Hello and good morning and welcome to the ADM's Third Quarter 2021 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 call, Vikram Luthar CEO, Vice President, Head of Investor Relations, Chief Financial Officer, Nutrition for ADM. Mr. Luthar, you may begin..

Thank you, Emily. Good morning and welcome to ADM's third quarter earnings webcast. Starting tomorrow, a replay of today's webcast will be available at www.ADM.com. For those following the presentation, please turn to Slide 2.

The Company's Safe Harbor statement, which says that some of our comments and materials 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 and materials are based on many assumptions and factors that are subject to risks 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 webcast, our Chairman and Chief Executive Officer Juan Luciano will provide an overview of the quarter and highlight some of our accomplishments.

Our Chief Financial Officer, Ray Young will review the drivers of our performance, as well as corporate results and financial highlights. Then Juan will make some final comments after which, they will take your questions. Please turn to Slide 3, I will now turn the call over to Juan..

Thank you, Vikram. This morning, we reported third quarter adjusted earnings per share of $0.97, but it's a 9% year-over-year improvement despite a higher tax rate. And our year-to-date adjusted EPS of $3.69 is already above our full-year 2020 adjusted EPS. Adjusted segment operating profit was $1 billion, up 18% versus the third quarter of 2020.

And our 8th consecutive quarter of year-over-year OP growth. Our trailing 4-quarter adjusted EBITDA was about $4.6 billion, almost a billion more than a year ago. And our trailing 4-quarter average adjusted ROIC was 9.6%, significantly higher versus the year-ago period.

I remain proud to lead a global team that is delivering robust returns and sustained growth in profits. Our strong quarter and our ongoing upward trajectory are a testament to our team's execution and agility, and the consistent implementation of our strategic plan.

I'd like to take a moment now to highlight some of our accomplishments from the quarter. Slide 4, please. I'd like to start by talking about our approach to portfolio management. Our starting point if they believe that in order to thrive and create value, a Company needs to have a dynamic view of its business portfolio.

So when we talked about the dramatic transformation of our portfolio over the last 10 years, it's not a discrete event, it's a representation of our continuous work to identify opportunities for growth and improvement. Of course, those opportunities may be the -- must be the right ones.

The enduring trends of food security, health, and well-being, and sustainability, provide unique and stable opportunities for ADM to expand our existing capabilities. And we're focusing our efforts on identifying high-growth on-trend areas with attractive margins and which are adjacent to our existing capabilities.

That focusing formed the building of our Global Nutrition business. The acquisition of Wild gave us entry into flavors and a global taste platform. With end-used bolt-on acquisitions to add adjacent capabilities and build a one-stop shop with an industry-leading pantry of ingredients and solutions for human nutrition.

We do the same for animal nutrition with the acquisition of Neovia. And we continue to do the same today as grows our business. In order to meet growing demand for sustainable solutions, we have announced a joint venture and offtake agreement with Marathon Oil Company to support the production of renewable diesel.

We're continuing to invest in key nutrition categories. As demand for alternative protein grows from $10 billion to $30 billion over the next decade, we're further enhancing our work capabilities with the acquisition of Sojaprotein.

And with global demand for pet foods growing $240 billion in the coming years, we are continuing our growth with a 75% ownership stake in PetDine. In the area of microbiome, we've signed an agreement with Vland Biotech to launch a joint venture that will perfectly position to help meet $1 billion in retail demand for probiotics in China.

These are just some examples of how we are dynamically positioning our portfolio to continue driving growth for years to come. There will be more to come, and you can expect an increased level of investments to support our sustainable earnings growth and further expand our capacity and capabilities. Please turn to Slide 5.

As part of our portfolio management approach, we're working to evolve our carbohydrate solutions business. Expanding our arrays of solutions to meet growing customer demand driven by the enduring trend of sustainability.

We've made significant progress recently focused on two areas, new opportunities for our alcohol production and our growing value solutions platform. Then we start with alcohol. Last Thursday, we announced that we reached an agreement which we expect to close at the end of the month to sell our ethanol facility in Peoria.

And yesterday, we announced a Memorandum of Understanding with Gevo to explore potential joint ventures, one of which would include our Columbus and see that rapid design mills, and our would've ethanol assets indicator. Transitioning 900 million gallons of ethanol production to support growing demand for low-carbon, sustainable aviation fuel.

These actions represent our commitment to a process that we began when we first announced the third issue review of our dry mills review of our dry mills. Taken together, they will allow us to significantly reduce our exposure to vehicle fuel ethanol while using our expertise and assets to capitalize on new opportunities.

SAS is one of those opportunities. The U.S. and EU have set goals that together, will support almost 4 billion gallons of annual sustainable aviation of fuel production by 2030 and more than 45 billion by 2050. The other focus area for are carbohydrate solutions evolution is our bio solutions growth platform.

Biosolutions, which we launched about a year ago, is an effort focused on using our product streams to expand our participation in sustainable, higher-margin solutions for attractive end markets like pharmaceuticals and personal care.

This is an area of significant potential, and our team is doing a great job identifying new and exciting opportunities. Earlier this fall, for example, we signed an MOU with LG Chem for the production of lactic and polylactic acid for bioplastics and other plant-based products.

These efforts are enabling value solutions to deliver 10% annualized revenue growth, Including more than $80 million in new revenue wins in the first 9 months of this year. And we believe there are many new opportunities to come.

So from the transformation of our dry mills to our growing biosolutions platform, our work to evolve our would carbohydrate solutions capabilities is a perfect example of how we're managing our portfolio and delivering the smart strategic growth.

And one of the many reasons we remain convinced in our ability to deliver sustainable earnings growth in the years to come. Lets talk a little bit more about our business outlook at the end of our call. And of course, we'll be going into much more detail at our Global Investor Day on December 10th.

But in the meantime, I will turn the call over to Ray to talk about our business performance. Ray..

Yeah, thanks, Juan. Slide 6, please. The Ag Services in Oilseeds team continued their outstanding year with another quarter of substantial profit growth. In Ag Services, we're proud of how the team executed in a challenging environment, including a swift return to operation after Hurricane Ida.

Overall results were significantly lower versus the prior year quarter, driven by approximately $50 million in net timing effects that should reverse in coming quarters, as well as $54 million in insurance settlement recorded in the prior year period and lower export volumes caused by Hurricane Ida. Global trade continues its strong performance.

The crushing team delivered substantially higher year-over-year results executed well, delivering stronger margins in a dynamic environment that includes strong demand for vegetable oils to support our existing food customers, as well as the increasing production of renewable diesel.

Results were also driven by about $70 million in net positive timing effects in the quarter. Refined products and other results were significantly higher than prior-year period driven by positive timing effects of approximately $80 million that are expected reverse in future quarters.

Strong execution EMEA North America biodiesel, and strong refining premiums due to demand for renewable diesel, and food service recovery in North America also contributed to the results. Equity and earnings from Walmart were lower year-over-year.

Now, looking ahead, we expect to see continued fundamental demand strength for egg service and oil seeds products, including from China, as well as solid global soybean crush margin environment in the Fourth Quarter. Partially offset by some higher manufacturing costs. In addition, RPO will be negatively impacted by timing reversals.

All told, we expect results in the fourth quarter to be significantly higher than the third quarter of this year. Slide 7, please. Carbohydrate solution results were lower year-over-year.

The starches and sweeteners sub-segment, including ethanol production from our wet mills, showed their agility by managing through dynamic market conditions and optimizing mix between sweeteners and ethanol production through the quarter. Year-over-year results were significantly lower primarily due higher input cost.

Vantage corn processor results were much higher versus the third quarter of 2020, supported by their resumption of production of -- at our 2 dry mills and improved fuel ethanol margins, particularly late in the quarter.

Looking ahead to the fourth quarter, we expect the solid fundamentals from the end of the third quarter to continue for Carbohydrate Solutions with good ethanol margins extending through the quarter due to industry supply demand balance in solid demand for corn oil and starches, offset by higher manufacturing costs, particularly in Europe.

As well as the absence of the Peoria dry mill. All told, fourth quarter results for the segment should be similar to the previous year fourth quarter.

On Slide 8, the nutrition business remains on its solid growth trajectory with 17% higher revenues and 15% on a constant currency basis and 20% higher profits year-over-year in continued strong EBITDA margins. The Human Nutrition team delivered revenue growth of 12% year-over-year on a constant-currency basis, helping to drive 9% higher profits.

Higher volume, improved product mix for particular strength in beverage show strong flavor results in the in North America, partially offset by lower results in APAC. Especially ingredients continued to benefit from strong demand for alternative proteins offset by some higher costs.

Health and wellness results were higher on robust sales growth in bioactives and fiber. And nutrition profits were nearly driven primarily by the strength in the mineral assets, as well as feed additives. Looking ahead.

We expect nutrition to continue on its impressive growth path with strength across the human and animal nutrition, linked to strong year-over-year earnings expansion and a 20% full-year growth versus 2020. Slide 9, please. Let me finish up with a few observations from the other segment, as well as some of the corporate line items.

Other business results were substantially lower in the prior year period, driven primarily by captive insurance underwriting losses, most of which were offset by corresponding recoveries in the other business segments.

We expect fourth quarter to have some additional insurance underwriting losses resulting in a break even other business for the Fourth Quarter. As expected, net interest expense for the quarter decreased year-over-year on lower interest rates, and a favorable liability management actions taken in the prior year.

In the corporate lines, an allocate corporate costs of $230 million were driven primarily by higher IT offering and project-related costs into the centralized centers of in supply chain and operations. Looking at total corporate costs, in other corporate, we are still on track for the calendar year to be overall similar to 2020.

The effective tax rate for the third quarter of 2021 was approximately 18%. We anticipate our calendar-year adjusted effective tax rate to be the upper end of our previously communicated range of 14% to 16%, and potentially a bit higher depending upon the geographic mix in the fourth quarter.

Our balance sheet remains solid with a net debt-to-total capital ratio of about 26% and available liquidity of about $11.5 billion. With that, I will turn it back to Juan..

Thank you, Ray. Slide 10 please. From consistent sustained profit growth to the ongoing management of our business and product portfolio, our team has a lot to be proud of. And there's one other thing we achieved last quarter that I want to mention.

We have many team members impacted when Hurricane Ida hit in late August, so we provide the temporary housing arrangements, portable generators, food and water, and more. In fact, many ADM colleagues traveled to the region and spent time helping repair their co-worker's damaged homes. Out of that, I'm very thankful to our team.

as we plan to grow into our outlook in far more of depth on our December 10th Global Investor Day. As I look back at the Third Quarter, and all of the last 9 months, I continue to see a team and a Company that are delivering on our goals and our purpose. We are closing out 2021 with great momentum.

We're on track for a strong Fourth Quarter, and the second consecutive year of record earnings per share. And as we look ahead to 2022, we see another strong year for ADM. A robust global demand environment will continue to look for opportunities for us to leverage our indispensable globally origination, processing and logistics capabilities.

And nutrition will continue on its strong growth trajectory in line with our 15% and on its way to a billion dollars in operating profit in the coming years. Of course, there are widely.

Thanks to our unique value chain and global footprint, our unmatched and well-being and sustainability, and a truly unparalleled team of nearly 40,000 colleagues around the world, we remain very optimistic in the strong year to come. With that, Emily,.

To register your questions, please, Our first question today comes from Ben Bienvenu from Stephens. Ben, your line is open..

Hey thanks. Good morning, everyone..

Morning Ben..

Hey, Ben..

I've got one long-term question with regards to your announcement yesterday around SAS. And then I want to ask a clarifier on the guidance. Yesterday, congratulations. A couple of questions.

One is, when you think about the total opportunity for SAS, obviously the embedded demand is significant, given SAS seems like one of the most pertinent ways to reduce greenhouse gas emissions, though are unclear at this time. So I'm curious has you think about engaging with Gevo on this partnership? One, well, to commit these facilities.

to this end market ultimately. And then to help us think about kind of the the Memorandum of Understanding, why did you go with that initially versus a more legally binding agreement? And then, if you would just talk just bigger picture the ethanol markets that would be helpful. I know a lot in there, but I'd love to hear you talk about it..

Thank you, Ben. We've been looking at the options for the dry mills for a very, very long time. So we've been studying the opportunities for the ADM shareholders to o as we try to divert these assets. Certainly, when we look at the sustainability trends and the opportunities, remember one of the issues with these assets are, they are very large.

Would become -- would became a little bit of an issue at the time by testing them. So we were looking for opportunities that are sizable. We are that size turns into a competitive advantage.

So certainly, when you look at all the industries to CO2, and we have identified, and we have checked with strategic partners, people in the industry that they say yes, is the solution. And I think we see also concurrently that both the U.S. and the European governments are looking at this a year final, trying to incentive the demand for that.

So you heard President Biden or Secretary Franco for making statements about that. So we see a very positive environment developing for this, a very sizable adjustable markets for us. And when you combine our size with our raw material procurement and our costs and the ability to decarbonize based on our carbon capture and sequestration.

As you recall, we've been running since 2017. Allows that complex to provide very competitive, low CI fuels for the industry. So we decided to. There are many opportunities and options potentially could happen, which is the creation of these two joint ventures.

In one of those joint ventures, ADMs contribution will be the 2 dry mills as I would objective it as to deconsolidate these two. So again, but still too many discussions to happen and many foreigners to join us into this. We are thinking over time to have a minority position in diesel, having probably strategics of financial foreigners to join us.

So -- but overall, as you can be assured, this is a better outcome for our shareholders in terms of the realization of value from these two drivers. So we're very excited about the opportunities..

Okay. Great. My next question is a clarifier in the discussion to the extent you can on 2022.

First, Ray, did I hear you say on the Ag Services and Oilseeds for the fourth quarter, you expect it to be higher than the third quarter, but you didn't say higher than the fourth quarter last year? Is that -- are those the goalpost we should be thinking about? That's part 1, and then question 2 within that is, export demand looks strong for next year, obviously renewable diesel is continuing to gain steam.

How do you feel about Ag Services and crushing in that broader Ag Services and Oilseeds segments as we go into 2022?.

So Ben, listen. As we think about Q4 for ADM, and when we say we expect a strong Q4, we look at strong crush margins, demand this is strong for proteins, but also the demand for Oilseeds very strong and tight and then you add RGD on top of that. We are facing an improved ethanol environment as we enter the Q4. We are estimating exports from the U.S.

in volume similar to last year. competitors plant is down because of our same situation. And then we continue to see nutrition growing at 15 to 20%. Inflation, we have energy issues that the team is dealing with it and trying to mitigate. But we're coming into Q4 and into Q1 with a strong momentum. We feel very strong about crush margins.

Our export window given that in September we didn't export that much, is probably going to be extended into January or February. A little bit maybe even longer than last year.

So we feel very good at the moment, but again, with an environment that there are supply chain issues, there are energy inflation rising, so we will have to manage all that, but from a demand perspective, we feel very good about it..

From Bank of America. Luke, your line is now open..

Thank you. Good morning, team..

Good morning..

Good morning, Luke..

I just wanted to ask a quick question and follow-up on Ben. You mentioned that the Peoria facility and this new MOU, Gevo, you've done a lot with your ethanol assets.

So just a clarifying point, are your strategic review of the ethanol assets completed? Are you still thinking about Now how you're looking at your fuel ethanol capacity, even wet mills, or is you're thinking now evolve?.

Yeah, no, I would say that the conclusion of its review ended being the best option for Peoria was to divest it, which was basically shed about 135 million gallons of our ethanol capacity.

And then we are taking about 2/3 of all our ethanol capacity in these MoU with Gevo exploring options solidating because we're going to be reviewed in these to joined. The assets to the joint venture. But of course we're going to have some exposure to ethanol on the long-term basis because that's changed for ethanol.

First of all, remember we always said we didn't like the undifferentiating nature of dry mills. In wet mills, we have more options to protect margins and to protect returns.

But secondly, is by taking all these capacity out of out of the market, basically got 900 million gallons in about two years are going to move from vehicle ethanol to SAS feedstock. Then we think that supply demand fundamentals and the margin environment that concludes our to now execute on the transaction but still have a lot to be discussed..

That makes sense. And then just staying on Carbohydrate Solutions quickly. Ray, I believe you said that operating profit last year and ethanol margin turned it looks like you were able to continue seem to be pretty good in 4Q.

So when I think about the starches and sweeteners side, it would seem that you are seeing quite a bit of maybe margin compression or at least lower operating profit.

Is this just a the function of you have higher input costs? And then how are you thinking about what you're selling, some of your sweeteners at or starches that will offset some of that margin pressure potentially?.

No, you're right. We're vertically over in Europe. So that's a little bit of a headwind. At the same time, you are right and the ethanol margins that we're seeing right now in the market are extremely healthy. And that's just reflective above to fallen down to 20 million variables right now.

And when you take a look at driving miles in gasoline demand, were sickly back to pre -pandemic levels of demand again. And so on the positive side, I would have to say the ethanol margins.

On the issue of sweeteners and starches, what's interesting is while a lot of people focus on the HFCS guide the business, the other parts of our business are doing extremely well than the non - HFCS business. For example, citric acid demand is extremely strong, starches demand, extremely strong.

So when we put it all together, that's why we provided the guidance that there are some puts and takes, but we expect our fourth quarter for Carbohydrate Solutions to be similar to where we were last year..

Got it. Very good. Thank you..

Our next question comes from Ken Zaslow from Bank of Montreal. Ken, please go ahead..

Hey, good morning, guys..

Good morning, Ken..

The investments that you have made, there's several of them, and the 75% in the tech business, the LG Chem, the ACS So how much capital have you deployed to this? What is the return expected on the -- I'll start there and then I'll ask the follow-up to that..

Yeah, I mean, I think we haven't disclosed the amount of capital in terms of the LG Chem, I mean, that's still up -- being discussed right now in terms of how the partnership will form on lactic acid and polylactic acid. The access vial is not that significant.

The big, big investment that you mentioned here is really the P4, the investment, the Company. And again, we decided to invest 75% into it, right? So therefore, I think we've managed that capital there. So the total invested capital on these recent announcement, actually, is far less than the billion dollars.

This is consistent with the kind of the bolt-on type of investment numbers that we've talked about in the past, Ken..

And then also those Sojaprotein. But if I take that and then, one, you said that in 2022, from nutrition, you still expecting that 15 and then you blood is up a little bit to 15% to 20%, which is always nice to hear.

But if you're adding less than a billion, but it sounds like more than a breadbasket, is that number going to start to capitals work? Would we start to see that number accelerate at what year and what type of returns that we expected or is it just not enough to make a difference? I'm just trying to cement that in my head..

Yeah. Certainly, Ken, we will see acceleration based on these investments. When we talked about our plan of 15%, that plan was not contemplating any significant acquisitions. And we were thinking and getting to about a billion-dollar OPE in a couple of years, so that trajectory continues and will be accelerated with some of these deals.

Some of these deals you have to understand are just bolt - ons where we plant some capacity where we don't have like in Sojaprotein and things like that, and some other ones become more platforms that actually give us people to accelerate even more our growth rate.

But we will continue in an investment phase on Nutrition because the opportunities are there. Our customers are reacting positively to our value proposition and we see our pipeline and our quarterly wins continue to grow. As long as we can post numbers of revenue growth in the 15% range and OP growth in the.

Are you outlining, every year you do it. consumer trend better, you believe is going to be the future of where we're going.

This one you laid out a -- when you think of your portfolio, what percentage of your portfolio you think targets those 8 today and then when I think back in 3 to 5 years, what percentage of your portfolio will target those 8 items. And then I'll leave it there and I appreciate your time..

Yeah. That's a very good question to which we'll provide more granularity at the December Investor Day, but I will say in general terms, and that's where you see us working on the evolution of the Carbohydrate Solutions portfolio.

Probably, the Carbohydrate Solutions portfolio because of the big assets, it's a one more difficult to adjust to some of these. We think that our services in all and nutrition, are margin that's more aligned to that.

And now that we are evolving the portfolio of Car solutions, we feel that the significant percentage of ADMs in couple of years will be aligned towards these trends. Which make us very optimistic about the future. We are very well-positioned for all these long-term trends..

But in the you, percentages are something to give some context to it like, hey, by 5 years will be at 25% or 30% or something part of how you're thinking. So I just hope that you do that. We appreciate it. Thank you..

Yes. We will provide that granulating. Thank you..

Our next question comes from Michael Piken from Cleveland Research. Michael, your line is open..

To understand a little bit better your outlook for exports, you mentioned that you think the outlook for China and their grain demand can be strong. Could you quantify what you think for their corn and soybean exports for the next year and then also the U.S.

share of what's going to go to China?.

Yeah, Mike listen, we still believe that protein demand is very strong. And when we look and we check with our team in China, we still believe that China will need to import about a 100 million tons give or take of soybeans and about 25 million tons of corn. So of that corn, the majority will come from the U.S. a little bit from Ukraine.

So we think that the volumes, although maybe a slightly in a different way than last year, right now, consumers are a little bit more short term. More hand-to-mouth, if you will, because they were expecting from a little bit of a correction in prices as we were hitting the harvest in the last few weeks. And we feel very good about this exports season.

You have to remember that we were in a tight situation from a supply-demand perspective given these import numbers.

And then when you add that, some of that capacity has been taken out, this will make it for a tight exports season that will probably have rolled forward maybe a month since in October -- at the beginning of October all these facilities were still trying to recover power..

Right. And then my follow-up is just -- it seems like right now there's shortages of fertilizer and maybe say.

What is your expectations for in Brazil or even in the U.S.? Do you think we're going to be able to have enough fertilizer to plant crops around the world? And what does that mean for your fertilizer business that more broadly speaking? Are you worried about being able to get enough crop plant around the world or how -- what's the work around from that? Thanks..

Yeah. Listen, at this point in time, it's a matter of price, of course, so natural gas have driven this up. Different situation when you 're in Europe than you 're in North America. So North America is paying like 5 bucks to 6 bucks for natural gas; Europe is paying maybe 30.

But I will say, at this point in time, it continues to be available for farmers only at higher prices. And we haven't detected a big shift in acreage from one to the other. It's still a little bit early from planting intentions, and you could think that potentially could be a shift from corn to soybeans, that is not clear yet.

And probably, the numbers today are a little bit of a tossup for the farmer on what to go. So, acreage for next year..

Okay great. Thank you..

Thank you..

Our next question comes from Tom Simonitsch from JP Morgan. Tom, your line is open..

Thanks. Good morning, everyone. Hey Tom. So you just in China to serve as a supply hub in the region. What is your outlook for Nutrition in Asia-Pacific compared to other regions? You've called out APAC is an area of weakness in both Human and Animal Nutrition in the last couple of quarters.

So how much of that relative weakness is down to ADM's current capabilities in the region, as opposed to ..

Right. I think that we've been very proud of being nutrition is have been happening on the developed parts of the world, if you will, in which developing market's exposure is still hold for ADM, whether we're talking about South America or Asia Pacific. So in Asia Pacific, we've been a player flavors for a while and this is just an expansion.

This is at about an hour a way from consumption. So we feel very good from a raw material perspective. We feel very good from an access to a big consumption base. And this will be very important for our customers. Our participation in Asia was limited to one plant for Flavors and about a handful of plants for animal nutrition.

And we continue to build that position in animal nutrition. We feel very good about it. And then given this opportunity in flavors, we will enhance our capabilities, not just production, but also market development and probability for customer innovation centers.

So you will see us going and putting more flags from the -- on the world in the developing areas. Whether it is Asia-Pacific or South-America, as we need to go and support our global customers. These are our customers that we do business every day here.

And some of them are represented there, but also we have a lot of new local customers that are requiring these capabilities. So it's just a natural evolution of the business if you will..

Thanks for that, Juan. And just following up on SAS.

What is your operating plan for the two dry mills between now and 2025, when that SCF production is expected to come online?.

We expect construction around that area. There probably is some transition. But as we look out over the next couple of years, we do expect that driving models are going to -- are coming back, we're seeing tight S&D right now in terms of our industry. We are seeing frankly the rest of the world is starting to recover from the pandemic.

So we expect rest-of-world driving miles to start recovering. And so therefore, there is a lag in terms of recovery of exports of ethanol from U.S. to the rest of the world. So I think over the next couple of years, I think you're going to continue to see some level of demand recovery from outside the U.S.

for ethanol, and then even China, as we talked about, I mean, they're focused on the environment, on energy. You could actually see China and returning back to the markets. And we've seen a little bit of that already..

So let me clarify from an operating's perspective. We now going to be doing anything two these dry mills. So dry mills will produce ethanol. And then there is downstream technology and capabilities that Gevo brings to the table to transform them into SAS. But those two plants will continue to produce ethanol as they are.

We are not planning to invest capital into that. Our contribution is those two plants, and then Gevo takes it from there, from a downstream perspective..

That's very helpful. Thank you. I will leave it there and pass it on..

Our next question comes from Ben Theurer from Barclays. Ben, please proceed..

Good morning. Ray congrats on the results. Just two quick follow-up questions. One on and I understand your commentary around the expectation into the Fourth Quarter, but just trying to maybe get a little bit of a sense differently.

So clearly, you have some implications in the third quarter because of Hurricane Ida, and you expect some of those effects to reverse in coming quarters. Are you comfortable enough that those almost immediately reversing and benefiting your fourth quarter, so to speak, you have a chance to get some workflows to where it was last year.

So that will be my first question..

Yeah. I would say, we expect a strong quarter for our services in this year. And you have to understand when sometimes at the end the year it becomes complicated because they could be margin expansion, margin contraction here, and the accounting rules according to Q1 and we need to respect that.

What we're talking, what we can be determine from middle of October, which is today, is the fundamentals from the market, and demand is strong, and the export capacity it was tight starting into these. And we started to see our so we feel good about it.

But again, it's difficult to call it sometimes Q4 versus Q1 because of the accounting rules and we can determine that now, we have to determine that at the end of the.

Perfect. And then if we take a look at the Nutrition business and you've highlighted it in your prepared remarks. Obviously, the very strong performance on the Animal Nutrition side, almost doubling operating profit but then Human Nutrition on the other side grow for just in the high single-digits.

Could you explore a little more on the details of what were the issues for the maybe lower than what you would want to see grow in Human Nutrition? Was it more of an impact because of input cost pressure where you just didn't pass that on significantly in the way you would have wanted to, or are there certain demand issues there's still in certain areas? Just to understand a little better what's been driving the growth in human nutritional some of the growth that way better..

If you look at the Human Nutrition for the quarter, we grew revenue about 12%. I mean, it's actually a pretty good number, and I think, if you look at our EBITDA margin on sales, we were able to maintain that EBITDA margin on sales. So when you grow twice the industry clip, if you will, and you maintain margins, so I was pretty satisfied.

Of course, it's not the spectacular maybe improvement year-over-year than Animal Nutrition have, but this is because Human Nutrition has been more stable and doing -- in animals, we're still going through the Neovia integration and all those things, but no, I don't think it was a weak quarter at all actually.

Actually, I think as I said, we continue to grow maybe twice the industry rates and maintaining very robust EBITDA margins on sales. So EBITDA margins on sales for flavors are north of 20%. And we've been able to maintain despite.

Congrats again,. Thank you very much..

Our next question is from Robert Moskow from Credit Suisse. Robert, please proceed..

Just a couple of cleanup questions. Can you talk about your pricing outlook for corn sweeteners? It would appear that corn prices have been on kind of a roller coaster, they're down off their highs. And how is that impacting negotiations for next year? And then I had a follow-up on the pea protein market..

Hey, Robert. It's Ray here. So the contracting season's underway, and we expect HFCS volumes and margins for EM to remain strong in 2022. Clearly, we did see some volatility in terms of corn prices. And that's -- Frankly, the input costs will get reflected in terms of our contract pricing.

And we do expect contract pricing to be higher next year compared to this year. Volume-wise, we do expect volumes for '22 to be similar to what we've seen this year..

You're seeing recovery in terms of the Food Service Sector. What -- when I look at Carbohydrate Solutions in total, non-HFCS is actually a very important component as well. And we've seen non-HFCS pretty attractive with a good margin side.

And that's just reflective of really a strong demand environment for citric acid, for starches, for dextrose, and other products. So that's another important factor when you take a look And look at Carbohydrate Solutions business in total for 2022.

As I indicated earlier, we do think that the bio-fuel part of the business should be actually quite positive when you compare year compared to this year. So when you put it all together, we do expect solution to have another strong.

And then the follow-up on pea proteins. You mentioned -- I think alternative protein. I thought I had heard that the pea crop in Canada was weak. But my perception is that that doesn't matter that much to processors like yourself.

But maybe you can help me understand whether it does or it doesn't, and how much volume are you doing in that market for the alternatively end markets..

Yeah, Rob. facility, and we feel very good about that business, actually. Specialty Ingredient Systems that we see in some of these new verticals. And both businesses are relatively new. They have almost no revenue solutions for customers. We have a strong customer interest in these areas and everybody wants to foundation.

So at this point in time, soy is the main driver for us. or a supplement or is different perspective. It's not a big impact, so we haven't felt any impact in our plant at all..

Got it. Okay. Thank you..

Thank you, Rob..

Our next question comes from Vincent Andrews, from Morgan Stanley. Vincent your line is open..

Thank you. And good morning, everyone. One, just want to ask you on the LGM -- LG Chem, excuse me. The LG Chem JV.

Why is it set up in two JVs rather than just one integrated production of lack of asset and then into THA? What's the thought process behind having an upstream and the downstream set up?.

This is a matter of where the expertise of each Company lies and, to be honest also, we want to be as asset life as possible. So in areas where LG is dominant and they're going to build that downstream capacity.

When we think about value solutions, our objective , is to make , an ownership position and we start making chemicals application technology and all that, we cannot become a chemical Company. So in that, we let the partner, take position. So we make corn grind plus one if you will, and then we let our partners take it from there.

Which is a matter of optimized capital for us and not getting best scenario as where we are -- that are not coal for us. Coal areas for us will continue to be within feed and beverages. When we go into these materials, if we're going to produce that make sense, and then we have the partner doing the rest.

Once we get the full details of the agreement, we'll see where the economics are setup and that would make sense to your investments will be in your target is trying to.

focus in net-to-net. As a follow-up, on the fertilizer issue, obviously the availability concerns, but seems like it's happening, it's at the high prices, they're deferring fertilizer purchases, particularly in South America.

How percentage of the big soy groups to buy less fertilizer, etc., and to you slide showing that farmer sales are I guess at a 5-year average, which is probably okay, but they're well below last year and probably the year before.

So what impact does that have on your origination business if the farmer is slow to sell the beans or if they buy less fertilizers, then he may hold onto more beans if they want to keep the FX -- keep the dollars.

So how do you think about that playing out for you moving into next year?.

I'll say South America is always an issue with a little bit more factors in terms of farmer selling just because, although currency and under distortion that sometimes the government bring s into the we continue to see maybe relatively slow farmer selling in Argentina and that will probably continue.

It's been a little bit better in in Brazil recently, but it's still relatively slow versus the accelerated pace at which they sold last year..

Thank you..

Our next question comes from Vincent Anderson from Stifel. Please go ahead..

Yes. Thanks. And I would like to continue as Vincent. Vincent of questioning on PLA.Maybe just approaching it from trying to prioritize getting incremental return out of your core competency and fermentation technology, but maybe limiting direct participation in the PLA Market.

And I ask just because that is a bit more of a commodity business than it feels like you've pushed more of your investments to recently?.

I think that as we said, we are trying to and I think that you said we're trying to optimize our facilities and as such those facilities to demand that has more growth opportunity. In this issue, again, we don't want to go into making chemicals.

That's a heavy capital intensive industry, and we want to make one derivative and then, reserve all that capital to continue to grow in food, feed, and beverages, and in health and wellness, that's what we're trying to do so LG Chem is a great partner. We're very honored to have them.

They have very good technology and it's a little bit like the discussions. We're going to continue to make ethanol, they will take it from there to make SAF. And with the -- with these partnerships, we're going to make lactic. They're going to take it from there to make PLA. So it's kind of a similar mindset..

That's perfect. Thank you. Then just a quick point of clarification, if I understand the phrasing of that MOU announcement, it sounded like you're considering investing in lactic acid capacity that would maybe exceed LG's needs and then you would market the remaining product yourself.

Is that correct? Then could you just talk briefly about the opportunity there as a stand-alone investment?.

Listen, partial of that is correct. I mean, lactic it can go to many opportunities. But this is relatively early on on the teams are looking at these. There is a lot -- there are a lot of numbers, there are a lot of things that could still change, there are a lot of discussions.

So I wouldn't like to venture that much since the teams are still discussing with LG Chem and by 2050, 2060, 2040, whatever it is that these are they are looking back at their portfolio. They need to clean their portfolios, if you will. And one of the ways to do that is through recycling, the other way to do it is to go in plant-based.

So we are receiving a lot of inbound request on that, and we're looking at our profits, our ability to produce plant-based products on our carbon capture and sequestration that provides an opportunity to make lower CI products. And we're trying to maximize the opportunity for ADM on all these.

So some of these things may not be that well-defined because that volume for the ADM shareholders. But it's a great opportunity for us and we will be mindful of returns and we not going to veer into areas that we shouldn't be putting capitals.

The capital will be reserved for our main thrust of the strategy, which is to continue to grow in food, and feed, and beverage..

Understood. I appreciate the added detail on that. Look forward to hearing more about it..

Thank you..

Our next question comes from Eric Larson from Seaport Research Partners. Eric, your line is open..

and the whole transaction. And I know that one of your -- maybe your dislike that you had with ethanol over the years is the extreme volatility of factors and when we talk about the in the past, one of the things was trying to reduce your earnings volatility.

So in your -- in the economic of how you nego -- We don't know much they are, but have you been able to -- do you think you've able to ink an agreement that actually gives you more sustainability or I guess plus volatility of current things on the economics of SAF going forward relative to ethanol..

Yeah. You're correct that Returns are important to us, but also dumping the volatility is in the mind of everything we do. So, of course, the team is considering that. I can't disclose that much at this early on. But I think what you need to also think is that over time, we will try to become a minority partner in all these.

And the objective all these is to deconsolidate and take all those assets out of our participation. So to a certain degree, we're acting owners long-term of this. That's why I talked before about partners or financial partners. I think we're going to be able to deconsolidate.

We're going to be able to monetize some amounts and if there is some upside to that, hopefully participate in all that. But you are correct. The objective is not to participate in.

Okay, no that is a lot. So when you look at the size of your investments, they're -- those are relatively new assets, but I guess they're probably 8 to 10 years older obviously you so you've probably depreciated them pretty significantly already.

Is your contribution to the putting those assets in there, or would you expect to see maybe a modest capital return as part of that JV Agreement as well?.

One of the reasons, Eric, that we landed in this option is that the valuation of our assets, I mean, it's better than the alternatives that we have. So we are pleased with the value at which we are contributing these 2 assets.

We don't need or we don't plan to add as such, then the joint venture or Gevo may put money for finishing of the -- and to convert it into through their technology. But our participation stops with the contribution of these 2 dry mills as they are..

Okay, perfect. Thank you. Juan, my questions at that. Thanks, everybody..

Thank you, Eric..

Our last question comes from Adam Samuelson from Goldman Sachs. Adam, your line is open..

Yes. Thank you. Good morning, everyone. Good morning, Adam. Hi. Well, a lot of ground bidding covered. so I'll try and make this quick. On the DSAS MoU, can you just maybe clarify just in the beginning factors of what you'd be looking for on the regulatory side to really move ahead here.

Obviously, SAS doesn't participate today in the RFS or California programs.

So what would you want to see in terms of the federal or state action on SAS before you really fully commit to going ahead?.

Yeah. Listen, we have experienced in both the U.S. and the European Union a strong desire to make this a reality. There is no another efficient way to decarbonize the airlines industry -- the aviation industry. Of course, on the short hauls, you can put the , long hauls is something like this.

So we expect the governments to be a partner, to a certain degree, in creating some of these markets. Some of those things are too early for me to disclose. But there are commitments both the U.S. government and the European Union to create a market for that in the 50 billion gallons type of size. So there's going to be some helping in to that.

But that's probably to the extent that I can talk about it right now..

Okay. And then, just quickly on the Balance Sheet, maybe this is for Ray. At the end of the quarter, net debt to EBITDA was sub two times. You haven't bought back any stock this year. Just help us think about how we should think about stock buyback as part of the capital allocation mix going forward..

I think that as we -- we've been monitoring commodity prices very carefully. And when you look in our offering working capital, right now it's still $2 billion higher than we were last year. So as we think about commodity prices next year, assuming you have a strong South America crop, you have a normal crop in U.S..

You see commodity prices coming off again. And after we've funded some of the bolt-on acquisitions that we've talked about, I expect our Balance Sheet to be pretty strong. And so there we can probably start looking back at return of capital that we've looked like in the pa st.

So I think a lot of it is a function of funding the investments that we've talked about, but importantly, making sure that the working capital environment reverts back to normalized levels, which I think -- I sense, assuming a normal South America crop, a normal U.S. crop next year. I see opportunities to look at return of capital..

Okay. All right. I'll leave it there Thanks so much..

Thank you, Adam..

We'll be headlining on December 10th, Global Investor Day. We look forward to talking in more detail projectory and why we are so optimistic about the opportunities ahead. In the meantime, as always, feel free to follow up with me if you have any other questions. Have a good day and thanks for your time and interest in ADM..

Thank you, everyone for joining us today. This now concludes today's conference call, please now disconnect your lines..