Earnings Call: Q2 2020

Jul 29, 2020

Good day, and welcome to the Bunge Limited Second Quarter 2020 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 would now like to turn the conference over to Ruth Ann Weinsner. Please go ahead. Thank you, operator, and thank you for joining us this morning. 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 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, our Chief Executive Officer, Greg Heckman and Chief Financial Officer, John Neville. I'll now turn the call over to Greg. Thank you, Ruth Ann, and good morning, everyone. Turning to Slide 3, you can see the agenda for today's call. I'll start with an overview of the Q2 then hand it over to John who will go into more detail on our performance. I'll share how we're thinking about the second half of the year and close with some remarks on the Q2 and how that fits in with what we discussed during our business update last month before opening the line up for your questions. I want to start by wishing you all well I hope your families and colleagues are safe and healthy. This is a relentless challenge we're all facing. I'd also like to very pointedly thank our team for their hard work, resilience and focus. Our results in the first half of twenty twenty are a testament to their dedication to getting the job done and I couldn't be prouder. Last, I'd like to thank all of you who joined us for our virtual business update meeting last month. We appreciate the positive feedback we've received and we look forward to continuing the dialogue. With that, let's turn to the quarter starting with Slide 4. Bunge delivered a very strong second quarter with operations reflecting the way we intend to run the business going forward and demonstrating the benefit of our new operating model, leadership team and mindset. Performance across all of our core businesses was excellent. Our strong execution against committed crush capacity, exceptional coordination of trade flows and great risk management allowed us to capture above average margins and deliver solid top and bottom line results. Across the platform, we hit record capacity utilization in crushing, reduced unplanned downtime about 20% year over year and had the lowest operating quarter cost for soy crush in the last 3 years. We really like to benefit from the risk management decisions we made in the first half of the year and we are a new business with our focus on innovation and a collaborative approach with customers. We generated strong free cash flow while still being disciplined with capital allocation and continue to execute on our key priorities including refining the portfolio and gaining momentum on reducing costs. Outstanding performance this quarter with improved performance in essentially every part of the business. In oilseeds, as we expected, prior period timing losses were reversed as gains. Average global replacement soy crush margins across the quarter were $27 But because of our active risk management and effective use of working capital to capture market opportunities, we were able to execute at an average of $40 per metric ton. In grains, performance in Brazil was exceptional as we benefited from increased farmer selling as local prices increased with the devaluation of the Brazilian real. Food and Ingredients continues to gain traction and demonstrated our nimbleness and flexibility in the current environment. Even as foodservice demand fell off as a result of lockdowns around the world, our growing strength with CPG food processors and renewable diesel producers, including new customer wins in those areas, offset the COVID related impacts in foodservice. As COVID continues to present challenges for our customers, they are increasingly turning to Bunge because the resilience of our value chain model can provide innovative solutions that will continue to benefit our relationships going forward. With the backdrop of great commercial execution, we continue to focus on optimizing our portfolio and recently entered into an agreement to sell the assets to the small non core food business in Brazil that produces tomato sauces. We've also officially closed our White Plains office and are well adjusted to our St. Louis headquarters and interim remote working situation. In short, we're very pleased with the results this quarter and very pleased with our overall momentum. Given the strong Q2, our outlook for the full year is now higher. I'll now turn it over to John to walk you through the financials and some of the puts and takes related to our outlook. Thanks, Greg, and good morning, everyone. You may have noticed that we updated the format of our earnings press release. We did this for a couple of reasons. 1, we wanted to more clearly differentiate from our non core businesses. And secondly, we wanted to provide a cleaner format for detailing individual segment performance. We hope you find these changes beneficial. Now let's turn to the earnings highlights on Slide 5. Our reported second quarter earnings per share was $3.47 compared to $1.43 in the Q2 of 2019. Adjusted EPS was 3.88 dollars in the Q2 versus $1.52 in the prior year. Our results include a net $0.41 charge primarily related to a provision against an aged receivable dating back to 2015 that is now deemed uncollectible as part of an anticipated legal settlement. Adjusted core segment earnings before interest and taxes or EBIT was $943,000,000 in the 2nd quarter, adjusted EBIT of $287 was in the prior year, primarily driven by results in Agribusiness, where EBIT was $843,000,000 compared to $211,000,000 last year. As Greg noted, higher Agribusiness results in the quarter reflected strong execution throughout the value chains, particularly in managing risk, committed crush capacity and global trade flows. Results also benefited from approximately $380,000,000 of timing differences related to expected Q1 reversals and new mark to market gains. In oilseeds, strong soy processing results were driven by higher margins in South America, Europe and Asia, largely reflecting the actions we took in the Q1 to lock in capacity. This was partially offset by lower margins in North America. Softseed processing results were higher in all regions. You may recall, we carried into the 2nd quarter a mark to market balance of approximately $295,000,000 of previously reported timing losses related to open forward oilseed processing contracts and hedges against sales to our downstream edible oils customers. As anticipated, approximately $155,000,000 of these timing losses reversed in the Q2 upon executing a portion of these contracts. In addition, as a result of a decrease in global crush margins and the recovery in vegetable oil prices during the quarter, we recorded new mark to market gains of approximately $145,000,000 on open contracts at the end of the quarter. This reduced our carry forward balance on open oilseed contracts to a net gain of less than $10,000,000 which will reverse in the coming quarters. Results in grains improved, driven by most areas of the business. Origination benefited from increased farmer selling in Brazil with the rise in local prices caused by the devaluation of Brazilian real. North America origination also showed improvement compared to a challenging year ago period. Higher results in trading and distribution were driven by improved margins and favorable positioning. Ocean Freight also had a strong quarter driven by excellent execution as well as approximately $75,000,000 of gains from the reversal of mark to market timing, primarily related to bunker fuel hedges that negatively impacted the Q1. In edible oils, we observed a steep drop in foodservice and biofuel demand due to COVID-nineteen related restrictions at the beginning of the second quarter, as discussed on our Q1 earnings call. However, as the quarter developed, refinery margins improved, driven by increased demand from food processors and retail channel, along with partial recovery in biofuel demand. This margin improvement combined with growth in new customers as well as lower costs resulted in higher earnings in all regions. In Milling, higher results in Brazil, primarily driven by increased foods, processor and consumer demand, as well as decreased costs, more than offset lower results in North America, which were negatively impacted by business mix. In Fertilizer, higher segment results reflect improved performance in our Argentine operation, which benefited from higher margins and volumes as farmers accelerated purchases in anticipation of higher local prices. In Corporate and Other, total adjusted segment EBIT included expenses of $56,000,000 from corporate and income of $2,000,000 from Bunge Ventures and Other. This compared to expenses of $60,000,000 from corporate and a gain of $146,000,000 from Bunge Ventures and Other for the prior year period, primarily reflecting our investment in Beyond Meat. In our non core segment, Sugar and Bioenergy results for this quarter, which are non cash, reflect our share of the results of the fifty-fifty joint venture with BP. By contrast, Q2 2019 reflected our 100% ownership of the Brazilian Sugar and Bioenergy operations that we contributed to the joint venture in December 2019. Additionally, results of the joint venture are reported on a 1 month lag. Lower results in the quarter were primarily driven by approximately $70,000,000 of foreign exchange translation losses on U. S. Dollar denominated debt of the joint venture due to depreciation of Brazilian real. Also contributing to the decline in earnings were lower Brazilian ethanol prices, driven by the drop in global oil prices. For the quarter ended June 30, 2020, income tax expense was $168,000,000 Net interest expense of $56,000,000 was in line with our expectations. Let's turn to Slide 6. This slide compares our Q2 SG and A to the prior year. Adjusted SG and A excludes notable items. For Q2, our adjusted SG and A was $28,000,000 lower than last year, of which $20,000,000 reflects our organizational redesign actions and increased focus on managing costs. The additional $8,000,000 reflects the net impact of such items as inflation, foreign currency fluctuations, changes in our perimeter and performance based compensation, essentially adjustments to enable an apples to apples assessment of our actions to manage costs. We recognize a portion of our savings due to COVID-nineteen related restrictions, such as reduced travel, some of which may be a temporary impact. However, we strongly believe we won't return to pre pandemic levels as we have all learned to operate differently. Moving to Slide 7, cash flow highlights. For the trailing 12 month period, our cash generation was strong at $1,300,000,000 of adjusted funds from operations. The cash flow generation enable us to comfortably fund our CapEx and dividend and to meaningfully reduce debt. As you can see on Slide 8, we continue to strengthen our balance sheet. At the end of the second quarter, nearly 85% of our debt was used to finance readily marketable inventories compared to about 70% for the same time a year ago. Turning to Slide 9, we have committed credit facilities of approximately $4,300,000,000 with $3,600,000,000 available at the end of the quarter and we had a cash balance of $277,000,000 Moving to Slide 10 and our summary of capital allocation. Year to date adjusted funds from operations was $817,000,000 After allocating $85,000,000 to sustaining CapEx, which includes maintenance, environmental health and safety and $17,000,000 to preferred dividends, we had $715,000,000 of discretionary cash flow available. Of this amount, we paid $142,000,000 in common dividends to shareholders, invested $42,000,000 in growth and productivity CapEx and bought back $100,000,000 of our stock. The retained cash flow of $431,000,000 was used to pay down debt. Please turn to Slide 11. On our business update last month, we introduced 2 complementary return metrics that we believe better reflect the performance of our business. One of those metrics was AEROIC, which recognizes merchandising RMI as a tool to generate incremental profit. For the trailing 12 months, AROIC was 11.7%, 5.1 percentage points over our RMI adjusted weighted average cost of capital of 6.6%. ROIC was 9.6%, 3.6 percentage points over our weighted average cost of capital of 6%. Detailed calculations of these metrics are in the appendix of this presentation. Moving to Slide 12. The 2nd complementary metric we introduced was cash flow yield, which is a ratio of discretionary cash flow to the adjusted book equity. This measure emphasizes cash generation and complements earnings and return metrics. Here you can see cash flow yield over the past 5 years as well as for the trailing 12 months ending Q2, measured against our cost of equity of 7%. For the trailing 12 month period ending June 30, after adjusting the book value for CTA changes, we produced a cash flow yield of just over 19%. Please turn to Slide 13 and our 2020 outlook. As Greg mentioned in his remarks, we are increasing our 2020 EPS outlook based on our stronger than expected second quarter. In Agribusiness, based on first half results, the curve market environment and forward curves, we expect our full year results to be approximately $100,000,000 higher than last year's results in the second half results weighted towards the Q4. In edible oils, we expect modest improvement compared to our previous outlook. Despite a stronger than expected Q2, the business will likely continue to face headwinds from COVID-nineteen in the second half. Expected results in milling continue to be in line with last year. We also expect an adjusted annual effective tax rate in the upper end of the 19% to 23% range. Net interest expense of approximately $230,000,000 and capital expenditures in the range of $375,000,000 to $400,000,000 and depreciation and amortization of approximately $400,000,000 The outlook of the Sugar and Bioenergy joint venture has declined from the previous forecast to reflect the impact of foreign exchange volatility in the first half of the year. With that, I'll turn things back over to Greg for some closing comments. Thanks, John. As we wrap up, it's clear that we're managing the business to maximize economic results and value creation for the long term, not any one calendar quarter. Accounting requirements can create timing differences that smooth out over time. The mark to market losses we recorded in the Q1 that reversed this quarter as expected are a good example of this. During our business update meeting last month, we forecasted a strong second quarter which ended up being even stronger than expected. We highlighted our new leadership team and our new approach to risk management, and you can see our execution this quarter. We emphasized our progress against our key priorities of improving financial discipline, optimizing our portfolio and changing our operating model to drive excellent performance. We've continued to execute on each of those areas. We stress greater transparency and accountability and you're seeing that in our reporting today. And finally, we told you that we're taking actions that have set us up to get to an earnings baseline of $5 per share with additional upside. While there's more work to be done, we're moving in the right direction, we're operating better than we have in many years, and we're making progress every day. And with that, we'll open the line for your questions. Thank you. We will now begin the question and answer session. Our first question comes from Vincent Andrews with Morgan Stanley. Please go ahead. Thank you and good morning everyone. Good morning. So I just want to understand a little bit better the results in the first half versus what's going to happen in the second half. And I think what's happened is that everything that happened in the Q1 has now reversed in the second quarter and carry very little into the back half of the year. So obviously very strong execution because you said you realized $40 a ton versus I guess the spot or the market, however you want to phrase it, would have been a $27 So whatever I thought you were going to reverse in the second half of the year has already happened. So I got to take that out and now I just have to consider what I think or what the market looks like in terms of what crush margins are all else equal. Is that correct? Yes, I think that's a good assessment. Okay. And then on farmer selling in Brazil, the slides you had a couple of good comments about the record capacity utilization rate and the lowest quarterly operating cost for soy crust. How much of that is a function of just the rate at which the Brazilian farmer is selling, which is allowing you to run at those in those conditions versus the good work you guys have been doing just sort of on operations irrespective of what the farmer is doing? I think it's both. No doubt the team did a great job of being in position to take advantage of the opportunities that we saw, whether it was the farmer selling driven by the action in Brazil in Brazil and which not only helped drive the strong exports there, but our crush utilization. But also even in the U. S. Where we saw the opportunity with margins where we were able to run hard to delay some maintenance and of course improved on unscheduled downtime to go ahead and capture those margins while they were there. So definitely a combination of environment, but definitely the team executing very well in this environment. Our next question comes from Adam Samuelson with Goldman Sachs. Please go ahead. Yes. Thank you. Good morning, everyone. Good morning, Adam. So maybe first, just continuing kind of on Vincent's point on second half expectations and maybe would love to get your reflection on what the state of soy and softseed crush margins are today around the world? I mean, the margins that we see have come down pretty notably from where they had been earlier in the year and just get your thoughts and positioning around that and I guess maybe opportunities to exceed that kind of visible crush kind of margin with some of the origination and sourcing activities that you have and the leverage you have in the network? Sure. Yes, current crush replacement margins are in the U. S. Around mid-20s, mid to high single digits in Brazil, low single digits in Argentina. And then you've got Europe and China both in the mid-20s. Now that being said, even in the last couple of weeks, we've seen the curve start to improve a little bit. So as usual, we don't have a lot of visibility into Q4 and as usual we have more locked in Q3 than we do in Q4, but that's not unusual. And then the kind of the broader I think keys to watch on the crush, the flags are as we know we've seen the strong exports with the farmers selling in Brazil, the strong exports there to China and then we've seen China increasing their purchases here in the U. S. And the question will be what pace will that continue on as well as we've got the crop developing here in the U. S, a big corn crop, but the bean crop is developing very well. So it looks like we'll have a big harvest and then how the farmer decides to commercialize that. So those are the key flags here as we watch the second half develop. Okay. That's very helpful. And then just to clarify kind of the revised outlook. So now it's expecting agribusiness up about $100,000,000 year on year. So relative to where you laid that out in with 1Q in late April, that was it's about $150,000,000 or so kind of delta to the positive. You increased the edible oil outlook. How much did sugar is sugar expected to be worse than the prior outlook, just to clarify and am I rolling up those pieces properly? Yes, Adam, I would say on edible oils, even though we had a little bit better second quarter than expected, over the whole year, if you look back versus where we were in April, we've actually taken the number down slightly. And then sugar, I'd say probably in the $30,000,000 range in terms of our the impact of that from a P and L standpoint versus April. And reminder that that's a non cash recording of the investment in the underlying JV. Okay. That's helpful. Just to clarify in terms of the hedge I mean, there's an issue around the hedging on the JV level debt. Would you be able to execute hedges to eliminate that FX translation impact going forward? Yes. So the JV has been working on hedging that. And at the end of June, they had $150,000,000 of it hedged. Their target is to hedge $500,000,000 to $700,000,000 dollars to get to $350,000,000 For us, because the debt is non recourse to us, it would have been a case of us putting a hedge on just to impact reported earnings, which then affect is basically a bad exposition. We manage our exposure to the Real at a much broader level for the company rather than on any specific individual exposure. And while that's a reported earnings impact, from a cash standpoint, it doesn't really impact us. So we made the decision not to do anything on our books because we look at it more globally from a real standpoint, but they are making progress in terms of getting that covered. Our next question comes from Tom Simanac with JPMorgan. Please go ahead. Thank you and good morning. Good morning. Sorry if I missed this, but can you clarify the 2020 EPS guidance? I think you had originally guided to around 3.70 at the start of the year and lowered it directly last quarter. So if you could just frame your guidance in a range or relative to that initial $370,000,000 guide, that would be very helpful. Yes. So if you look at kind of where we were coming into the quarter here, I think average consensus was 283, somewhere in that range. And the way we look at it, probably the biggest delta in our forecast now is $100,000,000 I mentioned in Agribusiness. And the rest of it kind of all offsets net kind of net to close to 0. So if you think about $100,000,000 from an EPS standpoint, that's around $0.55 roughly. And so that's kind of how we're thinking about it right now. Sorry, dollars 0.55 above current consensus or Yes. So upside, upside in agribusiness that $100,000,000 is roughly $0.55 Okay. And then just on the edible ores, I think your EBITDA 51,000,000 was about double what you had guided for Q2. So can you just help us reconcile the outperformance in the quarter with the comments that COVID-nineteen headwinds are likely to linger? Yes. What we saw the big driver of course is around U. S. Foodservice and where we talked about from a QSR, we're a little over indexed to QSR into the big QSR. So April was down about 40%. But then during the rest of the quarter, we saw a strong recovery. Some of that no doubt was pipeline filling, but we saw levels get to year ago levels. Now as that's kind of leveled off, we think it stabilized between the balance of what business moved over to the retail or CPG space and versus how foodservice with some of the closings coming back out. We're probably net off 15%. And we expect that to probably be pretty wavy on the demand as things open and close and we manage through COVID through the balance of the year. Our next question comes from Ben Bienvenu with Stephens Inc. Please go ahead. Thanks. Good morning, everyone. Good morning, Ben. Good morning, Ben. I wanted to revisit origination for the back half of the year in 4Q in particular. Greg, you know that's going to be kind of a key factor as it relates to the performance for the balance of the year. But just as we sit here today, you've already seen some renewed buying from China for U. S. Soybeans. Brazil's soybean balance sheet is pretty tight with their strong exports. There's some corn crop issues in China and we've seen their prices move higher as they've also sold through reserves. So just curious, recognizing there's variability both in how the crop fairs in the U. S. Through the balance of the year and inherent volatility in that business, how optimistic are you about origination for your business in the back half of the year? We're definitely optimistic about what's happening overall. There has been some of Q3 pulled into Q2 in South America. But with the programs that are building in the U. S, we're definitely seeing very good core margins there. I think the way we don't what you'll have to weigh there is how the buying continues for the program for the rest of the year on export out of the U. S. Versus the farmer commercializing what's to be a very big crop. Okay, great. On portfolio optimization, you noted a small sale of a tomato sauce business. I believe you guys were in process on selling another large asset. I think last update you had given, COVID wasn't a huge disruptor to the progress of the discussions and broader portfolio optimization discussions. But I think there had been a little bit of a slowdown. Kind of where are we in all of that? And how are those discussions going broadly? Yes, Ben, I'll take that. So with respect to some of our projects that we're working on, let's I'll give you a quick rundown of things we've talked about before first. And obviously, our Brazil margarine EMEA business, we had announced previously, still underway, still in regulatory in Brazil, but moving along. And I think we feel pretty confident we'll get that closed this year. We've talked before about the U. S. Grain asset sale. With the review there, it's probably we've talked before late Q4, Q1 type event to get that closed. I think we still feel pretty confident in that timing. And then we do have another project that we've been working on. I would say it's been a little bit COVID related, but but it's moving slowly, but it's moving forward. And it's just really at the pace of how we can work that with our counterparty. But all those things were pretty positive on how they're moving. And then on the other side with the announcement of MCOPA that's progressing. Again a regulatory and timing standpoint, it's probably slowed down a little bit, but we still feel pretty comfortable with where that's headed. Our next question comes from Ken Zaslow with Bank of Montreal. Please go ahead. Hey, good morning, everyone. Good morning, Ken. Just a couple of questions. One is, can you talk about the new business that you earned and what does that entail? You said that in the opening remarks. Can you just talk about that? Yes. I think what we've really seen is there continues to be a little bit of magic in the specialty fats and oils of loaders that we added into the legacy Bungeys portfolio of our commodity oils and then our global footprint. So what we've been able to do is help people solve the problems whether it's the switchover in the product mix we saw as people went from eating away from home to eating at home to where they were making it and using our global platform to help them solve problems that they understand long term that the power of Bunge and our ability to move and be nimble and our new operating model definitely supported that. That gets us in a less transactional and more partnership relationship with folks and not on single product but on the portfolio products and services we're able to bring. So we definitely like the progress that we're making and it's the right kind of growth with the right customers. Okay. And then a second question is in terms of the crush margin outlook, obviously U. S. Crush margin is getting better. Can you talk about why you think it's getting better, the longevity of that? And then also, China and Europe seem to be very strong as well. Can you talk about the underpinnings there? And again, it seems like China has changed as they are expanding their hog herd. Is that the derivation of why Chinese crush margins are? Is that a foreshadowing for the globe? Yes. I think a couple of the big drivers around let me talk to meal first and then oil. A couple of big drivers, of course, around meal demand have not only been the imports of protein into China which of course has helped the meal demand in those exporting countries. But the big one of the big drivers is how quick China's sows and hogs have come back and their meal demand has recovered much more quickly than any of us have thought. And then of course the U. S. Where we've got historically high numbers in chicken and hogs has been good for demand and those numbers have not tailed off as quickly as everyone had predicted. And then on the oil side, as we talked the oil demand has come back quicker than we thought here in the U. S. And that's not only on the food side but on the renewable diesel. So we continue to see strong demand there and see some definitely some tailwinds going forward not only second half of twenty twenty but into 2021 around renewable diesel. Probably the laggard right now and the one that we'll watch is biodiesel in Europe, which has been a little bit slower coming back. Our next question comes from Heather Jones with Heather Jones Research. Please go ahead. Good morning. Good morning, Heather. First, I want to say thank you for the new layout on the press release. It was I really like it and it's made a lot things a lot more helpful and more clear. Just a quick detail ish question. When you all are talking about your full year outlook for Sugar, the real has appreciated considerably since the end of May, which I think is the end of Q2 for Sugar. When you guys are talking about your full year outlook, are you assuming there's no appreciation in the real from Q2 or are you assuming the current rate? Yes. When we Heather, this is John. So when we put in the forecast, it's probably a week ago or so that we finalized that maybe a little bit less than a week ago. And we took some of that into consideration, but we don't assume going forward any big change one way or the other. So it we've got the remember, we're the reporting of that is the end of May for our June 30. So any change from May to the end of June would be reflected in Q3 and then of course all the way through August will be recorded our September number. So we don't have a big assumption one way or the other in there in terms of where it's headed, but obviously that will have an impact going forward. All right. And then I wanted to ask about meal demand. So Greg, you mentioned hog and chicken numbers and those have held up fairly well. But our understanding is that a lot of these hog guys have taken their rations down to levels basically maintenance rations and more recently, it seems like that soybean meal inclusion rate has bottomed and is starting to move higher again. Would what you're seeing, does that agree with that observation? Yes. I'd say generally, I don't know that kind of on that kind of detail, but yes, generally, I'm not 100% sure of the driver, but the demand has not come off as fast as we thought in the U. S. The demand has stayed there. And then of course, in China, we've not only seen the animal numbers, but the inclusion rates in China that we have seen is driving the demand there. And then of course there was less DDGs as the ethanol industry was not running as well. So I think that's where we saw some of the inclusion rate just from a protein side. And in China, given because I'm glad you mentioned that because it seems like the demand growth is outpacing the adding the number of animals that have been added. So would you all attribute that to the fact that it's large commercials that are the ones that are adding the hogs and so their inclusion rates tend to be higher? Or is there something else that we're that I might be missing? No, that's what we're seeing that it is the inclusion rate because it's the professional commercial operations that are coming back up which is how they've come up as quickly as they have. Okay. And my final question is on you mentioned strong U. S. Port elevation margins. I mean, our numbers are showing very strong, much stronger than last year in both beans and corn. That's consistent with your observation as far as the year on year strength? Yes, we'd agree. Okay. All right. Thank you so much. Thank you. Our next question comes from Ben Theurer with Barclays. Please go ahead. Hey, good morning, Greg, John, and thanks for taking my question. Congrats on the strong results. Thanks. I wanted to quickly follow-up on the foodservice piece. And you've mentioned that basically it was very much under pressure in April and then partially with filling rates going higher into May, June. What have you been seeing within July in terms of the pace of demand on foodservice? And how do you think this is going to turn out, just to understand a little bit how much maybe was just anticipated and now weakness into 3Q versus how the underlying business is actually doing? That will be my first question. Yes. It feels to us like it's settling out down about 15% and of course that's kind of wavy as things open and close and there's pipeline filling and then working off. But I think down 15% is what our team feels. Okay. And if we think about it, I mean, in the medium, long term and what you've been showing within the agribusiness piece, I mean, clearly, it was an outstanding quarter and you've mentioned all the benefits from the mark to market. But if we look into it with what likely the crop is going to be in the U. S. And what Brazil and Argentina is doing as well, How do you think more of a medium, long term level of profitability? And where do you see margins going? Do you really think we're going to be next year at that roughly mid $30 crush margin level as you have highlighted about a month ago or do you think it's still too early to get there? Look the curves will continue to change. The outlook we're giving you today is on the curves that we can see. And then of course in the business update, the number we spoke to was a baseline to deliver that $5 earnings so that based on what you believe the market is doing, you can adjust it against that baseline. We weren't making a prediction for crush margins for 2021 there. Our next question comes from Robert Moskow with Credit Suisse. Please go ahead. Hi, thanks for the question. I might be just doing my model incorrectly here, but if I start at that, I think you said $2.80 base and add the $100,000,000 to that, I'm getting, according to your math, something around $3.40 for the year. But my model is spinning out a much higher number. Maybe we're using the wrong base or maybe I'm misunderstanding the communication on sugar here. So kind of start there, are you expecting Sugar to operate at a loss in the back half of the year? Notwithstanding the any fluctuation in currency, I think our expectation is that there should be a small contribution from sugar in the second half to flat to 0. We don't expect underlying operational losses to continue in the second half based on what we can see. So it's all going to be dependent upon the exchange rate and how that impacts the reported numbers from the debt. Well, then maybe I'll just try the math here. Year to date, your adjusted EPS is up like $2.50 I think. It is $2.50 And now you're expecting the back half to look similar to the back half of last year. I think if you kind of net all that out, doesn't that get you a much higher number like closer to $5 Yes. No, we're not calling the $100,000,000 compared to the second half of last year. Is that right? No, that's for the full year. So that's looking at the over performance in the first half and then projecting, a look at the second half. For the full year, we're calling it up 100. Our next question comes from Ben Kallo with Baird. Please go ahead. Hey, guys. Thank you for all the clarity. Maybe just on the cash flow yield and maybe what the use of proceeds I think I asked this on in June, but what's the plan for the share repurchase? And then could you just talk to us about RMI and remind me how that changes in the second half of the year too? So should we see an uptick there? It looked like there was in the quarter. Thank you. Sure. Yes. So I'll start with cash flow yield. So as you look at the cash that we generated through the first half of the year, I think net number after all allocation was $432,000,000 And as we looked at the first half, you can imagine CapEx was a little under spent just given COVID related timing and impact on the ability to get some projects done. We do expect that to pick up a bit in the second half, certainly. Of course, our normal dividends were in there and that will be pretty standard with the second half of the year. When we were looking at the opportunity for stock buyback in the first half of the year, it was really looking at, as we always do, looking at the opportunity for risk adjusted return and where was the stock trading and what do we have in the pipeline in terms of projects. And we just felt like it was a good time to step into the market. We'll continue to look at it, we always do, as we communicated a month ago at our business update. In the second half of the year, I think, while we'll expect earnings to be more modest than they are for the first half of the year, We're also looking at CapEx likely picking up. We also you'll see in our Q, we announced we're making a $65,000,000 contribution to our pension plan to take advantage some tax opportunities that will have small impact on cash flow in the second half, but we'll continue to assess all of that. In terms of RMI, it's very seasonal. Certainly, our growth in Q2 related to the strong origination in South America. We were well ahead of our normal pace in terms of farmer selling and our ability to get a hold of the crops. So we feel very good about how we're positioned there. Then of course in Q4, we'll have a big growth in RMI because of North American harvest. So we'll expect to see that. But again, we're managing that in a smart way, making sure that when we invest in RMI, we're getting a return on that. And maybe just coming back to I think what was kind of the thread that ran through everyone's questions before me is that we're trying to square away the second half numbers to the outperformance here in Q2 and my math is not good either. But it looks like that I'm getting to like a $0.90 EPS for the second half total. I know you don't want to go to that granularity, but why do we expect a big drop off? I know there's a big mark to market here in Q2, but why should we expect a big drop off in earnings when it seems your commentary doesn't flush with that? And yes, maybe I'll just leave it there. Yes. I'd say we continue to look at what the current curves are giving us in the second half. Now that can quickly as we saw last year in Q4. And we're definitely we're facing something we haven't seen before, right? We're still working through the trade war. We've got COVID, but we are facing it with a new bungee. It's a different team and a different operating model. So we feel based on the opportunity that we see we'll get more than our share of that. Sure some of the Brazil business was pulled a little forward into Q2 from the second half. But the other side of that is we've got big crops coming in the U. S. And we'll see how the farmer markets is cropped there. And then how China continues as they work against the trade deal and fulfilling their obligations are been very aggressive here the last couple of months. And then we've got the oil complex, which feels like it continues to tighten really as we look across the complex. If COVID improves that also helps the curve. Argentina continues to be a challenging situation for all of us operating there with the pharma continuing to be a very reluctant marketer as he protects himself financially as well as some of the industry just continuing to struggle. So net net, a lot of people are in the spot because of that uncertainty they're seeing from their customers with COVID. So a lot of meal and oil customers are spot buyers today. That's also giving us less visibility. But the numbers are out there and we expect the business to be there. And I think we're very comfortable that we remain nimble, we remain well positioned and we've got the right team to take advantage of the opportunities as they happen. All right. Thanks, you all. Thank you. Our next question is a follow-up from Ken Zaslow with Bank of Montreal. Please go ahead. I appreciate the follow-up. Can you tell us a little bit about the operational efficiencies? You said that you had record utilizations, lower cost structure. Can you talk about what the parameters were, say, year or 2 ago, where they are now? And what is the key driver to the improvement of these metrics? I think the operating model has been a key driver, Ken. We talk about unscheduled downtime and that's one having the assets up and ready to run, but it's also how the industrial and the commercial teams are working together on getting the inputs there, getting the products away to make sure that those plants stay up and run. And then of course the first step before that is making sure that we get the customer business done. And that's whether it's the customer selling us the beans, the origination side of the customer buying the meal and oil, so that we've managed those earnings at risk. We've locked them in and we're able to run our facilities full and that's where the capacity utilization is coming from. As well as I said the team staying in step and making sure that we keep those facilities running. So it's been great coordination. We're looking at it as a global business, so we're able to move much faster as we move business around. And frankly, frankly, we've been able to help customers solve some of their problems and that's been extra business for us as well. And then the other thing we talked about is we're now scheduling the business as a global company and being thoughtful about when we're taking our scheduled downtimes to again get the capacity utilization and make sure we're running where the margins are best. And I would just add to that Ken that we are focusing much like we are on the SG and A side. We're focused on industrial costs as well, and I think the team is making good progress there. It's not always visible because it's buried in the margin number. But although we've incurred a little bit excess cost here in the Q2 relative to COVID, I think we feel really good about where we're headed from a cost standpoint as well. It's going to take time, but I think there's the team is making good progress on that as well. So is it fair to say that the way you're moving the business between the risk management and the operations, again, absent where the crush margin is, is but towards that $5 number, everything that's in your control is still working that way. There hasn't been any putbacks or anything like that. It seems like the path continues to move towards that direction. Is that a fair way of saying it given like these little milestones that you're kind of giving us? Absolutely. We continue to be really pleased with the transformation. We're ahead of our own schedule in several areas and on schedule on the others and all that in the midst of COVID. So couldn't be more pleased with the team, the ability to execute for customers in a really challenging environment, but also continue to stay focused on the transformation. Now look, we still got more to do. There's more self help to come. There's more cost to get out as we finish the portfolio rationalization here at the end of the year and as we finish our rewiring. But we're on track. We know what we're doing and we got the right team doing it. Feel real good about things. Great. Thank you very much. Thank you, Ken. This concludes our question and answer session. I'd like to turn the conference back over to Ruth Ann Weisner for any closing remarks. Thanks for joining us today. And if you have any questions, please feel free to reach out to us.