Good morning and welcome to the Archer Daniels Midland Company First Quarter 2019 Earnings Conference Call. [Operator Instructions] As a reminder, this conference call is being recorded. I would now like to introduce your host for today's call, Victoria de la Huerga, Vice President, Investor Relations for Archer Daniels Midland Company. Victoria de la Huerga, you may begin.

Thank you, Michelle. Good morning and welcome to ADM's first quarter earnings webcast. Starting tomorrow, a replay of today's webcast will be available at adm.com. For those following the presentation, please turn to Slide 2, the Company's Safe Harbor statement, which says that some of our comments 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 are based on many assumptions and factors that are subject to risks and uncertainties. ADM has provided additional information in it's reports on file with the SEC concerning assumptions and factors that could cause actual results to differ materially from those in this presentation, and you should carefully review the assumptions and factors in our SEC reports. To the extent permitted under applicable law, ADM assumes no obligation to update any forward-looking statements as a result of new information or future events. On today's webcast, our Chairman and Chief Executive Officer, Juan Luciano, will provide an overview of the quarter and important actions we are taking to meet our strategic goals. Our Chief Financial Officer, Ray Young, will review financial highlights and corporate results, as well as the drivers of our performance. Then, Juan will discuss our forward-look. And finally, they will take your questions. Please turn to Slide 3. I will now turn the call over to Juan.

Thank you, Victoria. Good morning, everyone. Thank you all for joining us today. This morning we reported first quarter's adjusted earnings per share of $0.46, down from $0.68 in the prior year quarter. Our adjusted segment operating profit was $608 million. It was a more challenging quarter than we initially expected. Severe weather in North America, the ongoing China trade dispute, and a difficult ethanol industry margin environment, all impacted the quarter. As we look ahead; however, we expect improved conditions in the second half of the year and we remain focused on executing our strategy and making changes to improve our company including some new actions we are announcing today. And despite the challenging start of the year, we remain committed to continuing to pull the levers under our control to deliver our objective of full year earnings comparable to or higher than 2018. We have already made substantial progress in each of the three strategic pillars this year. In our optimize pillar, we've begun the process of rationalizing our peanuts and tree nut selling footprint in the U.S. We announced the closure of two 100-year old wheat flour mills in the Midwest as we approach the second half opening of our new state-of-the-art facility in Mendota, Illinois; and we still plan to close our century old mill in Chicago once the new facility is online. We also sold three grain elevators in Kansas, Colorado, and Oklahoma as part of our continued efforts to optimize our U.S. origination footprint. In our drive pillar, as part of Readiness, we expanded a company-wide process simplification effort that seeks to improve our business model to realize additional value across the company. We enhanced our global business services organization by centrally pooling accounting, finance, and other support resources that were previously spread throughout…

Yes, thanks, Juan. Slide 5 provides some financial highlights for the quarter. As Juan mentioned, adjusted EPS for the quarter was $0.46, down from the $0.68 in the prior year quarter. Excluding specified items, adjusted segment operating profit was $608 million, down 15%. Our trailing four quarter average adjusted ROIC was 7.8%, slightly over 100 basis points above our 2019 annual WACC of 6.75%, a significant improvement from the year-ago period, and generating positive EVA of nearly $300 million. The effective tax rate for the first quarter of 2019 was approximately 26%, which included transition tax expense from U.S. Tax Reform and other discrete tax items. Excluding those items, the adjusted effective tax rate for the quarter was about 19%. For the full year 2019, we continue to expect an effective tax rate in the range of 17% to 20%, which was our initial guidance. On Chart 18 in the Appendix, you can see the reconciliation of our reported quarterly earnings of $0.41 to the adjusted earnings of $0.46 per share. The adjustments include charges of $0.02 per share each related to impairment restructuring and settlement charges, and expenses related to acquisitions, a $0.03 per share charge due to the transition tax expense and discrete tax items, and a $0.02 per share gain on sale of assets. Slide 6 provides an operating profit summary and the components of our corporate line. Other business results were $14 million, slightly ahead of the prior year period. Our full year estimate of other is about $100 million based upon actual and expected underwriting performance. In the corporate lines, net interest expense for the quarter increased due to higher long-term debt levels, largely due to the Neovia acquisition. We are still on target toward approximately $400 million of net interest expense on a managerial…

Thank you, Ray. Please turn to Slide 14. The first quarter was challenging, and as Ray explained, we believe some of those challenges will continue into the second quarter. But despite those challenges, we remain committed to executing our plan to deliver our objective of full year earnings compatible to or higher than 2018, and we are making good progress on the growth algorithm we described on our last call. First, our efforts to improve the performance of certain businesses are continuing to take root. Focus areas like our Decatur complex, lysine, or our golden peanut and tree nuts business are doing better with every passing month, and are on track to be solid contributors in the back half of the year. And we continue to look for additional opportunities such as the Marshall plant repurposing and the ethanol subsidiary, I mentioned earlier. Second, as I've already discussed, Readiness continues to expand. Readiness is truly changing how we run our business in fundamental ways. Let me give you just one example. The nature of our business is that there are many touching points throughout the value chain. We are now analyzing those to see how can we reduce internal transactions, which in certain businesses are as high as 50% of all transactions. Readiness by streamlining and simplifying our processes is helping us address issues like this, so we can minimize errors, increase efficiencies, and reduce costs. Our colleagues are all in on Readiness, and their support and execution are the reason we are revising our estimates higher including our new $1.2 billion in run rate benefits by the end of next year. Third, we continue to aggressively harvest the investments we have recently made. As I mentioned earlier, we're accelerating our efforts to capture synergies from recent acquisitions, and we're…

[Operator Instructions] Your first question comes from Heather Jones from Vertical Group.

So I have a question about your comments on ASF. So it's been our thought that you would see accelerating protein production in these other origin countries to fulfill the shortfall in China. But thought that would be more like second half. Are you -- your comments sounded more constructive than they did on your Q4 call? So are you already starting to see that expanded demand, ex-China, and as a corollary to that, how are you thinking about the margin structure of that increased demand if there is a trade deal resolution given Chinese demand of U.S. beans will probably accelerate? Thank you.

Listen, of course we saw the ASF impacts when we were thinking about the plan for this year, but I think that the world, all of us are rapidly waking up to the significance and the magnitude of this event. I think that at this point in time, we'll see available global protein supplies to have to be redirected to China to satisfy the protein that facilities have created. To give an idea of the magnitude of these, we think that of the probably 700 million herds of annual hog production in China, we may see about 20% to 30% of that disappear. That's about the size of the U.S. production. So this will create the gap in China of about, people take 10 million tons of protein, that is a lot, and I think that that's going to be a pressure on a system that is already working with good demand. If we look at our business in North America, we are enjoying good demand, and that's why you're seeing margins have stayed very strong, actually margins have popped up over the last couple of days with the drop in soybeans. So I think that overall, we are seeing that how China covers that gap of 10 million tons, maybe 4 million tons, they shift to other proteins, whether it's poultry and all that. But I think that leaves still a significant gap. So imports will have to cover that accelerating weight gain from the existing herd will happen to that, and I think that the countries or the regions more likely to be able to serve that, whether it's Europe or North America or Brazil, are starting to prepare to do that. I cannot say that today we have seen a significant spike in our demand, but we see our customers are getting ready to do that. So if you think that we are already above $1 per bushel crush margins in the US, if you add this incremental demand, we think that that's very constructive for margins in the second half of the year.

And you believe that demand can offset potential price increases in beans?

We think so. When we think about the scenario for the second half of the year, we think that in a scenario of trade resolution is more bullish for grains, for ethanol, and for pork meat, than actually for soybeans. First of all, because China naturally will have to import less soybeans, we're thinking about before maybe 96 million tons, now we're thinking more like 85 million tons, just because they will have less animals to feed. So, and there are plenty of beans around the world. So we do believe that is going to be more bullish on grains, pork meat and ethanol, than actually in soybeans. So we believe that given the ownership that we have, any psychological spike in soybean bases will be temporary and we can handle that with our inventory.

Your next question comes from David Driscoll from Citi.

I just wanted one follow-up on your comments on Readiness, and then I have an ethanol question. So, just on Readiness, the program hasn't been out for very long and you're upgrading the program. Can you guys just walk me through your planning process and just why you're so confident that you should be upgrading the program right now. Juan, I know, you mentioned that the project list has gotten larger, but it's just we don't often see a program upgrade so soon after kind of the initial launch of it. And then on ethanol, I wanted to ask you guys about just industry conditions, the loss in the first quarter was quite significant relative to the history at ADM's ethanol operations. Why do you think the industry hasn't been more disciplined, ADM's plants are very large, they're very efficient plants, how did these small ethanol plants fair in the first quarter, I mean, did they just get absolutely hammered if you guys are taking up to $75 million hit. And then in the second quarter, do you see better discipline industry wide in ethanol? Thank you.

Let me address the Readiness question, then may have Ray address the ethanol question. So Readiness actually in April has turned 1-year-old as an initiative. So, we've been working at this for a while, although the first part was the planning process, so it was quiet there if you will and the training. So, at this point in time, we have gotten everybody trained, we have gotten a very robust pipeline of initiatives, and we are going and reviewing every aspect of ADM businesses and this is a very thorough process where we have a pipeline of ideas that are reviewed weekly and weekly are reported into our steering committee and we continue to monitor these. We have seen already two quarters of these, David, don't forget that we implemented this in Q4 2018, which was a little bit ahead of our plan and now we have Q1 behind us. So as we look at our pipeline and the growth of the initiatives, we have some experience into this program, so how much maybe you realize only a percentage of everything you have but every indication so far is we are going ahead of that. We don't see the drop that sometimes we get when we turn an opportunity from an idea to a reality and we are seeing our teams coming with more ideas to a higher rate than we thought. So, we thought it was in the spirit of transparency was proper to actually disclose that to shareholders increasing our targets. So, of course, we feel extremely confident about that, for us to have increased the target. But, again, don't think that this is just something that is happening overnight. As I said, Readiness has been with us for the year, we have been -- we have trained already 3,400 people in this, we have 650 initiatives and we have two quarters already of realizations of the savings that give us the confidence to increase the targets. So with that, I will ask Ray to make some comments on the ethanol quarter.

Yes, Ethanol in the first quarter was a tough quarter. Industry conditions were very, very poor. Inventories were building up through the quarter. When you look at generic indices, clearly industry had negative EBITDAs in the first quarter. In fact, when you compare the EBITDAs for the industry first quarter this year versus first quarter last year, we're actually down about $0.25 a gallon. Now, as we kind of look forward, what we're thinking is and you're starting to see this, ethanol margins are improving right now. I think for several factors. First of all, seasonally you always see some improvements in terms of ethanol margins as demand for ethanol improves just due to normally the seasonal pattern of demand here in United States. And secondly, inventory levels, partly due to the weather impacts throughout the entire industry have stabilized. Now going forward, we believe that our resolution of the US-China trade dispute would be a positive catalyst for industry margins. And, again, David, as you're probably aware, a resolution of US-China trade issue will likely include ethanol as one the commodities that China will purchase and as we indicated, I mean, China is moving toward an E10 program in 2020, a national program, which will basically drive an additional requirement of about 5 billion gallons of ethanol for that country. Their current production capacity is roughly 1 billion gallons domestically and they'll probably have some additional capacity come online, which would quite bring that number up to 2 billion gallons. And so they will probably have about 3 billion gallons deficit in terms of ethanol, which they will have to either source from additional capacity within the country or more likely importing ethanol from other countries such as United States and Brazil. So, as we kind of think forward in the back half of the year, we do believe that as part of the trade resolution that China will resume imports of ethanol. That will be a positive catalyst for industry margins in the back half of the year.

Your next question comes from Tom Simon [ph] from JPMorgan. Your line is open.

So you're assuming a resolution on US-China trade before the U.S. harvest. Can you just elaborate on what that resolution looks like beyond ethanol? And then can you discuss the potential impact on each of your businesses later in 2019 without a resolution?

We're seeing, of course, we don't have any previous data other than we would revisit reading the tea leaves But if you look at both countries talking about constructive talks and both Presidents giving indications whether in speeches like Presidency or the comments by President Trump, I think both teams are getting closer. Also, if we look at the market and our commercial -- the behavior of our commercial counterparties in China seems to indicate the deal is getting closer whether it is having not being covered for the Q4 and remaining open there or reducing mill inventories in anticipation of having to buy some beans or reviewing the corn contract languages with us, we've seen that they are getting ready for that movement. So what that movement will do, we think that they're going to be, if China, let's say, is going to import about 85 million tons of soybean. We think that maybe the percentage of soybeans they are going to buy from the U.S. could be about 50%, so about 40 million tons. Then, if you think about that they're going to buy corn and potentially with, that will create for Q4 basically what the conditions that we need in the U.S. for elevation margins to pulp, which is to have a strong simultaneous, if you will, soybean and corn program than we have seen that in other years and that candidly, Tom, is what we plan for. Our plan for 2019 was very second half loaded. We are second-half loaded based on the Q4 potentially strong origination nation earnings and what Ray described before, which is China coming back to us for ethanol into the US, are they trying to fulfill their E10 for 2020 pledge. So we think that those are the two things that will impact. When you add that to the improvements that we're making in our business, whether it's Decatur, or whether it is lysine or whether it is golden peanuts and tree nuts, which will remove some of the burden that was in the second half of last year and we will remove from '19, you will have a better comparable of some of the costs that we faced last year, that we are facing still today, and we're working out of those. So, all that give us a very constructive perspective for second half. If you add that potentially, the increase in milk consumption in the U.S. or Europe or South America to satisfy the protein gap in China created by the ASF that will give us the confidence to describe second half as being a very, very strong second half that will position 2019 as a very solid year for ADM.

Thank you very much. And just -- if you could update us on your business turnaround for the year, has the targeted $150 million to $200 million improvement been impaired by weather?

No, Tom. I think that the three pillars that we have, the improve pillar and the Readiness and the harvesting; they are all on track or slightly ahead of schedule as we look at after the first quarter. Certainly weather of the severity that we faced in the U.S. doesn't help. We run fermentation units and when you run the fermentation units with an outside temperature of minus 50 degrees Fahrenheit like it happened in January, strange things happen in the plant, but I would say, we still have part of that tail in the first quarter and we might have a little bit of that in Q2, but we expect all these issues to be behind us by the end of Q2, by the end of June. So, I would say we continue to make progress, of course better weather helps, but we have to do what we have done in the first quarter. I think the teams continue to make progress, and we feel these programs are on track, and we will deliver what we promised.

How you want to think about this Tom is some of the weather impacts that we experienced in the first quarter, and maybe some in the second quarter, will get offset with the incremental Readiness benefits that we're going to see particularly in the back half of year. That's how you should be thinking about.

Your next question comes from Vincent Anderson from Stifel.

So, just going back to China's 2020 ethanol mandate, I believe they have a significant amount of idled food grade alcohol capacity that could be used to close that capacity gap. Do you have a view on how much of that is actually fit to be converted to fuel grade ethanol, and how long that might take?

Yes. It's tough to assess that. We just think that the gap is so significant that they clearly will need to import now. Do we believe they are going to import 3 billion gallons, I mean, probably not. I mean that seems like a very tall order in 2020, but do we believe this will phase in over time? The answer is 'yes.' And do we believe this will have an impact on the U.S. ethanol margins? Without doubt, it will.

And with regard to your wet mill conversion, was this in response to declining demand for high fructose corn syrup, maybe from a specific customer moving away from the product or is this just more of a portfolio optimization? And then just quickly, what would the timing and earnings impact of that conversion be?

Yes, Vincent, this is -- you always heard us talking about the fight for the grind and trying to maximize the margins from the 22 products we tend to make in these places. So, of all the products, starches have been growing very fast, and also the bio economy is placing a lot of requests for fermentation capacity to produce liquid feedstocks to make products for the bio economy. So those are areas that we see with high growth rates and higher margins and candidly, and we said -- we reported this in previous earnings calls, although we've seen 55 hanging better in terms of volume, we saw 42 being replaced more aggressively. So this is a strategic shift in which we are shifting our 42 capacity into things that are going to give us better margin, some better growth rates. So, we are sacrificing a lot, a little bit of volume and share for margins and growth rates, and so we think that this is the right thing to do. Regarding the specific impact, this will be a transition, Vince, and at this point in time, since we still need to own out a lot of commitments, you wouldn't see any of these in 2019, let's put it this way, it will be more a 2020, 2021 impact if you will.

And just a clarification, this is 42 capacity that you're phasing out?

Correct, 42 capacity, yes. This is about 30% of our 42 capacity that we are shedding.

Your next question comes from Adam Samuelson from Goldman Sachs.

So I just wanted to go back to the kind of way you've laid out the rest of the earnings for the rest of the year and having flat operating for the whole year. Just with 1Q down as it is, 2Q, I mean against a very difficult comparison, it implies a record back half, and certainly a trade, the trade deal, and the benefit that that could have around origination, around ethanol, and even parts of oilseed processing, certainly auger for better cyclical dynamics. I'm just trying to understand kind of the internal dynamics and internal improvements, I think levers under your control on a year-on-year basis, that help us get to that outlook as we kind of roll through the year?

So, again our plan for 2019 is based on three big things. Delivering and sometimes outperforming in the three strategic levers; improve, Readiness and harvest; the trade deal resolution; and the third one, the big impact from ASF. So let me expand on those three a little bit. When we plan the year, we plan a year backend loaded, as I said, this is something that, it was very different seasonality that 2018 for reasons that Ray explained before, Q1 in 2018 had a big vitamin boost because somebody blew up a plant and prices went up. Second quarter with the threat of Chinese tariff in July 1, we got a big boost of export that were anticipated, so a very unusual first half. On the second half of 2018, we had a lot of these issues with the plants, lysine or golden peanut that made second half lighter. So last year, very different than this year, because this year, we are walking through the tail of those issues in the first half, but we are having them, while we are not going to have them in the second half. While on the other hand, the reaction to the trade deal, it's exactly the opposite, in which there is very little activity in the first half, and we expect it to be much bigger activity in the second half. Probably the two things that we didn't plan, so that, I'm describing the plan, the two things that we didn't plan, because we couldn't know about that, it was one, the severity of the weather in the first half and that is $60 million in the first quarter, and some of that will overspill into the second quarter, maybe like Ray said before, you could consider that the over achievement in…

And then, just on the U.S. export opportunity, just interested in your sizing the grain opportunities to China in the event of a favorable resolution in corn, wheat, DDGs even and just relative to soy, I mean, I would be more inclined to think that those will be more incremental to U.S. balances where the soy market in some respects is pricing in a meaningful return of exports to China already?

Yes, I think you saw it even in the market yesterday when Xi Jinping spoke at the Belt and Road Forum or positively about some of the changes that they need to make, which are aligned to that trade resolution or whether Mr. Trump announced that he's inviting Mr. Xi, President, to the White House soon. You saw what the market did, the market basically went down in soybeans, and up in wheat and corn, and up in pork. And I think that's giving you the perspective that, -- and don't forget that for us to tighten up our margins in the US, we probably need 10 million, 15 million tons give or take of corn exports from the U.S. to China. Remember that China used to have -- I mean, they consume like 230 million tons of corn with consumption that is growing faster than their capacity to produce that corn. They used to have like 250 million tons of reserve; today their reserves are something in the range of 75 million to 80 million tons. So for them as a gesture of complying with the trade resolution to import 10 million to 15 million tons is something very achievable. So we believe that's a very plausible scenario and again we can only read the tea leaves like you are reading, but we think that from the commercial actors all the way to the government, everybody is inching into a deal for the summer and that's what we believe is going to happen.

On corn imports, don't forget, as I indicated earlier, China is ramping up production of ethanol in the country, so they will also need to consume more corn with the domestic ethanol plants that they have in the country. So that's another reason as to why there is an incentive associated with the deal for China to also import U.S. corn.

And then, just a quick clarification on the commentary around the second quarter; the 20% decline quarter-on-quarter in oilseeds, was that the whole segment or was that just crushing and origination?

That's the whole segment.

Your next question comes from Vincent Andrews from Morgan Stanley.

Just some follow-ups on the ethanol situation. Did China -- first of all, are they in a position right now where they could go to that E10 blend, is all the infrastructure in place, I mean, I just remember from when the U.S. did it, it wound up taking a long time. So where do you think they are on that? Just to start off.

Well, they currently have in about 10 provinces in the country. They've indicated that they want to move toward the 2020 mandate nationally. They are in the process of moving toward that. Now, will they actually get their nationally by 2020? One can argue they won't get there by that year, but they are clearly on track as part of their environmental focus, remember this is driven by the focus on the environment here, they're moving toward that mandate over time. And so, I think, as I indicated earlier, are they going to import 3 billion gallons in 2020. I don't think they're going to do that, but it is unrealistic to assume that they will import 1 billion gallon from United States in 2020 as part of a trade deal, that's not an unrealistic scenario for us to think about.

And you kind of laid out a pretty good structural bull case for ethanol based on China and so forth. So what is driving sort of the desire to separate the assets, potentially sell it in spin, if it sounds like your outlook is actually quite bullish?

Yes, I think just -- I mean it is a strategic decision on the part of the company. I mean, we do believe that from a medium term perspective, the outlook for the U.S. ethanol industry is constructive but when you think about like what we've announced in the past and we indicated that the dry mills themselves, right. There is an industry structure issue here in United States, which I think they alluded to at an earlier call, is that there is a lot of producers of ethanol and so there is a case for consolidation in the industry here. And so from our perspective, our decision to monetize the dry mills is, frankly, a strategic decision on our part to basically help the industry consolidate and we're still going to have wet mills here, right. And so, we still have some wet mill capacity available, but from a business strategy perspective, we believe this is in the best interest of our shareholders.

Your next question comes from Robert Moskow from Credit Suisse.

Just a question about the oilseeds outlook for second quarter being down 20%, I think your commentary about first quarter was that really strong global demand, margin is good and so to see the guidance be pretty, pretty negative for 2Q, even after you stripped out the Argentina tough comp, is there something else that's making the comparison tough versus year ago that I'm forgetting? Thanks.

Don't forget Rob, last year in the second quarter crush margins were extremely healthy, right, driven primarily not just because of the China issue, but really the Argentina drill situation, it really culminated in the second quarter when we saw margins move toward $2 per bushel. So when we look at this year and we compare this year versus last year, you're not going to see that pop right in terms of the underlying margin structure. At the same time, demand remains very strong, right. From our perspective, the environment remains very constructive for demand for particularly U.S. soybean meal. So, therefore, we believe the margin environment is going to be healthy for us in the second quarter. It's just not going to be as health -- as strong as what we saw last year in the second quarter which was frankly abnormally strong like $2 per bushel, margins were abnormally strong.

Yes, I think this is the quarter, Rob, where we have to absorb all the harvest that's coming from Argentina and all that, they are going place that capacity. The world needs Argentina mills and, I think, as Ray described, last year was an anomaly in that regard. So this is a more normalization on that in a still very strong environment from a demand and margin perspective.

So you -- for the year for oilseeds, has anything changed versus your outlook for the overall year?

I think today versus our previous call, we are more optimistic than last time. Remember that so far this year, we also don't have the benefit that we had last year of the Biodiesel tax credit that we believe that is going to come during the second half, but I would say given my comments before about ASF, our scenario for oilseeds has become more constructive since our last call, we see now even higher meal growth around the world outside China than we saw at our last call, so significantly higher.

Yes, and that's despite the fact that South America, I think the commentary for the quarter anyway was slow farmer selling, weak origination margins, so does that mean that your confidence is very North America oriented regarding oilseeds being better?

In South America, there are, of course, we do not have crushing in Argentina, but in Brazil, we are not pessimistic about it I would say, think about these Biodiesel continues good in Brazil, also refined oils is going very strong and the fact that Brazil has very big -- very large corn crop will be positive for crushing in the second half because to a certain degree now corn is taking a lot of the infrastructure, so people will have less of a pressure to chase beans to comply with their mark to market -- sorry not mark to market -- with their take-or-pay contracts. So, corn taking part of that alleviates that, will create a better environment or less pressure on soybean basis later on that will benefit crush. So I think that even for Brazil, we are more optimistic and remember that we will have the impact of the Algar -- positive impact of having Algar in our portfolio that we didn't have in the second half of last year. So, all that makes the second half very positive.

Your next question comes from Michael Piken from Cleveland Research.

Just a couple of other follow-up questions on oilseed. In terms of your stake in Wilmar, how are they going to be affected by ASF and have you sort of incorporated any sort of potential headwind there?

Listen, if you think about Wilmar, I know what I'm going to describe is public information. So, but if you think about, of course, short-term they are going to impact I think in crush and, first of all, always remember the Wilmar team is exceptional at risk management adjusting. So they are very, very astute and very good at that. So we feel that if somebody -- if there is a team that can navigate that, it is the ADM team or the Wilmar team. So they are very good at that. But second, if you think about their earnings and sometimes it's not that clear, but if you look at public information about half of their earnings is the segment that they describe as oilseeds and grains, that includes their oilseed crushing, but also include wheat milling, Wilmar is a giant wheat miller in China and also includes their consumer products. So, let's say that maybe oilseed is about 25% to 30% of overall earnings for Wilmar. Then you have a big segment which is palm oil which is about 35% of that, and Wilmar is the largest palm oil producer in the world. And then you have about 15% to 17% of other associates which are joint ventures in either Africa or Russia. So, I would say -- and then you have the sugar business. So when you think about it, it's a very, very diversified and well-balanced portfolio. So even if crush margins in the short-term may have an issue, you still have palm oil, you still have consumer products, you still have wheat milling, you still have the affiliates and you still have sugar. So, and again, I can't disclose any specifics, but I would say between their ability to risk manage and their wide and…

And then, could you talk about the situation down in Brazil with logistics. I know last year there was a big truckers' strike, what's happening down there, and as we approach harvest, are you expecting any hiccups to your Brazilian operation?

So at this point in time when the harvest comes, obviously the truckers' is when they put forward their mandates. The situation in Brazil, if I can describe it is complex in the sense that Petrobras is aligning their diesel prices to international markets, what they call the international parity pricing, and of course, the soy change and the meal change works at market prices. So, it's very difficult how do you regulate freight and expect it to work because you cannot guarantee freight for a piece of the chain when the two other aspects of the chain are working on market pricing. But certainly, the situation for the truck owners is complicated, and I can understand them, because at this point in time, there is low economic activity in Brazil, there is a little bit of a recession going on; so there are low freight prices. In an environment in which Petrobras was to increase oil prices because of oil prices climbing, and there is overcapacity of trucks, given the past subsidies to buy trucks. So when you add that, the poor state of some of the roads in Brazil, that maybe create more maintenance cost for the truckers. The truckers are a little bit in bind. So, this could become and more -- a bigger issue. The government has been trying to discuss and negotiate and have a dialog with truckers, and of course we have this issue of the freight table. The freight table, the end has not been heard about the freight table, the freight table if the government ask the School of Agriculture of the University of Sao Paulo to create a technical freight table, then new technical freight table is like a 45% under the current negotiated freight prices that there are in Brazil right now. So, the problem we're going to have with that, there are 60-days of public hearings right now to discuss that that is supposed to be implemented in July. So theoretically, you're going to have two freight tables, one in July, one in January every year. But of course, although, we feel good with the freight table that this 45% under current negotiated market prices, that, as you can imagine, the truck drivers will not be happy with that. So I think that we are following it very closely, and it continues to emphasize the issues that Brazil has in terms of infrastructure that makes the U.S. a more reliable supplier sometimes. So, Brazil big producer continues to be unreliable from a logistics perspective if you will. So, we're watching it, we're all over it. And at this point in time, we hope that the government and the truckers will find a solution.

Your next question comes from Ken Zaslow from Bank of Montreal.

Just can you talk about the animal nutrition business, and what kind to had gone wrong in there relative to your initial expectations?

Yes, I can talk about the animal nutrition. So, we are very happy with the Neovia acquisition. We are very happy how it matches with our business. Our business was mostly North America and China, and the Neovia acquisition brought us Mexico, Central America, Brazil, Europe and Southeast Asia. So very good complement, and the more we own them, the happier we get, and the more optimistic we get about their synergies, and their ability to deliver in 2019. What had happened in the first quarter, first of all, it was a very big comp versus last year because of an issue that the industry had in vitamins that allowed everybody to sell a lot at a very high prices. So, we knew we were not going to have that. And every time you get a new transaction of the size of Neovia, you have this purchase price adjustment, this time was inventory valuation that impacted the quarter in $10 million. And then, remember, we are fighting still the tail of the lysine issue, the lysine issue is being solved, is being addressed, and we're very happy with the progress, but it still hit us in $10 million. So if you think about $20 million of noise, if you will, with a tough comp, and when you take over a company like in the case of nutrition, and Neovia, you have extra costs that you cannot properly quantify. For starters, people travel more, because you need to get to know each other, we need to start defining the synergies. Remember also that we closed at the end of January, so we closed one less -- we had one month less of that. But as we look today, we are very optimistic and very confident about delivering the EUR100 million of EBITDA that the business was supposed to deliver in 2019. And when we look at the synergies, the synergies that we were looking to deliver, the EUR50 million synergies that we were looking to deliver at year four, we are thinking now, we're estimating, we're going to deliver by the end of the year two. So, much better than expected. So, I would say, short-term noise, I look at this, can -- a little bit -- traced the parallel what happened with WILD. We took WILD in October 2014. The first quarter, not spectacular, even you guys were complaining, where do you see the revenue growth because we were shifting product mix and all that. Look at -- immediately, we started to grow faster than market, we grow organically 6%, profit growth 20% per year, and this is like four, five years after we have acquired. So, I think you're going to see the same evolution with animal nutrition, and the margin up story that we mentioned originally for Neovia is intact.

And then my next question and this will be my last question is, given how bullish you are on the oilseed environment, particularly with ASF, does this embolden you to pursue more M&A activity in this space to consolidate the industry, I know you've said this repeatedly that you know, it is the geographic place that you'd like to expand, as well as the industry needs to consolidate, so does this ASF embolden you take bigger actions?

I praise you Ken for your creativity to ask the consolidation question in a different way. We continue to be -- listen in oilseeds, we continue to be very bullish about that, we like the growth rates on that, and we are very much intending to have smart consolidations. If you will look at what we did with Algar, you look at what we did in Egypt with the joint venture with Cargill. And our teams continue to look at assets that fit our footprint well, that are an upgrade to our assets and if those are available, we're always looking.

Your final question for today will come from Eric Larson from Buckingham Research.

Thanks, everyone. I know we're out of time, so my questions will be very brief. The first one is really a clarification question, and the way investors will be looking at your quarter here, you had a negative impact of $0.05 from a higher tax rate, negative $0.08 from weather-related issues, and then another $10 million in purchasing inventory adjustments from Neovia. So now that is $0.14 to $0.15 or kind of the $0.60 to $0.61 if we look at it from an investor point of view, is that a reasonable way to look at it? It is probably a question for Ray.

Yes. Just remember on the tax rate, remember, part of it is an adjustment item. So, therefore, the bulk of the reason why we were at a higher tax rate is due to the transition tax adjustments that we had in the quarter. That's an adjustment item. And so, as I indicated in my remarks, we're looking more like a 19% rate for the year, so that -- at least at this point in time, it's 19% if we exclude all those adjustment items. On the weather issues, as we indicated, part of that will get offset in the back half of the year. We're looking at probably some insurance settlements in order to mitigate some of those impacts, part of it, the volume we may be able to recover some of that. So, therefore the raw $16 million impact, there will be some mitigation toward that and, as I also indicated, the rest of the business, we were driving additional Readiness actions that will offset part of that as well. On the $10 million in additional depreciation related -- yes, I mean that's an impact, and we didn't have that initially estimated because we couldn't estimate that number, but I kind of view that as in the quarter, I mean, that's just a one-time impact that we're going to have and so, just looking at the $60 million that we're going to have in terms of the impact is a segment OP tougher number. And so, I mean, again, we need to just make sure we separate out the segment OP impacts versus the tax rate impacts there too.

And then my final question is, really talking about some of your bold moves that you had in the quarter, I don't think in my 25 or 30 years of covering the company, I have seen a product adjustment move like you -- like you're doing Marshall, the old ADM would have built more capacity to more front-end grind to supply the 42 market and you folks are not doing that, you're trying to get more return out of each plant and you just increase the size of the number of initiatives in your Readiness program. So when I look at -- so this is really positive for your returns going forward. When I look at this, I know you haven't changed your return profile in terms of your total goals, but certainly, this should give you more confidence that you can achieve a 10% ROIC. And maybe even at some point move higher, I mean how would you react to that thought?

Yes, that continues to be our objective. We never deviated from the desire to achieve 10% ROIC and 10% ROIC as a way to get to higher numbers. I think that the core businesses have done a tremendous job in that in improving ROIC and those businesses will continue to drive cash flow and Readiness and efficiencies to drive returns. That's the way they're going to create shareholder value. The Nutrition business that we have invested in is basically a growth option for the company and of course their returns are a little bit hampered right now by all the acquisitions and the goodwill that we are digesting, but their role to create shareholder value is through actually revenue growth and margin up, and they are doing that. So, we feel very good about our strategy and I think if something you have to learn or you probably know and that is what you're reflecting on is that there are no sacred cows for our team. The most important thing is to focus on shareholder value creation and we will continue to do everything we can to drive value creation, either through returns in our base business or through organic growth in our nutrition division.

This brings our Q&A portion to a conclusion. I would now like to turn the call back over to Ms. Victoria de la Huerga. Please go ahead.

Thank you, Michelle, and thank you everybody for joining us today. Slide 15 notes some of the upcoming investor events where will be participating. And as always, please feel free to follow up with me if you have any other questions. Have a good day. And thanks for your time and interest in ADM.

Thank you, everyone. This will conclude today's conference call. You may now disconnect.