Good morning, and welcome to the ADM Second Quarter 2025 Earnings Conference Call. [Operator Instructions] As a reminder, this conference call is being recorded. I'd now like to introduce your host for today's call, Megan Britt, Vice President, Investor Relations for ADM. Ms. Britt, you may begin.

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

Thank you, Megan. Hello, and welcome to all who have joined the call. Please turn to Slide 4. Today, ADM reported adjusted earnings per share of $0.93. Total segment operating profit was $830 million for the quarter. Our trailing fourth quarter adjusted ROIC was 6.9%, and cash flow from operations before working capital changes was $1.2 billion for the first half of the year. The team focus has been on managing what we can control in a dynamic environment, and we continue to drive positive momentum in those areas in the second quarter. Our Carbohydrate Solutions team again delivered steady results with a strong execution and disciplined risk management. The Nutrition team drove another quarter of sequential improvement, led by our Flavors and Animal Nutrition portfolios. We also made important progress in getting our Decatur East plant back online, already ramping to our planned run rates. Services and Oilseeds performed in line with our expectations, the team worked to offset lower margins this quarter through targeted organizational realignment and network consolidations, enabling us to be well positioned to take advantage of expected improved conditions in the second half of the year. Across our global operations network, our efforts to improve operational resilience and delivered outstanding results. We achieved our best performance in limiting unscheduled and unplanned downtime in more than 5 years. We're also proud to have been named as one of America's greatest workplaces in manufacturing, a testament to the tireless efforts of our colleagues across the ADM operations workforce. The external environment became clearer in some critical areas for our business throughout the quarter. The U.S. administration drove positive tax and biofuel policies that are helping biofuel producers make better decisions about production rates and feedstock demand, while also supporting an uplift in crush and biodiesel margins. The…

Thank you, Juan. Please turn to Slide 6. AS&O segment operating profit for the second quarter was $379 million, down 17% compared to the prior year quarter as limited clarity on legislative and biofuel policy continued to impact margins in the segment. In the Ag Services subsegment, operating profit was $113 million, down 7% versus the prior year quarter, driven primarily by lower global trade and South American origination results. Global trade results were lower relative to the same quarter last year, largely due to the lower trading volumes, partially related to the trade policy uncertainty as well as lower margins due to lower commodity prices, negative freight timing and currency impacts. South American origination results were lower primarily due to lower volumes and margins stemming from the loss of operations at a key port facility in Brazil and foreign exchange impacts. North American origination results improved in the quarter due to higher margins and volumes as well as from a timing benefit associated with receiving $19 million in proceeds from a USDA grant earlier this year compared to in 2024. There were net negative timing impacts of approximately $27 million year-over-year. In the Crushing subsegment, operating profit was $33 million, down 75% from the prior year quarter. Consistent with our expectations for the quarter, both global soybean and canola crush execution margins were lower than the prior year quarter. Global executed crush margins were approximately $7 per ton lower in soybeans compared to the prior year quarter and approximately $29 per ton lower in canola. By region, crush margins were down significantly in North America. North America soybean crush margins were negatively impacted by higher crush rates and lower soybean oil demand stemming from biofuel policy uncertainty earlier in the quarter. North America canola crush margins were approximately $50…

Thanks, Monish. Let me wrap up by highlighting some of the ways we are setting our business up for the back half of 2025 and into 2026, along with the positive signals we see that are providing momentum. Overall, we will continue to drive operational excellence through our focus on cost savings and cash and by simplifying our business through targeted portfolio optimization, including the recent examples I mentioned earlier in today's call. In Carbohydrate Solutions, we'll continue to drive operational excellence and closely monitor both consumer sentiment and broader economic signals while maintaining momentum around our decarbonization and cost reduction initiatives. For Nutrition, the ramp-up of Decatur East and optimized portfolio will support continued recovery of the business while we focus on building upon our strong opportunity pipeline in segments like Flavors and Health and Wellness. In Ag Services and Oilseeds, our active network optimization and operations focus is positioning us with the agility to capture opportunities from improved market conditions in the back half of the year. Additionally, we're closely monitoring global trade developments, particularly in relation to China and broader export market dynamics as we head into the critical U.S. harvest season later this year. These factors will play an important role in shaping opportunities in the months ahead. We are seeing selective market share increases that are offsetting sluggish markets elsewhere, and we're sharpening our focus on good risk management practices. Looking to the fourth quarter of 2025 and onwards, we see several reasons for optimism. Clarity in biofuel policy and legislative support for agriculture are creating a favorable environment for market access for our farmer partners and enhances ADM's ability to deliver economic value to the broader sector. The foundational work we've done in the first half of 2025 set us for a stronger operational momentum. Our investments in innovative spaces such as probiotics, natural flavors and colors and decarbonization position us to capture growth in high potential markets. We have recalibrated many variables as we navigate the current complexities and our confidence in ADM's resilience stems from the dedication and expertise of our team. Their ability to adapt to challenges and execute against our strategy has been evident throughout the year. We are a company built to endure cycles and our unparalleled asset network, combined with the ingenuity of our workforce ensures we remain a source of strength for our farmers, customers and partners. As we move forward, our focus on self- help initiatives, execution excellence and disciplined capital allocation will continue to drive value for our shareholders and position ADM for success in 2026 and beyond. With that, let's open the line for questions. Operator?

[Operator Instructions] Our first question for today comes from Andrew Strelzik of BMO.

You gave a lot of helpful color for the back half of the year, but I was hoping you could maybe a little bit more explicitly give us kind of the earnings split between 3Q and 4Q or at least a little bit more guide kind of at the total company level. And if I take that, does it make sense to, as we start to think about 2026, annualize 4Q as kind of a starting point? I know it's a bit of a bigger quarter, so we can make some mental math adjustments around that. But is there any reason why that kind of doesn't make sense to you?

Well, thank you for the question. As you said or are you implying in your question, we see the perspectives for ADM improving and getting more clearer as we go into the second half. Of course, first half has a lot of headwinds. Second half with the benefits now of a little bit more clarity on RVOs and 45Z, we certainly see the potential for soybean oil to be much more demanded, and that will be the preferred feedstocks for North America. Unfortunately, by the time this was announced, we have already contracted more -- most of our Q3. So you will see the impact for us mostly in Q4. So as such, it's probably going to be something in that, I don't know, 35-65 type of split between Q3 and Q4. If you think about what are the things that we have in Q4 coming from us. We continue with our improvement in cost position. We're going to see an improvement in crush margins if all these RVO numbers are finally confirmed. We're going to see the benefit of our East plant in Nutrition being back into production. And we're going to see better earnings from Ag Services as we get into our export season and probably from a global trade perspective as well. So we have high expectations for that quarter provided all these RVOs are confirmed. In terms of 2026, probably too early, but most of the time, we said the rate that we exit 2025 becomes the rate that we enter 2026. Whether that's going to be multiplied by 4, too early to speculate at this point.

Just Andrew, a couple more data points to Juan's point, 1/3, 2/3 split Q3, Q4. Secondly, just as you're modeling, just remember, last year, we had $230 million of insurance proceeds. $96 million of it was in Q3 and the balance was in Q4, and you can see the segments. So in Q3, carbs will be the biggest impact on a year-over-year basis. If crush margins don't move up or the replacement curve doesn't move up, that's another $0.15 headwind if the curve doesn't move. Corporate, usually, second half is usually higher than the first half due to some naturally seasonal items will continue to drive our cost and cash initiatives that we have. Ethanol, when you think about ethanol, it's still lower on a year-over-year basis. While the second quarter was positive, it was still lower than the total -- than last year. And so we continue to see ethanol to be a little softer in the second half. But all of that is currently baked into our guide, except, of course, the headwind if the replacement curve doesn't work. And timing is another item that could move between quarters or where our mark comes at the end of the year. But hopefully, that answers your question.

Our next question comes from Ben Theurer of Barclays.

Congrats on the solid results for the second quarter. I wanted to dive into the outlook for the Nutrition segment into the back half. Obviously, with Decatur East coming back, as we look into this and kind of like have like an LTM run rate, kind of call it about $400 million operating income now in that segment. But clearly, with all these headwinds, what would you suggest us assuming has been kind of like that incremental cost that you called out for not having Decatur East over the last couple of quarters. And as we ramp this through 3Q into 4Q and then particularly into 2026, where do you think like kind of like a current run rate is for that business on a stand-alone basis?

Yes. Thank you for the question, Ben. Let me address Nutrition and how is it going. So Nutrition continues recovery. We're very pleased with that. If I take it into pieces, if you take Animal -- Human Nutrition, Human Nutrition is being driven by Flavors, strong revenue growth. We are holding to our EBITDA margins. So we are very pleased with that, mostly driven by beverages in North America, but also strength in Europe. And we have an opportunity to grow geographically as our plants in Asia Pacific are increasing output. In terms of Health and Wellness, Biotics has grown so far 9% revenue. So that's going very, very well. And we are very pleased with that. And we will be releasing some data of studies that we perform in 2025. We're going to be -- or in the past that we were releasing in '25 and '26 that will give much more opportunities for us to penetrate more applications, especially in the heat-treated probiotic area where ADM is one of the leading companies. In terms of Specialty Ingredients was the headwinds for the human nutrition part. And as you said, we have mentioned before, the headwinds in terms of cost for having the Decatur plant down was about $20 million to $25 million per quarter. That will be -- hopefully be behind us as we go into 2026. So then you have the Animal Nutrition. The Animal Nutrition side has been an improvement story, if you will, a margin up story. Remember, I mentioned that from the time that -- from like 3 or 4 years ago. And they've been executing on that. They've been executing for the last, I think, 7 quarters. They've been presenting better results based on self-help. The market is a relatively good market in the sense that all the protein customers are making money. Feed is relatively cheap right now, so profitability is there. And our portfolio is slightly shifting into more specialty products as we go along. So we are deemphasizing some of the commodities and emphasizing a little bit more our innovation in those segments. So we feel good about that piece continuing . So I think we are setting up well for continued growth into 2026. Numbers-wise or run rate, I wouldn't like to venture at this point in time. But I think you can, for sure, add about $100 million of specialty ingredient headwinds that we're not going to have in 2026. The plant so far is running well since it started up back. The team brought it back safely. So we're very proud of the team. So, so far, so good.

Our next question comes from Manav Gupta of UBS.

Monish, I just want a little bit of a clarification. I know you had been working very closely with SEC responding to all these queries. And now basically, you're putting out a statement that the material weakness is no longer there. So am I -- are we to understand that you reached out to SEC, you gave them what they wanted and then they did not come back with additional questions. So at this point, would it be fair to say that SEC is okay with where your financials are being constructed? And what can also be done to make sure this never happens again, if you could just talk about those things?

Yes. So Manav, I think there are 2 different points that maybe I can make. Number one is, yes, we did remediate the material weakness this quarter. And the team did a really heavy job. They had created -- if you think it's 18 months that the company has worked on this robust remediation plan. So we designed and implemented a lot of enhanced internal controls, especially in related to our intersegment policies, pricing and measurement controls, which was the reason for the material weakness. We improved our training. We upgraded talent. We have tested these controls and right -- and we've tested them over multiple periods. And right now, we believe these are effective. The way we do this, Manav, just for your benefit, is management test it, they have their controls, they test it. And then at the end of the day, we consult with the Audit Committee as well as our auditors to make sure that what we are doing has robust internal controls. So we have actively engaged our auditors. While there -- while the audit will not be complete until the 10-K is filed, the auditors do have an obligation to make sure that what we are publicly disclosing is accurate as well as they feel good that our internal controls have been met. So based on all of that, that we have made sure that our controls are working, we, as management, feel that the material weakness has been remediated. And as I said, it's in consultation with our auditors and the Audit Committee. I would say, going forward, we will continue this journey. So we will continue to keep focusing on broader initiatives that will enhance our transparency and compliance processes while continuing to maintain an effective operating environment. So hopefully, I answered your question, Manav. This is based on a robust remediation plan, and we have tested it. And we feel that over the last few quarters that these -- our controls have been effective. And that's why we felt that we are in a position to remediate the material weakness this quarter.

Our next question comes from Heather Jones of Heather Jones Research.

I had a 2-part question on crush. And the first part was just a clarification. Wondering when you say if the replacement curve doesn't move up from here, are you referring to physical? And then secondly, more a big picture question. If the RVO SREs play out as benignly as expected, just wondering the benefits to your biodiesel business, but more importantly, to your global crush business. When we think about how that business was doing in '22, '23, how would you think about how ADM would be positioned going into '26 and '27, if that plays out -- if the policy picture plays out as we're expecting?

So just a quick one, Heather, to answer your question. When we think about the replacement curve, yes, we do look at board crush. But at the end of the day, margins have to show up on the cash side, and that's the curve that I mentioned. So we are combining both, and that's where I came up with the math that I gave you. Now that will move every day depending on how markets move, but this is where we are at this point in time.

Yes. Heather, on the big picture perspective, as you said, the RVOs have been very positive for soybean oil, and that can certainly increase demand. There are going to be adjustments. If you think about at this point in time or in the first half, we were exporting soybean oil and we probably won't do that. And some of our customers are already -- some of our food customers, we are already offering different mixes of products. Of course, we have peanut oil and cotton oil and rapeseed oil, and we have many different blends because soybean oil will be a preferred feedstock for biofuel. So I think that we will adjust and we will maximize the profitability for the envelope. If you think about where the margins will fall, so I think initially, we will probably have to see RINs popping up. We will see probably the benefits laying in, in the crush because we're going to have these very strong legs in terms of oil, but also in biodiesel. I think refining will probably be a little bit squeezed refining margins because of all the pretreatment capacity, and we will have to see how many people run this pretreatment capacity, how many of the refineries come on stream. But that's the way we see it. We feel very comfortable that the places where we have crush where you have Brazil and you're going to have a B14 to B15 and then the progression of increasing that. The U.S. will have the RVOs. And then in Europe, Germany has abolished the double counting, which also is going to be good growth for rapeseed oil. So all in all, you can see about 6 million tons of extra feedstocks coming into the biofuel area that you add about 800,000 tons of growth in the food, it gives a very good perspective for this. You will see oil taking about 50% of the share of the crush, which hasn't happened in quite a while. And every time that happens, of course, margins pop up. So we will have to put pencil to all that when the RVOs are done. But I think if all this is confirmed and the SREs are kept in check, I think it plays very well for ADM going forward.

Our next question comes from Pooran Sharma of Stephens.

I was wondering if maybe we could get a little bit more detail on the network optimization plan. I know you mentioned some detail in your prepared remarks, including some facilities that you had shut down in different geographies. But you also mentioned that there's some room to go. And so was, a, just wondering where do you see the most room for kind of your further optimization? Is it more ag services, processing? Would just love a little bit of color there. And then also, how does this optimize your processing kind of OpEx? Like should we be looking at like a $5 per metric ton improvement? Or how should we think about it from a crush perspective?

Yes. Thank you. Yes, I think that performance improvement around operations is one of the things that we highlighted early in the year, we were going to focus on, and we are delivering on that. I'm very proud of the improvements of the team. We were preparing our footprint for all these potential RVO improvements and the ability to have to crush at full rates going forward. So thankfully, we have the means to do that, and we needed to have the plants in good shape. So we spent a lot of time optimizing the network. I'm pleased to report, as we said in our prepared remarks, that some of our unscheduled downtime is -- on rates that we haven't seen since 2000. So it's been -- 2020, right, sorry, not 2000, it has been very good in that regard. I will say selectively, we tend to look at -- we have many plants, and we tend to look instead of having individual plants and pockets of that, we tend to look at the network and what optimizations can we do to keep plants or expanding plants that are -- that have lower cost position and maybe retiring plants that have a challenged cost position. We do that across the portfolio. We've done it in milling. We do it in Oilseeds and Ag Services. In Ag Services, we're constantly shifting the elevators that we own. At times, we sell them, at times, we trade them weather -- or we swap them for others. At times, we shut them down or we sell them. The same happened with the facilities. We announced the Kershaw shutdown. We announced in the joint venture of Lubbock which is for cotton seed oil. So you're going to see that no spectacular announcement, but a continued trickle down of optimization. We have a large footprint, and we have targets to optimize our cost base. I'm not going to disclose them right now. I want to see more stability of the run rates, and we still have a few things that we need to get done before maybe we give those numbers. But needless to say, we're very happy with how our plants are operating in the face of, again, hopefully, a few years of very high crush rates.

Our next question comes from Steven Haynes of Morgan Stanley.

I wanted to come back to something on the RVO. It seems like since the proposal, RD margins have kind of remained pressured and almost all the value has kind of accrued back to the crush complex. So I would be curious to hear some thoughts on why you think that is and whether or not you would expect that to kind of remain that way.

Yes. Well, this is a very difficult period. You need to understand. We were giving an indication of what may happen. But then there are a lot of rumors one day or the other that are shifting this because the whole numbers have not been confirmed. So although we feel optimistic about the future, we are in an uncertain period until the final numbers are clarified. What are the final RVOs, how we're going to treat SREs. So I would say we shouldn't take a lot of cues from right now what's happening. I think that we know what happened with industry crush margins when oil in the past have taken about 50%, 52% of the crush. So I wouldn't read that much right now until we get more clarity. It is still -- this is still a forecast. And I think you need to see we have produced very little to comply with the mandates in the first half as an industry. So we will have to pick up those rates in the second half when all this clarity is given. So we see accelerated production, and you're going to see RINs reacting first. So at this point in time, there's still -- I mean, they are much bigger than -- much higher than they were last year, they moved like from $0.40 to $1.15 or $1.16 or whatever they are. So -- but we still have roads to go there. So I think that we are watching it closely. As I said, in the meantime, we're getting ready. There is a big crop coming. Our plants are ready to crush. So when we have the indication, we are well positioned to do so.

Our next question comes from Salvator Tiano of Bank of America.

Firstly, if you can -- I may have misunderstood or missed it before, if you can clarify a little bit the $100 million benefit from the Decatur restart, is that '26 versus '25 or the eventual benefits, which includes 2025 tailwinds. But my primary question is on high fructose corn syrup, we also saw the news a few weeks ago about Coca-Cola potentially shifting away into cane sugar. And I'm just wondering if you can help us a little bit better understand how big this business is for you in terms of perhaps anything like volume, revenues, EBIT as well as what is the risk if other companies follow suit to the industry?

Yes, Salvator. So what's the first question?

The Decatur, if you can clarify that?

Yes, yes. Sorry for that. Yes, Decatur cost us basically when it was shut down about $20 million to $25 million per quarter. So Decatur is back up now. So you should consider that starting Q4 for the full quarter, that's going to be an impact of run rate from that moment onward. And then hopefully, if it continues to run and nothing happens, you will put that into -- but I will say for 2025, you should consider that we have like 3 quarters of that cost still with us because the plant is ramping up, and we still probably have inventory of material that we have bought that needs to go and run through the cost of goods sold. On the high fructose corn syrup, listen, this is -- we have relationships here in this market that go back decades with the key players. And we have relationship at every level. And at this point in time, we have no indication of any changes in their order pattern or their projections nor we have seen any volume changes based on any announcement. So I would say, in that regard, we are not planning on any change. I would say this business has been working on what we call the fight for the grind. We make more than 22 products in our wet mill. And if you think about it, high fructose syrup has been slightly declining 1% or 1.5% since I've been here. So -- and we've been managing to have a Carb Solutions business that is very stable based on optimization, product mix, development of new products like when we highlight biosolutions, product like glucose for fermentation. So there are a lot of opportunities for us to do. This is a big market, and we plan to continue to supply it. But we've been servicing the beverage industry again for multiple decades, and we've always been very flexible and adjusting to the conditions. And at times, it's with natural colors or flavors, at times it's with high fructose corn syrup at times it's with other solutions to reduce sweetness. So we will continue to be a major player in that. But at this point in time, I want to tell you, there's no change in our volumes in high fructose corn syrup.

There's just one piece I wanted to -- just one I wanted to add on the Specialty Ingredients, Decatur East. As Juan mentioned, the operating improvement is the $20 million to $25 million. At the same time, we have seen higher insurance premiums. And of course, we'll have to see where utility costs, et cetera, keep going and driving the cost out that the team is doing. So just keep that in mind. At the end, when we come to 2026, we'll give you the right guidance.

And Salvator, maybe also I would say, in terms of the segments in beverage and snacks and all that, we mentioned in our prepared remarks, we've seen some pockets of sluggish demand that I think that you can tell that there is a consumer out there that there is a little bit more stressed and maybe making more prudent choices with their spending. So I would say across ADM, whether it's on snacks and sweets, we have seen pockets of softness that I think our team has been very good to neutralize or navigate around, but there is some cautious from a consumer perspective.

Thank you. At this time, we currently have no further questions for today. So that concludes today's conference call. Thank you all for joining. You may now disconnect your lines.