Archer-Daniels-Midland Co. Q3 FY2026 earnings call

• Financial Execution: ADM reported adjusted EPS of $1.77 and total segment operating profit of $1.4 billion in Q3 2026, representing a 64% increase from the prior year. Adjusted ROIC over trailing four quarters was 9%.
• Biofuels Advantage: The company leveraged its substantial crushing, ethanol, and biodiesel footprint to capitalize on favorable North American biofuel margins, driven by higher domestic demand from RBO policy and elevated global energy prices.
• Nutrition Momentum: Progress is evident in Flavors and Animal Nutrition. Operational improvements and portfolio actions are gaining traction, offsetting softness in wholesome ingredients and biotics.
• Strategic Joint Venture: Plans announced for a joint venture with CJ combining ADM’s Decatur, Illinois amino acid facility with select CJ assets to create a cost-competitive, reliable US source of fifth-grade amino acids amid global market pressures.
• Precision Fermentation Strategy: ADM is investing in precision fermentation within Carbohydrate Solutions, leveraging existing fermentation assets, dextrose feedstock access, and R&D expertise. Focus areas include animal-free meat alternatives for pet food, egg-white replacements, and whey alternatives.
• Carbon Sequestration: The company sequestered approximately 300,000 metric tons of CO2 in Q3, totaling close to one million metric tons year-to-date.
• Operational Efficiency: New COO Jeff Rowe highlighted focus on reducing unplanned downtime, modernizing facilities, and integrating AI/data analytics to drive innovation and competitive advantage.

Ag Services and Oilseeds (ASNO) segment operating profit was $778 million, up 105% year-over-year. This included approximately $35 million of net positive mark-to-market impacts. Ag Services reported $172 million in operating profit (down 9% sequentially), while Crushing contributed $311 million (up ~$300 million from prior quarter). Refined Products and Other generated $218 million (up 82%). Carbohydrate Solutions segment operating profit was $470 million, a 40% increase year-over-year, driven by strong ethanol margins. Starches and Sweeteners contributed $324 million (up 11%), and Vantage Corn Processors contributed $146 million (up $103 million). Nutrition segment revenues were $1.8 billion (down 4% year-over-year). Human Nutrition revenue decreased 2%, while Animal Nutrition revenue decreased 6%. Nutrition segment operating profit was $134 million (up 3% sequentially), with Human Nutrition at $93 million (down 3%) and Animal Nutrition at $41 million (up 21%).

• Full-Year 2026 Adjusted EPS: Raised to a range of $5.50–$5.80, up from the previous guidance of $5.15–$5.60. This marks the third raise this year.
• Capital Expenditures: Lowered 2026 CapEx expectations to $1.2–$1.3 billion, down from the prior range of $1.3–$1.5 billion, reflecting disciplined capital allocation and project sequencing.
• Net 45Z Benefit: Increased expected net benefit from Section 45Z tax credits to approximately $350 million for 2026, up from prior estimates of $250 million.
• Q4 Outlook Drivers: Management expects constructive biofuels margins, strong ag services order books, and reversal of negative mark-to-market impacts carried from earlier in the year. Nutrition is expected to show good YoY growth despite seasonal lows in flavors.

• Commodity Price Volatility: Mark-to-market impacts are excluded from forward guidance but can significantly affect quarterly results depending on commodity price movements at period-end.
• Geopolitical and Trade Disruptions: Ongoing issues in Ukraine affect inventory valuation and export capabilities; management monitors trade flows closely as they shift monthly.
• Policy Uncertainty: While management expects biofuel policies to remain supportive, potential political shifts or changes in blending obligations could impact long-term investment decisions.
• Operational Downtime: Unplanned downtime at specific nutrition plants has impacted performance; while under control, such events pose execution risks.
• Inflationary Pressures: Rising input costs and inflation in certain markets continue to pressure margins, particularly in human nutrition wholesome ingredient lines.

Q: Analyst asked about the trajectory toward the top end of the raised EPS guide and the macro outlook for 2027. / A: Management emphasized that the raised guide reflects strong execution and a constructive biofuels environment continuing into Q4. For 2027, they expect a market structure similar to the second half of 2026, with favorable biofuel demand and margins. They anticipate supply chain disruptions where their global footprint will shine, and view 2027 as an investment year focused on R&D, automation, and digitization, while maintaining prudent capital allocation despite rising interest costs.

Q: Analyst questioned if board crush margins have peaked and requested color on nutrition headwinds persisting into Q4/2027. / A: CEO Juan Luciano stated that crush margins have not collapsed; strong RBO policy and soybean oil/meal demand support continued strength through Q4 and into 2027. Regarding nutrition, he noted underlying growth of 13% YoY (correcting for insurance proceeds), with flavors performing well globally. He confirmed that a plant upset is identified and under control, with no significant lingering P&L impact expected.

Q: Analyst asked about the rationale behind lowering CapEx guidance and what it implies for 2027. / A: CFO Monish Patolawala explained the reduction reflects improved capital efficiency and prioritization of high-return projects like de-bottlenecking, rather than delaying investments. CEO Juan Luciano added that changes often result from sequencing and staggering projects to align team capacity. He indicated that future CapEx should be viewed within the $1.2–$1.5 billion range as opportunities evolve.

Q: Analyst inquired about the voluntary carbon removal initiative in Columbus and its financial impact. / A: Management announced plans to enter the voluntary carbon removal market via their Columbus, Nebraska complex, which can capture over 800,000 tons of biogenic CO2 annually. Initial credit issuance is expected by year-end 2026. While the market is nascent, participation positions ADM to benefit from growing customer demand for durable carbon removal solutions without requiring significant new capital.

Q: Analyst sought clarification on the step-down from Q3 to implied Q4 EPS, asking about mechanical items vs. operational drivers. / A: CFO detailed that Q4 typically sees lower sequential results due to seasonal lows in ethanol and flavors, and a potential reduction in 45Z benefits compared to the expanded program in Q3. Additionally, a one-time insurance release of $40–50 million occurred in Q3 but will not repeat. Underlying operations remain strong, with Ag Services seasonally higher and Animal Nutrition ramping back up post-downtime.