Summary of Archer-Daniels-Midland Company (ADM) Conference Call Company Overview - **Company**: Archer-Daniels-Midland Company (NYSE: ADM) - **Date**: March 1, 2023 - **Participants**: Greg Morris (SVP, President, Agricultural Services and Oilseeds), Sal Tiano (Bank of America), Steve Byrne (Bank of America) Key Points Financial Performance - Adjusted earnings per share for the previous year was $7.85, a 51% increase year-over-year [3] - Ag Services and Oilseeds reported operating profits of nearly $4.4 billion, marking a 58% increase from the previous year [4] Strategic Focus - The company has emphasized cash, cost, capital, and customer focus, aiming for quality of earnings alongside quantity [2] - Significant portfolio adjustments were made, exiting underperforming and volatile businesses to stabilize earnings growth [3] Growth Initiatives - Future growth will depend on productivity and innovation, including modernizing facilities and enhancing operational resiliency [4] - The company is focusing on environmentally friendly practices in agriculture, such as regenerative agriculture and climate-smart farming [5] Ag Services Investments - Investments in Ag Services include acquiring high-throughput facilities and enhancing existing facilities to improve throughput [10] - The company aims to push more volume through its network while managing risk [10] Crushing and Refining Operations - The Spiritwood crush plant in North Dakota is set to be commissioned by Q3/Q4 2023, adding 1.5 million tons of crush capacity [12] - Expansion of refining capacity in Quincy, Illinois, was completed to better match crush capacity with refined oils demand [12] Nutrition Business Synergies - The company is leveraging synergies between its Ag Services, crushing, and nutrition businesses to optimize raw material sourcing [16] - Collaborations with customers, such as Pepsi, are part of the sustainability initiatives [18] Sustainability and Decarbonization - ADM is focusing on reducing carbon emissions, with 70% of carbon generated on farms, and is incentivizing farmers to adopt environmentally friendly practices [20] - The company has expanded its regenerative agriculture program from 150,000 acres in 2021 to over 1 million acres in 2023 [24] Market Dynamics - Global supply-demand balance is tight, particularly for soybeans and corn, with significant regional disparities [38] - Brazil is expected to produce a large soybean crop, while Argentina faces challenges with the smallest crop in 20 years due to adverse weather [38] - The Black Sea region continues to face logistical challenges affecting market access [39] China Market Outlook - China's consumer demand is recovering post-COVID, which could lead to increased trade flows and demand for agricultural products [42] Commodity Pricing - Wheat balance sheets are in better shape compared to corn and soybeans, with U.S. farmers likely to plant significant corn and soybean acreage [45] - Meal prices have risen due to crop issues in Argentina, while soybean oil prices have been weaker but are expected to firm as demand grows [56][58] Future Projections - The renewable green diesel market is projected to expand significantly, with U.S. capacity expected to reach around 3.5 billion gallons by the end of 2023 [32] - The company anticipates that oil demand growth will outpace meal demand growth, supporting oil prices in the medium term [58] Additional Insights - The company is actively working on carbon capture and sequestration initiatives to enhance its sustainability efforts [28] - The complexity of future supply chains will require careful management to avoid additional costs while ensuring compliance with sustainability goals [26]

Part I [Business](index=5&type=section&id=Item%201.%20Business) ADM is a global agricultural supply chain manager and processor, structured into three segments, emphasizing food security and sustainability - ADM operates as a global agricultural supply chain manager and processor, structured into **three reportable segments**: Ag Services and Oilseeds, Carbohydrate Solutions, and Nutrition, focusing on food security and sustainability[6](index=6&type=chunk)[13](index=13&type=chunk) - The company's "Strive 35" environmental goals aim to reduce Scope 1, 2, and 3 GHG emissions by **25%**, energy intensity by **15%**, and water intensity by **10%** by 2035 from a 2019 baseline[11](index=11&type=chunk)[47](index=47&type=chunk) Product Revenue Contribution | Product | % of Revenues (2022) | % of Revenues (2021) | % of Revenues (2020) | | :--- | :--- | :--- | :--- | | Soybeans | 17% | 18% | 18% | | Corn | 14% | 14% | 12% | | Soybean Meal | 12% | 12% | 14% | - As of December 31, 2022, ADM employed approximately **42,001 people globally**, with **75% male** and **25% female** employees[57](index=57&type=chunk)[58](index=58&type=chunk)[59](index=59&type=chunk) - ADM aims for gender parity in senior leadership by 2030, with female representation at **28%** in 2022, up from **21%** in 2018[60](index=60&type=chunk) [Risk Factors](index=21&type=section&id=Item%201A.%20Risk%20Factors) The company manages diverse risks including operational, strategic, geopolitical, and regulatory factors, impacting its global operations - Operational risks include business disruptions from equipment failure, natural disasters, and transportation issues, alongside sensitivity to energy price fluctuations affecting costs and product prices[72](index=72&type=chunk)[73](index=73&type=chunk)[74](index=74&type=chunk) - Strategic and economic risks arise from highly volatile agricultural commodity prices influenced by weather, government policies, and global demand, alongside intense competition based on price and quality[81](index=81&type=chunk)[87](index=87&type=chunk) - Geopolitical risks, particularly the conflict in Ukraine, could impact global margins through increased commodity and energy costs, supply chain disruptions, and risks to regional assets and operations[96](index=96&type=chunk)[97](index=97&type=chunk) - Technological risks include reliance on key IT systems and exposure to cybersecurity breaches, with a new ERP system being implemented to mitigate legacy system risks[100](index=100&type=chunk)[101](index=101&type=chunk)[102](index=102&type=chunk) - Regulatory risks stem from operating in over **190 countries**, requiring compliance with diverse laws, where changes in government policies like the U.S. Renewable Fuel Standard can significantly impact operating results[104](index=104&type=chunk)[106](index=106&type=chunk) [Unresolved Staff Comments](index=31&type=section&id=Item%201B.%20Unresolved%20Staff%20Comments) The company reports no unresolved staff comments from the SEC - The Company has no unresolved staff comments[108](index=108&type=chunk) [Properties](index=31&type=section&id=Item%202.%20Properties) ADM owns and leases extensive processing plants, storage facilities, and a comprehensive transportation network globally - The Company owns a significant transportation fleet, including approximately **1,800 barges**, **10,000 rail cars**, **240 trucks**, and **3 ocean-going vessels**, supplemented by leased assets[110](index=110&type=chunk) Daily Processing Capacity by Segment | Segment | Owned Daily Processing Capacity (metric tons) | Leased Daily Processing Capacity (metric tons) | | :--- | :--- | :--- | | Ag Services and Oilseeds | 160,000 | 2,000 | | Carbohydrate Solutions | 95,000 | 1,000 | | Nutrition | 101,000 | 88,000 | Storage Capacity by Segment | Segment | Owned Storage Capacity (metric tons) | Leased Storage Capacity (metric tons) | | :--- | :--- | :--- | | Ag Services and Oilseeds | 17,352,000 | 2,239,000 | | Carbohydrate Solutions | 588,000 | 104,000 | | Nutrition | 344,000 | 2,000 | [Legal Proceedings](index=33&type=section&id=Item%203.%20Legal%20Proceedings) The company is routinely involved in legal actions and regulatory inquiries, including ethanol price manipulation lawsuits - The Company is routinely involved in legal actions and regulatory inquiries, recording liabilities for probable and estimable material loss contingencies[119](index=119&type=chunk) - ADM is defending against class-action lawsuits alleging ethanol benchmark price manipulation, denying liability and expecting no material adverse effect on its financial condition[477](index=477&type=chunk) [Mine Safety Disclosures](index=33&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) The company reports no applicable mine safety disclosures for its operations - None[120](index=120&type=chunk) Part II [Market for Registrant's Common Equity, Related Stockholder Matters, and Issuer Purchases of Equity Securities](index=34&type=section&id=Item%205.%20Market%20for%20Registrant%27s%20Common%20Equity%2C%20Related%20Stockholder%20Matters%2C%20and%20Issuer%20Purchases%20of%20Equity%20Securities) ADM common stock trades on NYSE, with an active repurchase program extended through 2024 for up to 100 million shares - The Company's common stock trades on the NYSE under symbol "ADM", with **8,153 registered stockholders** as of December 31, 2022[122](index=122&type=chunk) Stock Repurchase Activity | Period | Total Number of Shares Purchased | Average Price Paid per Share | | :--- | :--- | :--- | | Oct 1 - Oct 31, 2022 | 115,433 | $94.162 | | Nov 1 - Nov 30, 2022 | 837,596 | $94.786 | | Dec 1 - Dec 31, 2022 | 1,722,577 | $92.864 | | **Total Q4 2022** | **2,675,606** | **$93.522** | - The Board extended the stock repurchase program through December 31, 2024, authorizing up to an additional **100 million shares**, with **87,812,005 shares** remaining available as of December 31, 2022[124](index=124&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=38&type=section&id=Item%207.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) ADM's 2022 net earnings increased **60%** to **$4.3 billion**, driven by strong segment performance and robust liquidity - Net earnings attributable to controlling interests for 2022 increased by **60%** to **$4.3 billion**, up from **$2.7 billion** in 2021, with adjusted segment operating profit rising to **$6.6 billion** from **$4.8 billion**[142](index=142&type=chunk) - Ag Services and Oilseeds operating profit increased **58%**, driven by strong global trade, higher South American origination margins, and robust demand for protein and renewable diesel[158](index=158&type=chunk) - Carbohydrate Solutions operating profit increased **6%**, with strong Starches and Sweeteners results offsetting lower ethanol margins in Vantage Corn Processors[159](index=159&type=chunk) - Nutrition operating profit grew **7%**, driven by strong Health and Wellness and Animal Nutrition performance, despite lower Flavors results due to demand and cost challenges[160](index=160&type=chunk) - Cash provided by operating activities was **$3.5 billion** in 2022, a decrease from **$6.6 billion** in 2021 due to working capital changes, while maintaining strong liquidity with **$10.3 billion** available at year-end[173](index=173&type=chunk)[178](index=178&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=55&type=section&id=Item%207A.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) ADM manages market risks from commodity prices, foreign currency, and interest rates using derivatives and VaR limits - The company manages commodity price risk using derivative contracts, volumetric limits, and VaR monitoring, with a hypothetical **10% adverse price change** resulting in a **$39 million** market risk for 2022[197](index=197&type=chunk)[198](index=198&type=chunk)[199](index=199&type=chunk) - The company faces foreign currency risk from operations in over **70 countries**; a hypothetical **10% adverse exchange rate change** could result in a **$1.6 billion** loss on **$13.0 billion** invested in foreign subsidiaries[201](index=201&type=chunk)[202](index=202&type=chunk) Fair Value of Long-Term Debt and Market Risk | Metric | Dec 31, 2022 (in millions) | Dec 31, 2021 (in millions) | | :--- | :--- | :--- | | Fair value of long-term debt | $7,502 | $9,512 | | Fair value amount over (under) carrying value | $(232) | $1,500 | | Market risk (from 50 bps rate decrease) | $342 | $490 | [Financial Statements and Supplementary Data](index=57&type=section&id=Item%208.%20Financial%20Statements%20and%20Supplementary%20Data) This section presents audited consolidated financial statements for 2020-2022, including revenues, net earnings, and balance sheet data Consolidated Statements of Earnings | (In millions, except per share amounts) | 2022 | 2021 | 2020 | | :--- | :--- | :--- | :--- | | Revenues | $101,556 | $85,249 | $64,355 | | Gross Profit | $7,570 | $5,987 | $4,453 | | Net Earnings Attributable to Controlling Interests | $4,340 | $2,709 | $1,772 | | Diluted earnings per common share | $7.71 | $4.79 | $3.15 | Consolidated Balance Sheets | (In millions) | Dec 31, 2022 | Dec 31, 2021 | | :--- | :--- | :--- | | **Assets** | | | | Total Current Assets | $35,410 | $31,909 | | Total Assets | $59,774 | $56,136 | | **Liabilities & Equity** | | | | Total Current Liabilities | $24,191 | $21,948 | | Long-term debt | $7,735 | $8,011 | | Total Shareholders' Equity | $24,317 | $22,508 | Consolidated Statements of Cash Flows | (In millions) | 2022 | 2021 | 2020 | | :--- | :--- | :--- | :--- | | Net cash provided by Operating Activities | $3,478 | $6,595 | $(2,386) | | Net cash used in Investing Activities | $(1,400) | $(2,669) | $4,465 | | Net cash used in Financing Activities | $(2,499) | $(1,118) | $(423) | - In fiscal year 2021, the Nutrition segment completed **five acquisitions** for an aggregate consideration of **$1.6 billion**, significantly expanding capabilities with additions like P4, Deerland, and Sojaprotein[279](index=279&type=chunk) - The company's accounts receivable securitization program provides up to **$2.6 billion** in funding, fully utilized as of December 31, 2022[358](index=358&type=chunk) [Changes in and Disagreements With Accountants on Accounting and Financial Disclosure](index=128&type=section&id=Item%209.%20Changes%20in%20and%20Disagreements%20With%20Accountants%20on%20Accounting%20and%20Financial%20Disclosure) The company reports no disagreements with its accountants on accounting or financial disclosure matters - None[495](index=495&type=chunk) [Controls and Procedures](index=128&type=section&id=Item%209A.%20Controls%20and%20Procedures) Management concluded disclosure controls and internal control over financial reporting were effective as of December 31, 2022 - Management concluded the Company's disclosure controls and procedures were effective as of December 31, 2022[496](index=496&type=chunk) - Management assessed and concluded internal control over financial reporting was effective as of December 31, 2022, attested by Ernst & Young LLP[499](index=499&type=chunk) [Other Information](index=128&type=section&id=Item%209B.%20Other%20Information) The company reports no other information for this item - None[500](index=500&type=chunk) Part III [Directors, Executive Officers and Corporate Governance](index=130&type=section&id=Item%2010.%20Directors%2C%20Executive%20Officers%20and%20Corporate%20Governance) This section details executive officers and incorporates director and corporate governance information by reference - Information on directors, code of conduct, and the audit committee is incorporated by reference from the definitive proxy statement[502](index=502&type=chunk) - Executive officers include Juan R. Luciano (Chairman, CEO, and President, age **61**) and Vikram Luthar (SVP and CFO, age **56**)[504](index=504&type=chunk)[505](index=505&type=chunk) [Executive Compensation](index=132&type=section&id=Item%2011.%20Executive%20Compensation) Executive and director compensation information is incorporated by reference from the definitive proxy statement - Information responsive to this item is incorporated by reference from the definitive proxy statement for the Company's annual meeting of stockholders[507](index=507&type=chunk) [Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters](index=132&type=section&id=Item%2012.%20Security%20Ownership%20of%20Certain%20Beneficial%20Owners%20and%20Management%20and%20Related%20Stockholder%20Matters) Security ownership information for beneficial owners, management, and equity plans is incorporated by reference - Information responsive to this item is incorporated by reference from the definitive proxy statement for the Company's annual meeting of stockholders[508](index=508&type=chunk) [Certain Relationships and Related Transactions, and Director Independence](index=132&type=section&id=Item%2013.%20Certain%20Relationships%20and%20Related%20Transactions%2C%20and%20Director%20Independence) Related party transactions and director independence information is incorporated by reference from the proxy statement - Information responsive to this item is incorporated by reference from the definitive proxy statement for the Company's annual meeting of stockholders[509](index=509&type=chunk) [Principal Accounting Fees and Services](index=132&type=section&id=Item%2014.%20Principal%20Accounting%20Fees%20and%20Services) Information on independent auditor fees and audit committee pre-approval policies is incorporated by reference - Information responsive to this item is incorporated by reference from the definitive proxy statement for the Company's annual meeting of stockholders[510](index=510&type=chunk) Part IV [Exhibits and Financial Statement Schedules](index=133&type=section&id=Item%2015.%20Exhibits%20and%20Financial%20Statement%20Schedules) This section lists financial statements, schedules, and exhibits filed with the Form 10-K, including valuation allowances Schedule II - Valuation and Qualifying Accounts and Reserves | (In millions) | Beginning Balance (Jan 1, 2022) | Additions | Deductions | Ending Balance (Dec 31, 2022) | | :--- | :--- | :--- | :--- | :--- | | Allowance for doubtful accounts | $122 | $88 | $(12) | $199 | | Income tax valuation allowance | $281 | $18 | $(90) | $209 | - A detailed list of exhibits includes the company's Bylaws, debt instrument Indentures, equity compensation plans, and required CEO/CFO certifications[515](index=515&type=chunk)[521](index=521&type=chunk)[528](index=528&type=chunk) [Form 10-K Summary](index=139&type=section&id=Item%2016.%20Form%2010-K%20Summary) This item is listed in the table of contents but contains no substantive information - This item is noted as 'Not Applicable' in the exhibit list[528](index=528&type=chunk)

1 Proprietary business information of ADM. 2 Safe Harbor Statement Proprietary ...

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