Bunge Global - Earnings Call - Q1 2025

Executive Summary

• Q1 2025 was better than expected operationally, with adjusted EPS of $1.81 vs. $3.04 last year, as tariff-related timing shifts pulled earnings forward from Q2; FY25 adjusted EPS guidance held at approximately $7.75.
• Mix was two-speed: Processing delivered solid results with strength in Brazil/Europe/Asia soy crush, while Refined & Specialty Oils was down in most regions amid a more balanced supply/demand and U.S. biofuel policy uncertainty.
• Balance sheet/liquidity remain robust (RMI > net debt by ~$3B; adjusted leverage 0.6x) and FY25 net interest expense guidance was lowered to $220–$250M from $250–$280M, offering a tailwind to EPS durability.
• Near-term stock catalysts: potential U.S. RVO update, final regulatory approval and closing of the Viterra combination, and closing of announced divestitures (NA corn milling; EU margarines).

What Went Well and What Went Wrong

What Went Well

• “Better than expected” start to 2025; management highlighted nimbleness and tariff-related timing shifts that supported Q1, and reaffirmed FY25 adjusted EPS of ~$7.75.
• Processing outperformed in Brazil/Europe/Asia soy crush; management cited flexibility to benefit from regional dynamics and to keep capacity open in 2H if margins improve.
• Strong liquidity and low leverage: RMI exceeded net debt by ~$3B; adjusted net debt/EBITDA at 0.6x, with $8.7B undrawn credit lines and ~$3.2B cash.

What Went Wrong

• Refined & Specialty Oils results were down in most regions (except Asia) given a more balanced supply/demand and U.S. biofuel policy uncertainty.
• Cash from operations was -$285M (vs. +$994M LY), driven by working capital swings as inventories rose with seasonal flows.
• YoY earnings compression: adjusted EPS $1.81 vs. $3.04 and adjusted Segment EBIT $406M vs. $719M, reflecting a softer merchandising environment and lower Processing vs. last year.

Transcript

Operator (participant)

Good day and welcome to the Bunge Global SA Q1 2025 Earnings Release and Conference Call. Today, all participants will be in listen-only mode. Should you need assistance during today's call, please sign up for a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask your questions. To ask a question, you may press star and then one on your telephone keypad. To withdraw your question, you may press star and then two. Please note that today's event is being recorded. I would now like to turn the conference over to Ruth Ann Wisener. Please go ahead, Madam.

Ruth Ann Wisener (VP Government Affairs)

Thank you, Operator, and thank you for joining us this morning for our first quarter earnings call. Before we get started, I want to let you know that we have slides to accompany our discussion. These can be found at the Investor Center on our website at bunge.com under Events and Presentations. Reconciliations of our non-GAAP measures to the most directly comparable GAAP financial measure are posted on our website as well. I'd like to direct you to slide two and remind you that today's presentation includes forward-looking statements that reflect Bunge's current view 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.

On the call this morning are Greg Heckman, Bunge's Chief Executive Officer, and John Neppl, Chief Financial Officer. I'll now turn the call over to Greg.

Greg Heckman (CEO)

Thank you, Ruth Ann. Good morning, everyone. I want to start by thanking our team for their hard work and adaptability in what has already been a highly dynamic 2025. Their continued focus and great execution delivered a strong start to the year that demonstrated once again that we can navigate market environments, agility and speed, harnessing a truly global platform, and strengthen our core markets. We continue to believe in the strategic merits of our planned combination with Viterra and expect to close the transaction in the near term. While the timing of regulatory approvals has not been what we anticipated, we've engaged in constructive conversations with the relevant authorities and prepared to close in very short order once received. We recently chose to execute our rights to terminate the definitive share purchase agreement with CJ Selecta pursuant to its terms.

However, soy protein concentrate for feed remains an attractive market with promising growth prospects and nicely complements our soy origination crushing capabilities in Brazil. At the same time, we've made great progress in other key areas, further sharpening our portfolio, strengthening our business, and positioning Bunge for the future. We recently announced the sale of our European margins and spreads business and our North American corn milling business. Both of these transactions allow us to further align around our global value chains. We also closed our previously announced partnership with Repsol and announced a key milestone with the incorporation of intermediate novel crops in the production of renewable fuels in Europe. This alliance furthers our long-term strategy to create alternative paths towards meeting our customers' demand for lower-carbon agricultural and oil supply chains.

Shifting to operating results, first quarter exceeded our expectations, driven in part by some pull forward of activity from Q2 into Q1. Later in the quarter, shifts in trade dynamics, including tariff and regulatory uncertainty, prompted some farmers and consumers to act ahead of potential changes. Looking ahead, we're reaffirming our full-year 2025 adjusted EPS guidance at approximately $7.75 and remain confident in our ability to continue to execute despite the current market environment. As we mentioned last quarter, we expect to provide an outlook for the combined company once we've closed the Viterra transaction. With that, I'll turn it over to John for a deeper look at our financials and outlook. John?

John Neppl (CFO)

Thanks, Greg, and good morning, everyone. Let's turn to the earnings highlights on slide five. As Greg mentioned, first quarter exceeded our expectations. As tariff and regulatory uncertainty increased later in the quarter, some farmers and customers moved ahead of potential changes, which pulled earnings from Q2 into Q1. Our reported first quarter earnings per share was $1.48 compared to $1.68 in first quarter 2024. Our reported results included an unfavorable mark-to-market timing difference of $0.08 per share to a negative impact of $0.25 per share with notable items related to the transaction integration costs associated with Viterra. Adjusted EPS was $1.81 in the first quarter versus $3.04 the prior year. Adjusted segment earnings before interest and taxes, or EBIT, was $406 million in the quarter versus $719 million last year.

In processing, higher results in the Brazil, Europe, and Asia soy crush value chains were more than offset by lower results in North America, Argentina, and European soft seeds. Merchandising improved performance in global grains and financial services business, more than offset by lower results in ocean freight. With the exception of Asia, refinement specialty oils results were down in all regions, reflecting a more balanced global supply and demand environment, driven in part by the uncertainty in U.S. biofuel policies. In milling, slightly higher results in North America were more than offset by lower results in South America, where milling margins were pressured by a more competitive pricing environment. Moving forward another, the decrease in corporate expenses was primarily driven by lower performance-based compensation. Prior year other results include $24 million from the sugar and bioenergy joint venture that would be divested in the fourth quarter of last year.

Net interest expense of $45 million was down in the quarter compared to last year due to increased capitalized interest, higher interest income on investments in interest-bearing instruments, and interest received on Brazilian tax refunds. Decrease in income tax expense for the quarter was primarily due to lower pre-tax income in 2025 and prior year unfavorable adjustments related to foreign currency fluctuations in South America. Let's turn to slide six, where you can see our adjusted EPS and EBIT trends over the past four years, along with the trailing 12 months. Throughout this period, our team has excelled in navigating the complexities of dynamic markets while simultaneously executing various internal initiatives. Recent trend indicates a more balanced supply and demand environment and the impact of trade and biofuel uncertainty, translating into less volatility and lower earnings. Slide seven details our capital allocation.

For the first quarter, we generated $392 million of adjusted funds from operations. After allocating $54 million to sustaining CapEx, which includes maintenance, environmental health, and safety, we had $338 million of discretionary cash flow available. Of this amount, we paid $91 million in dividends and invested $256 million in growth and productivity-related CapEx. We also received $306 million of cash proceeds related to the sale of an interest in our soy crush footprint in Spain to Repsol as part of our newly formed joint venture and a final payment for the sale of our interest in the sugar and bioenergy joint venture. This resulted in approximately $300 million of retained cash flow. Moving to slide eight, quarter end Readily Marketable Inventories, or RMI, exceeded our net debt by approximately $3 billion.

Our adjusted leverage ratio, which reflects our adjusted net debt to adjusted EBITDA, was 0.6x at the end of the quarter. Slide nine highlights our liquidity position. At quarter end, we had committed credit facilities of approximately $8.7 billion, all of which were unused, providing ample liquidity to maintain ongoing capital needs. In addition, we had a cash balance of approximately $3.2 billion, accumulated in large part from the U.S. public debt offering that we closed last September in support of the Viterra transaction. There were no amounts outstanding on our $2 billion commercial paper bill. Let me turn to slide ten. The trailing 12 months adjusted ROIC was 9.4% and ROIC was 8.2%.

Adjusting for construction in progress on our large multi-year projects not yet operating and the excess cash on our balance sheet from the Viterra closing, our adjusted ROIC would increase by 1.5 percentage points and ROIC by approximately 1 percentage point. Returns have declined from recent highs and remain above our adjusted weighted average cost of capital of 7.7%. Moving to slide eleven. In the trailing 12 months, we produced discretionary cash flow of approximately $1.2 billion and a cash flow yield of 10.2% compared to our cost of equity of 8.2%. Let me turn to slide twelve in our 2025 outlook. As Greg mentioned in his remarks, taking into account Q1 results, current margin, and macro environment in forward curves, we continue to expect Q2 2025 adjusted EPS of approximately $7.75. This forecast excludes the impact of announced acquisitions and divestitures that are expected to close during the year.

In agribusiness, full-year results are forecast to be slightly lower than our previous outlook and down from last year, primarily due to lower results in processing. In refinement specialty oils, full-year results are expected to be similar to our previous outlook and down from the prior year, primarily driven by a more balanced supply and demand environment in North America. In milling, full-year results are expected to be lower than our previous outlook and up from last year. In corporate and other, full-year results are expected to be more favorable than our previous outlook and the prior year.

Additionally, the company expects the following for 2025: an adjusted annual effective tax rate in the range of 21%-25%, net interest expense in the range of $220 million-$250 million, which is down from our previous expected range of $250 million-$280 million, capital expenditures in the range of $1.5 billion-$1.7 billion, and depreciation and amortization of approximately $490 million. With that, I'll turn things back over to Greg for some closing comments.

Greg Heckman (CEO)

Thanks, John. Before turning to Q&A, I want to offer a few closing thoughts. In today's uncertain global environment, we can be certain of the strength of our team, our global footprint, and our operating model. Our purpose of connecting farmers to consumers to deliver essential food, feed, and fuel is something the world depends on, regardless of external circumstances. Over the last few years, our team has consistently risen to the challenge, navigating an ever-changing world and exceeding expectations in the face of a global pandemic, trade wars, and geopolitical uncertainty. We are confident that the same focus, discipline, and ability to execute will continue to drive our success. Our business is built on a resilient global infrastructure that ensures an efficient supply of staple crops and food and feed products that has proven its ability to withstand volatility.

We have the right systems and strategies in place to manage risk, adapt to external challenges, and remain focused on what truly matters. This planned combination with Viterra will only enhance our diversification across assets, geographies, and crops, providing us with more optionality to help address the world's food security needs. At its core, our business is resilient. Our track record proves this, and I have no doubt that we'll continue to deliver value for customers at both ends of the value chain. With that, let's turn to Q&A.

Operator (participant)

The first question from the phone comes from Salvator Tiano with Bank of America. Please go ahead.

Salvator Tiano (Equity Research Analyst)

Yes, thank you very much. Firstly, I wanted to ask to follow up a little bit on acquisitions. With Viterra, you make it very clear that it seems the approval is very, very imminent. Obviously, China seems to be the holdup here, and there's always limited visibility in what they do. How confident are you that actually they will approve the transaction soon? If actually there is a chance that this may not happen, what is your backup plan there? Also, CJ Selecta, can you provide a little bit more commentary on why the transaction didn't go through? It seems you indicated that you chose to terminate it, but at least by our mouth, it was a pretty nice, very accretive transaction. Why would you make this decision? Why did you make this decision?

Greg Heckman (CEO)

Let me start with Viterra. Of course, number one, look, the strategic merits of this transaction remain in place, and it accelerates everything that we're doing strategically. We've had very constructive interaction with the authorities as we've submitted additional information as needed. They've done a really excellent job engaging with all the parties and advancing the process. We are confident the traction is going to be improved. When you look at the merits, it's very, very clear. We're purpose-built to create a resilient supply chain, and that's to serve China and the rest of the key demand markets globally. In times of some of the extreme market disruptions that we've seen, and one like we're experiencing now, the reliability that comes from a company like ourselves that's operating in every major origin is even more important.

Timing, we don't know, but the process moves, and we feel very good about the ultimate destination. As far as CJ, look, we went through the long stop date. We passed that, and we just kind of looked at the circumstances of currently where things were at, where the business, and it just made sense at this point to terminate the transaction. As I said in the comments, look, the market for CSPC on the feed market, that continues to be attractive, and it really fits well with our Brazilian business. We'll continue to look for the right opportunity to expand in that market.

John Neppl (CFO)

Maybe just to clarify, Salvatore, on CJ, going through the end date was a result of not having all the regulatory approvals. At that point, we could have chosen to extend it if we felt it was appropriate. As Greg mentioned, we just felt at that time the right thing to do was terminate the agreement.

Salvator Tiano (Equity Research Analyst)

Great. Thank you. I also want to ask about your processing business. Specifically, can you break down your margins for U.S. soy and Canadian canola versus the margins you had in the rest of the world? How did they trend Q1 versus Q4? Also, how were they on an absolute base? I guess U.S. soy historically has been a much stronger performer, but that may not necessarily be the case in Q1.

Greg Heckman (CEO)

Yeah. Look, let me, I guess, hit the high spots here quickly. We definitely saw, if you look at the fact on soy that we are holding the year, you have kind of got to look down into the quarters. Q1 was better. That caused the overperformance. Unfortunately, things have gotten softer here on the curves as we have gone into Q2, and some of that definitely is on open capacity.

Crush will be in soy will be lower in Q2. With the crop coming off, the curves are telling us it should be better again in Q4. The net of that is the year will be flat. As often happens in this business, when you have two crops a year coming off, and you look at the 12-month cycle, the timing can move around a little bit. Really, in soy, the spot crush margins are pretty good, are better everywhere. The outlook is definitely tougher in the curves, except for North America, where we see it getting better with crop. In the soft seeds, North America, canola in Canada, much the same. We had a tighter crop there, and the curves get better as we look out to set these for new crop.

In soft seeds in Europe and the Black Sea, both sunseed and rapeseed production was tighter last year. We got slow farmer selling. Of course, with soybean oil being very competitive globally, that has been tough on soft seed crush margins. We look to new crop in the set these period for that to improve.

John Neppl (CFO)

Maybe to put a finer point on that, looking at Q1 versus a year ago, the U.S. soy crush margins were not dramatically different than they were a year ago for Q1, a little bit lower. The big impact in North America was the soft seed margins were much lower in Q1 versus last year. In terms of soy kind of globally, as Greg mentioned, probably strongest in Europe in Q1, and then U.S. is number two. We had really weak margins in Argentina in Q1. Of course, we are seeing the improvement there in the spot in Q2, given farmer activity in Argentina. We are running harder down there now.

Salvator Tiano (Equity Research Analyst)

Perfect. Thank you very much.

Operator (participant)

The next question comes from Tom Palmer with Citi. Please go ahead.

Tom Palmer (VP and Senior Equity Research Analyst)

Hi, and thanks for the question. Maybe just to follow up on the last question on cadence of earnings, you did indicate the pull forward and kind of the one Q2, Q2 dynamics, and then how maybe it, especially in North America, ramps up a bit to close out the year. You provided some specificity last quarter, talking about 40% of annual earnings coming in the first half of the year. I guess just any updated thoughts on thinking about the cadence of earnings as we move through this year, just given the one Q dynamics?

John Neppl (CFO)

Yeah, Tom, I think this is John. The look at the year, 40/60, really hasn't changed first half, second half. What we saw was really a flip between Q1 and Q2. Instead of 40/60, it came out more 60. It looks to be more 60/40. We pulled earnings forward from Q2 and expect a little bit of softness in Q2 from our prior forecast. About half that overperformance in Q1 was pulled forward from Q2. The other half, we're seeing we had some other things go well in Q1, but we're seeing a little bit of softness in Q2. We're looking at 60, maybe 62, 38, if I wanted to put a really fine point on it, from Q1 to Q2. The broader first half, second half is the same outlook as we had last year, last quarter.

Tom Palmer (VP and Senior Equity Research Analyst)

All right. Thank you. Then, just on the assumptions embedded in guidance, you did note kind of new crop, better crush margins late in the year as is normal. I wondered about kind of what you're embedding for other items, such as U.S. biofuels policy and potential clarity on the RVO for next year, and then just what you're embedding for U.S. kind of China trade relations and how that might impact you as the year progresses. Thanks.

Greg Heckman (CEO)

Yeah. Just as a reminder, we do not have any M&A or share repurchases factored in, and we only assume what is kind of what we can see in the current tariff situation and the forward curves. To the point, what the market believes about RVO in kind of the current trade tensions is reflected in the curves. It is in our forecast and outlook. We are not making any calls that are different from what the market is telling us.

Tom Palmer (VP and Senior Equity Research Analyst)

All right. Thank you for that.

John Neppl (CFO)

Thanks, Tom.

Greg Heckman (CEO)

Thank you.

Operator (participant)

The next question comes from Manav Gupta with UBS. Please go ahead.

Manav Gupta (Executive Director)

Good morning. I just wanted to focus a little bit on this development with Repsol. Looks like you're moving forward with it. Help us understand the benefits and why does it make strategic sense to move ahead with Repsol on this kind of a JV?

Greg Heckman (CEO)

Yeah. We're really excited. Repsol is a great partner. They're making investments in their infrastructure as they're moving to lower carbon fuels. We're excited to form the joint venture to be able to help that, not only with the soy processing assets that went into the JV, but in the origination of the lower carbon intensity feed stocks. Of course, some of that is the announcement we made at the same time to bring novel crops to be part of that solution of lower carbon intensity oils to then go into their renewable diesel and SAF process. We're at the front end of that, but we're excited. We really want to be the partner of choice in every space that we operate. That includes working with the fuel industries as they look to put lower carbon fuels into their portfolios.

John Neppl (CFO)

Manav might just add that while there's a lot of discussion around uncertainty in U.S. biofuel policy, there's a lot more certainty than that in Europe and other places. Europe seems very committed to it, and Repsol is part of that commitment. We wanted to be, as Greg pointed out, partnered with someone that we think is in a great position to take advantage of the growing biofuels opportunity in Europe.

Manav Gupta (Executive Director)

Perfect. My quick follow-up is, I understand it's not in your guidance, but there's a lot of chatter that in the next two or three weeks, you could get a much higher revised RVO with a stronger biomass diesel volume. In the event you do get a higher RVO, which is significantly better, how is Bunge going to benefit from it, probably in the second half or in 2026, if you could provide some thoughts on it?

Greg Heckman (CEO)

Yeah. That would definitely strengthen the oil leg of the crush here in North America. North America has an exporter of oil. Of course, that would help the oil leg globally. That would be good for crush margins.

John Neppl (CFO)

Yeah. We're not very covered. We're not very locked for Q3 and Q4. To the extent the second half, the margin environment improves, we should be well-positioned to take advantage of that. Right now, energy customers are a relatively low percentage of our combined oil volume. Any demand there will be certainly good for our outlook.

Manav Gupta (Executive Director)

Thank you so much.

Operator (participant)

The next question comes from Heather Jones with Heather Jones Research. Please go ahead.

Heather Jones (Founder)

Hey, thanks for the question.

Greg Heckman (CEO)

Good morning.

Heather Jones (Founder)

Stick with the RVO. I have recently, and this was from a conference as well as other things, recently I've heard from some industry watchers that the five and a quarter billion gallon D4 headline number that's been in media reports, etc., that it may not be that high, that it may be more in the mid-fours with the backfill opportunity taking you into the fives. Just wanted to get your thoughts on that. A follow-up to that is, do you think that would be enough to make the domestic market much tighter given the limitations that we have on feedstock imports and biofuel imports this year that we didn't have previously?

Greg Heckman (CEO)

Yeah. Demand is good, but what I'd like to start with is, we are really proud to be part of that first-of-a-kind coalition where we've got farmers, a large segment of the petroleum refiners, and the crushing industry, right, driving to consensus and then advocating for an RVO that's aligned with what the U.S. can produce. When I say the U.S., I mean, think about the investments that have been made that are already in place to help the U.S. achieve energy security and dominance and provide a lot of support for rural communities. The farmers have invested, right? They've invested in the land, in the machinery, the know-how around the inputs and the crop production. The oil companies have invested in converting their plants to biofuels. The crush industry, we've added production capacity to provide the inputs. The infrastructure's in place in every part of the supply chain.

We can serve the demand right now. This is unused capacity. This is not aspirational. That has been the message. We remain, I think, encouraged and optimistic that we will get to the right number. If it does not, right off the bat, the coalition is going to continue to advocate, continue to explain the facts, the impact that the RVO has on rural America, and what it really does to drive value at the farm gate, and all the way through the local economies by adding that domestic demand.

Heather Jones (Founder)

Okay. Thank you for that. I wanted to move on to the tariff situation. Clearly, it's a very dynamic environment. Who knows? It might be very different by next week. As it sits right now with the tariffs in place with China and the impacts on U.S. beans, etc., how are you thinking about how that impacts Brazilian crush margins? Could that potentially, if those dynamics don't shift quickly, affect or slow down the build-out of crush down there?

Greg Heckman (CEO)

Yeah. Look, to start with, the policy is going to work itself out. We like policies that are good for farmers because that's good for the entire ag value chain. The markets do work, and they send the right signal to farmers, and they send the right signal to industry. One of the things we like about our footprint is that whether we're going to crush more in the U.S. domestically, if exports are lower, the same would be offset in Brazil. If exports are higher, we'll crush less. We are going to flex our system not only by regions globally, but within those regions between crush and export and other domestic demand. I think that's what we love about our balanced footprint.

John Neppl (CFO)

Yeah. Heather, when you think about it, there are three things we do in any origin: storage, export, and processing. Depending on what the global markets are telling us from any of those origins, we can either choose to store it and ultimately process it or export it, whatever the market's telling us to do. To Greg's point, we have ultimately good flexibility around whatever the tariff situation ends up being.

Heather Jones (Founder)

Awesome. Thank you so much.

Greg Heckman (CEO)

Thank you.

Operator (participant)

The next question comes from Pooran Sharma with Stephens. Please go ahead.

Pooran Sharma (Equity Research Analyst)

Great. Thanks for the question. Just wanted to ask about South America. Do you expect accelerated farmer selling out of South America in the coming months, out of Argentina in the coming months? What would this mean for kind of global crush margins and your footprint?

Greg Heckman (CEO)

Yeah. In Argentina, I think we talked about pretty slow farmer selling there in Q1. Now, we've seen a recent pickup in the farmer selling, and that's been better for margins there in Argentina. We've adjusted the global footprint a little bit. You've got a temporary lower export tax window that closes late June. You've got better weather, which is telling the farmers what their beliefs are, and they've lifted some of the capital controls. That's driving the farmer selling today. We'll see how long the duration of that goes and how that'll affect. In Brazil, the driver, another record soybean crop. There's no take or pay this year, which should help improve the value chain performance versus 2024. If you think about it, we've got a big total corn crop coming behind that.

From the farmer selling of beans, historically, the farmer has been marketed more regularly to get ready for the Safrinha harvest to free up the bin space and to deal with some of any of the logistical timing and coordination that needs to happen.

Pooran Sharma (Equity Research Analyst)

Appreciate that detail. My follow-up was actually going to be on the take or pay. Appreciate you getting ahead of that. I guess wanted to maybe hone in on some of the divestitures you've announced. With the divestiture of corn milling, just wanted to, A, ask, does this just leave you with wheat milling in your milling business? Is it just wheat milling now? How should we think about that business when it comes to kind of your core operations as you look ahead?

Greg Heckman (CEO)

Yeah. Correct. We've got a real nice South American wheat milling business there in Brazil. Viterra also has some Brazilian wheat milling. Those footprints fit together very nicely to serve our customers there. We like our position there in Brazil in the wheat milling business because not only the local crop, but we feed that from our Argentine wheat value chain as well as other global wheat markets as they make sense to import into Brazil, which happens quite often. That business is a good fit. We think we're in a very competitive position for the long term to serve our customers.

John Neppl (CFO)

Yeah. Just to clarify the first part of your question, our South American wheat milling will be the only thing left from a milling perspective once we close the transaction.

Pooran Sharma (Equity Research Analyst)

Great. Appreciate the details.

Operator (participant)

The next question comes from the line of Derrick Whitfield with Texas Capital. Please go ahead.

Derrick Whitfield (Managing Director)

Good morning, Allen. Thanks for taking my questions. I wanted to ask a follow-up on Repsol with my first. Could you speak to the amount of camelina and safflower that could be processed as feedstock for their biorefinery or the mix that they're solving for through this partnership?

Greg Heckman (CEO)

It's probably too early to give the exact numbers on that. Basically, what we want to do with our energy companies are give them the different choices of the lower CI feedstocks. Having multiple novel crops and even used cooking oil and the other things that we're sourcing in our portfolio, we can then give them the choice on what works in their machinery for the cost, the quality, and the carbon intensity that works for them. What we want to be able to provide is that optionality of feedstocks. Even in these novel crops, then it becomes building the programs and continuing to build the volumes. That's like winter canola in the U.S. We got started last year, and then we've seen great uptake by the farmers. We've got a lot more acres out there.

We'll build these programs in partnership with the demand and with the growers.

John Neppl (CFO)

Yeah. Maybe just one thing, Derrick. We're not targeting a specific mix of inputs. It's going to be whatever the market tells us is the most economic. That could be, as Greg mentioned, a mix of novel seeds, soy oil, soybean oil, Yuko. All those things Greg mentioned are part of the portfolio. Ultimately, the economics are going to drive what the most logical combination of inputs is.

Derrick Whitfield (Managing Director)

Great. That makes sense. For my follow-up, I wanted to stay on biofuels. Do you expect a more favorable assessment for SPO and winter canola based on industry feedback and your interaction with the administration on 45Z? There seems to be quite a bit of energy around the inclusion of CSA practices for seed oils.

Greg Heckman (CEO)

We're optimistic, and we're engaged in that and trying to bring the facts forward and bringing the economics forward and to do what's good for farmers as well as the entire value chain there.

Derrick Whitfield (Managing Director)

That's great. Thanks for your time.

Operator (participant)

The next question comes from Steven Haynes with Morgan Stanley. Please go ahead.

Steven Haynes (Equity Research Associates)

Hey, good morning, and thanks for taking my question. Just on U.S. industry crush capacity, I think one of your peers has announced the shutdown of the plant. Really, maybe just kind of two questions. It does not sound like it, but is there anything in your portfolio that you would be looking to rationalize in the U.S. or North America more broadly? How do you expect the rest of the industry to respond to some of the new capacity that has kind of come online over the last 12-18 months? Thank you.

Greg Heckman (CEO)

Yeah. Look, we've been very thoughtful about our portfolio, really. Everything we've been doing over the last six years, right, it's always continuous improvement. Where we've made our investments, whether it's been bottlenecking or brown fields or green fields, it's to get our footprint to be the most competitive. We're running the assets that we're running now because we plan to. We'll constantly evaluate that globally, and that's part of having that global system. Our goal, of course, is to have a cost structure and capabilities that are built for any point in the cycle. Yeah, during the cycle, at the tougher parts of the cycle, it sends signals. Certain people with cost structures may be shutting down some of these standalone plants and that.

They could be different economics than us running it as part of a network here in the U.S. and also as part of our global network. We are just focused on having the most competitive footprint and system for really any point in the cycle. That is kind of our responsibility.

Steven Haynes (Equity Research Associates)

Okay. Thank you.

Operator (participant)

The next question from the phone comes through Andrew Strelzik with BMO. Please go ahead.

Andrew Strelzik (Equity Research Analyst)

Hey, good morning. Thanks for taking the questions. My first one, you mentioned being open on the majority of your capacity for the back half of the year. I'm just curious if you're managing or how you're managing your forward book right now in an environment that's relatively soft and could look a lot different later in the year. Have you changed that approach at all? I'm just curious how that compares maybe to normal. Any color on that would be great.

Greg Heckman (CEO)

Sure. Our team is constantly focusing on our customers on both ends of the value chain and what they're doing to manage their risk. I will tell you, in this environment, we have seen everybody go to more spot, right? There is less done on the forward curve because people don't know what to do with some of this uncertainty. They pulled in, the farmers have been more spot sellers. The end consumers, whether it's feed, food, or fuel, unless they've got margins, they've been more spot buyers. That has led to less of a forward book.

Now, we've got different ways to manage our risk, and we're always evaluating what the supply and demand tells us, what the outlook looks like, and where globally we want to be placing our hedges and locking in margins as they occur versus how we believe they will and as they have versus history based on what the supply and demand numbers are telling us. There is less on right now, one, because we're looking at what the curves are telling us and what we believe. Part of it is driven from customers on both sides. When you get in that close in 30-90 days, that's when the logistics really start driving the activity really for all the participants in the market.

Of course, that's why you've got more visibility on the front end to get things on the books and maximize those logistics to serve everyone.

Andrew Strelzik (Equity Research Analyst)

Right. Okay. Okay. That makes sense. My second question, and I do not know if you will be able to answer this with any specificity, but I am just trying to think about the right earnings base for the core business. Obviously, this year has a ton of disruption that maybe is abnormal, right, and depressing numbers this year. Is there any way to frame kind of how much you think that that has impacted relative to your $775 million kind of outlook? Yeah. Is there any way to think about how much that is impacting the year and what maybe a more normal earnings base would look like? Thanks.

John Neppl (CFO)

Yeah. Look, I think, this is John. Certainly, we're in a little bit more challenging environment this year just given all the uncertainty versus where we would expect to be kind of in a mid-cycle. When we look at that, it's really driven by a more challenging merchandising environment. This year is one of the big drivers. As we look at, if I just take us back to our original mid-cycle modeling, at this point in time, a couple of years later, a lot of the projects that we had slated are still under construction. Those haven't contributed yet. We didn't expect those to yet at this point in time. We made some divestments along the way in Russia, Ukraine impact. Those things have kind of pulled our results down from the mid-cycle.

Margins have largely held in versus kind of how we'd see mid-cycle. Other than the refining side, those have actually been better, more longer. Merchandising has been more challenging for us. On the cost side, we experienced a couple of years of high inflation. Overall, offset to some degree a little bit by some of the actions we've taken around share buybacks and things. Ultimately, it's hard to gauge what the $775 million would be without the current environment we're in. Certainly, if things improve here the back half of the year, we'll have a better sense next year of kind of earnings power going forward, excluding Viterra. Of course, that will have a big impact on our outlook as we integrate that business. We have capital projects that are going to be coming online late 2025 and through 2026.

End of 2026, it will have a further impact ongoing. As you can imagine, pretty hard to put a fine point on what the $775 million would have been had we not had all this volatility this year. We are going to get every dollar we can.

Andrew Strelzik (Equity Research Analyst)

Sure. Absolutely appreciate that and appreciate the perspective. Thanks.

Operator (participant)

The next question comes from Ben Heckler with Barclays. Please go ahead.

Hi. This is Rohi going on for Ben. I just have some questions for some timeline questions. For the milling business, what do you see as a timeline to close? What regulatory processes are we still waiting on, and do you foresee any risk? Also for biofuel, thank you so much for the color on the call. When do you expect an update on that? Thanks so much.

John Neppl (CFO)

In terms of corn milling, we're hoping it's purely a U.S. business. It will just need to go through the domestic regulatory process. We feel like we've got a chance to get that closed by the end of Q2. Latest, early Q3 is kind of our view right now. Can you maybe clarify your second question on biofuels?

To kind of predict when you're going to get an update from the EPA or any other body. Do you have—I mean, we were talking about the volumes that were estimated. Do you kind of expect something from the EPA on volumes within?

On the RVO update?

Yeah. On RVO. Yeah.

Yeah. I mean, it could be any day. We're thinking by end of May is a good chance that we'll hear something. Of course, they're not obligated to come out with anything until later in the year, but they've indicated as near as we can tell, they could do something as early as sometime in this month. We'll see. We're anxiously watching just like everybody else. Ultimately, I think they're being very thoughtful. They're listening. As Greg talked about, the coalition that was put together with farmers and the energy companies and the AG companies, they're listening. We're hopeful that they're formulating the right approach, and will come out soon.

Operator (participant)

This concludes our question and answer session. I would like to turn the conference back over to Greg Heckman for any closing remarks.

Greg Heckman (CEO)

I'd like to thank everyone for joining us today. Thank you for your interest in Bunge. We continue to have great confidence in our team to be able to deliver for our customers, both farmers and consumers, whatever challenging environment that we're in. We look forward to speaking with you again soon, and have a great day.

Operator (participant)

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