ADM Latest Analyst Presentation.

  • 1,926 views
Uploaded on

 

More in: Technology , Business
  • Full Name Full Name Comment goes here.
    Are you sure you want to
    Your message goes here
    Be the first to comment
    Be the first to like this
No Downloads

Views

Total Views
1,926
On Slideshare
0
From Embeds
0
Number of Embeds
0

Actions

Shares
Downloads
94
Comments
0
Likes
0

Embeds 0

No embeds

Report content

Flagged as inappropriate Flag as inappropriate
Flag as inappropriate

Select your reason for flagging this presentation as inappropriate.

Cancel
    No notes for slide

Transcript

  • 1. Vital to the World Corn Processing Business Review And Plant Tour Patricia Woertz – Chairman, CEO and President Steve Mills – EVP & CFO October 7, 2008 John Rice – EVP, Commercial & Production Ed Harjehausen – SVP, Global Corn Randy Kampfe – VP, Corn Processing Dwight Grimestad - VP, Investor Relations
  • 2. Safety Moment 2
  • 3. Please Turn Off Cell Phones and Pagers 3
  • 4. Safe Harbor Statement Some of our comments constitute forward-looking statements that reflect management’s current views and estimates of future economic circumstances, industry conditions, company performance and financial results. The statements are based on many assumptions and factors, including availability and prices of raw materials, market conditions, operating efficiencies, access to capital and actions of governments. Any changes in such assumptions or factors could produce significantly different results. To the extent permitted under applicable law, the Company assumes no obligation to update any forward-looking statements as a result of new information or future events. 4
  • 5. Agenda for the Day 8:00am Overview Presentation: Strategy and Execution; Patricia Woertz - Chairman, CEO and President Financial Performance and Capital Expenditures; Steve Mills - EVP and CFO Recent Trends Shaping Global Grain Supply, Demand and Prices; John Rice - EVP, Commercial and Production **Q&A Break 8:55am Corn Processing Business Review; Ed Harjehausen - SVP, Global Corn Corn Operations Review; Randy Kampfe - VP, Corn Processing **Q&A 10:00am Cedar Rapids Plant Tour; Doug Brakhan - Plant Manager 12:00pm Wrap-up Q&A and Lunch; ADM Management Team 1:30pm Conclusion 5
  • 6. Overview Presentation: Strategy and Execution Pat Woertz – Chairman, Chief Executive Officer and President
  • 7. 7
  • 8. Our World-Class Asset Base Is Positioned for Global Growth Sourcing facilities Oilseed processing Corn processing Cocoa & wheat processing Sourcing distribution Processing distribution 8
  • 9. We Have Leveraged our Value Chain and Executed on our Strategy The ADM Value Chain CORN FOOD SOURCING TRANSPORTATION PROCESSING DISTRIBUTION SALES OILSEEDS FEED WHEAT FUEL COCOA INDUSTRIAL 9
  • 10. We Have Diversified Feedstocks CORN FOOD SOURCING TRANSPORTATION PROCESSING DISTRIBUTION SALES OILSEEDS FEED WHEAT FUEL COCOA INDUSTRIAL Diversify Feedstocks • Palm • Sugar • Biomass 10
  • 11. We Have Expanded the Geographic Scope of our Core Model CORN FOOD SOURCING TRANSPORTATION PROCESSING DISTRIBUTION SALES OILSEEDS FEED WHEAT FUEL COCOA INDUSTRIAL Expand Geographic Scope of Core Model Diversify •Rapeseed crushing in Germany Feedstocks •Cocoa plants in U.S. and Ghana •Origination, transportation network in U.S. 11
  • 12. We Have Grown our BioEnergy Business CORN FOOD SOURCING TRANSPORTATION PROCESSING DISTRIBUTION SALES OILSEEDS FEED WHEAT FUEL COCOA INDUSTRIAL Grow BioEnergy Business Expand Geographic Diversify Scope of Core Model •Completing BioEnergy facilities Feedstocks •Pursuing innovative research with partners 12
  • 13. We Have Reduced Water Consumption CORN FOOD SOURCING TRANSPORTATION PROCESSING DISTRIBUTION SALES OILSEEDS FEED WHEAT FUEL Diversify Expand Geographic Grow Feedstocks Scope of Core Model BioEnergy COCOA INDUSTRIAL Business Technology and Innovation Drive Growth Reduced Water Consumption 13
  • 14. We Are Building Efficient Cogen Plants CORN FOOD SOURCING TRANSPORTATION PROCESSING DISTRIBUTION SALES OILSEEDS FEED WHEAT FUEL Diversify Expand Geographic Grow Feedstocks Scope of Core Model BioEnergy COCOA INDUSTRIAL Business Technology and Innovation Drive Growth Reduced Water Consumption Cogeneration 14
  • 15. We Are Continuing Advanced Biofuels Research CORN FOOD SOURCING TRANSPORTATION PROCESSING DISTRIBUTION SALES OILSEEDS FEED WHEAT FUEL Diversify Expand Geographic Grow Feedstocks Scope of Core Model BioEnergy COCOA INDUSTRIAL Business Technology and Innovation Drive Growth Reduced Water Consumption Cogeneration Advanced Biofuels 15
  • 16. We Use Technology and Innovation to Meet Customer Needs CORN FOOD SOURCING TRANSPORTATION PROCESSING DISTRIBUTION SALES OILSEEDS FEED WHEAT FUEL Diversify Expand Geographic Grow Feedstocks Scope of Core Model BioEnergy COCOA INDUSTRIAL Business Technology and Innovation Drive Growth Reduced Water Consumption Cogeneration Advanced Biofuels Customer Needs 16
  • 17. We Have Driven Improvements in Key Priority Areas… • Safety • Continuous Learning • Leadership • Cost Management • Communication • Project & Capital Discipline • Metrics …and Set New Priorities • Safety • Cost Management • Performance • Sustainability 17
  • 18. We Are Advancing the Understanding that Agriculture Can and Will Meet Global Demands 18
  • 19. Financial Performance and Capital Expenditures Steve Mills - Executive Vice President and Chief Financial Officer
  • 20. We Achieved Record Segment Operating Profit in 2008 (Amounts in millions, except for per share data and percentages) Year ended FY08 FY07 % Change Net sales and other operating income $ 69,816 $ 44,018 59% Segment Operating Profit 3,441 3,161 9% Net earnings 1,802 2,162 (17%) Diluted earnings per share $ 2.79 $ 3.30 (15%) 20
  • 21. Our Diversified Portfolio Drives Earnings Growth FY06 FY07 FY08 Oilseed Processing Corn Processing Other Ag Services Sweeteners & Merchandising & Wheat, Cocoa, Malt Crushing & Origination Starches Handling Refining, Packaging, Financial Bioproducts Biodiesel & Other Transportation Asia 21
  • 22. Our Diversified Portfolio Drives Earnings Growth FY06 FY07 FY08 Oilseed Processing Corn Processing Other Ag Services Sweeteners & Merchandising & Wheat, Cocoa, Malt Crushing & Origination Starches Handling Refining, Packaging, Financial Bioproducts Biodiesel & Other Transportation Asia 22
  • 23. Our Balance Sheet Reflects the Impact of Increased Commodity Prices and our Capital Construction Projects June 30 June 30 2008 2007 Invested Capital W orking capital $ 14,189 $ 7,787 Net property, plant and equipment 7,125 6,010 Investment in affiliates 2,773 2,498 Long-term marketable securities 590 657 Other non-current assets 1,113 831 $ 25,790 $ 17,783 Financed By Short-term debt $ 3,123 $ 468 Long-term debt 7,922 4,817 Deferred liabilities 1,255 1,245 Equity 13,490 11,253 $ 25,790 $ 17,783 23
  • 24. Major Construction Projects Are on Schedule Current Timeline* Project Plant Location – Project Phase I Completion Columbus, NE – Ethanol Q309 Cedar Rapids, IA – Ethanol Q110 Clinton, IA – Co-Generation On-line Q109 Columbus, NE – Co-Generation Q309 Q409 Clinton, IA – PHA Q209 Hazleton, PA – Cocoa On-line Q309 Decatur, IL – Propylene/Ethylene Glycol Q309 Total Projected Costs $2.6B *Calendar Year 24
  • 25. Recent Trends Shaping Global Grain Supply, Demand and Prices John Rice - Executive Vice President, Commercial and Production
  • 26. World Meat and Grain Consumption Is Growing (Amounts in millions of tons) 2007/08 1988/89 % Change Population 6.7B 5.2B 29% 26
  • 27. World Grain and Oilseeds Production Is Growing Area Production 27
  • 28. High Crude Oil Prices Impact Crop Prices (Amounts in U.S. dollar/barrel) 28
  • 29. The Weak Dollar Impacts Crop Prices (Amounts in Euro) 29
  • 30. Fund Investments Impact Crop Prices (Amounts in billions of dollars) 30
  • 31. Increased Crop Production Is Projected for 08/09 • Wheat production to increase by 65M tons • Oilseeds production to rise by 27M tons • Coarse grains production to grow by 11M tons Source: USDA 31
  • 32. World Corn Production Grows to Meet Demands Source: USDA 32
  • 33. ADM Is Positioned to Respond to a Changing Marketplace • Proprietary crop intelligence offering insight into world grain markets and flows • Transportation network spanning five continents • Versatile, responsive processing facilities • Ability to reformulate rations to produce cost-effective feeds based on current commodities prices 33
  • 34. ADM Provides Alternatives to Optimize Swine Feed Formulas Corn Amino Acids Canola Wheat Barley SBM Vit & Min Fat Wheat Midds Milo Meat & Bone Meal Bakery Meal DDGS Rapeseed Meal 34
  • 35. ADM Provides Alternatives to Optimize Poultry Feed Formulas Corn Amino Acids Canola Wheat Barley SBM Vit & Min Fat Wheat Midds Milo Meat & Bone Meal Bakery Meal DDGS Rapeseed Meal 35
  • 36. ADM Provides Alternatives to Optimize Dairy Cattle Feed Formulas Ration Without Ethanol Current Ration Based on Alternative Ration Based on Coproducts Available Coproducts Increased DDGS Availability Similar to 1990’s Protein Supplements Cottonseed Alfalfa Hay DDGS Soybean Hulls Corn Grain Wheat Midds Canola Meal Cottonseed Hulls Corn Silage CGFP Citrus Pulp 36
  • 37. Q&A ADM Strategy and Execution Financial Performance and Capital Expenditures Crop Dynamics 37
  • 38. BREAK 38
  • 39. Corn Processing Business Review Ed Harjehausen - Senior Vice President, Corn
  • 40. Corn Processing Business Review • Fundamentals • New Product Development • Issues • Strengths 40
  • 41. ADM’s Diversified Product Line Maximizes Value • 2.0 million bu/day • 7 U.S. plant locations • Maximize returns by allocating grind to different products that make the most financial and strategic sense • Will continue to develop new value-added products that effect product mix 41
  • 42. Joint Ventures Are Positioned for International Opportunities Slovakia Hungary Romania Bulgaria Turkey Guadalahara 42
  • 43. Wet Corn Mills Deliver Lower Net Corn Costs (BU = 56 lbs) Wet Mill Dry Mill Cash Price $ 5.00/BU $ 5.00/BU Coproduct Credits 2.5 lbs of 60% corn gluten meal $ 470.00/ST 12.5 lbs 21% corn gluten feed $ 85.00/ST 1.5 lbs of corn oil $ 0.45/LB 18 lbs distilled dry grain $100.00/ST Net Corn $ 3.18/BU $ 4.00/BU (cost of starch 31.5 lbs/bu) Typical Coproduct Credit 35 - 45% 20 - 30% 43
  • 44. We Produce 24 Products from Corn CORN SYRUP, HIGH FRUCTOSE CORN SYRUP Dextrose (Liquid and Crystalline), Maltodextrin Starch Xanthan Gum, Citric Acid, Lactic Acid, Yeast Sorbitol (Liquid and Crystalline) Propylene Glycol, Ethylene Glycol Lysine, Threonine, Astaxanthin FUEL ALCOHOL Corn Oil Food and Industrial Starches Gluten Feed Ethyl Lactate Gluten Meal PHA (biodegradable plastic) Additional Products 44
  • 45. ADM Has Leading Positions in Key Markets 1st 2nd 3rd Total Grind Cargill Tate & Lyle HFCS Cargill Tate & Lyle Syrup Cargill Tate & Lyle National Starch Starch Tate & Lyle & Chemical Aventine Ethanol Poet Renewable Energy 45
  • 46. HFCS Remains an Attractive Alternative to Sugar • U.S. market – 23.5 billion pounds, slightly declining volume • Mexico volumes – up over last year • ADM has approximately 30-35% market share • Beverages account for 70% of HFCS usage • Price differential between sugar and fructose has grown 46
  • 47. U.S. Ethanol Demand and Supply Are Growing 20 Days *Calendar Year Source: Energy Information Administration 47
  • 48. Ethanol Demand Exceeds RFS Requirements *Calendar Year Source: Energy Information Administration 48
  • 49. The Ethanol Industry Sees Growing Demand 2008 2009 2010 - Florida 900 mmg - Michigan 350 mmg - California 700 mmg - Georgia 500 mmg - Oregon 120 mmg - Texas 800 mmg - Tennessee 350 mmg - Nevada 50 mmg - Arizona 160 mmg - Utah 115 mmg - N Carolina 450 mmg - Pennsylvania 350 mmg - Virginia 390 mmg - New York 290 mmg - Indiana 120 mmg - Washington 260 mmg - Illinois 170 mmg - Kentucky 175 mmg - Ohio 160 mmg - Mississippi 150 mmg - Iowa 40 mmg - Arkansas 125 mmg - Kansas 40 mmg - Oklahoma 200 mmg - Maryland 25 mmg - Louisiana 200 mmg - S Carolina 260 mmg - Alabama 200 mmg - W Virginia 80 mmg - Maine 80 mmg - N Hampshire 60 mmg - Vermont 35 mmg 2008: 3,405 mmg 2009: 2,725 mmg 2010: 1,775 mmg Three-year period: 7,905 mmg 49
  • 50. Low Refining Margins Drive Ethanol Use 50
  • 51. Ethanol Has a Competitive Advantage • Ethanol = $ 1.8100 (net) 116 Octane • USGC RUL = $ 2.8226 87 Octane • USGC PUL = $ 3.0226 93 Octane • MTBE = $ 2.8700 110 Octane • Alkylate = $ 3.3126 93 Octane • Iso-octane = $ 3.3426 98 Octane • Reformate = $ 3.6926 100 Octane • Toluene = $ 3.7900 101 Octane Ethanol = NYMEX RBOB $2.6651 - $.3451 = 2.3200 - .51 = 1.8100 Source: Platt’s Marketwire September 26, 2008 51
  • 52. Brazilian Ethanol Export Capacity Is Limited (Amounts in millions of gallons, except for percentages) Import to U.S. 2007 2008 Est. 2009 Est. 2010 Est. Caribbean 354 495 675 740 Direct 85 46 0 0 TOTAL 439 541 675 740 US Market 6,600 9,000 10,500 12,000 % of US Market 6.65% 6.01% 6.43% 6.17% *Total export capacity 1.5 billion gallons/year *2008 estimates non-U.S. CBI exports - 475 mmg Source: F.O. Lichts , The Kingsman 52
  • 53. New Products Offer Opportunities to Increase Value from Grind Commercialization in progress • Telles JV between ADM and Metabolix - Biodegrades in soil and marine environments - Heat resistant • Glycols 53
  • 54. Industrial Chemicals Offer Growth Potential for the Future • Focus on direct chemical replacements - Based on ADM feedstocks - Low cost position possible - Initial focus on North America - High growth market or market support for bio-based - Increases speed-to-market • License external process technology where necessary • Develop partners for specialty chemicals where performance knowledge is required 54
  • 55. Issues Affecting Corn Industry 55
  • 56. HFCS Is the Same as Table Sugar • “It's basically no different from table sugar. Table sugar is glucose and fructose stuck together. Corn sweeteners are glucose and fructose separated. The body really can't tell them apart ...” - Dr. Marion Nestle, Paulette Goddard Professor of Nutrition, Food Studies, and Public Health, New York University • “If there was no high-fructose corn syrup, I don't think we would see a change in anything important.” - Dr. Walter Willett, Chairman of the Nutrition Department, Harvard School of Public Health 56
  • 57. Facts about HFCS Are a Sweet Surprise 57
  • 58. U.S. DDGS Demand Is Growing With Supply Source: Informa 58
  • 59. DDGS Are an Effective Feed Ingredient CHICKENS • “I’m very enthusiastic about using DDGS in poultry diets. We use it just like other ingredients that are available. And as the ethanol Industry has grown, there are more and more tons of DDGS, and we’ll continue to use it” - Philip Smith, Poultry Nutritionist, Tyson Foods, Inc. TURKEYS • “Current feeding trials have examined the use of low and moderate levels of distillers dried grains with solubles in broiler and turkey diets. In market tom turkeys, up to 20% DDGS in grow/finish diets is possible in diets with normal protein content and when feed intake is not limited.” - Dr. Sally Knoll, Professor, University of Minnesota Extension Service SWINE • “The Maschhoffs Inc. feed DDGS at up to 30% in some swine rations. At current commodity prices DDGS is very competitive and allows for the replacement of corn, soybean meal, and monocalcium phosphate. ” - Aaron Gaines, The Maschhoffs Inc. 59
  • 60. Food Prices Are Driven by Energy Costs • “During the first four months of 2008, the all food CPI increased by 4.8 percent, with increased ethanol and biodiesel consumption accounting for only about 4-5 percent of the total increase, while other factors accounted for 95-96 percent of the increase.” - U.S. Dept. of Energy, U.S. Dept. of Agriculture • Increasing petroleum prices have about twice the impact on consumer food prices as equivalent increases in corn prices. - USDA Economic Research Service • Food travels on average 1,500 miles before it gets to the retail establishment. - National Farmers Union 60
  • 61. Ethanol Is Keeping Down Gasoline Costs • “Oil and gas prices would be 15% higher if biofuel producers weren’t increasing output.” - Merrill Lynch commodity strategist Francisco Blanch • “If we had not been blending ethanol into gasoline, gasoline prices would be between 20 cents and 35 cents per gallon higher.” - U.S. Dept. of Energy, U.S. Dept. of Agriculture 61
  • 62. Global Agricultural Leaders Are Responding to Concerns www.FoodAndEnergy.org 62
  • 63. ADM Has Competitive Advantages in Corn Processing • Diversification of product mix • Advantages of combining wet and dry operations • Cogeneration: steam and power from coal • Size: first in grind and first or second in major product lines • Logistics • Global markets for coproducts • Grain origination • Economies of scale 63
  • 64. Corn Operations Review Randy Kampfe - Vice President, Corn Processing
  • 65. Corn Plants Are Organized around Focus Areas Plant Manager Human Wet Mill Dry Mill Quality Environmental Purchasing Cost Analyst Engineering Safety Resources Superintendent Superintendent Const. Supvs. Dept 1 Dept 2 Dept N Maintenance Shift Supts. Dept 1 Dept 2 Dept N Co-Gen 1-N Supt. Supt. Supt. Supt. 4-5 Supt. Supt. Supt. Superintendent Shift Project Engineers Process Process Process Reliability Process Process Process Supervisor 1-N Engineer Engineer Engineer Engineer Engineer Engineer Engineer 4-5 Shift Supv. Shift Supv. Shift Supv. Shift Supv. Shift Supv. Shift Supv. Shift Supv. Engineering 4-5 4-5 4-5 4-5 4-5 4-5 4-5 Maintenance 65
  • 66. We’re Improving Safety Performance 66
  • 67. Each Kernel of Corn Contains Multiple Value Streams Fiber: 8.75 lbs/bu Starch: 31.5 lbs/bu Protein: 5.3 lbs/bu Oil: 1.75 lbs/bu 56 lbs/bu total, 15.5% H2O = 47.3 lbs/bu dry matter 67
  • 68. Dry Milling Is Simpler but Less Flexible 68
  • 69. Wet Milling Is Flexible but Capital Intensive 69
  • 70. Increasing Grind Rates Maximize the Value of Existing Assets 70
  • 71. Cost Control Is Critical to Success • Cost control is a challenge – especially with the rising cost of energy • Efficient use of energy is a key to success, and our investments in cogeneration are helping mitigate our costs for steam and electricity • An on-going Task Force explores projects that affect cost optimization • Improvements are being achieved through capital expenditures to improve efficiencies 71
  • 72. We Are Improving Capital Project Management Enhancing and improving project management: - Safety is actively managed with on-site safety pros - Design once, build multiple times - Global sourcing used for equipment and materials - Maximize shop fabrication, minimize field fabrication - Best practices adopted and shared between projects - Coordinated management oversight across major projects - Collaboration between projects for development and training of production teams 72
  • 73. Cedar Rapids, IA - Adding Ethanol Dry Mill Dry Mill Cogen Wet Mill Red Star Process Products Wet Dry 42 55 CS 97DE Sorb Starch Ethanol Other X CIP X X X X X X X 73
  • 74. Clinton, IA - Adding Cogen and PHA PHA Cogen Feedhouse Wet Mill Process Products Wet Dry 42 55 CS 97DE Sorb Starch Ethanol Other X XX X X X X 74
  • 75. Columbus, NE - Adding Ethanol Dry Mill and CoGen Dry Mill Wet Mill Cogen Process Products Wet Dry 42 55 CS 97DE Sorb Starch Ethanol Other X CIP X X X X 75
  • 76. Decatur, IL - Our Largest Corn Plant Propylene Wet Mill Glycol Corp Cogen BioProducts Process Products Wet Dry 42 55 CS 97DE Sorb Starch Ethanol Other X XX X X X 76
  • 77. Marshall, MN Wet Mill Refinery Ethanol Process Products Wet Dry 42 55 CS 97DE Sorb Starch Ethanol Other X X X X X 77
  • 78. Peoria, IL - Our Largest Dry Mill Ethanol Dry Mill Process Products Wet Dry 42 55 CS 97DE Sorb Starch Ethanol Other X X 78
  • 79. Walhalla, ND - Our Smallest Corn Plant Ethanol Dry Mill Process Products Wet Dry 42 55 CS 97DE Sorb Starch Ethanol Other X X 79
  • 80. ADM Has Competitive Advantages in Corn Processing • Diversification of product mix • Advantages of combining wet and dry operations • Cogeneration: steam and power from coal • Size: first in grind and first or second in major product lines • Logistics • Global markets for coproducts • Grain origination • Economies of scale 80
  • 81. Q&A Corn Processing Business Corn Processing Operations 81
  • 82. Plant Tour Video 82
  • 83. Tour Security & Safety 1. Proper clothing is mandatory 2. Personal Protective Equipment (hard hats, safety glasses, ear protection) provided by ADM 3. No cell phones, cameras, pagers, or any other electronic devices 4. You will be escorted by an ADM employee 5. Be aware of potential slip, trip, and fall hazards 83
  • 84. Tour Security & Safety 6. Be alert for railcars moving on the tracks (red light and audible horns are warnings) 7. Some production areas have special requirements which are posted at their entrances 8. The facility is tobacco-free 9. In the event of an emergency your ADM escort will instruct you where to go 84