Mark Schweitzer - Vice President-Investor Relations Juan Ricardo Luciano - President, Chief Executive Officer & Director Ray G. Young - Chief Financial Officer & Executive Vice President.

Farha Aslam - Stephens, Inc. Adam Samuelson - Goldman Sachs & Co. Cornell R. Burnette - Citigroup Global Markets, Inc. (Broker) Robert B. Moskow - Credit Suisse Securities (USA) LLC (Broker) Michael Leith Piken - Cleveland Research Co. LLC Ann P. Duignan - JPMorgan Securities LLC Kenneth B. Zaslow - BMO Capital Markets (United States) Sandy H.

Klugman - Vertical Research Partners LLC.

Good morning and welcome to the Archer Daniels Midland Company Second Quarter 2015 Earnings Conference Call. All lines have been placed on a listen-only mode to prevent background noise. As a reminder, this conference call is being recorded.

I would now like to introduce your host for today's conference call, Mark Schweitzer, Vice President, Investor Relations, for Archer Daniels Midland Company. Mr. Schweitzer, you may begin..

Thank you, Stephanie. Good morning, and welcome to ADM's second quarter earnings conference call. Starting tomorrow, a replay of today's call will be available at adm.com.

For those following this presentation, please turn to slide two, the company's Safe Harbor Statement, which says that 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.

These statements are based on many assumptions and factors that are subject to risk 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 you should carefully review the assumptions and factors in our SEC reports. To the extent permitted under applicable law, ADM assumes no obligation to update any forward-looking statements as a result of new information or future events. On today's call, our Chief Executive Officer, Juan Luciano, will provide an overview of the quarter.

Our Chief Financial Officer, Ray Young, will review financial highlights and corporate results. Then, Juan will review the drivers of our performance in the quarter, provide an update on our scorecard, and discuss our forward look. Finally, they will take your questions. Please turn to slide three. I will now turn the call over to Juan..

Thank you, Mark. Good morning, everyone. Thank you all for joining us today. This morning, we reported adjusted earnings per share of $0.60. Our adjusted segment operating profit was $724 million. Adjusted ROIC of 9% was 240 basis points above our cost of capital.

Our second quarter results demonstrate the strength and value of our geographic and business portfolio diversity. In Corn, domestic and export demand for ethanol was robust, but record industry production limited margins. This was partially offset by strong results from our corn sweeteners and starches business.

In Oilseeds, good meal demand supported strong North American soybean crushing results. And South American origination and export volumes were up, leading to good throughput at our expanded origination and port network. These, combined with the flexibility of our global crush plants, helped the Oilseeds team deliver another strong performance.

The Wild Flavors and Specialty Ingredients team had an excellent quarter and continues to make great progress toward achieving their targeted cost and revenue synergies.

Ag Services earnings were impacted by lower margins and volumes of North American exports, as they were less competitive globally, and by a sharp upward move in commodity prices at the end of the quarter.

But within our Ag Services segment, the milling business had record second quarter results We've continued to advance our strategic plan that's improving our ROIC and growing our EVA.

Among numerous other actions, we closed the sale of our global chocolate business to Cargill; we closed the Barcarena port transaction with Glencore in June; and we remain on track to close both our Eaststarch transaction and the sale of our global cocoa business later this year.

And we're making great progress on our operational excellence initiatives. I'll provide more detail on our scorecard activities later in the call. Now, I'll turn the call over to Ray..

one, increased GAAP pension expenses relating to the changes in discount rates and mortality tables; second, increased spending in IT in our ERP project; third, investments related to strategic business improvement projects; and lastly, unique costs related to specific divestiture activities, including the chocolate and cocoa.

We're starting to see some of the benefits of some of the strategic business improvement projects in our results. Excluding these factors, our run rate in underlying corporate costs are consistent with the prior year, and you should expect our run rate the next few quarters to be between $110 million to $120 million per quarter.

I would also like to comment on our GAAP net revenue number that can be found in the appendix. GAAP net revenues for the quarter were $17.2 billion, down from last year's $21.5 billion.

This significant reduction was driven by large declines in commodity prices that impact our revenues, but this decline also impacts our cost of goods sold as our input costs are lower. So the key is managing the spread between the revenues and cost of goods sold, which is a core competency of our teams.

This dynamic makes operating profit much more relevant when analyzing us. I also want to highlight that the GAAP statements in the prior year do not include the revenues and the costs of WILD and SCI, which transactions closed in the fourth quarter of last year. Now turning to the cash flow statement on slide six.

Here's the cash flow statement for the six months ending June 30, 2015 compared to the same period the prior year. We generated $1.2 billion from operations before working capital changes in the six months, slightly higher than the prior year.

Total capital spending for the six months was $540 million, up from the prior year, but consistent with our guidance of $1.1 billion to $1.3 billion for the calendar year.

During the six months, we spent $1.2 billion to repurchase about 24 million shares towards our 2015 target of repurchasing $1.5 billion to $2 billion of shares, subject to strategic capital requirements.

Our average share count for the first six months was 633 million diluted shares outstanding, down 28 million from the 661 million at this time one year ago. At the end of the second quarter, we had 621 million shares outstanding on a fully diluted basis.

For the first half, our total return of capital to shareholders, including dividends, was over $1.5 billion. Our six months cash flows are consistent with our 2015 calendar year targets of capital allocations, namely CapEx of $1.1 billion to $1.3 billion, approximately $700 million of dividends, and $1.5 billion to $2 billion in share repurchases.

We have been more aggressive in the pace of stock buybacks, taking advantage of the recent weakness in our stock price, and all this is consistent with the balanced capital allocation framework we set forth at our December Investor Day. Slide seven highlights our balance sheet as of June 30 for 2015 and 2014. Our balance sheet remains strong.

Operating working capital of $8.3 billion was down $2.7 billion from the year-ago period.

This decrease was comprised of about $2.1 billion related to lower inventory prices, including the translation impact, partially offset about $0.9 billion related to higher inventory quantities and a decrease of about $1.5 billion in other working capital, primarily related to reclassification of working capital for our global cocoa and chocolate businesses under held-for-sale accounting.

Total debt was about $6.9 billion, resulting in a net debt balance, that is debt less cash, of $5.7 billion, up from the 2014 net debt level of $3.6 billion, in part reflecting the fourth quarter cash outflows related to our acquisitions of WILD and SCI.

In addition, we raised €1.1 billion in June in the euro debt markets to take advantage of low interest rates and to serve as a net investment hedge for our grown euro asset base following the WILD acquisition. We have paid down $0.8 billion of notional debt in July in a U.S.

debt tender settlement, and we may pay down an additional $0.2 billion before the end of the third quarter.

While we will take a pre-tax charge of slightly above $0.2 billion in the third quarter related to the debt tender premium, we expect going forward our ongoing annual interest expense to be lower by about $40 million pre-tax, or $0.04 per share after-tax, through the combination of the U.S. debt reductions and the euro debt issuances. This U.S.

debt tender/euro debt issuance transaction had a very positive NPV benefit for ADM. Our shareholders' equity of $18.6 billion is $1.7 billion lower than the level last year, with the cumulative translation account down about $0.5 billion due to the strength of the U.S. dollar. We had $5.9 billion available global credit capacity at the end of June.

If you add the available cash, we had access to over $7 billion of short-term liquidity. Next, Juan will take us through a review of our business performance.

Juan?.

Thanks, Ray. Please turn to slide eight. In the second quarter, we earned $724 million of operating profits, excluding specified items. Our ROIC of 9% was up 120 basis points over last year's second quarter and EVA was up $238 million, an increase of more than 60% from last year.

First half operating profits were similar to the same period last year, despite a decline of more than $200 million in operating profits from the ethanol business. These results demonstrate the power of our business model. Now, I will review the performance of each segment.

Starting on slide nine, in the second quarter, Ag Services results declined from last year. Merchandising and handling results reflected a more significant seasonal decline in North American export volumes and margins, while some global demand was met by increased South American exports that improved our Oilseeds segment results.

We also saw lower Global Trade Desk margins, as the June 30 USDA report drove an increasing prices of some commodities, which negatively impacted some merchandising positions. While we had this impact at the end of Q2, markets came back a few days after the report. In transportation, we saw lower total U.S.

barge freight volumes and high water increased our costs. Milling and other results increased due to improvements in product margins, mix and strong merchandising results, a great quarter for our global milling operations; record second quarter results there. Please turn to slide 10.

Corn Processing results improved sequentially and declined year-over-year. In sweeteners and starches, overall volumes were up about 3% year-over-year. The tight supply chain for North American sweeteners supported very good margins and volumes. We also saw good demand for livestock feed.

And our Almex joint venture in Mexico and our Eaststarch joint venture in Europe both delivered solid results. And in bioproducts, ethanol earnings were lower. As I mentioned earlier, demand was robust, with increased exports and record U.S. driving miles, but margins were limited as the industry ran at record volumes.

Our ethanol profitability improved from the first quarter, with second quarter ethanol EBITDA margins estimated at around $0.18 per gallon. Now, looking forward, on the demand side, we see continued strong domestic and export demand for ethanol.

Driving miles are up more than 3%, which will help domestic ethanol consumption approach 14 billion gallons in 2015. We see annualized net exports running at about 800 million gallons. We expect continued growth of exports to markets that currently use MTBE. And E15 adoption continues to grow, which will also bolster demand long-term.

On the supply side, industry production levels will be a function of many factors, including maintenance timing, yields, hot weather, planned and unplanned downtime, and the pace of industry capacity creep. In terms of what we are doing, we're strengthening our efforts to expand E15 adoption in the U.S. and ethanol adoption in markets abroad.

We're also investing to further improve ADM's cost position in this business.

ADM has invested a lot of effort to drive operational excellence and cost reductions in our wet mills, which represent about 1.1 billion gallons of nameplate capacity, and that have translated into strong financial results from these facilities even in challenging environments.

We believe there are still opportunities to improve the cost positions of our large dry mills, which represent about 600 million gallons of nameplate capacity. We are intensifying efforts across a range of areas to drive these cost improvements.

In summary, we continue to believe there is an important place for ethanol in the global fuel supply, and we expect that our actions will help drive improved results from this business in the near term. Slide 11 please. Oilseeds had another consistent solid quarter, similar to last year.

In crushing and origination, large global bean supplies and strong U.S. mill demand drove great global soy crush results. In the first half of 2015, we crushed record volumes of soybeans globally.

As part of our strategic plan for Oilseeds, we've added switch capacity to more of our North American crush plants, and we profited from our global switch capacity in a weak softseed margin environment this quarter.

As I mentioned earlier, our South American origination and port operations, including our Barcarena port, had good throughput as the region's large corn and soy harvests proved the world's most competitive supplier. In fact, ADM's South American export volumes were up 38% compared to last year's second quarter.

On the softseed side, concerns about seed supply significantly reduced margins and volumes. Refining, packaging, biodiesel and other results declined mainly on the absence of biodiesel blender's credits we recorded last year. In Europe and South America, margins were challenged by regional market conditions.

In North America, we saw strong refining margins and our Stratas Foods bottled oil joint venture delivered its best quarter yet. Stratas continues to be an industry leader in working with customers to manage the transition away from trans fat. Results from Asia rose primarily and (20:19) improve performance. Slide 12, please.

In their second reporting quarter, the Wild Flavors and Specialty Ingredients business unit delivered more than $100 million in earnings, an excellent performance. Wild Flavors had strong results in North America.

To provide some context, it's worth noting that in 2014, North America represented slightly more than half of the profit for Wild Flavors globally. And despite macroeconomic headwinds, Flavor profits in Europe were in line with our plan. And this quarter was one of the best ever for our specialty proteins business.

Among other highlights, a customer launched the first retail product with our Textura customized inclusions. The WFSI business with products ranging from protein, specialties to ancient grains to natural flavors, is a key component in ADM's efforts to serve customers with on-trend products to grow their business.

As I mentioned earlier, WFSI team continued working across all ADM businesses to fuel synergy efforts. In terms of revenue synergies, they continued to grow the pipeline and customer base. In the quarter, they added 175 projects to the pipeline, bringing the total to nearly 600 projects.

In the quarter, they worked across all ADM's business units to deliver more than 50 more revenue synergy wins. One interesting note here, the SCI team and their customer relationships have proved to be a valuable engine for driving cross business collaboration and delivering these wins.

So, so far this year, the WFSI team has implemented $24 million in annualized run rate cost synergies, that's more than half away toward the three-year target. We remain confident that the team will deliver €100 million of run rate synergies from the WILD acquisition by the end of year three, which is 2017.

I would still expect the WILD business to deliver $0.10 to $0.15 earnings accretion in the first full year of operations, despite some forex headwinds. Now, on the Slide 13, I would like to update you on how we're strengthening and growing our company. This is a scorecard we presented at the Investor Day in December.

It lists the actions we are taking to help grow our business, our earnings and our returns. We've highlighted some of the areas in which we made significant progress. I'll discuss a few. In Ag Services, we expanded our former services offering with an investment in AgriGold, a leader in on-farm analytical and forecasting tools.

We announced the expansion of our port at Puerto General San Martin in Argentina, enhancing our export capability from the region. And our port services JV acquired a Brazilian port and shipping agency. In Corn, we are on track to close the Eaststarch acquisition in the second half of the year.

We contributed our liquids feed business into a joint venture to achieve greater scale without additional capital intensity. And in May, we announced an agreement to acquire a small sweetener manufacturer in Central China, but unfortunately that transaction failed through.

In Oilseeds, we closed the sale of a 50% stake in our Barcarena Port to Glencore. We closed the sale of our global chocolate business to Cargill, and we remain on track to close the global cocoa sale to Olam by the end of the year.

And in WFSI, we acquired a Tree Nut & Seed Processing Facility in California, adding processing to support strong sales growth. We remain on track to deliver synergy and accretion targets, and we continue to advance our construction projects in Brazil, China, Germany, India and the U.S.

And with respect to our operational excellence initiatives, I've talked about our objective of delivering $550 million of run rate savings by the end of year five. By the end of the second quarter, we have realized already about $125 million of these run rate savings.

We'll update you on our scorecard each quarter, and over time, you should expect to see the results of these actions in improved earnings and returns. So before we take your questions, I wanted to offer some additional perspective as we look forward. We continue to feel good about 2015. Large U.S.

harvest should help drive utilization of our storage and transportation assets in the U.S. The large global corn corps, the tight North American sweetener balance sheet and continued global sweetener demand should support margins and volumes in our sweeteners and starches business.

As I mentioned earlier, in ethanol in the near-term and medium-term, we expect demand, both domestic and export to remain very strong. Production levels should also be robust and industry margin should evolve based on the supply-demand balance as we move through the year. We're intensifying our work on the cost position of our dry mills.

Over the medium-term, ethanol remains the cheapest octane enhancer in the world and we're growing to work domestic and international demand. Good global demand for meals should continue to support capacity utilization at our global soybean processing assets. And the WFSI team is well on track toward their costs and revenue synergy targets for 2015.

We continue to see great collaboration across all of ADM's business units as we partner to serve a growing customer base. Overall, we continue to advance our clear and aggressive strategic plan. We'll continue to see contributions from that effort throughout the year and will remain focused on growing EVA.

With that, operator, please open the line for questions..

Certainly. Your first question comes from the line of Farha Aslam with Stephens. Your line is open..

Hi, good morning..

Good morning, Farha..

Good morning, Farha..

Could you just walk us around the globe for global crush margins, one? Clearly, soy crush margins are very, very strong.

How will ADM position itself for that and can that be adequate to offset the weakness in softseed margins?.

Yes. So, margins in North America continued to be very, very good; very strong domestic demand. And if you remember, we announced earlier in the year that there are two facilities in the U.S., where we have added switch capacity to soybean. So, that's helping us to offset a little bit the weakness that we expect in softseeds.

South American margins continued to be solid. European margins were very solid in soybeans in second quarter. We took advantage again of our swing capacity and we maxed the soybean crushing capacity in Europe. We've seen now a little bit more softness as more South American soybean mill is arriving. And in China, we saw some recovery of that.

It's not where it used to be at the beginning of the year, but it's much better than last year. So, overall, we see a strong continued demand and we foresee good crushing margins for the rest of the year..

That's helpful.

And are you concerned about Argentine capacity coming back online this year or early part of next year?.

Listen, I think that at one point in time we'll have to deal with that; it's predicated in many factors at this point what the farmer will do in Argentina. There are upcoming elections and all that. But we are fairly bullish given the domestic demand in the U.S. and the global demand that continues to grow for soybean mill..

That's helpful, thank you. And just one follow up. On Ag Services, in your prepared remarks you'd highlighted that you expect a strong performance in the second half from that business due to a good U.S. crop.

Could you just share with us kind of what you've seen so far from the farmers as they've prepared for harvest, and kind of what you think your elevator utilizations are going to be and how that's going to affect earnings going forward?.

Yes. So obviously, Ag Services' first half was softer than what normally is the second half. We saw it last year. It doesn't surprise us that much. If you look at the performance year-to-date for Ag Services, it's in line with the first quarter last year. So as last year, as the U.S.

comes into the harvest and it becomes more competitive in export, we plan to move a very strong harvest through all our facilities. So we expect a very strong second half. We expect the U.S. to become more competitive in export; we haven't been so far.

But we expect that that demand to come to our elevators very fast and being able to increase elevation margins towards the end of the year. So, at this point, we are very bullish second half for Ag Services earnings..

Thank you very much..

Your next question comes from the line of Adam Samuelson with Goldman Sachs. Your line is open..

Yes, thanks. Good morning, everyone..

Good morning, Adam..

Good morning, Adam..

Maybe the first question in ethanol, and Juan, I heard you express some confidence that the margin outlook would improve from here, and I guess I'm trying to reconcile. The supply/demand with exports where they are seems reasonably balanced, although it's not clear stocks are actually going to draw as you move into the second half.

But with the sharp decline in oil prices, how do you see – do you become incrementally concerned about the pricing of ethanol relative to gasoline, both domestically and overseas just keeping that margin kind of contained over the near term to medium term?.

Listen, we have to separate the analysis in certain businesses. From a demand perspective, we continue to feel very good about ethanol. As I said before, domestic demand with low gasoline prices got increased 3% and that pattern should continue with the normal seasonality between summer and winter in the U.S.

Export demand continues to be very solid in those countries that are already customers and we have many, many new countries trying to become new customers, and our team are out there trying to develop those markets. So, the issue always become the – in this relatively new industry, what's happened with the supply.

And the supply has been strong so far during this year because we have a really mild start of the summer from a temperature perceptive. We expect that – right now, we've seen that even in June in July. Over the last three weeks, inventory has been flat or slightly declining for the last two weeks or three weeks.

So, the industry can produce at that 15 billion gallon but not more than for a very few weeks. And then, I would say, it's relatively balanced what do we see right now in ethanol. And even at this oil prices, we are making money in our – in all our mills.

And if you think about the oxygenate values, MTBE continues to be at about $2.85 versus ethanol of about $1.50 or $1.60 and the other alkylates at about $2.50. So we continue to be the most competitive octane enhancer out there. And so without even thinking about E15 growing in the background.

So I think overall – I cannot call it through the months or through the quarter because, as I said, this is a relatively volatile industry as we grow into our capacity. But I think, medium term, we're pretty optimistic about the balance turning to the favor of ethanol..

Okay. that's very helpful. And then on – you expressed confidence in Ag Services in the second half principally in the U.S.

Do you a) Was there a loss on the Global Trading Desk late in the quarter that provides some good cushion to the third quarter, and if so, can you quantify it? And second, how do you think about the mix, the breakdown of that Ag Services second half between the export volumes against a very competitive in South American crop versus domestic merchandising and origination, domestic transportation and the offshore business?.

Yeah. It's a complex question, Adam. Let me see if I can split it a little bit. So, the first part was – Global Trade Desk, yes, the loss on the Global Trade Desk, yeah. As you know, June 30 report created a big volatility and basically brought prices up. So, when we mark-to-market that I think the loss was around $25 million, Adam.

So maybe not that significant and the prices corrected like by July 2 or July 3, they go back to. So part of that has already come back in those positions. Regarding second half, I think, maybe the export season will start a little bit later this year for the U.S. as South America continued to extend their window a little bit.

But we believe that the demand will come to the U.S. and will come all of a sudden, altogether, so that will bode well for elevation margins. We think that our transportation business also will be very strong. We need to move a very large crop. I think that we're going to see the comeback of the normal carries that we see in the U.S.

So we believe that a very strong crop and a very big carryout bodes very well for our footprint in North America. So, I think it's going to be heavy fourth quarter loaded, and I cannot call it, Adam, whether it's all exactly fourth quarter or slip a little bit into Q1, but we are prepared to manage a very large crop..

Okay. And then a point of clarification there on the carries.

Is that corn or corn and wheat or both?.

I think we're seeing both at this point in time..

Okay. That's very helpful. I'll pass it along. Thanks..

Thank you, Adam..

Your next question comes from the line of David Driscoll with Citi Research. Your line is open..

Good morning, Juan. This is Cornell Burnette on with a few for David Driscoll..

Hey, Cornell..

All right. All right. Just wanted to give a few on ethanol. Just wanted to see what was your take on where export rents would be at the end of 2015. It appears to us that the number could be something greater than 1 billion gallons.

And so putting that together with the fact that you're seeing somewhat of an oversupply currently in the ethanol market, just was wondering kind of what prevents margins from continuing to be soft if that is indeed the case?.

Yeah. We expect this balance to be like $1.8 billion. I think I said it before when I answered to Adam in the ethanol. It's difficult to call it in the short term. In the short term, there are risks to our forecast. Certainly, Brazilian ethanol could be coming into the U.S., but we continue to see market being developed outside the U.S. and the U.S.

domestic market being robust. Consider these and I think we said it before, Cornell, there are out there at least 6 billion gallons of MTBE capacity that we're working very hard to replace and this product, again, ethanol is the most sustainable and the lowest cost octane enhancer.

So I like to be in a positioned in a product that is very sustainable and lower cost and their alternatives. So there is a big market out there. And here we're going to go through ups and downs through all these regulations. Again, I said it before, it's relatively new industry, an industry that has started in 2007.

You need to go through phases of consolidation. We're going to have credit capacity, some producers will become better producer, more cost efficient that will push some of the marginal producers into more troubled water. That will to a certain degree modify the industry. So we're watching this industry development.

But at this point in time, we continue to be very excited about the potential we find in our own plants to improve our competitive advantage, and the potential for this market to grow in front of us..

Okay. And then just a follow-up, I mean, over the remainder of 2015, we're looking at, on the futures market, petroleum price is under $50 a barrel and there is some concern that there might be some oversupply into the market.

When you talk about kind of the ethanol profitability perhaps strengthening going forward from what you saw in the second quarter, was that predicated on us seeing some type of rebound in petroleum and that kind of what levels of petroleum do you think you can get there?.

Yeah. At this point in time, I'd refrain from forecasting oil for obvious reasons. But I would say, in the current environment, when I make this comment, adding the framework of the current oil prices and the current corn prices, if you will. So I'm not forecasting that they're going to go anywhere..

Okay, very good. Thank you..

Thank you, Cornell..

Your next question comes from the line of Robert Moskow with Credit Suisse. Your line is open..

Hi, Juan and Ray. Just in general, it looks like the first half came in below internal expectations for the year. And judging from what you're saying that the mark-to-market trading benefit would only be $25 million in third quarter, it just looks like the year as a whole is going to be below what your internal expectations might have been.

And I just kind of want to get a sense of that from you.

Is there still a chance that you can hit your internal targets for the year as you set them?.

Yeah. Let me walk you through the different businesses, Rob. Oilseeds is way ahead of last year, and we continue to see upside in Oilseeds, granted we come in against the strong comps that we had in Q3 and Q4 last year, but Oilseeds is coming very strong on very strong demand. So that's ahead of last year and that should continue to be over the year.

Ag Services, as I told you, is on line for the first half. And last year, we had a second half that allowed us to deliver in the range of $850 million to $900 million. And we see, this year, again the possibility to be in that range, if we can repeat the second quarter, the second half. And with these kind of crops, we have the potential to do so.

So I will say those businesses are on par or ahead of last year. WFSI is having very good performance, will hit within the range. And so that an addition of last year. And then we have in sweeteners and starches that are going very, very strongly, and it needs to offset the weakness in ethanol.

I think ethanol obviously started the year very soft in Q1, it improved in Q2, it has improved a little bit over the last three weeks. So I think the issue is we have one business that we think it will deliver, which is Ag Services.

We have two businesses, WFSI and Oilseeds, that will probably outperform, and that needs to offset a little bit the softness in ethanol. So all in all, at this point, we still feel good about 2015..

Okay..

Also, from a returns perspective, Rob, we feel good about our ROIC focus, and we continue to be running our plants pretty aggressively and managing invested capital. We're buying back shares, also to reduce invested capital. So we feel good in terms of our progress towards ROIC as well..

Don't forget, Rob, that when we divest cocoa and chocolate, when you consider we are 9% ROIC today, we are divesting basically $1.2 billion of invested capital that, for us, represent very, very low returns. So our implicit return, when all that is gone, is going to get a boost..

No, I totally agree, no doubt. I just think that your stock, whether justified or not, is going to hinge on forward projections for EPS and it just looks like the ethanol business, it would require a pretty heroic recovery to improve off of the first half. So I just think that that's what's holding back your stock..

Yeah....

And let me ask a follow-up.

On share repurchase, Ray, did you say that you're shooting more towards the $2 billion now, in that range of share repurchase guidance? Is that what you said?.

Yeah. I mean, given the pace that you've seen in the first half of the year, we've been fairly aggressive, especially when our stock pulled back. So I have to say that we're probably on the higher end of the range there, for sure..

Okay..

And our balance sheet remains strong. So we've got a lot of capacity to buy back shares..

Certainly. Okay. Thank you..

Your next question comes from the line of Michael Piken with Cleveland Research. Your line is open..

Yeah. Hi, good morning.

Just wanted to dig a little bit deeper into the Wild Flavors/Specialty Ingredients segment and maybe you could talk about the cadence of earnings for the back half and what type of growth rate we might be looking for from an EBIT standpoint or a revenue standpoint as we look ahead maybe to some of the outer years?.

Yeah. Well, sure. So there is some seasonality in this business, as you know, because there is a lot of juices and there is a lot of product that are sold in the summer. So the second quarter is a slightly higher from a seasonal perspective than Q3, if you will. Margins continue to be very strong in the high-teens EBITDA margins for this business.

The ingredients growth that we continue to see are in the range of 3% to 5%, and when you take natural products, natural flavors products are more in the 5% to 6% range.

We feel very excited about the reaction that our customers have had to our product mix into these segments, and we've been expanding the customer base to make our business even much more robust. Just to give you some example, the number of customers driving 80% of sales have increased by 47%, which show the robustness of our pipeline going forward.

And as I said in my prepared remarks, the pipeline of new wins or projects that compose our revenue synergy portfolio have had a quantum leap of 75% from Q1 to Q2. So all the prospects, all the products are on trends. Those trends are strong and customers are reacting very well to innovating with us. So we feel very good about it..

Okay. So I mean, I guess just as a follow-up, I mean do you have any quantification? And I understand the seasonality part, but in terms of like do you have a revenue target or, in terms of next year, what could that $0.10 to $0.15 maybe turn into from an accretion standpoint? Thanks..

Yeah. To be honest, Michael, this is such a new business for us and this is a combination for us of nine different businesses that we grouped together.

So we don't have a strong comp, so we don't have a lot of history to – and since a lot of this growth are the product of combination of new synergies, of new solutions for customer, it is difficult to put a target.

We know we are ahead of schedule in terms of synergies and we know we're going to deliver the accretion next year; we just haven't developed the robustness of comps going forward since this is a new business for us..

Operator?.

Operator, do we have more questions or....

Your next question comes from the line of Ann Duignan with JPMorgan. Your line is open..

Hi. Good morning, everyone..

Morning, Ann..

Good morning, Ann..

Hi. My question is more kind of big picture. There was some press releases over the weekend that the Chinese government is considering changing its corn pricing policy and that if it did do so, the world might be awash in Chinese corn.

Just curious if you've heard anything about that and what could that do to your business if they did indeed change their pricing policy?.

Yeah. There are two things, Ann, that everybody says bring excitement to our lives in the grain business; one is weather, the other is government intervention. So we are very used to follow that, to track that. It always presents opportunity for discontinuity.

Obviously, we hear the rumors that China is finding more difficult to sustain these subsidies to the farmers, but we don't know at this point in time. And I'd rarely bet against the Chinese government; they seem to be very prudent and very strategic about their moves. So we're just paying attention.

Obviously, a release of inventories or a drop in price could mean a decline in prices for corn. That would probably bode well for our business..

Okay, I appreciate that. And not to beat a dead horse on the ethanol side, but you were very clear at the end of Q1 that you're running the ethanol business for profits, not for volumes. The tone of your comment seems to have changed a little bit.

Am I reading too much into that or are you just running for volume now, not returns?.

We don't make a statement for the full quarter, so we don't commit to the position. It's very much tactical based on what we see in the supply and demands and what we see in the unplanned capacities and the weather and all that. So the team remains very flexible. I guess what we wanted to say is we're trying to maximize earnings into our business.

It depends, during the quarter we may move from one position to the other. So I wouldn't make a statement for the full quarter at this point..

Okay. I'll get back in line and take my questions offline. Thanks..

Thank you, Ann..

Your next question comes from the line of Ken Zaslow with Bank of Montreal. Your line is open..

Hey, good morning, everyone..

Morning, Ken..

Morning, Ken..

I had just two questions.

One is on the Ag Services, what are the keys that we have to be looking for, for you to have the recovery? Is it the basis, is it the farmer moving and what are the concerns that are associated with when the farmer is going to be selling and how do you think about it? And then my second question is, can you give us an update on the cost savings programs? Are you finding more – is it coming in as expected and just give us an update on that as well? Thank you..

Yeah. So one key thing in Ag Services is the rate of exports and how competitive the U.S. is. Obviously, the U.S. have shown some competitiveness out of the PNW this year, but still the Gulf continues to be second or third in terms of bids versus other origin. So that will be probably the key aspect that will drive our earnings in the second half.

But every year, the Ag Services business find different ways to make money. Sometimes it's through better usage of our footprint, sometimes different carriers, sometimes it's through export. So we will adjust; a large crop gives us a lot of opportunities.

The second point was?.

Cost savings..

Well, the cost savings program, yeah. We are, at this point in time, a $125 million run rate of that promise of $500 million in five years. I will say, Ken, that we have probably identified enough opportunities that we know already that we can implement, that are close to $380 million to $400 million of those $500 million.

And since we are one year into this five-year program, we feel that we are ahead of schedule. So we continue to find – you heard me saying about our intensifying focus on dry mills. The wet mills are larger and older. So rightfully so, when we started this program, we focused a little bit more energy there because we felt the opportunity was bigger.

Now, when we look at the difference we have in cost between the wet mills and the dry mills, we feel that there are opportunities there, whether it's enzymes or yields or things like that. So we continue to find ADM is a large company, and as much as we cut cost, we continue to find new technologies that bring us new promises..

Thank you very much..

You're welcome..

And your final question comes from the line of Sandy Klugman with Vertical Research. Your line is open..

Thank you. Returning to ethanol, you highlighted E15 as a positive driver, and I know the near-term is hard to forecast. But I think flex-fuel vehicles currently about 6% to 7% of the total vehicle fleet.

I was wondering where you see this going over the long term and how quickly do you see us getting there?.

Yeah. When we started with E15, we said that we were expecting the implementation to take about five years. And I think, at the end of the day, we would like to thank Secretary Vilsack for making available some funds to invest in infrastructure.

The industry has coalesced around that and is gathering money and is putting together projects to be able to participate in this program.

And at the end of day, there's going to become a tipping point, and I don't know exactly when to call it, but we think that by 2017, 2018, this will become a more meaningful part of our fuel supply, and we feel very good what that will do to supply-demand balances for the ethanol industry..

Okay, thank you.

And then just to shift to biodiesel, could you tell us how you're thinking about the near-term to medium-term outlook? And do you see further opportunities to reduce your dependency on biofuels in Europe, or have you already done what you needed to do on that front?.

No. I will say, first of all, in the medium term, situation is tough for biodiesel. In the absences of a more clear RFS, biodiesel will struggle, no doubt. I will say in our strategic intent to reduce the dependency on biodiesel, we are just getting started. You heard us about AOR, which is an acquisition we did in Belgium on a bottle oil producer.

So there are three elements to our program. One is to crush more soy in Europe that produces less oil. The second is to grow our share in food industry, which AOR is one of those elements. And the third one is to increase the use of oil into industrial uses, and that's growing as well.

But I will say you're not going to feel an impact until probably 2016 from our perspective..

Yeah. That's helpful. Thank you..

You're welcome..

I would now like to turn the call back over to Juan Luciano for closing remarks..

Thank you, Stephanie. So thank you joining us today. Slide 15 notes our upcoming investor events. As always, please feel free to follow-up with Mark if you have any other questions. And have a good day, and thanks for the time and interest in ADM..

This concludes today's conference call. You may now disconnect..