We are targeting a close in mid-2024, subject to a Bunge shareholder vote and receipt of regulatory approvals and other customary closing conditions. Finally, following the close of the transaction, we will maintain our dividend per share with the intention of growing it over time and we remain committed to maintaining a strong investment-grade balance sheet to support liquidity needs and growth of the combined company. On Slide 23, we've included an overview of the synergy opportunities. We expect to achieve approximately $250 million in operational run rate synergies within 3 years of completion. As Greg noted, because of the complementary nature of these businesses, we do not expect significant savings from headcount reduction. While we do expect to realize synergies from streamlining some redundant corporate costs, the operational synergies will largely stem from optimizing asset utilization, logistics and investments across the combined platform as well as procurement savings. In addition to these operational synergies, we believe this combination will allow us to realize significant incremental upside from the network synergies you can see on the slide, which we expect to achieve over time. While we believe in our ability to achieve these network benefits, we have not included them in our accretion calculation. On Slide 24, you can see the pro forma cash flow of the combined company over the past 3 years. For the year-end 2022, pro forma annualized discretionary cash flow, including the tax effected run rate of operational synergies, would have been $3.2 billion. With the enhanced diversification across geographies, crops and businesses that Greg covered, we believe the combined company will be able to deliver strong earnings and cash flow that is both enhanced and more stable than from either company on a stand-alone basis. At close, we expect our pro forma adjusted net debt-to-EBITDA to be approximately 1.6x, which reflects the share repurchase and transaction cash consideration. Consistent with how the rating agencies calculate our leverage, net debt-to-EBITDA has been adjusted for RMI due to its cash like nature. As a reminder, RMI is highly liquid, while at any point in time, we need a certain level of RMI to feed our global crush operations, RMI is core to our merchandising operations, where we originate, store and distribute commodities in excess of our direct [indiscernible]. We use RMI as a tool to capture margin opportunities we see in our grain origination and handling businesses. For Viterra's business, which is more heavily weighted toward merchandising, the RMI balance is higher than Bunge's. Our pro forma RMI adjusted net debt reflects a blend of our 2 businesses. For reference, you can see a reconciliation of net debt to adjusted -- adjusted net debt in the appendix. As summarized on Slide 25, we expect to execute the $2 billion share repurchase program. This structure allows the Viterra shareholders to achieve their desired stock cash mix at close while enhancing our per share pro forma earnings for our entire shareholder base. As Greg mentioned earlier, we want to be in the market as soon as possible and we expect that a portion of these repurchases will be executed prior to close, with the remainder to be completed within 18 months of close. Turning to Slide 26. We've included the pro forma summary of why we believe this is such a financially compelling combination. With the diversified global business mix we've discussed, the combined company will increase the resiliency of its earnings. We will continue to target a strong investment-grade credit rating that will allow us to continue to invest back into the business and return capital to shareholders. Now I'll turn things back over to Greg.

Thanks, John. Before we take your questions, let me end by just reiterating my excitement about this fantastic combination and the future of these 2 great organizations. Together, we'll be even better positioned to deliver value for all stakeholders across food, feed and fuel markets while driving sustainability progress. We look forward to innovating and evolving together with our colleagues at Viterra. Thank you again for joining us today and now we'd be happy to take your questions.

[Operator Instructions] The first question comes from Thomas Palmer from JPMorgan.

Congrats. So you've laid out for 2026, your earnings outlook of $11 or potentially even $12 per share. The cash outlay here is obviously bigger than the $3.3 billion you laid out in your earnings framework. And I guess, given this higher spend, should we expect the transaction to be additive to this '26 outlook? I realize you may not be prepared today to quantify it but maybe just clarify that piece of it. And then secondarily, to what extent, if any, this changes maybe the prior capital allocation plans, especially when it comes to the CapEx projects?

Yes, Tom, the underlying model that we built in our game plan around CapEx and the smaller M&A, all of that remains intact. And we believe that with this acquisition, we'll be able to continue on that journey with our prior plans as well. We always knew that we had this core CapEx and smaller M&A pipeline that would get us to the $12 by 2026. This transaction, we believe, is additive to that and we will be able to execute on both.

Okay. And then just maybe a question on kind of how you arrived at the valuation. How you guys are thinking about the multiple and whatnot?

Yes. We focused this transaction on a relative contribution basis. So we looked at underlying net income of the 2 businesses, cash flow, DCF models. We looked at a lot of different things but ultimately, it was really about relative contribution and relative value of the 2 businesses. So it was not one particular metric but a number of metrics we looked at and ultimately arrived at the value.

Our next question comes from Ben Bienvenu from Stephens.

I'll add my congratulations as well. I want to ask around the commentary you provided around both operational synergies and network synergies. Obviously, Greg, John, when you guys arrived at Bunge, you've really transformed the earnings power of the business. You know a significant portion of these assets that you're seeking to merge with, quite well. And Greg, I think you used the term, you have good line of sight into network synergies beyond the operational synergies that you laid out. Can you talk about what gives you the confidence into that line of sight? And maybe help us think about kind of time line to achieve some of those things as we think about future accretion.

Yes. I'd say we're very confident for a number of reasons, Ben. I mean, one, of course, everyone has seen as a public company, what journey we've been on. But I think if you watch the journey that David Mattiske and his team has been on, it's been very similar. They have been transforming their business and having a lot of success in what's been a very difficult environment on the external forces that were outside of all our control. And I think that success they've had is much like ours, is that we're providing value for customers at both ends of the value chain. So the alignment around the philosophy and the focus on continuous improvement and how these teams execute makes me really confident in our ability to deliver the $250 million. Yes. We haven't got started yet. We've barely been able to work together. So we are confident in that. I trust these teams and I'm excited to get a chance to see them work together. And then on the optionality and the commercial side of it, look, that we haven't had any chance to work on. But we've seen our global footprint has allowed us here at Bunge to do the things that we have throughout the cycles and the challenges and the opportunities we've seen in the last 4 years. Viterra has done some of the same. The complementary nature of these asset footprints, when you put them together, continue to build that network. And I think that's what makes us really confident about what we'll be able to do from a performance standpoint to drive sustainability, to help our customers at both end of the value chain to be successful. And the thing we're most excited about is the people. This is an industry where people make a huge difference. And today, both companies have -- their growth has not been limited by their access to working capital or their access to risk capital or their access to fixed capital. Both companies have been restricted in their growth because of the human capital. And what's exciting is the talent that we are bringing together and the growth that we'll be able to drive with that and the success to help support our customers. And I think that's one of the most exciting things about this and that's why it's not a big cost play. The excitement is turning loose our people when we get a chance to work together.

Okay. Great. My second question is just about the timing of the transaction. Obviously, we're in a period of elevated earnings and you're combining 2 cyclical businesses. I think it makes sense certainly to scale through cycle to create long-term shareholder value. But as you think about combining these 2 businesses with where we are in the cycle, kind of in the context of your bigger picture views, how you think about rationalizing the sort of transaction versus just buying back your stock, which obviously, you announced a big buyback today as well, which is, I think, speaks to the financial strength of Bunge today. But maybe why now and why this versus just buying back your stock?

Well, why now is because it's the right time. We've earned the right to do this in our execution and what we've done to strengthen the balance sheet. These deals are hard to do. And so when things and the stars line up and I think it was the right time for both companies, the capabilities that this builds because of the complementary nature of the footprints and the skill sets gives us additional capabilities for whatever challenges that we see coming forward. And the optionality in the combined larger platform, again, allows us to serve those needs of customers on both ends of the value chain and that ultimately leads, we believe, to higher highs on an earnings and higher lows or at mid-cycle, so it creates more capabilities whatever the cycle or the environment. So we think it's a plus-plus.

And I would just add to that, Ben, that a big reason why we really focused on the structure of this transaction is a relative contribution as it takes into account seasonality for both companies. And we really looked at -- it's a little bit less important about where you are in the cycle when you look at the relative earnings value of the 2 companies and that's how we arrived ultimately at the value.

The next question comes from Ben Theurer from Barclays.

Also congrats from my side. Just one, very quick one, following along the lines with like the buyback and so on. So you said that once you've spent the $2 billion buyback, that's going to be EPS accretive on the deal. So is it without the buyback as well EPS accretive or is it EPS neutral? So how should we think about it as a very first technical one?

Yes. I would I think early on, it's going to be neutral to modestly accretive with, say, a part of the buyback. At the end of it, it will be accretive even without the buyback but that just improves the accretion for the existing shareholders.

Okay. Perfect. And then the second one is really more like strategic things. So Greg, when you came in together with John a few years ago, one of the things you've identified was really the silo mentality and the many little Bunges within one Bunge and that took you a couple of years to really streamline and optimize the whole network to be aligned across the different regions. So obviously, with that, you're going to add a massive incremental footprint from a geographic point of view. Can you share some initial thoughts as to what you need to do to align the new businesses with the existing one in a similar way as what you've done over the last 3 years?

Yes. I think it -- we always say, it's a lot of common sense and markets work, it's transparency and it's collaboration. And that's really where we started the journey here 4 years ago with Bunge. Viterra has performed very well because they've built their global network the same way. They're leveraging all of their origins and destinations and capabilities with customers on both ends of the value chain. So philosophically, we're very aligned. And so when we have a chance to get these teams together and work together in a transparent and collaborative fashion just like we did when we started the reset of Bunge 4 years ago, I'm really excited about -- kind of turning these teams loose.

Our next question comes from Manav Gupta from UBS.

I only have one question. Moving back to Slide 15. I know you talked a little bit about it but can we get some more views on why moving from this current model for Bunge to a combined model is better? And then also why is it good for Viterra, why should they be excited about the fact that their -- the combined business will be more stable because you would want them to become your long-term shareholder? So if you can just talk a little more about Slide 15 here.

Yes, I would say, first of all, I mean, we get 3 great shareholders that really know this industry. And I think the fact that they're voting on this combination in an industry that they know well and a company they know well, by wanting to have equity in the company and be our partners going forward. The diversification that we get from these businesses really helps offset all of the challenges that we're seeing, right? Whether you look at the last few years, whether it's trade war, ASF, pandemic, war, inflation, the regional droughts, we've kind of seen everything thrown at it. And we've seen by the more diversification you have regionally in the different crops, in the different origins, to get crops from where they're growing to the places where they're needed. And let's not forget, population continues to grow. There's going to need to continue to be investment in the infrastructure to lower the cost between the producers and the end consumers for the long term. There's going to need to continue to be investment in sustainability, in the data management, in bringing digital to ag and food, to lower cost and create these end-to-end transparent supply chains. In both companies, we're working on that and now we're able to take those best practices and work together and use the strong cash flow from this business to invest in the industry because we are focused on this space. This is where we make all of our capital decisions.

Our next question comes from Adam Samuelson from Goldman Sachs.

So I guess the first question, maybe coming back to the synergies and kind of the strength of the combined organization. John, is there -- your Bunge credit rating is a notch above Viterra, have you assumed that the combined company kind of would be able to retain just Bunge's rating? Is there much bigger kind of more diversified business? Is there scope for the rating to inch up even higher? And kind of along those lines, have you kind of incorporated or factored into any cost of capital savings that might come from cheaper interest rate on certainly, at least the Viterra kind of financing?

Sure. As you can imagine, we had meetings with the rating agencies ahead of announcement of this transaction. And Fitch and S&P have both released their view this morning and both have indicated ratings upgrades at close of the transaction. Moody's is yet to come out but we've got similar feedback from them. All of them were very positive regarding the combination of the 2 companies. We haven't really factored in lower cost of money in our forward look but certainly that we think will be an opportunity as we move forward.

Okay. That's helpful. And then along the lines on network optimization, both the accounted for synergies and kind of the unaccounted for synergies, can you speak to -- maybe some of the areas of overlap from a network perspective by region, whether that's ports or logistics or crush assets, where maybe the redundancies might be more significant? And I guess the corollary to that would be kind of, is there any planned divestitures that you anticipate to get this across the finish line with regulators?

Yes. One of the things that we really like about this combination is it's very complementary. And I think if you look at what is needed long term, whether it's at origin or destination, with the continuing growing volumes globally, there's going to need to be investments made in all these markets over time. So -- now we like how it fits together and we look forward to working with the regulators and helping them understand the footprint and why we believe it's important.

The next question comes from Steven Haynes from Morgan Stanley.

Just want to maybe follow up on the regulatory front from last question as well. Do you think this deal would require any approval from Chinese regulators? And would also just love to kind of gauge your level of confidence in terms of the overall timing of being able to achieve all required approvals?

Yes, we'll have to file in a number of jurisdictions because of the footprint of both companies, no doubt. And well, there's a lot of things I'll predict. I'll never predict regulatory time lines. I don't have that skill set. But look, we'll engage in a transparent fashion and hope to work through it very quickly so that we can get to work together in solving a lot of the problems that we see across these value chains and working with our customers. So we'll see how it plays out.

Our next question comes from Sam Margolin from Wolfe Research.

So you highlighted the mix differences between the 2 companies, with Viterra a little more oriented to grains or much more oriented to grains. Prior to that, Bunge's growth CapEx was substantially all towards oilseeds. And so I'm wondering if there's anything in the environment that's changed, that's prompted a little bit more of a need for diversification or if being diversified more in grains actually is necessary for the oilseeds investments too?

Yes. I think what we've continued to see in the last 3 years with the focus, whether it's feed, food or fuel customers, everyone wanting lower carbon intensity products, needing to get a more transparent and traceable supply chain all the way back to the farmer, needing to drive that change, whether it's regenerative ag or the practices at the farm gate and to be able to give the farmer the market access and to create that value, that touch with the farmer is more and more important. Even if you look at some of the things we've announced around developing cover crop and some of the other novel crops to help not only continue to serve all of our food customers, which continue to be the majority of our volume is food and feed. But we have the growing fuel customers and we can serve all of those industries. But as you bring a new cover crop out or a new winter canola, you've got to work with the farmers to then get that out on the acreage and get that put out. So that touch around the origination and that touch with the farmers and then, of course, having the distribution is a key part of driving the change and really making a difference around sustainability at scale. And if you're going to make a difference, right, we've got to make change at scale.

That's super helpful. Okay. And then just on the balance sheet, a quick one. Both companies are operating with RMI, excess RMI or an RMI that can be excluded in your leverage calculation. When you look at that ratio that you put in the table, can you work RMI down to that level? Or are you -- is it -- and free up cash? Or is there always kind of an impulse to operate with that surplus RMI?

Yes. I mean, RMI is really the lifeblood of both businesses. We look at it as sort of -- it's like the blood that flows through the veins in a way. It's ultimately what allows us to capture market opportunity. For us, it's obviously core to feeding our processing business and also taking advantage of the global footprint that we have, the same thing for Viterra, maybe even more so. RMI is a critical part of how they generate earnings. And the key for us and it has been for them as well, is to make sure we're getting return on that investment. And -- but of course, it's very convertible and readily convertible to cash at any point in time given the liquidity, the liquid nature of it, for the most part, all exchange-traded commodities. So it's something that will obviously, seasonally go up and down, cyclically will go up and down, driven heavily by prices. But it is an important component on both of our business models.

I think that is the one thing that's different in this industry, different than a normal industrial business. And John and I have ran -- ran a lot of both is that this is -- if you think about it, it's like electricity. We use the working capital to make money. And if you look historically, generally, the times of higher working capital or times of higher earnings, so it is an important part of running the business. You want to do it efficiently and get the right returns but that's part of the financial discipline that we operate with across the platform.

The next question comes from Andrew Strelzik from BMO.

First one for me, kind of 2 parts on the financials. The first, how should we think about the synergy cadence over those 3 years? And then in the slides where you talked about the Viterra adjusted EBITDA, $2.1 billion. How should we think about that going forward? Is that the right kind of run rate as a starting point?

Yes. I think from a synergy standpoint, we're being relatively conservative about the flow. We think we'll have all of it captured within 3 years. But probably about, let's say, 1/3 of it year 1 and a little bit more, maybe 40% of it in year 2, so you're talking a little over 70% roughly. But in the first 2 years, with the balance of it year 3, that's how we're cadencing out, at least how we look at it today. And obviously, we'll continue to look at that and we'll look for additional opportunities on top of that. In terms of the earnings capability of Viterra and how we think about that, we're really excited about their historical performance and their performance going forward. We've taken, I think, a conservative approach at forecasting the future. I won't get into the details but I think they've demonstrated the ability to generate earnings in that neighborhood.

Okay. Great. That's helpful. And then you called out in the prepared remarks and in the slides, the advantage or the ability to kind of have scalable risk management tools. Can you elaborate a little bit on that and kind of how that plays into your thinking on how we should expect that to impact the business or what role that plays?

Yes. It's just -- it's a deep part of our culture in both organizations that's driven deep and wide in everything we do, right, whether it's managing the risk around the inventories or the working capital or the quality, the earnings at risk in the assets, right, getting those hedged out and then any of the market risk when our customers at either end of the value chain want to come to market and help them be profitable. So -- and it's as well as even the risk and how we analyze our capital investments and putting those long-lived assets in the ground. So it's just a big part of this business. It's been a big part of our success over the last 4 years and we'll continue to maintain that discipline and leverage kind of the best of both because Viterra is very, very good at this as well. So we'll be excited to work together to continue enhancing. We've got a culture of continuous improvement across everything, no matter how good we think we do it, we keep trying to figure out how to do it better.

Okay. That's helpful. And if I could maybe just squeeze one more, quick one in here. How should we think about the CapEx of the combined business moving forward? And kind of how you think about the ability to accelerate or how much you can accelerate the growth profile of the combined business post the deal?

Yes. As I mentioned earlier, for us, our growth pipeline of projects that we talked about a year ago or so, that's still intact and that game plan is still in place. Viterra, a little bit more modest in terms of their CapEx growth plans and what they had laid out. But both of us will continue to do those projects that we think are going to be important and beneficial and accretive for our shareholders. Given the cash flow generation, the strength of that and the fact that we -- stock was a portion of this, it's going to allow both of us to continue to make those future investments that are going to be accretive and grow -- and help us grow the business.

There are no more questions in the queue. This concludes our question-and-answer session. I would like to turn the conference back over to Greg Heckman for any closing remarks.

I want to thank you all for joining today. And I just would like to reiterate, we're really excited about bringing these 2 great companies together and these 2 great teams together and we can't wait to get at the opportunity of this combined platform and being able to help it reach its full potential. So thanks for your interest in Bunge and have a great day.

Conference has now concluded. Thank you for attending today's presentation. You may now disconnect.