Archer-daniels-midland Company · NYSE:ADM
Archer-daniels-midland — Investor Day (December 2014)
110 slides from Archer-daniels-midland's investor day presentation, Dec 3, 2014
Slide 1: What’s Next? ADM Investor Day 2014
What’s Next? ADM Investor Day 2014
Slide 2: Christina Hahn, Vice President, Investor Relations
Christina Hahn Vice President, Investor Relations
Slide 3: Our Agenda Today
Our Agenda Today Journey to Value Creation Pat Woertz Changing While Winning Juan Luciano Ag Services Joe Taets, Kevin Brassington, Federico Gorbea, Scott Fredericksen Corn Mark Bemis, Chris Cuddy, Pierre Duprat, Craig Willis Lunch 12:30-1:15 Oilseeds Matt Jansen, John McGowan, Renee Roberts, Valmor
Slide 4: Safe Harbor Statement
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
Slide 5: Journey to Value Creation
Journey to Value Creation Pat Woertz Chairman & CEO
Slide 6: Becoming “Fit for the Journey”
Becoming “Fit for the Journey” • Safety • Goal Setting • Financial Metrics • Strategic Planning • Organizational Alignment ARCHER DANIELS MIDLAND COMPANY 6
Slide 7: Strengthening the Business
Strengthening the Business • Operational Excellence • Cost • Focus on Returns • Capital Discipline • Global Strategy ARCHER DANIELS MIDLAND COMPANY 7
Slide 8: What’s Next?
What’s Next? Bright Future • Well positioned to capitalize on global trends • Strong team, focused on executing with excellence • Updated strategy • Seamless transition ARCHER DANIELS MIDLAND COMPANY 8
Slide 9: Changing While Winning
Changing While Winning Juan Luciano President & COO
Slide 10: Our Priorities
Our Priorities • Fully capitalize on enduring trends • Set the competitive standard by industry • Balanced capital allocation ARCHER DANIELS MIDLAND COMPANY 10
Slide 11: The Global Middle Class is Growing
The Global Middle Class is Growing 2009 2020 2030 1.8 Billion 3.2 Billion 4.9 Billion ARCHER DANIELS MIDLAND COMPANY 11
Slide 12: Global Graying and the Silver Economy
Global Graying and the Silver Economy Within the next five years, the number of adults aged 65 and over will outnumber children under the age of 5, for the first time in human history. “The world has never before seen such a powerful market, with about $3 trillion to spend in the U.S. alone.” ARCHER
Slide 13: Customers’ Need are Changing
Customers’ Need are Changing Food and beverage manufacturers’ desire for better quality and faster innovation is leading to increased outsourcing of R&D activities to ingredients suppliers. ARCHER DANIELS MIDLAND COMPANY 13
Slide 14: Returns Journey
Returns Journey ARCHER DANIELS MIDLAND COMPANY 14
Slide 15: Actions are Improving Returns
Actions are Improving Returns Trailing 4Q Average Adjusted ROIC 8.5% 6.2% 5.5% Q4 Q3 CY12 CY14 ARCHER DANIELS MIDLAND COMPANY 15
Slide 16: Financial Objectives
Financial Objectives • Increase Returns & EVA • Dampen Volatility of Earnings ARCHER DANIELS MIDLAND COMPANY 16
Slide 17: The ADM Advantage
The ADM Advantage Team ADM Ingredients Teamwork & Solutions Knowledge Agility Customer Franchise Basic & Advantaged Key Processing Building Blocks Raw Materials Origination & & Logistics Cost Position Global Market Intelligence & Merchandising Acumen Strategic Relationships ARCHER DANIELS MIDLAND CO
Slide 18: Agility with Scale
Agility with Scale ARCHER DANIELS MIDLAND COMPANY 18
Slide 19: Setting the Competitive Standard in Each Industry
Setting the Competitive Standard in Each Industry Source Transport Process Transform Distribute Market & Sell ARCHER DANIELS MIDLAND COMPANY 19
Slide 20: Increasing the Number of Levers under Our Control
Increasing the Number of Levers under Our Control Align Operating Metrics with Key Drivers of Shareholder Value Drive Operational Expand Optimize the Core Efficiencies Strategically Increase destination Technology for comp. Geographic expansion marketing advantage Grow market-facing units Portfolio
Slide 21: Better Projects Drive Better Results
Better Projects Drive Better Results IRR of Approved Projects 18% 16.5% • Lookbacks 13.9% 15.2% 12.6% 13% • Learnings 8% 2011 2012 2013 2014F ARCHER DANIELS MIDLAND COMPANY 21
Slide 22: Capital Deployment Philosophy
Capital Deployment Philosophy Invest in Business Return to Shareholders Available for strategic opportunities Value Creation ARCHER DANIELS MIDLAND COMPANY 22
Slide 23: Strategy Shifts Portfolio Center of Gravity
Strategy Shifts Portfolio Center of Gravity Source Transport Process Transform Distribute Market & Sell ARCHER DANIELS MIDLAND COMPANY 23
Slide 24: Our Scorecard
Our Scorecard Optimize the Core Drive Operational Efficiencies Expand Strategically Reduce EU dependency on biofuels Develop origination position in N. Brazil Inventories (capital reduction) Oilseeds Improve South American returns Pursue JV partners for Barcarena Port Divest underperforming b
Slide 25: The Investment Rationale for ADM is Compelling
The Investment Rationale for ADM is Compelling Trends Intensifying Value Creation/Execution Accelerating Capital Stewardship Strengthening ARCHER DANIELS MIDLAND COMPANY 25
Slide 26: Agricultural Services
Agricultural Services
Slide 27: Ag Services: What’s Next?
Ag Services What’s Next? • Focus Actions to Improve Returns and Grow EVA Joe Taets Kevin Brassington • Diversify Global SVP/President Ag Services, EMEA Managing Director, EU Oilseed Origination 26 years industry experience Processing & Global Trade Oilseed 20 years industry experience • Expand Desti
Slide 28: ADM is the Premier Global Ag Services Company
ADM is the Premier Global Ag Services Company Former Toepfer Grain Elevators Wheat Milling Other Processing Edible Bean Feed/Premix Trucking ARTCO Sales Office GrainCorp Note: Origination Assets in South America and part of Europe are reported within the Oilseed segment. ARCHER DANIELS MIDLAND COMPA
Slide 29: How We Make Money Today
How We Make Money Today Milling & Other 25% Merchandising & 14% 61% Handling Transportation Note: Origination Assets in South America and part of Europe are reported within the Oilseed segment. ARCHER DANIELS MIDLAND COMPANY 29
Slide 30: Sources of Profitability
Sources of Profitability Physical PhysicalGrain GrainAssets Assets Intellectual Capital Transportation • Operating Expertise • Risk Management • Operating Efficiency • Elevation Capacity • Market Intelligence • Centralized Negotiations • Volume • Arbitrage—Grain & Freight • Trade Knowledge/Relations
Slide 31: Where We Make Money Today
Where We Make Money Today Asia Australia 3% 1% Europe & Africa 12% South America 2% Mexico & Central 7% US - Domestic America 5% 52% Canada 18% US - Export ARCHER DANIELS MIDLAND COMPANY 31
Slide 32: Our Vision: Retain Our Position as the Premier End-to-End Global Ag Services Company
Our Vision: Retain Our Position as the Premier End-to-End Global Ag Services Company Grow Origination Grow in Leverage Global Platform Destination Markets Transportation & Distribution Network ARCHER DANIELS MIDLAND COMPANY 32
Slide 33: Expand Origination in Key Growing Regions
Expand Origination in Key Growing Regions Europe China US & Canada Origination SE Mexico Network Asia Central Middle America East & Africa South America Australia NZ ARCHER DANIELS MIDLAND COMPANY 33
Slide 34: Grow Destination Marketing and Distribution
Grow Destination Marketing and Distribution Europe China US & Canada Origination SE Mexico Network Asia Central Middle Destination America Market East & Presence Africa South America Australia NZ ARCHER DANIELS MIDLAND COMPANY 34
Slide 35: Grow Destination Marketing and Distribution
Grow Destination Marketing and Distribution FOB to CIF Margin $2 - $3 per MT Destination Margin $8 - $12 per MT Domestic River Strategic Grain Destination Destination Origination Logistics Export Assets Ports Distribution ARCHER DANIELS MIDLAND COMPANY 35
Slide 36: Fully Capitalize on Global Trade Flows
Fully Capitalize on Global Trade Flows Europe China US & Canada Origination SE Mexico Network Asia Central Middle Destination America Market East & Presence Africa Global Trade Flows South America Australia NZ ARCHER DANIELS MIDLAND COMPANY 36
Slide 37: Fully Capitalize on Global Trade Flows
Fully Capitalize on Global Trade Flows Combining ADM and Toepfer • Reorganizing • Rebranded as ADM • Restructured legal entities • Reducing invested capital • Establishing global merchandising operation • Eliminating redundancies ARCHER DANIELS MIDLAND COMPANY 37
Slide 38: Transportation: Core Competency & Competitive Advantage
Transportation: Core Competency & Competitive Advantage Europe Rail Barge China Ocean Going Vessel US & Canada Origination SE Mexico Network Asia Central Middle Destination America Market East & Presence Africa Truck Global Trade Flows Container South America Transportation Australia Mode NZ ARCHER
Slide 39: Transportation: Core Competency & Competitive Advantage
Transportation: Core Competency & Competitive Advantage Efficiency Technology 1,200 Trucks Fleet 2,300 Barges Optimization Asset Utilization 9 Owned Bulk Carriers 27,500 Railcars 150 on Time Charters Leverage Yearly ship 160,000 containers ARCHER DANIELS MIDLAND COMPANY 39
Slide 40: Unmatched Global Origination and Marketing
Unmatched Global Origination and Marketing ADM owns, leases, and Europe operates 45 Rail Barge global ports China Ocean Going Vessel US & Canada Origination SE Mexico Network Asia Central Middle Destination America Market East & Presence Africa Truck Global Trade Flows Container South America Transp
Slide 41: Evolving Ag Services Earnings Mix
Evolving Ag Services Earnings Mix Earnings Mix Today Future Earnings Mix Asia Australia Australia Asia Europe & South America Africa US - Domestic Mexico & Central America US - Domestic Europe & Canada Africa US - Export US - Export Mexico South America & Canada Central America ARCHER DANIELS MIDLAN
Slide 42: Agricultural Services – Key Takeaways
Agricultural Services – Key Takeaways Continue to execute and capitalize on current strong footprint, while expanding geographically outside of the US in Origination with the potential to double volumes and grow EVA Agricultural Services will capture incremental margin through expansion of the d
Slide 43: Corn
Corn
Slide 44: Presentation Agenda: Corn
Presentation Agenda What’s Next? • Focusing on actions to improve returns and grow EVA Mark Bemis Chris Cuddy SVP/President Corn President Sweetener & Starches • Building on strong cost 31 years industry experience 16 years industry experience position • Accelerating diversification of products and
Slide 45: We Are the World’s Largest Corn Processor
We Are the World’s Largest Corn Processor Corn Processing Plant Other Processing Plant Sweetener Terminal Ethanol Terminal Animal Nutrition Processing Plant Export Flow • 14 corn processing plants in 7 countries and 8 • 3 of 5 largest corn mills in the world other processing plants • Daily grind cap
Slide 46: Our NA Footprint is Strategically Positioned
Our NA Footprint is Strategically Positioned for Efficient Origination and Distribution Corn Belt Corn Processing Plant ADM Elevator Sweetener Terminal Ethanol Terminal ADM Export Facility ARCHER DANIELS MIDLAND COMPANY 46
Slide 47: We Have Been Steadily Improving Our Cost Position
We Have Been Steadily Improving Our Cost Position • Energy efficiency improved by 10% in the past 5 years; opportunities still plentiful • Yield improvement offers significant opportunity Manufacturing Costs Energy Usage (BTU/Bu) Operating Supplies Depreciation & Amortization Energy Salaries 28% & B
Slide 48: Boosting Returns with Capital Discipline & Portfolio Management
…While Also Boosting Returns with Capital Discipline & Portfolio Management Cost Improvement 8% 2011 Shut down Walhalla dry mill and closed astaxanthin business 2006 - 2010 Growth - US 2012 Shut down PHA and started repurposing assets in Clinton 92% 2013 Integrated Specialty Feed and Alliance Nutrit
Slide 49: Improved Ethanol Industry Dynamics Should Generate Solid Returns
Improved Ethanol Industry Dynamics Should Generate Solid Returns • Growing export business • Promoting E-15 implementation • Incremental opportunity from global • Continue to build on logistics advantage replacement of MTBE 2014 Select Export Destination Net Exports Millions of Gallons 800 Millions
Slide 50: Market Leading Positions Across a Diverse Product Portfolio
We Have Market Leading Positions Across a Diverse Product Portfolio Products Key Applications Market Position • Soft Drinks • Bakery Sweeteners • Confectionery • Brewery U.S.: #1 • Paper making Starches • Food U.S.: #2 • Corrugating • Confectionery Sorbitol • Personal care U.S.: #1 • Fuel (E-10/15/8
Slide 51: Further Expanding Product Portfolio to Optimize Margins
Further Expanding Product Portfolio to Optimize Margins Fibersol Soluble ingredient used to increase dietary fiber Soluble ingredient used to increase non-dietary fiber and Polydextrose reduce sugar and calories Rare Sugar Ultralow-calorie sugar with taste similar to fructose Sustainable alternative
Slide 52: Scale with Flex Capacity Enabled Product and Margin Optimization
Scale in Combination with Flex Capacity Has Enabled Product and Margin Optimization 2009 Sweetener & Starches OP 2014 Forecast Sweetener & Starches OP Corn Germ and Oil Specialty Corn Germ Products HFCS and Oil HFCS Specialty Products Joint Joint Liquid Ventures Corn Syrup Ventures Corn Dextrose Liq
Slide 53: Strategic Focus: Global Growth Market Perspectives
Strategic Focus: Global Growth Market Perspectives Mtons World market projections: starches & derivatives Keys Insights • China is the # 1 100 ROW 80 Other Asia 60 China starch & derivatives 40 Other Europe market since the 20 EU early 2010’s Other America 0 2000 2005 2010 2015 2020 NAFTA • Develope
Slide 54: We Are Growing Our Global Footprint with China Plants
We Are Growing Our Global Footprint with China Plants Premix Plants Tianjin Plant Complex China Corn Belt Tianjin Premix Plant Dalian Premix Plant Tianjin 320K MT Fructose Plant Tianjin 18K MT Fibersol Plant Nanjing Premix Plant ARCHER DANIELS MIDLAND COMPANY 54
Slide 55: Corn – Key Takeaways
Corn – Key Takeaways Corn is having a great year, but we have many more opportunities for improvements and for growth Significant cost and yield improvement opportunities still ahead Product diversification to add to the “Fight for the Grind” and geographic diversification into key markets cen
Slide 56: Oilseeds
Oilseeds
Slide 57: Presentation Agenda: Oilseeds
Presentation Agenda What’s Next? • Improve Returns and Grow EVA • Innovate to diversify product Matt Jansen Valmor Schaffer SVP/President Global Oilseeds President South America mix. 25 years industry experience 28 years industry experience • Achieve further cost and productivity savings • Portfolio
Slide 58: World’s Most Diversified Oilseed Business
World’s Most Diversified Oilseed Business Crush – Refinery Biodiesel Elevator Elevator – Port Packaging Value Added Cocoa Golden Peanut Golden Peanut Buying Point Sales Office Wilmar ARCHER DANIELS MIDLAND COMPANY 58
Slide 59: Markets, Innovation, Productivity and Expansion Drive Our Business
Markets, Innovation, Productivity and Expansion Drive Our Business Trends Capital Deployment & Geographic Expansion Value Added Portfolio Portfolio Management ARCHER DANIELS MIDLAND COMPANY 59
Slide 60: Diversified Profit Stream
Diversified Profit Stream Average 2009-2013 OP $1.5B Cocoa & Other Flax 2% Other Asia 6% 8% 15% Crushing & Cotton 10% Soybean Origination 45% Comprised of 57% Canola Refining, 22% 25% Packaging, Sun Biodiesel, Other 10% ARCHER DANIELS MIDLAND COMPANY 60
Slide 61: Growing, Optimizing and Innovating
Growing, Optimizing and Innovating Better Returns Our Focus • Energy efficiency • Yield improvements • Cost reduction R&D Technology • Improved processes Production Efficiency ARCHER DANIELS MIDLAND COMPANY 61
Slide 62: Capitalizing on Soy Production Growth in Brazil’s Northern Frontier
Capitalizing on Soy Production Growth in Brazil’s Northern Frontier MT Per Year Mato Grosso CAGR 4.5% 2009 2011 2013 2015E 2017E Mato Grosso MATOPIPA Source: USDA, OECD ARCHER DANIELS MIDLAND COMPANY 62
Slide 63: Capitalizing on Soy Production Growth in Brazil’s Northern Frontier
Capitalizing on Soy Production Growth in Brazil’s Northern Frontier Ports Transhipments (Porto Velho and Miritituba) Barge Transport (waterway) Truck Transport (highway) Soybean Production ARCHER DANIELS MIDLAND COMPANY 63
Slide 64: Targeted Growth
Targeted Growth Strengthen Northern Campo Grande Specialty Expand Food Oils Brazil Origination Proteins Applications • Increase origination/ • Growing market • Sunflower and canola oils transportation network • Displace high cost imported • Migration to healthier oils to feed Barcarena products with
Slide 65: Industry in Transition
Industry in Transition Soy Corn To WFSI Canola Labeling • Lecithin Health Profile • Soy Protein Coconut • Plant Cotton Sterols Flax • Vitamin E Sunflower Economic & Functionality • Texturized Peanut Vegetable Protein Palm • Soy Flour First in NA to announce intention of sourcing Mass Balance sustai
Slide 66: Golden Peanut and Tree Nuts
Golden Peanut and Tree Nuts • Transforming from single commodity peanut supplier to a value-added, nut and nut ingredient supplier • Expanded into South African peanuts & pecans in 2013 and U.S. pecans in 2014 • Healthy and convenient snacking will continue to drive nut & nut ingredient growth ARCHE
Slide 67: Customer Relationship Management
Customer Relationship Management • Create single, shared resource for storing, tracking and accessing customer data • Facilitate customer communication • Enhance coordination among business units and shared services that interact with customers. ARCHER DANIELS MIDLAND COMPANY 67
Slide 68: Oilseeds – Key Takeaways
Oilseeds – Key Takeaways Oilseeds Processing has the most diversified product and global footprint in the industry with still many more opportunities to grow EVA South American focus on growth in both origination and specialty products Oilseeds has been a great incubator for new products and n
Slide 69: Flavors and Specialty Ingredients
Flavors and Specialty Ingredients
Slide 70: WILD Flavors & Specialty Ingredients
WILD Flavors & Specialty Ingredients What’s Next? • Consumer trends driving strategy Greg Morris SVP/President WFSI Bruce Bennett VP Specialty Ingredients • Vision to become a world 20 years industry experience 21 years industry experience class specialty ingredient business • Winning in the special
Slide 71: The Path to Build a Specialty Ingredient Business
The Path to Build a Specialty Ingredient Business Timeline • Prior to 2013 – Oilseeds, Corn and Ag Services Systems/Platforms • March 2013 – Creation of ADM Foods & Wellness group Downstream • August 2013 – Vision & Strategy presented to SGI Omega 3 Adjacent the board • 2013/2014 – Added resources t
Slide 72: We have Created a World Class Specialty Ingredient Business
We have Created a World Class Specialty Ingredient Business Our Vision Core Markets and Products • Create a one-of-a-kind, Meats & Meals Beverages Personal Care world-class specialty ingredients business Baked Goods Health & Nutrition Dairy & Ice Cream Our Strategy • Grow geographically Snacks & Con
Slide 73: Combined Portfolio Addresses Major Consumer Trends
Combined Portfolio Addresses Major Consumer Trends, Serves Vast Range of Customer Needs Specialty Proteins Emulsifiers Edible Beans Nutritional Fiber Polyols Supplements Day 1 revenues of = $2.5 billion+ Specialty Hydrocolloids WILD Flavors Commodities ARCHER DANIELS MIDLAND COMPANY 73
Slide 74: WILD Flavors and Specialty Ingredients: A Truly Global Business
WILD Flavors and Specialty Ingredients: A Truly Global Business Processing (30+) ADM Specialty Ingredients Specialty Commodities WILD Flavors Sales Locations (50+) ADM Specialty Ingredients Specialty Commodities WILD Flavors R&D and Applications (30+) ADM Specialty Ingredients R&D WILD Center of Exc
Slide 75: Consumer Trends Drive Our Strategy
Consumer Trends Drive Our Strategy Trends Specialty Ingredient Market $50Bn • $30 Bn Ingredients • $20 Bn Flavors Market growing at 5-6% Driven by: • Health & Wellness • Protein • Convenient foods • Clean labels • Greater variety Sources: Euromonitor. International Food Information Council Foundatio
Slide 76: Purposeful Innovation Leads to Value Creation
Purposeful Innovation Leads to Value Creation Portfolio Value Creation ADM Specialty Ingredients Ingredients to Systems-Based Solutions Plant-Based Proteins Beans, Bean Powders, Crisps Polyols, Specialty Gums Emulsifiers, Fibers Nutritional Supplements Customized Ingredient Blends Specialty Commodit
Slide 77: Purposeful Innovation Leads to Value Creation
Purposeful Innovation Leads to Value Creation Portfolio Value Creation ADM Specialty Ingredients Pina Colada Orchard Fruit Binding Syrup/Particulates Binding Syrup/Particulates Plant-Based Proteins Fibersol Fibersol Beans, Bean Powders, Crisps Corn Syrup Fruit-Up Corn Syrup Fruit-Up Polyols, Special
Slide 78: WILD’s Leading Positions in Natural Aligned with Key Trends
WILD’s Leading Positions in Natural Aligned with Key Trends Market Opportunity Trends Specialty Ingredient Market Ingredients ~$30Bn • Market growing 5-6% globally Flavors ̶ Natural flavor market growing 6% ~$20Bn ̶ Artificial flavor growing at 5% Flavors Breakdown Artificial • Regionally 70% 5.5% i
Slide 79: Our System-Based Model is Complex and Hard to Replicate
Our System-Based Model is Complex and Hard to Replicate, and it Drives Customer Value Portfolio Value Creation WILD High Margin Ingredients Natural Flavors Natural Colors Natural Taste Natural Fruit Sweeteners WILD High Volume Raw Materials Natural Concentrates ADM Specialty Ingredients Protein, Fib
Slide 80: Targeting €100 Million in Synergies by Year 3
Targeting €100 Million in Synergies by Year 3 Geographies Customers Optimization Complimentary growth Key customers Footprint optimization strategies ̶ CPGs outsourcing R&D Cost efficiencies Leveraging speed-to-market Target segments capabilities / relationships Purposeful innovation E
Slide 81: Our Vision: Reach $10 billion in Revenues
Our Vision WFSI Goal: Create a one-of-a-kind, Reach $10 billion world class specialty ingredients business in revenues ARCHER DANIELS MIDLAND COMPANY 81
Slide 82: Innovation & Improvement Initiatives
Innovation & Improvement Initiatives
Slide 83: Presentation Agenda: Innovation & Improvement
Presentation Agenda What’s Next? • Deploying technology to drive cost savings and EVA growth Todd A. Werpy, Ph.D. Mark Matlock SVP, Research & Development SVP, Food Research • Developing a strong 22 years industry experience 37 years industry experience pipeline of new products • Combining new techn
Slide 84: More Than 700 Scientists and Engineers Around the World
More Than 700 Scientists and Engineers Around the World Engaged in New Product Development, Process Advancements and Customer Projects R&D and Applications • Greater than $100 M in R&D Spend Feed & Animal • 13 Locations in North America Chemistry & Nutrition • 16 Locations in Europe Biotechnology 6%
Slide 85: Building a Superior Intellectual Property Portfolio
Building a Superior Intellectual Property Portfolio Patents and Published Applications* 257 250 233 212 209 204 201 175 173 157 157 130 100 107 78 70 74 68 2009 2010 2011 2012 2013 2014 Jan-Oct ADM Diversified Global Processor Diversified Ingredient Supplier *Includes granted patents and application
Slide 86: Technology Plays a Critical Role in Saving Costs
Technology Plays a Critical Role in Saving Costs Continuous Operational and Technology Excellence to Save Costs • Diverse project portfolio – Improvement Initiatives by Area projects with savings from 2013-2014 Run Rate Savings - $400 M $50K to $5M • Many capital light projects Procurement Operation
Slide 87: Significant Opportunity for Additional Improvements
Significant Opportunity for Additional Improvements A Systematic Approach to Operational Excellence & Process Improvements Data Corn & Oilseeds Advanced Maintenance Operational Infrastructure Energy Process Initiatives Reliability & Analytics Efficiencies Controls By 2019 2013-2014 Operational Excel
Slide 88: Strategic Innovation Enables New Products
Strategic Innovation Enables New Products Diversifying Corn Grind & Expanding Oilseeds Product Portfolio Super Absorbent Industrial Oils Specialty Alternative Polymers (Coatings) Proteins Sweeteners Feedstocks: Target: Corn Industrials Project Pipeline Food and Feed >$1B in New Oilseeds Product Sale
Slide 89: Taste and Price Drive Consumer Choices, but Healthfulness is Increasingly Important
Taste and Price Drive Consumer Choices, but Healthfulness is Increasingly Important How much of an impact do the following have on your decision to buy foods and beverages? 95% 90% +5% 85% Taste 80% Price 75% +9% 70% +13% Healthfulness 65% 60% 55% 50% 2006 2007 2008 2009 2010 2011 2012 2013 2014 Sou
Slide 90: Opportunities Exist in Healthier Ingredients
Opportunities Exist in Healthier Ingredients Usual Intake as a Percent of Goal or Limit Whole Grains 15% GOAL • Increase fiber with Vegetables 59% Fruits 42% whole grains and new Increase Dairy 52% Intake fiber sources Seafood 44% Oils Fiber 40% 61% • Add protein with beans, LIMIT nuts and soy Calor
Slide 91: Retail Product Launches with Healthy Ingredients
Retail Product Launches with Healthy Ingredients New Food and Beverage Product Introductions with: 1,800 Wholegrain 1,600 High/Added Fiber 1,400 Omega-3 1,200 High Protein 1,000 800 600 400 200 0 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 2009 2014 2009 2009 2009 2009 2010 201
Slide 92: Broadest Ingredient Portfolio & Deepest Expertise in the Industry
Broadest Ingredient Portfolio & Deepest Expertise in the Industry Food Processing Applications Extrusion, Blending, Baking, Snacks, Enzymes, Fermentation, Meats, Confections, Membranes, Dressings, Soups, Applications Processing Chromatography, Sauces, Beverages Specialists Experts Thermal Processing
Slide 93: Flavors & Colors Further Enhances the Portfolio
Flavors & Colors Further Enhances the Portfolio Applications Processing Specialists Experts The Broadest World Class Ingredient Technical Portfolio Support ARCHER DANIELS MIDLAND COMPANY 93
Slide 94: ADM, SCI & WILD: Making “Healthy” Taste Great, Naturally
ADM, SCI & WILD: Making “Healthy” Taste Great, Naturally Whole Grain Flour Sweeteners Oil Acidulants Ancient Grains Emulsifiers Salad Oil Shortening Flavors/Colors Sweeteners Fiber Acidulants Fruit Inclusions Xanthan Gum Pecans Flavors/Colors Feed Ingredients: Soybean Meal Edible Beans DDGS Quinoa L
Slide 95: Flavor – a Star in our Customers’ Products
Flavor – a Star in our Customers’ Products • Provides fabulous Taste • Product Differentiation & Brand Identity through Customization • Drives Preference • Evokes an Emotional Connection • Provides a Cultural experience
Slide 96: A flavorist requires the precision of a scientist and creativity of a chef
A flavorist requires the precision & skill of a scientist with the creativity and passion of a chef Learning the Craft - mentorship & in house training program <150 practicing US certified flavor chemists WILD has >10% WILD’s flavorists artfully craft tastes in our customers’ products that drive con
Slide 97: Creating the Next Great Taste
Creating the Next Great Taste Trend watch – WFSI’s unique positioning with entrepreneurs/innovators Beyond the gold standard Translating the trend into delivering a multidimensional experience of flavor, taste and texture into a single flavor
Slide 98: Creativity Through Customer Intimacy
Creativity Through Customer Intimacy • Technical to technical contact • “End to End Approach” • Transparency, trust and approachability • Creating the WOW WILD’ flavorists work collaboratively with our customers technical teams to develop great tasting consumer preferred products
Slide 99: R&D – Key Takeaways
R&D – Key Takeaways Operational excellence and process improvements pipeline to yield $350 million in incremental cost savings by 2019 Building a strategic new product portfolio to diversify corn grind and oilseeds crush Customers are facing challenges – a need to drive top line growth, reduce
Slide 100: Investor Day – Financial Strategies
Investor Day – Financial Strategies Ray G. Young
Slide 101: Financial Strategies to Drive Value Creation
Financial Strategies to Drive Value Creation • Diversified Funding Strategies and Strong Balance Sheet • Balanced Capital Allocations • Incentive Compensation Linkage to Returns ARCHER DANIELS MIDLAND COMPANY101
Slide 102: Diversification of Funding Sources
Diversification of Funding Sources Better Equipped to Handle Volatility Working Capital Longer-Term Financing • US CP Program • Public Debt • Euro CP Program • Lease Financing • US Money Market Lines • Asset-light Strategies • US Securitization Program • Project Financing • International Securitizat
Slide 103: Clear Objectives, Focused Actions Driving Results
Clear Objectives, Focused Actions Driving Results 2011/2012 2013/2014 2015 & Beyond Objective ROIC ≥ S-T WACC ROIC ≥ L-T WACC of 8% ROIC = 10%; EVA Growth • Continued operational • Capital/project discipline • Project prioritization excellence • Technology Center • Operational excellence Actions to
Slide 104: ROIC versus WACC
ROIC versus WACC ROIC Objective: 200 BPS over WACC Q3 CY14 14% Trailing 4Q Average Adjusted EVA $553M 12% Trailing 4Q Average Adjusted ROIC(1)(2) 8.5% 10% 2014 Annual WACC 6.4% 8% 6% 4% 2% 0% (3) Q3 Q3 (1)(2) Q3 Q3 Q3 Q3 FY09 FY10 FY11 FY12 CY13 CY14 Trailing 4Q Average Adjusted ROIC Long Term WACC
Slide 105: More Balanced Capital Allocation Philosophy
More Balanced Capital Allocation Philosophy Percent of Operating Cash Flow (before W/C changes) Spent on: 80% 70% 70% 60% 54% 50% 42% 40% 36% 30% 23% 26% 20% CY 2012 CY 2013 CY 2014(F) Capex Dividends & Share Repurchases ARCHER DANIELS MIDLAND COMPANY105
Slide 106: Forward Capital Allocation Targets
Forward Capital Allocation Targets % of Operating Cash Flow Spend: 80% 70% 60%-70% in strategic M&A or 60% return of capital to shareholders 50% 40% 30%-40% reinvested in Capex 30% 20% 10% 0% CY 2012 CY 2013 CY 2014(F) Medium Term ARCHER DANIELS MIDLAND COMPANY106
Slide 107: Expect Dividends Payout Ranges to Increase
Expect Dividends Payout Ranges to Increase with Stronger and More Stable Earnings Dividend Payout Ratios Ranges Medium-Term Range Near-Term Range 30%-40% Historical Range 25%-30% 20%-25% ARCHER DANIELS MIDLAND COMPANY107
Slide 108: Financial Framework for Shareholder Value Creation
Financial Framework for Shareholder Value Creation Operating Cash Flows Reinvestment in Capex to Generate Value Available for Strategic Growth or Distributions 30%-40% 60%-70% + Strategic Growth Opportunities Distributions to Shareholders Dividends Share Repurchases + 30%-40% of Earnings = Value Cre
Slide 109: Alignment of Incentive Compensation to Returns
Alignment of Incentive Compensation to Returns • Annual Incentive Plan (AIP) • Total Shareholder Return (TSR) • Special Reward for Returns (R4R) ARCHER DANIELS MIDLAND COMPANY109
Slide 110: In Summary
In Summary Medium-term outlook assumptions Metric Capex to D&A 1.0-1.2x Capital Allocation Operating Cash Flow Allocation (before W/C Changes) Philosophy • Capex 30%-40% • Strategic M&A, Return to Shareholders 60%-70% Dividend Dividend Payout Ratio (As a % of Earnings) 30%-40% Philosophy Memo: Histo
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