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    Archer-Daniels-Midland Co (ADM)

    Q4 2023 Summary

    Published Jan 10, 2025, 5:10 PM UTC
    Initial Price$74.80October 1, 2023
    Final Price$72.22December 31, 2023
    Price Change$-2.58
    % Change-3.45%

    What went well

    • ADM anticipates strong global soybean meal demand, driven by recovering economies in Southeast Asia and favorable protein margins for poultry, which is expected to support the Ag Services and Oilseeds segment.
    • The company's capacity expansions, such as the Marshall, Minnesota starch facility and new crush capacity in Brazil, are expected to contribute to growth in 2024 and beyond.
    • ADM expects its Nutrition segment to return to growth in 2024 and 2025 due to simplification efforts and portfolio optimization, enhancing overall company performance and shareholder value.

    What went wrong

    • Biodiesel margins have moderated significantly in the U.S. and are expected to be lower than previous years, leading to potential headwinds in 2024.
    • Crush margins have moved significantly lower recently, and the timing of their recovery is uncertain, which may negatively impact earnings.
    • The Nutrition segment's operating profit decreased by 36% compared to the prior year, and despite management's efforts, recovery remains uncertain and may take time.

    Q&A Summary

    1. 2024 Earnings Outlook and Nutrition
      Q: Outlook for 2024 earnings and Nutrition growth?
      A: Management expects 2024 earnings to be lower than 2023 but still strong, with margins moderating yet remaining above historical averages. They foresee potential for growth in the Nutrition segment, which faced challenges in 2023 but is expected to recover in 2024 and progress toward 2025 targets.

    2. 2025 Earnings Growth
      Q: Is 2024 earnings the trough before growth in 2025?
      A: Management anticipates 2024 to be a down year versus 2023, but expects 2025 to improve over 2024, expressing optimism about achieving and exceeding the 2025 earnings targets set in 2021.

    3. EPS Target of $6–$7 by 2025
      Q: What will drive EPS growth to $6–$7 by 2025?
      A: Key drivers include recovery in soybean meal demand leading to improved crush margins, growth in Carbohydrate Solutions through decarbonization and Biosolutions, and a return to growth in the Nutrition segment. They are confident in achieving and surpassing the $6–$7 EPS target by 2025.

    4. Soybean Crush Margins
      Q: Details on soybean crush margins outlook?
      A: Management expects global soybean crush margins to be between $35 and $60 per ton, lower than last year's margins. They believe margins have already priced in increased soybean availability and see demand for soybean meal recovering due to lower prices.

    5. Nutrition Recovery in 2024
      Q: How will Nutrition's recovery progress throughout 2024?
      A: Management expects mid-single-digit revenue growth in Nutrition, with operating profit higher year over year. They anticipate recovery building throughout 2024, driven by improved demand fulfillment and growth in flavors, pet nutrition, and animal nutrition, while acknowledging some headwinds from lower prices in texturizing products.

    6. Renewable Diesel Demand
      Q: Will renewable diesel demand for soybean oil decline?
      A: Management believes the path for renewable green diesel remains strong and will require vegetable oils like soybean oil. They see continued commitment to renewable diesel capacity that cannot be filled with other feedstocks, expecting this demand to stay firm over the years.

    7. Carbohydrate Solutions Investment
      Q: Plans for investment in Carbohydrate Solutions capacity?
      A: Management is investing in the Carbohydrate Solutions segment, expanding capacity for Biosolutions and starches, including a 50% expansion at the Marshall facility. They see growth opportunities driven by decarbonization efforts and expect tailwinds from lower energy and chemical costs later in the year.

    8. Nutrition Portfolio Optimization
      Q: Details on Nutrition portfolio optimization plans?
      A: Management is reviewing the Nutrition portfolio to improve performance, potentially through divestitures or adjustments. They are focusing on units not meeting return expectations and are taking actions similar to past divestitures to enhance overall performance.

    9. Biodiesel Margins and Capacity
      Q: Outlook for biodiesel margins and capacity?
      A: Management expects biodiesel margins to remain good but lower in the U.S., with better margins in Europe and Brazil. They anticipate increased biodiesel mandates globally and expect biodiesel to continue being a strong part of crush demand.

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