Earnings Call: Q1 2021

May 4, 2021

Good morning, and welcome to the Bunge Limited First Quarter 2021 Earnings Release and Conference Call. All participants will be in listen only mode. After today's presentation, there will be an opportunity to ask questions. Please note this event is being recorded. I'd now like to turn the conference over to Ruth Ann Weisner. Please go ahead. Thank you, Jason, and thank you for joining us this morning for our Q1 earnings call. Before we get started, I want to let you know that we have slides to accompany our discussion. These can be found in the Investors section of our website at bunge.com under Events and Presentations. Reconciliations of Non GAAP measures to the most directly comparable GAAP financial measure are posted on our website as well. I'd like to direct you to Slide 2 and I remind you that today's presentation includes forward looking statements that reflect Bunge's current view with respect to future events, financial performance and industry conditions. These forward looking statements are subject to various risks and uncertainties. Bunge has provided additional information in its reports on file with the SEC Concerning factors that could cause actual results to differ materially from those contained in this presentation, and we encourage you to review these factors. On the call this morning are Greg Heckman, Bunge's Chief Executive Officer and John Neville, Chief Financial Officer. I'll now turn the call over to Greg. Thank you, Ruth Ann, and good morning, everyone. Turning to Slide 3, You'll see the agenda for today's call. I'll start with some highlights of the Q1 before handing over to John, who'll go into more detail on our performance. I'll then share some closing thoughts on how we're thinking about the remainder of the year before opening the line for your questions. Let's start with an overview of the quarter, turning to Slide 4. Thanks to the outstanding execution by our global team working seamlessly Delivering our 6th consecutive quarter of increased earnings. Operationally, our team did a fantastic job maximizing our assets. We reached a new high watermark for crush capacity utilization, and we continue to reduce unplanned downtime. We also executed well in the marketplace through outstanding customer service, innovation, agility and partnership. Our strong results over the past few quarters reflect the value of working as a unified global company and the benefits of our integrated model delivers to our customers on both ends of the value chain from farmers to customers to consumers. We're committed to continuous improvement and managing risk effectively, because while we're incredibly proud of what we have achieved, We recognize there's always more we can do, especially in an industry that doesn't always offer a straight line path from quarter to quarter. The dramatic swings in consumer and customer behavior during the COVID pandemic are case in point. COVID is still very much a factor in most parts of the world, especially in Brazil and India, and our thoughts are with all of those who are still in the center of the battle with this pandemic. In regions where restrictions are easing, we're seeing increased demand in pricing across the range of products as Their families and communities. Turning now to our segment performance. As you saw last week, We changed our reporting to better align with our new value chain operating structure. John will go into more detail on that later in the call, But our new segments more closely reflect the way we manage our business. In the Q1, we delivered especially strong results in Agribusiness. Earnings were driven primarily by oilseed processing, particularly in softseeds and our merchandising value chains. Refined and Specialty Oils had a record quarter, benefiting from tightening global supplies, improved demand, particularly in North America, and our continued focus on customers and innovation. And before handing the call over to John, You'll note that with our strong Q1 results and favorable outlook across a number of our markets, we raised our full year adjusted EPS forecast So approximately $7.50 I'll share some additional thoughts on the remainder of 2021 before opening the call for Q and A. And additionally, we announced this morning that our Board of Directors approved a 5% increase to our quarterly common dividend, reflecting our positive momentum and favorable market trends. I'll now turn the call over to John to walk through our financial results in more detail. Thanks, Greg, and good morning, everyone. You may have seen our announcement last week that we have changed our segment reporting to align with our new value chain model and to reflect how we manage the business and review financial information. For the Niagara business, we have realigned grains and oilseeds operations in the processing and merchandising. The fertilizer segment has been eliminated with those results now included in the processing component of agribusiness. Processing in addition to fertilizer is principally the oilseeds operations plus the soy and softseed crush related origination activities previously included in grains. You can find additional details in Note 2 of our earnings press release and in the appendix of the slide presentation. Let's turn to earnings highlights on Slide 5. Our reported Q1 earnings per share was $5.52 compared to a loss of $1.46 in the Q1 of 2020. Our reported results include a net gain of $1.09 related to the previously announced sale of our Rotterdam Oil Refinery as well as a packaging plant in Mexico. Reported results also include a mark to market timing difference of $1.30 per share. Adjusted EPS was $3.13 in the quarter versus $0.91 in the prior year. Adjusted core segment earnings before interest and taxes or EBIT were $737,000,000 in the quarter versus $354,000,000 in the prior year, driven by strong performances in our agribusiness and Refined and Specialty Oil segments. As Greg noted, Agribusiness results in the quarter reflect outstanding execution by the Managing our crush capacity and drain flows. In processing, improved performance in the quarter Was driven by higher results in all softseed and soy crush value chains, which included an increased contribution from U. S. Soybean origination. In addition, we achieved record Q1 soy and rapeseed crush volume and capacity utilization, reflecting reduced unplanned downtime and excellent coordination between our commercial and industrial teams. This improved crush output brings immediate financial benefits, especially in periods of strong margins like we've been experiencing. In merchandising, improved volumes and margins in our global oils, corn and wheat value chains were primarily driven by increased export demand, Strong grain origination in North America and Australia and outstanding execution on logistics and risk management. Results in our Financial Services business were also higher. In Refining and Specialty Oils, The strong performance reflected higher results in all regions, driven by improved execution as well as favorable market trends. Margins in North America refining benefited from early stage recovery in food service and increased demand from the renewable diesel sector. Higher margins in South America and Europe were more than offset slower volumes. Asia benefited from strong demand in India prior to the reimposition Restrictions due to the surge in new COVID cases. In Milling, results were down in both North and South America, primarily due to lower margins. Additionally, volumes in Brazil were negatively impacted by the resurgence in COVID cases. The increase in corporate expenses during the quarter was primarily related to the performance based compensation accruals, a portion of which was not allocated after these segments. The decrease in other was related to our captive insurance program. Results for our Sugar and Bioenergy joint venture environment and were also negatively impacted by approximately $25,000,000 in FX translation losses of the joint venture due to depreciation of Brazilian real. For the quarter, income tax expense was 192,000,000 as compared to an income tax benefit of $55,000,000 for the prior year. The increase in income tax expense was due to higher pre tax income. Adjusted for notable items, the effective tax rate for the quarter was 21%. Net interest expense of 64,000,000 was in line with our expectations. Let's turn to Slide 6. Here you can see our positive earnings trend adjusted for notable items and timing differences over the past 4 years along with the most recent trailing 12 month period. This improved performance not only reflects a strong operating environment, but also the hard work of our global teams and the benefits of our new operating model That brings organizational alignment across the regions and importantly has shifted our culture to one of continuous improvement and capital discipline. Slide 7 compares our Q1 SG and A to the prior year. We achieved underlying addressable SG and A savings of $16,000,000 of which approximately 80% was related to indirect costs. COVID related restrictions continue to impact areas such as travel, But we also realized lower employee and professional services costs. Moving to Slide 8. The most recent trailing 12 month period, our cash generation excluding notable items and mark to market timing differences We're strong in approximately $2,200,000,000 of adjusted funds from operations. This cash flow generation enabled us to comfortably fund our cash obligations Over the past year and retained approximately $1,400,000,000 to strengthen our balance sheet in support of our credit rating objective of BBB Baa2. On Slide 9 details our capital allocation of adjusted funds from operations for the Q1. After allocating $32,000,000 to sustaining CapEx, which includes maintenance, environmental health and safety and $8,000,000 For dividends, we had $493,000,000 of discretionary cash flow available. Of this amount, we paid $71,000,000 in common dividends to shareholders We invested $21,000,000 in growth and productivity CapEx, leaving approximately $400,000,000 of retained cash flow. Moving on to Slide 10. The $400,000,000 of retained cash flow and other cash sources, including proceeds from sale of assets more than offset our approximately $700,000,000 of cash outflow this quarter for working capital. As a result, Net debt decreased by approximately $100,000,000 We also took action to increase our availability under committed credit lines to $5,800,000,000 leaving us with ample liquidity to support potentially higher working capital needs. As you can see on Slide 11, We further strengthened our balance sheet during the quarter to a point where the entirety of our net debt funded 91% of our readily marketable inventory, with the 9% balance of RMI being funded with equity. Please turn to Slide 12 for our return metrics. For the trailing 12 months, adjusted ROIC was 18.7 percent or 12.1 percentage points over our RMI adjusted weighted average cost of capital of 6.6 ROIC was 13.4%, 7.4 percentage points over our weighted average cost of capital 6% and well above our stated target of 9. The widening spread between these metrics reflects how we have been effectively using ROI in our operations The tool to generate incremental profit. Moving to Slide 13. Our discretionary cash flow and cash flow yield Have continued to increase, reflecting strong cash flow generation that is available for strengthening our balance sheet, investing in growth and returning to shareholders. The trailing 12 months, we produced a discretionary cash flow of almost $1,900,000,000 and a cash flow yield of nearly 29%. Please Please turn to Slide 14 in our 2021 outlook. As Greg mentioned in his remarks, Taking into account our strong Q1 results, forward curves and market conditions, we've increased our full year adjusted EPS outlook from at least $6 per share to approximately $7.50 per share. This is based on the following expectations. In agribusiness, full year results are expected to be up from our Previous expectations, but down from 2020. In Refined and Specialty Oils, we expect full year results to be up from our previous outlook and Significantly higher compared to last year due to strong first quarter results and positive demand trends in North America. Results in billing and corporate and other are expected to be generally in line with last year. In non core, full year results in our Sugar and Bioenergy joint venture Are expected to be a positive contributor, driven by improved sugar and Brazilian ethanol prices. Additionally, the company expects the following for 2021: an adjusted annual effective tax rate in the range of 20% to 22% Net interest expense in the range of $230,000,000 to $240,000,000 capital expenditures in the range of $425,000,000 to 4.75 And depreciation and amortization of approximately $415,000,000 With that, I'll turn things back over to Greg for some closing comments. Thanks, John. Before opening the call to Q and A, I want to provide some perspective on the balance of 2021. As we noted, with our strong Q1 performance and what we see from the forward curves, we're forecasting full year EPS be around $7.50 While we don't have full visibility in the back half of the year, the market and demand trends are favorable. We expect higher volumes because of increased post COVID food service demand in several countries as well as from the U. S. Renewable diesel industry in the second half of the year. Because of the work we've done, we now have the ability to pursue the type of projects that will help us meet growing demand and continue to improve our platform. We have a number of projects in various stages to enhance the efficiency of our core oilseeds business. We're taking a thoughtful approach as we invest in our specialty fats and oils and our plant based proteins businesses and we're staying disciplined, but also recognize that the demand for sustainable products is providing us more opportunities than ever to grow our business as we continue to connect farmers to consumers. The leadership team and I are incredibly proud of the entire Bunge team's continued focus on execution, and we're confident Our capabilities and the business model we have here at Bunge. While there's always more work to be done, we're making progress every day and the results are evident. And with that, I'll open the call to your questions. We will now begin the question and answer session. Our first question comes from Adam Samuelson from Goldman Sachs. Please go ahead. Thanks. Good morning, everyone. Good morning, Adam. Good morning, Adam. Good morning. Hi. So, Greg, John, I was hoping to maybe dig in a little bit on the updated Outlook and in light, Q1 was very strong. And I'm just trying to think about How much did the full year outlook change based on the realized Q1 performance versus changes in forward curves, your hedge positions And market outlook over the balance of the year, especially on the oilseed crush side where Obviously, margins have been pretty volatile, at least on the Board given tight soybean supplies. Yes. Definitely, couldn't be more pleased with the way the team carries the momentum out of a record 2020 here Into Q1 and how they continue to execute. And consistent with what we've done, right, we're going to tell you what we're seeing Currently, in the forward curves and the market outlook versus what we hope is going to happen, but that's given us the confidence to go ahead and raise the number From 6 to 7 50. There's definitely good momentum. And as we said, we're seeing as things reopen Here in March, we're getting back to demand on the food side to pre COVID levels. And then of course, that's why we've seen a little bit out from renewable diesel here in North America On the oil demand side, we really expect to start to feel that in the second half. So, feel real comfortable even as early as it is here in the year So go ahead and take the number up. Okay. That's helpful. And then maybe just keying off something you just mentioned. On renewable diesel specifically, As that demand becomes more visible, I mean, you've seen cash oil prices get And premiums will be very strong year to date. Help us think about how we should expect That incremental demand on the veg oil chain to flow through your P and L, both in oilseeds, it's in crush, but also in the refined oils piece on the refining side, which would seem to be a critical bottleneck from a feedstock perspective for a lot of renewable diesel producers near term. Yes. I guess one of the things we're really excited about is being basic in all the oils globally. And as connected to the global wells market is, we're going to see the benefit of that multiyear sustained demand really across our Of course, here in North America is where the majority of the work is starting to get done. And there'll be reformulation both for those that have the ability to do that on the fuel side and of course on the food side, they've always been where they have the flexibility to reformulate. So we'll be working with our customers as the market adjusts and the market is doing its work with price to incent some additional supply. But that takes multi years to get that in place. So we're really excited about the benefits of this meeting with new multi year demand. And if I could just squeeze one more quick one in just on that last point. You've seen some competitors announce, Especially in Canada on the canola crush side, a bunch of new capacity. As you would look at kind of margin structures Across the forward curves, are we anywhere near where Bunge would consider growth capital on the crush side or More debottlenecking and maybe expansion on Ed Oil Refining. I'm just trying to think about the capital commitment against that opportunity. Yes. So I think if you look historically at this industry or really any industry, when you're adding a new demand, You see price react and the market starts to do its work to put that supply in place. A lot of announcements get made. Some of it even gets built. And as the leading oilseed crusher, we're doing the kind of things you'd expect we'll be doing. We're already doing debottlenecking In our crushing and refining footprint, we'll continue to look at a number of projects where we have work ongoing to Do some brownfield things, maybe at refinery where we don't have one and or add some optionality to be able to crush soft. And then as far as greenfields, those Those have got to make sense. We're going to have discipline because it's nice off the spot economics. It's the long term economics. And so we've got to look at building The right plans in the right location with the right customer and the right partners, because the one thing we're going to make sure that we do is when we put Along with capital in the ground that we're to be comfortable with the long term returns. Got it. I really appreciate all that color. I'll pass it on. Thank you. Next question is from Tom Simonich from JPMorgan. Please go ahead. Hi, good morning guys. Good morning, Tom. Good morning, Tom. So Argentina exported a record value of soy How are you expecting Argentina to impact the global soybean complex for the rest of this year? Yes. We Definitely, the market has needed that supply from Argentina, right? It's calling forward on price, and It's that time of year when that market should be running hard. I think with the election coming up and the Still kind of looming devaluation. We expect the farmers to be pretty much hand to mouth. And so we don't think that industry will run as that R and D Run as hard for the balance of the year, but we have been running harder here in 2021 than we did in 2020. And I think at the end of the year, you'll see that Argentina will run harder in 2021 for the full year, but second half probably won't be as hard as the first half. And then maybe could you just provide some more color around the quarterly cadence of earnings to get to the $750,000,000 for the full year? Tom, could you repeat that? Sorry, you cut out a little bit. I said, Could you provide some more color around the quarterly cadence of earnings to get to the $750,000,000 for the full year? Sure. So I'll kind of look at it in halves, I I think based on our Q1 performance, which we largely pushed through the year, We're looking at probably a split between 1st and second half about sixty-forty is our current outlook. Obviously, things are going to move around a lot, but That's sort of how we look at it. And last year was a little bit the opposite. We were 35, 65 first half, second half, but with the Strong start to the year and certainly a lot less visibility into the second half, a little bit less liquidity out there and a lot of volatility Volatility to market, we're looking at more of a sixty-forty split. As we've talked before, in this business, the one thing is We're obviously going to be able to move around within the value chain and it will move around from quarter to quarter, which is one of the reasons we've kind of tried to get people also focus The next question comes from Ben Furr from Barclays. Please go ahead. Hey, good morning, Rick, John. First of all, congrats on the strong results. Thank you very much. Question around capital allocation and your further ideas around the I mean, obviously, the one thing that just pops up is your non core business. I mean, it's now the Q3 in a row with some positive contribution here. And So if you could give us a quick update on where you think you stand in the process of the divestiture of that Sugarwire Energy business? That will be my first question. Okay. Well, we are assessing the Sugar business and obviously our first goal is to stabilize that business and improve the performance and of course the team is doing a great job. We're really happy to be part of that joint venture as a partner and VP. We are certainly As we said before, we're certainly looking at some point exiting that business, but obviously timing is important and The markets are a bit interesting in Brazil, obviously, with COVID impact. We're benefiting from Better sugar and ethanol environment today than we had a year ago, better currency environment. But we have a little bit of time here before we can really Actually execute on anything based on our agreement. And but we are exploring some options there, thinking about Strategically, when is going to be the right time, but again, our communication has been pretty consistent over the long run is that we plan to exit that business Okay. And I'd say just from a broader portfolio action, look, we're never done. It's never really over. It's constant evaluation, and We're challenging the lowest returning parts of the portfolio to get better. So we'll continue to always have that focus. Okay. And obviously, in light with that and now with the strong cash flow and your balance sheet capacity, etcetera, And you've talked about it in your closing remarks to look for your disciplined approach into investments. Which regions, which areas, where do you think you still have a little bit of white space, where do you think you can put on some money to work To further grow to ultimately benefit from what the underlying dynamics are, is it within what might be done on renewable green diesel? Is it within The oil feeds that then go into whatever meat alternatives, those kind of businesses, just Give a little bit of sense on where you're heading to from a capital allocation perspective. Sure. I'll tell you, We are excited about the timing of finishing up our transformation work and the divestitures and to have The great operating performance that we have and to now have the fuel. And as we said, we feel we've earned the right to grow because it's we continue to have the global footprint and we'll continue to look at that global network and where we need to Forwarded by some of our strongholds and where we need to continue to shore things up. And of course, with what's going on in North America that's changing some of the flows and that goes into our thinking. So that will continue to be on our core oilseeds and distribution network. And of course, that still has the benefit of population and per capita income growth and that kind of ticks along and don't forget that demand growth But to have 2 new sources of multiyear demand and 2 strong trends in place, It's a pretty exciting place to be. You think about renewable diesel, the demand that that's got and the adjustments that That's going to create some definite opportunities. And then what we're seeing in plant proteins, and so that's creating not only a real opportunity On the plant protein side, but where our specialty fats and oils plays a role in those products and given them the taste and the mouth feel and the bite that people love. We're already working with those customers. And the one thing that's clear, whatever trends you look at, everybody believes that there's not enough supply to meet What's happening on sustainability standpoint and lower carbon index products, whether it's going to the fuel, food and the feed industry, We think that's going to create a lot of opportunities for products and services as it runs throughout our entire platform. So excited about The team continuing to execute and the choices and the competing that we're going to have for that capital for growth. Perfect. I'll leave it here. Thank you very much, Rick, John. Thank you. The next question comes from Robert Moskow from Credit Suisse. Please go ahead. Hi, thanks. Just another question on the guidance, Greg. Your competitor Has specifically pointed to 4th quarter as setting up extremely well because of exports to China. Your guidance seems to have something a little more conservative about Q4. Do you Is this just a difference in style in terms of how you're looking at the world? Or is there something about your footprint that We'll make it, I guess, less easy to capitalize on a strong export environment in Q4. I'd say, yes, it might be a style issue. We're not forecasting what we Hope it's going to happen. We're looking at the forward curves. I think the one thing that we've kept the approach Consistent since we got here in the one message that I think everybody was pretty consistent as they didn't want us promising things we couldn't deliver. So Look, I've got a lot of confidence in this team. And as we've said before, when we see it, we roll it forward as we just did from taking from 6 And if the opportunities here in Q4 develops the way that some think it will, this team will find a way to chase last Okay. And just a follow-up. With corn up here at $7 and And soybeans above 13, like it's beginning to feel more like 2,008. And I'm just wondering if you have any Lessons learned from that time period, is that just a different time and it's Not what we should expect for this time. I mean, certainly, the ride down in terms of deflation for commodities really hurt Bunge. So how should we think about it this time around? I'd say a couple of key things. One, every time a market Cycles, people like it's different this time. Hey, and maybe it is, and it's our job to look at that, and we do have some new demand in the plant These are some long term trends that are going to change things. How is what we're trying to figure out. But I think the biggest thing is that Our leadership team all lived through that and we've lived through some other cycles in ag and food. And this is a time to really instill some discipline because this is when industries and companies get in trouble when there's a little irrational exuberance. And so you'll see us Be very disciplined about what we're going to do and thinking about the long term and really stressing the projects that we do so that they will return for the long term. I mean, frankly, we just spent some time the last 2 years cleaning up some things that we want to make sure that we don't make mistakes in the future. Hey, Rob. This is John. I would add on that it was important for us in 2,008 to manage our balance sheet both on the way up and then on the way down as markets came off. But What we ended up with was a very strong balance sheet at the end of 2,008. In 2,009 to Greg's point is people were struggling, We really went on the hunt looking for opportunities to invest. And over the course of a couple of years after that, after the financial crisis of 'eight, we We grew substantially in a couple of years with the opportunities and that's really how we think about it. Great. Okay. Thank you. The next question comes from Luke Washer from Bank of America. Please go ahead. Hi, good morning. Good morning. So I just wanted to take another stab at your guidance here, great guidance at $750,000,000 And you talked about how this is related to your So maybe just two things. What does that expect in terms of your volumes for kind of your processed goods and your merchandising goods, And then on the crush side, is there significant variability by region? Or do you see crush margins elevated over the course of the year in most regions. Yes. Let me start, Jonathan, if you can fill in. I'd say on Food side, let me talk about how we're seeing it. On the food side, we're definitely seeing an improvement, right. We just don't Refining and Specialty Oil has had a record quarter with every region posting year on year improvement. And so a lot of the improvement efforts there we've had really starting to unlock our down potential. We're seeing organic growth and we've got a strong order book in all regions. So a big part of that increase is definitely on the food side. And then as we talked about earlier, we do expect Argentina net net to run harder this year Then last year, so that will be additional volume. And then second part of the question, sorry. Yes. With respect to margins, kind of how we see those over the balance of the year. You're saying fairly consistent on the soy side is what we saw in 1st quarter overall over the balance of the year will be a little lumpy from Q to Q, but really Pretty strong margins on the soft side. We saw very good margins in Q1. Maybe not as good over the balance of the year, at least on the base of the 4 curves, but obviously We'll take the opportunity when it's there. But I'd say on the soft side, good strength really in the areas where we're big in Canada and Europe Especially, we do expect elevated sausage margins this year versus a year ago. Oh, I remember you asked Crush margins. Yes, if you look around the world, of course, they're the best in the U. S, Europe, 2nd and then South America, 3rd, but very volatile. And then China right now, of With some of the weak feeding that happened over there, that hurt meal demand, crush margins are the worst in China. We do expect Those to improve and we're seeing crush margins in Brazil improving now. So that's kind of how we see it setting up. Great, thanks. And maybe just one more on Brazil. The safrinha corn crop looks like it's going I mean, particularly with soybean oil soybean supplies being rather tight too. Is this an opportunity from you when you think about dislocation, your ability to provide value to your Customers or could this be a potential tailwind in the back or headwind in the back half of the year? No, definitely opportunity. The one thing about This global machine here is that we definitely help customers during times of dislocation, higher volume is Good for us, higher volatility. So the environment that we've got right now is definitely that. And what you're describing in Safrina, yes, with it being wet, it got in a little bit later. That's going to put it kind of a critical development period out there when it's usually drier, so there's some worry about some concern about yield. So, the global corn market will Have to kind of fill in when that crop comes off late and then depending how the weather and how volumes develop, of course, will be a price driver in which Origin destination pairs, you actually end up see shipping. Great. Thank you. The next question comes from Vincent Andrews from Morgan Stanley. Please go ahead. Hi, thanks very much. Could you talk a little bit about what you're seeing from a Farmer selling perspective, you already touched on Argentina, but maybe in Brazil. And I'm just looking at your cash flow statement and the secured advances to suppliers in the Quarter was actually a source of cash, which is a use in the prior period and your advances on sales were a little bit less of a use. Maybe I'm wrong, but I would have thought that maybe those would have been bigger numbers. But maybe just talk about is the Brazilian farmer Finally starting to decelerate in a material way or what are you seeing? Yes, a little bit of a switch compared to last year We've got the Brazilian farmer behind year ago levels, not marketing as fast and we've got the North American farmer ahead of year levels and with these prices, has been a more aggressive marketer. As far as Those are more detailed questions, John. John doesn't allow me to answer those. So I'm happy. Look, we the As Greg mentioned, farmer selling has slowed a bit in Brazil. We're still very active on the farmer financing But clearly in the quarter, as things slowed down, we advanced a lot of funds in the fall Ahead of harvest and as we get into Q1 and Q2 and they're delivering on crops and you We start to see those numbers down generally or maybe in Q1 they opened a whole lot and then in Q2 we'll see a more dramatic Drop as farmers deliver on crops. So not terribly unusual in terms of the cash flow. Okay. That's helpful. And just as a follow-up, in oils into foodservice, I mean, as we're all painfully aware, a lot of foodservice outlets have just been shut for periods of time or operating at very low rates if they're up and running at all. So presumably those folks need to build inventory, get inventory Is that a tailwind into 3Q or how long do you think it takes to get those foodservice customers to the inventory levels that they need just to be a going concern? Yes. We saw a slow Jan and then we had some of the bad weather through Feb. And then definitely the Supply chain, we continue to battle fewer drivers out there on the truck side and getting the railroad crews in place as volumes come back up. But March was good, and that's where we saw March at pre COVID levels, which gave us the confidence here in the back half. And then when we look at the order book here in the balance of the year. So, we do expect volumes to be good. It will be a little different than historically. It looks like Food at home may settle out a little bit above the pre pandemic levels. And then as we see foodservice come back, I think the big QSRs are Probably going to get more than their share, where the smaller food service and the dine in looks like it may be slower to recover. Thanks very much guys. You bet. Next question comes from Ben Bienvenu from Stephens. Please go ahead. Hey, thanks. Good morning, everybody. Hey, good morning. I want to ask on the demand side of the equation, Initially specific to China, but then more broadly, you mentioned the wheat feeding substitution, the demand for soybean meal being reduced. You mentioned you expect that to get better. Do you think that gets better because of a demand recovery or just a capacity utilization Down trends that kind of firms up the soybean meal market a little bit there domestically. And then as you look more broadly across your global footprint, And I guess here in the U. S, the primary users of grain protein and ethanol, those margin backdrops are quite favorable. So it doesn't seem like we're In an environment where we'd see any demand destruction, but are you seeing demand destruction yet at all anywhere across your global footprint And in any particular end markets, that would be helpful to hear. Yes. No demand destruction. Animal profitability continues to be good. Demand continues to be on the meal side as well as, of course, we've talked about the oil side. The two exceptions are Brazil, where they made an adjustment from B13 to B10, and so we'll be watching and see If that comes back, and then of course, a little bit on Brazil and India with the resurgence But they were stronger ahead of that. And then the weak feeding that we talked about, that's kind of the market Again, does its work and you see it historically, it's cheap, comes in the rations, it's fed and price adjust. But that did steal a little bit of Demand from us and primarily in China on the soybean meal side, wheat being about 4 points higher on the protein side than corn, But that's a temporary thing. It's not a long term structural issue. And then the other is we'll watch ethanol as Comes back, there will be a little bit more DDG, but as we said, we've got good animal profitability and good demand right now. So feel pretty good about things. Okay, great. Second question is related to kind of strategic initiatives. In the ethanol complex And to a lesser extent, but it's being talked about in fertilizers, there's a lot of discussion and engagement with carbon capture and sequestration. What opportunity does that present for you all as large processors in terms of whether it's I'm just curious, within your broader ESG goals and greenhouse gas Emission Reduction goals, where does that fit? Well, we continue to work on our own platform around our own usage, but we really think There's just a huge opportunity. There's such a focus on low carbon and it starts by being a low carbon feedstock supplier To the fuel industry, but I think we believe it's going to continue to be the change. And it's really about giving the What they want and get some of that value back to the producer as they continue to change their farming practices It's a more climate friendly, more regenerative farming. And then I think we'll see everybody wanting across food, feed and fuel wanting lower carbon products all the way through and that's going to be an opportunity in the products and the services. I think you're going to see innovation All the way across the industry and change is good, right? That's new demand and you've just got to be smart enough to Step into the right place and make the right investments. But we're a huge part of the value chain and that value has got to be pulled through from the producer to the consumer. And we're here to help that happen. So excited about the new opportunities that that's going to create. Okay, great. Thanks. Good luck with the rest of the year. Thank you very much. Thanks, Ken. The next question comes from Ken Zaslow from Bank of Montreal. Please go ahead. Hey, good morning, everyone. Hi, Jim. Hi, Jim. Just a couple of questions. One is, When you think about the forward curve, how do you think soybean oil demand from renewable diesel is in there at this point? And When do you think it will actually develop into the curve and how does that progress? Yes, I think we're seeing it right as plans come online, as they book, as it becomes a reality, The market tightens up. It's still a big part of that's got to play out in the second half. And I think as you see See it play out, then you'll see if the inverse comes out of the market, but it's a second half 'twenty one and then on into 'twenty two. So you think that over the next half, you'll actually see it in the forward curve more than you're seeing it now. Is that fair? The market is going to do its work. But yes, you'd have to believe that. That's not what the market is telling you today, but I think that's what a lot of people believe and so that's what we'll continue to watch and develop. Okay. And the second question is on your growth CapEx, can you talk about what were the key projects that you've done And what type of returns you'll get over what timeframe, so we could put a little quantitative thoughts on that, that would be helpful. Yes, Ken. We most of our the projects we're focusing on right now are really debottlenecking and smaller, I'll say organic growth projects inside our existing facilities, so nothing greenfield at this point. But everything that we do needs a double digit return. A lot of those projects that are underway today probably won't be additive until next year. But we look at long term and obviously in the 1st year of start up, those projects never hit the ground running. But Certainly over the long run, there are solid double digit returns on projects is what we expect. So it's all That's principally what we've been doing right now is really focused on debottlenecking type projects. But that when you think about the latest assets, whether it's Whether it's a debottlenecking, those are the highest returning and you can do those the quickest and lowest risk. The brownfield That comes into the next category or if you look into Greenfield, but they've all got to meet that hurdle. I am sorry, Ken. When you think about for 2020, let's just go back to some base number of In 2022, as your CapEx comes in, will that be incremental by 2% to 3%, 5% to 10%, 10% to 15%, how do I think about what how that plays out in 2022 of all the CapEx? And then I'll leave it there. I appreciate it. So you're talking about 2021 CapEx and how that will impact 2022? No, yes, but the returns, How incremental will that be on 2022? Look, you've been laying down some of the pea protein, Infrastructure for renewable diesel, all the things you've been doing, I think some of it's going to come to fruition in 2022. Is that worth A couple of 100 basis points of growth, is it worth 500? Like just curious to see what you're thinking about in 2022 2023 from these projects? Yes, probably a good way to think about it is we're going to spend just a little north of $200,000,000 this year in growth capital. And some of that's going to come online early next year, some of it late next year, some of it maybe even the following year. Part of that is in the protein space, it's a little bit slower growth. Some of it will be in, as I mentioned before, debottlenecking type projects that are going to be You started fairly quickly. I think probably a fair rule of thumb would be to assume Mid double digit return on capital and probably lagging in it ratably over next year, where by the end of next year, Most of the capital we spend this year probably a majority of it will be up and running by the end of next year. Some will carry on beyond that, It's a list of a lot of detailed projects, so it's hard to just give you one simple answer. Great. I appreciate it. Thanks. Thank you, Ken. There are no more questions in the queue. This concludes our question and answer session. I would like to turn the conference back over to Ruth Ann Wisener for any closing remarks. Thanks for your interest in Bunge. And if you have any questions, feel free to reach out to us. The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.