Accelerating. CAGNY February 2015

Transcription

1 Accelerating CAGNY February 2015

2 Safe Harbor Statement 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. The statements are based on many assumptions and factors, including availability and prices of raw materials, market conditions, operating efficiencies, access to capital and actions of governments. Any changes in such assumptions or factors could produce significantly different results. To the extent permitted under applicable law, the Company assumes no obligation to update any forward-looking statements as a result of new information or future events. ARCHER DANIELS MIDLAND COMPANY 2

3 Our Agenda Today Overview and Strategy Juan Luciano Wild Flavors & Specialty Ingredients Greg Morris Financial Review and Capital Allocation Ray Young Q&A ARCHER DANIELS MIDLAND COMPANY 3

4 ADM: Profitable Growth, a Global Leader Key Financial Statistics CY14 revenue: $81B Facilities: 750+ Market cap (12/31/2014): ~$33B NYSE: ADM FY04 Adjusted Segment Operating Profit $1.6 Billion 1 CY14 Adjusted Segment Operating Profit $3.7 Billion 1 Corn Processing CY14 Adjusted Segment Operating Profit Pro-Forma 2 Corn Processing Corn Processing 32% 30% 43% 24% Ag Services 40% Oilseeds Processing 28% 6% Other 23% Ag Services Oilseeds Processing 26% 2% Other Ag Services Oilseeds Processing 35% 9% 2% Other Wild Flavors & Specialty Ingredients 1 Excludes specified items 2 Pro-Forma assumes WILD Flavors and SCI CY 2014 results included as well as segment realignment ARCHER DANIELS MIDLAND COMPANY 4

5 The Global Middle Class is Growing Billion 3.2 Billion 4.9 Billion ARCHER DANIELS MIDLAND COMPANY 5

6 Global Graying and the Silver Economy Within the next five years, the number of adults aged 65 and over will outnumber children under the age of 5, for the first time in human history. ARCHER DANIELS MIDLAND COMPANY 6

7 Customers Needs are Changing Food and beverage manufacturers desire for better quality and faster innovation is leading to increased outsourcing of R&D activities to ingredients suppliers. ARCHER DANIELS MIDLAND COMPANY 7

8 We are Well-Positioned to Capitalize on Global Trends Team ADM Teamwork Knowledge Agility Origination & Logistics Basic Processing Ingredients & Solutions Raw Materials & Cost Position Customer Franchise & Advantaged Key Building Blocks Global Market Intelligence & Merchandising AcumenStrategic Relationships ARCHER DANIELS MIDLAND COMPANY 8

9 We are Advancing a Strategy to Set the Competitive Standard in our Industries In the Grain Business Geographic diversification Expand destination marketing EVA & ROE Source Transport Process Transform Distribute In Processing Operational Improvements Higher value processing EVA & ROIC Market & Sell In Ingredients & Solutions Capitalize on healthy trends Leverage flavor capabilities EVA & Revenue Growth ARCHER DANIELS MIDLAND COMPANY 9

10 We are Focused on Key Financial Objectives Increase Returns & EVA Dampen Volatility of Earnings ARCHER DANIELS MIDLAND COMPANY 10

11 Our Value Creation Framework Align Operating Metrics with Key Drivers of Shareholder Value Optimize the Core Increase destination marketing Portfolio management Rejuvenate product mix Drive Operational Efficiencies Technology for comp. advantage Standardization for scale 1ADM for productivity Expand Strategically Geographic expansion Grow market-facing units Create new ingredients business Enhance Talent & Capabilities Build talent base around the world Selective marketing and application development Add customer-centric capabilities ARCHER DANIELS MIDLAND COMPANY 11

12 Actions are Improving Returns Strengthening the Business Exceeded $400 million in ongoing cost savings in 2014 Targeting incremental $550 million over next 5 years Managing the Portfolio Progressing WILD integration and synergies Announced sale of cocoa business On-track to close chocolate sale in mid 2015 Closed South America fertilizer sale Investing to Grow Sweetener and fiber in Tianjin, China Feed premix in Nanjing, China Protein Specialties in Campo Grande, Brazil Fibersol at Clinton, Iowa Non-GMO lecithin plants in Germany and India Q4 CY14 Trailing 4Q Average Adjusted ROIC (1)(2) 9.0% Annual WACC 6.4% Long-Term WACC 8.0% 6.2% Q4 CY12 5.5% 6.6% Q4 CY13 Trailing 4Q Average Adjusted ROIC (1)(2) (1) Non-GAAP measure (2) Adjusted for LIFO and specified items Q4 CY14 9.0% ARCHER DANIELS MIDLAND COMPANY 12

13 ADM is the Premier Global Ag Services Company Former Toepfer Grain Elevators Wheat Milling Other Processing Edible Bean Feed/Premix Trucking ARTCO Sales Office GrainCorp (19.8% Equity Stake) Note: Origination Assets in South America and part of Europe are reported within the Oilseed segment. ARCHER DANIELS MIDLAND COMPANY 13

14 We Are the World s Largest Corn Processor Corn Processing Plant Other Processing Plant Sweetener Terminal Ethanol Terminal Animal Nutrition Processing Plant Export Flow 14 corn processing plants in 7 countries and 8 other processing plants 37 feed and premix facilities in 6 countries 3 of 5 largest corn mills in the world Daily grind capacity of 3.0 million bushels ARCHER DANIELS MIDLAND COMPANY 14

15 World s Most Diversified Oilseed Business Crush Refinery Biodiesel Elevator Elevator Port Packaging Value Added Cocoa Golden Peanut Golden Peanut Buying Point Sales Office Wilmar (17.3% Equity Stake) ARCHER DANIELS MIDLAND COMPANY 15

16 Significant Opportunity for Additional Improvements A Systematic Approach to Cost Savings $240 M Data Infrastructure & Analytics Maintenance Initiatives Corn & Oilseeds Energy Efficiencies Operational Excellence Process Improvements Advanced Process Controls Operational Reliability By 2019 $350 M Additional Savings $160 M Corn & Oilseeds Processing Technology Membrane Technology Fermentation Advanced Separations Procurement Savings Yield Improvements Catalysis + $200 M Additional Procurement Savings = $550 Million ARCHER DANIELS MIDLAND COMPANY 16

17 Strategic Innovation Enables New Products Diversifying Corn Grind & Expanding Oilseeds Product Portfolio Feedstocks: Corn Oilseeds Super Absorbent Polymers Industrials Industrial Oils (Coatings) Project Pipeline Specialty Proteins Alternative Sweeteners Food and Feed Target: >$1B in New Product Sales Packaging and Fibers Home and Personal Care Specialty Oils Omega-3 ARCHER DANIELS MIDLAND COMPANY 17

18 Segment 2014 and 2015 Drivers 2014 Adj. Seg. OP 2014 Drivers of Results 2015 Drivers of Improvement Oilseeds $1.5 B Demonstrated strength and diversity of the portfolio in delivering consistent results Corn $1.2 B Showed the value of managing the business for overall results Record annual operating profit Strong margin environment in 1Q Recovery in South American business Divestitures of Cocoa and Chocolate Improvements in underperforming businesses Stable U.S. sweeteners and starches demand Balanced supply/demand for ethanol over the CY Continued product and customer mix optimization Ag Services $1.0 B Strong recovery from prior year Turnaround in int. merchandising Good execution to fully capitalize on more favorable environment Export opportunities carrying into 1Q Targeted growth in international merchandising Large US and global stocks provide opportunities across the grain network WFSI Benefit from new wins and increased customer engagements Enhanced geographic scale, capital projects: China, Brazil, India, Germany, US Synergy capture Expanding scope of portfolio ARCHER DANIELS MIDLAND COMPANY 18

19 WILD Flavors and Specialty Ingredients: A Truly Global Business Processing (30+) ADM Specialty Ingredients Specialty Commodities WILD Flavors Sales Locations (50+) ADM Specialty Ingredients Specialty Commodities WILD Flavors R&D and Applications (30+) ADM Specialty Ingredients R&D WILD Center of Excellence WILD Product Dev & App Day 1 revenues of $2.5 billion+ ARCHER DANIELS MIDLAND COMPANY 19

20 We have Created a World Class Specialty Ingredients Business Our Strategy Grow geographically Expand the specialty portfolio Build the brand Expand structural capital Meats & Meals Baked Goods Core Markets and Products Beverages Personal Care Health & Nutrition Dairy & Ice Cream Snacks & Confection SYSTEMS Nutrition Texture Taste Function Build Tools Lever Technology Lead with Systems ARCHER DANIELS MIDLAND COMPANY 20

21 Consumer Trends Drive Our Strategy Trends Specialty Ingredient Market $50B $30B Ingredients $20B Flavors Market growing at 5-6% Driven by: Health & Wellness Protein Convenient foods Clean labels Greater variety Sources: Euromonitor. International Food Information Council Foundation 2014 Food & Health Survey. Mintel. Markets and Markets Report. IFT. ARCHER DANIELS MIDLAND COMPANY 21

22 Combined Portfolio Addresses Major Consumer Trends, Serves Vast Range of Customer Needs Specialty Proteins Emulsifiers Edible Beans Nutritional Supplements Fiber Polyols = Day 1 revenues of $2.5 billion+ Hydrocolloids WILD Flavors Specialty Commodities ARCHER DANIELS MIDLAND COMPANY 22

23 Customer Value Driven by System-Based Model, Purposeful Innovation Portfolio WILD Flavors Natural Flavors, Colors, Sweeteners, Juice Concentrates ADM Specialty Ingredients Plant-Based Proteins Beans, Bean Powders, Crisps Polyols, Specialty Gums Emulsifiers, Fibers Nutritional Supplements Customized Ingredient Blends Specialty Commodities Ancient Grains, Dried Fruits/Vegetables Value Creation Ingredients to Innovative, Systems-Based Solutions ARCHER DANIELS MIDLAND COMPANY 23

24 Driving for Profitable Growth Setting the stage for growth Executing on synergies Staying the course with Capital Projects ARCHER DANIELS MIDLAND COMPANY 24

25 Financial Review and Capital Allocation Financial Performance Returns Forward Capital Allocation ARCHER DANIELS MIDLAND COMPANY 25

26 $ Millions Diversity Reduces Overall Volatility Adjusted Segment Operating Profit 3,900 3,447 4,083 3,693 2,900 2,728 2,833 2,962 1, FY09 FY10 FY11 CY12 CY13 CY14 Oilseeds Processing Corn Processing Agricultural Services Other Prior periods have been restated to conform to current year presentation, except for the elimination of the allocation of working capital interest in fiscal 2007, 2008, and In January 2013, ADM converted to a calendar year ending fiscal year. CY12 represents 12-months ending December 31, Prior FY s represent 12-months ending June 30th. ARCHER DANIELS MIDLAND COMPANY 26

27 Return to EPS Growth $4.00 $3.00 $3.45 $ /2012 US drought impact $3.20 $2.33 $2.77 $2.00 $1.99 $1.65 $2.32 $1.00 FY06 FY07 FY08 FY09 FY10 FY11 CY12 CY13 CY14 YOY EPS (adj) 2Y Moving Avg.(adj) Earnings and EPS net of specified items (including LIFO) In January 2013, ADM converted to a calendar year ending fiscal year. CY12 represents 12-months ending December 31, Prior FY s represent 12-months ending June 30th. ARCHER DANIELS MIDLAND COMPANY 27

28 $ Billions Strong Cash Flow Generation /2012 US drought impact Cash Flow from Operations before Working Capital Changes 1.0 FY09 FY10 FY11 CY12 CY13 CY14 In January 2013, ADM converted to a calendar year ending fiscal year. CY12 represents 12-months ending December 31, Prior FY s represent 12-months ending June 30th. ARCHER DANIELS MIDLAND COMPANY 28

29 Clear Objectives, Focused Actions Driving Returns Results 2011/ / & Beyond Objective ROIC S-T WACC ROIC L-T WACC of 8% ROIC = 10%; EVA Growth Actions Results Capital/project discipline Technology Center SG&A savings Billion Dollar Challenge Achieved S-T WACC in 2012 Project prioritization Operational excellence to drive cost reductions Active Portfolio Management Exceeded L-T WACC in 2014 Continued operational excellence Targeted growth investments Dampen volatility of earnings Driving toward mediumterm objectives ARCHER DANIELS MIDLAND COMPANY 29

30 Value Creation with Increasing Returns Above Cost of Capital ROIC Objective: 200 BPS over WACC 14% 12% 10% 8% 6% 4% 2% Q4 CY14 Trailing 4Q Average Adjusted EVA (1)(2) $670M Trailing 4Q Average Adjusted ROIC (1)(2) 9.0% 2014 Annual WACC 6.4% 0% Q4 FY09 Q4 FY10 Q4 FY11 Q4 FY12 Q4 CY13 Trailing 4Q Average Adjusted ROIC Long Term WACC Short Term WACC Q4 CY14 (1) Non-GAAP measure (2) Adjusted for LIFO and specified items ARCHER DANIELS MIDLAND COMPANY 30

31 Steadily Increasing Dividends Annual Dividends per Share $ CY09 CY10 CY11 CY12 CY13 CY14 CY15 (Q1 Annualized) ARCHER DANIELS MIDLAND COMPANY 31

32 Focus on Returns has Translated to Strong Relative TSR As of Dec 31, Year TSR 3-Year TSR 5-Year TSR 10-Year TSR ADM 22.3% 94.4% 85.1% 179.9% S&P 500 Consumer Staples Index 16.0% 62.0% 110.8% 176.7% S&P 500 Industrials Index 9.8% 78.1% 124.3% 111.6% S&P 500 Index 13.7% 74.6% 105.1% 109.4% Source: Bloomberg ARCHER DANIELS MIDLAND COMPANY 32

33 Forward Capital Allocation Targets 80% 60% % of Operating Cash Flow Spend: 60%-70% in strategic M&A or return of capital to shareholders 40% 30%-40% reinvested in Capex 20% 0% CY 2012 CY 2013 CY 2014 Medium-Term ARCHER DANIELS MIDLAND COMPANY 33

34 Dividend Payout Range to Increase with Stronger and More Stable Earnings Dividend Payout Ratios Ranges 20%-25% Near-Term Range Historical Range 25%-30% Medium-Term Range 30%-40% ARCHER DANIELS MIDLAND COMPANY 34

35 2015 Capital Allocation Projections Element Amount Comment Capexp: ~$1.1-$1.3B Approximately 1.2X D&A and within the 30%-40% capexp/cash flow range Return of Capital: Dividends 28 /~$0.7B annual 17% increase; Payout of 33% of 2015 consensus EPS and within the 30%- 40% medium-term payout range Share Repurchase ~$1.5-$2.0B Subject to strategic requirements Estimated Total Return of Capital: ~$2.2-$2.9B Above 60%-70% of cash flow range because of return of capital from some asset sales ARCHER DANIELS MIDLAND COMPANY 35

36 ADM Investment Thesis Growth Opportunities Supported by Enduring Trends Focus on Driving Returns and Creating EVA Active Portfolio Management Resulting in More Stable Earnings Strong Cash Flow Generator Supported by Diversified Funding Strategies Balanced Capital Allocation Philosophy ARCHER DANIELS MIDLAND COMPANY 36

37 Appendix ARCHER DANIELS MIDLAND COMPANY 37

38 Sources of Profitability Physical Grain Assets Physical Grain Assets Intellectual Capital Transportation Operating Expertise Elevation Capacity Volume Discounts Carry Charges Blending/Drying/Storage Connection to Farmers Risk Management Market Intelligence Arbitrage Grain & Freight Spreads/Options Diversified Product Portfolio Value Added Services Operating Efficiency Centralized Negotiations Trade Knowledge/Relationships Round Trip Optimization Competitive Advantage 3rd Party Logistics Inland Port/Intermodal Ramp Multi-modal Flexibility ARCHER DANIELS MIDLAND COMPANY 38

39 Transportation: Core Competency & Competitive Advantage Efficiency Technology 1,200 Trucks Fleet 2,300 Barges Optimization 27,500 Railcars Asset Utilization Leverage 9 Owned Bulk Carriers 150 on Time Charters Yearly ship 160,000 containers ARCHER DANIELS MIDLAND COMPANY 39

40 Our NA Footprint is Strategically Positioned for Efficient Origination and Distribution Corn Belt Corn Processing Plant ADM Elevator Sweetener Terminal Ethanol Terminal ADM Export Facility ARCHER DANIELS MIDLAND COMPANY 40

41 We Have Market Leading Positions Across a Diverse Product Portfolio Products Key Applications Market Position Sweeteners Soft Drinks Confectionery Bakery Brewery U.S.: #1 Starches Sorbitol Paper making Corrugating Confectionery Personal care Food U.S.: #2 U.S.: #1 Alcohol Amino Acid (Lysine) Bio-based Propylene Glycol (PG) Fuel (E-10/15/85) Beverage Personal Care Solvent U.S.: #1 Animal nutrition U.S.: #1 Food & beverage De-icing Personal care Home care U.S.: #1 ARCHER DANIELS MIDLAND COMPANY 41

42 Further Expanding Product Portfolio to Optimize Margins Fibersol Polydextrose Rare Sugar Omega-3 DHA Renewable Chemicals Enzymes Polyols Over-the-fence Opportunities Soluble ingredient used to increase dietary fiber Soluble ingredient used to increase non-dietary fiber and reduce sugar and calories Ultralow-calorie sugar with taste similar to fructose Sustainable alternative to fish oil with widely recognized health benefits for both humans and animals Exploring technology to produce adipic acid and other base ingredients for products such as nylon Key production input for various ADM products; could also be sold directly for food and feed applications Used in food and personal care products Long-term agreements to supply ADM s low-cost raw materials to co-located 3 rd parties ARCHER DANIELS MIDLAND COMPANY 42

43 US Europe Latin America Africa South-East Asia China Glucose Native Starch HFCS 55 Polyols Strategic Focus: Global Growth Market Perspectives expected growth per region (%) expected growth per product (%) Keys Insights China is the # 1 starch & derivatives market since the early 2010 s Developed regions are growing below 1% per year Emerging markets are growing between 1x and 2x GDP growth rate Source: LMC International 2014 ARCHER DANIELS MIDLAND COMPANY 43

44 We Are Growing Our Global Footprint with China Plants Premix Plants Tianjin Plant Complex China Corn Belt Tianjin Premix Plant Dalian Premix Plant Nanjing Premix Plant Tianjin 320K MT Fructose Plant Tianjin 18K MT Fibersol Plant ARCHER DANIELS MIDLAND COMPANY 44

45 Diversified Profit Stream Average OP $1.5B Cocoa & Other Asia 15% Refining, 22% Packaging, Biodiesel, Other 6% Crushing & Origination 57% Comprised of Flax 2% Other 8% Cotton 10% Canola 25% Soybean 45% Sun 10% ARCHER DANIELS MIDLAND COMPANY 45

46 Capitalizing on Soy Production Growth in Brazil s Northern Frontier Ports Transhipments (Porto Velho and Miritituba) Barge Transport (waterway) Truck Transport (highway) Soybean Production ARCHER DANIELS MIDLAND COMPANY 46

47 Targeted Growth Strengthen Northern Brazil Origination Campo Grande Specialty Proteins Expand Food Oils Applications Increase origination/ transportation network to feed Barcarena operation Growing market Displace high cost imported products with local production Expand sales to neighboring countries Free up US capacity Sunflower and canola oils Migration to healthier oils Innovate around packed oils Capitalized on trend that includes blends Specialty oils and fats ARCHER DANIELS MIDLAND COMPANY 47

48 Industry in Transition Soy Corn Canola Coconut Cotton Flax Sunflower Peanut Palm First in NA to announce intention of sourcing Mass Balance sustainable palm by 2016 Health Profile Economic & Functionality Labeling Next Generation Solution ARCHER DANIELS MIDLAND COMPANY 48