Upload
finance6
View
1.959
Download
1
Tags:
Embed Size (px)
DESCRIPTION
Citation preview
Vital to the World
Patricia Woertz – Chairman, CEO and PresidentSteve Mills – EVP & CFO John Rice – EVP, Commercial & Production Ed Harjehausen – SVP, Global CornRandy Kampfe – VP, Corn ProcessingDwight Grimestad - VP, Investor Relations
Corn Processing Business ReviewAnd Plant Tour
October 7, 2008
2
Safety Moment
3
Please Turn Off Cell Phones and Pagers
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. Anychanges 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.
5
Agenda for the Day8:00am Overview Presentation: Strategy and Execution;
Patricia Woertz - Chairman, CEO and PresidentFinancial Performance and Capital Expenditures;
Steve Mills - EVP and CFORecent 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
Overview Presentation:Strategy and Execution
Pat Woertz – Chairman, Chief Executive Officer and President
7
8
Sourcing facilitiesOilseed processingCorn processingCocoa & wheat processingSourcing distributionProcessing distribution
Our World-Class Asset Base Is Positioned for Global Growth
9
We Have Leveraged our Value Chain and Executed on our Strategy
CORN
OILSEEDS
WHEAT
COCOA
FOOD
FEED
FUEL
INDUSTRIAL
SALESPROCESSING DISTRIBUTIONSOURCING TRANSPORTATION
The ADM Value Chain
10
We Have Diversified Feedstocks
DiversifyFeedstocks• Palm• Sugar• Biomass
CORN
OILSEEDS
WHEAT
COCOA
FOOD
FEED
FUEL
INDUSTRIAL
SALESPROCESSING DISTRIBUTIONSOURCING TRANSPORTATION
11
We Have Expanded the Geographic Scope of our Core Model
DiversifyFeedstocks
CORN
OILSEEDS
WHEAT
COCOA
FOOD
FEED
FUEL
INDUSTRIAL
SALESPROCESSING DISTRIBUTIONSOURCING TRANSPORTATION
Expand Geographic Scope of Core Model•Rapeseed crushing in Germany •Cocoa plants in U.S. and Ghana•Origination, transportation network in U.S.
12
We Have Grown our BioEnergy Business
Grow BioEnergy Business•Completing BioEnergy facilities•Pursuing innovative research with partners
CORN
OILSEEDS
WHEAT
COCOA
FOOD
FEED
FUEL
INDUSTRIAL
SALESPROCESSING DISTRIBUTIONSOURCING TRANSPORTATION
Expand Geographic Scope of Core Model
DiversifyFeedstocks
13
We Have Reduced Water Consumption
CORN
OILSEEDS
WHEAT
COCOA
FOOD
FEED
FUEL
INDUSTRIAL
SALESPROCESSING DISTRIBUTIONSOURCING TRANSPORTATION
DiversifyFeedstocks
GrowBioEnergyBusiness
Expand Geographic Scope of Core Model
Technology and Innovation Drive Growth
Reduced Water Consumption
14
CORN
OILSEEDS
WHEAT
COCOA
FOOD
FEED
FUEL
INDUSTRIAL
SALESPROCESSING DISTRIBUTIONSOURCING TRANSPORTATION
DiversifyFeedstocks
GrowBioEnergyBusiness
Expand Geographic Scope of Core Model
Technology and Innovation Drive Growth
Reduced Water Consumption Cogeneration
We Are Building Efficient Cogen Plants
15
Technology and Innovation Drive Growth
CORN
OILSEEDS
WHEAT
COCOA
FOOD
FEED
FUEL
INDUSTRIAL
SALESPROCESSING DISTRIBUTIONSOURCING TRANSPORTATION
DiversifyFeedstocks
GrowBioEnergyBusiness
Expand Geographic Scope of Core Model
Reduced Water Consumption Cogeneration Advanced Biofuels
We Are Continuing Advanced Biofuels Research
16
Technology and Innovation Drive Growth
CORN
OILSEEDS
WHEAT
COCOA
FOOD
FEED
FUEL
INDUSTRIAL
SALESPROCESSING DISTRIBUTIONSOURCING TRANSPORTATION
DiversifyFeedstocks
GrowBioEnergyBusiness
Expand Geographic Scope of Core Model
Reduced Water Consumption Cogeneration Advanced Biofuels
Customer Needs
We Use Technology and Innovation to Meet Customer Needs
17
We Have Driven Improvements in Key Priority Areas…
• Safety• Cost Management• Project & Capital Discipline• Metrics
…and Set New Priorities• Safety• Cost Management• Performance• Sustainability
• Continuous Learning• Leadership• Communication
18
We Are Advancing the Understanding that Agriculture Can and Will Meet Global Demands
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)
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%)
Year ended
21
Our Diversified Portfolio Drives Earnings Growth
Crushing & OriginationRefining, Packaging, Biodiesel & Other
Asia
Sweeteners &StarchesBioproducts
Merchandising &Handling
Transportation
Wheat, Cocoa, Malt
Financial
Oilseed Processing Ag ServicesCorn Processing Other
FY06 FY07 FY08
22
Our Diversified Portfolio Drives Earnings Growth
Crushing & OriginationRefining, Packaging, Biodiesel & Other
Asia
Sweeteners &StarchesBioproducts
Merchandising &Handling
Transportation
Wheat, Cocoa, Malt
Financial
Oilseed Processing Ag ServicesCorn Processing Other
FY06 FY07 FY08
23
Our Balance Sheet Reflects the Impact of Increased Commodity Prices and our Capital Construction Projects
June 30 June 302008 2007
Invested Capital
Working 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$
24
Major Construction Projects Are on Schedule
Current Timeline*
Plant Location – Project Phase IProject
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
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
2007/08 1988/89 % ChangePopulation 6.7B 5.2B 29%
(Amounts in millions of tons)
2727
World Grain and Oilseeds Production Is GrowingArea Production
2828
High Crude Oil Prices Impact Crop Prices(Amounts in U.S. dollar/barrel)
2929
The Weak Dollar Impacts Crop Prices(Amounts in Euro)
3030
Fund Investments Impact Crop Prices(Amounts in billions of dollars)
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
32
World Corn Production Grows to Meet Demands
Source: USDA
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
3434
ADM Provides Alternatives to Optimize Swine Feed Formulas
Corn Amino Acids Canola Wheat Barley SBM Vit & Min Fat Wheat Midds MiloMeat & Bone Meal Bakery Meal DDGS Rapeseed Meal
3535
Corn Amino Acids Canola Wheat Barley SBM Vit & Min Fat Wheat Midds MiloMeat & Bone Meal Bakery Meal DDGS Rapeseed Meal
ADM Provides Alternatives to Optimize Poultry Feed Formulas
3636
Current Ration Based on Available Coproducts
Alternative Ration Based on Increased DDGS Availability
Ration Without Ethanol Coproducts
Similar to 1990’s
Protein Supplements Cottonseed Alfalfa Hay DDGSSoybean Hulls Corn Grain Wheat Midds Canola MealCottonseed Hulls Corn Silage CGFP Citrus Pulp
ADM Provides Alternatives to Optimize Dairy Cattle Feed Formulas
37
Q&A
ADM Strategy and Execution
Financial Performance and Capital Expenditures
Crop Dynamics
38
BREAK
Corn Processing Business Review
Ed Harjehausen - Senior Vice President, Corn
40
Corn Processing Business Review
• Fundamentals
• New Product Development
• Issues
• Strengths
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
42
Joint Ventures Are Positioned for International Opportunities
SlovakiaHungary
Romania
Bulgaria
Turkey
Guadalahara
43
Wet Corn Mills Deliver Lower Net Corn Costs
Wet Mill Dry MillCash Price $ 5.00/BU $ 5.00/BU
Coproduct Credits2.5 lbs of 60% corn gluten meal $ 470.00/ST12.5 lbs 21% corn gluten feed $ 85.00/ST1.5 lbs of corn oil $ 0.45/LB18 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%
(BU = 56 lbs)
44
We Produce 24 Products from Corn
Starch
CORN SYRUP, HIGH FRUCTOSE CORN SYRUP
FUEL ALCOHOL
Dextrose (Liquid and Crystalline), Maltodextrin
Xanthan Gum, Citric Acid, Lactic Acid, Yeast
Sorbitol (Liquid and Crystalline)Propylene Glycol, Ethylene Glycol
Additional Products
PHA (biodegradable plastic)
Ethyl Lactate
Food and Industrial Starches
Lysine, Threonine, Astaxanthin
Corn Oil
Gluten Feed
Gluten Meal
45
ADM Has Leading Positions in Key Markets
1st 2nd 3rd
Total Grind Cargill Tate & Lyle
HFCS Cargill Tate & Lyle
Syrup Cargill Tate & Lyle
Starch Tate & Lyle National Starch & Chemical
Ethanol PoetAventine
Renewable Energy
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
47
Source: Energy Information Administration
U.S. Ethanol Demand and Supply Are Growing
20 Days
*Calendar Year
48
Ethanol Demand Exceeds RFS Requirements
Source: Energy Information Administration*Calendar Year
49
The Ethanol Industry Sees Growing Demand
2008- Florida 900 mmg- Georgia 500 mmg- Tennessee 350 mmg- N Carolina 450 mmg- Virginia 390 mmg- Indiana 120 mmg- Illinois 170 mmg- Ohio 160 mmg- Iowa 40 mmg- Kansas 40 mmg- Maryland 25 mmg- S Carolina 260 mmg
2010- California 700 mmg- Texas 800 mmg- Arizona 160 mmg- Utah 115 mmg
2009 - Michigan 350 mmg- Oregon 120 mmg- Nevada 50 mmg- Pennsylvania 350 mmg- New York 290 mmg- Washington 260 mmg- Kentucky 175 mmg- Mississippi 150 mmg- Arkansas 125 mmg- Oklahoma 200 mmg- Louisiana 200 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
50
Low Refining Margins Drive Ethanol Use
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
52
Brazilian Ethanol Export Capacity Is Limited
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
(Amounts in millions of gallons, except for percentages)
53
Commercialization in progress
• Telles JV between ADM and Metabolix
- Biodegrades in soil and marine environments
- Heat resistant
• Glycols
New Products Offer Opportunities to Increase Value from Grind
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
55
Issues Affecting Corn Industry
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
57
Facts about HFCS Are a Sweet Surprise
58
U.S. DDGS Demand Is Growing With Supply
Source: Informa
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.
60
Food Prices Are Driven by Energy Costs
• “During the first four months of 2008, the all food CPI increasedby 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
61
Ethanol Is Keeping Down Gasoline Costs
• “Oil and gas prices would be 15% higher if biofuelproducers 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
62
Global Agricultural Leaders Are Responding to Concerns
www.FoodAndEnergy.org
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
Corn Operations Review
Randy Kampfe - Vice President, Corn Processing
65
Corn Plants Are Organized around Focus Areas
EngineeringCost AnalystPurchasingHuman ResourcesEnvironmentalQuality
Co-Gen Superintendent
Shift Supervisor
4-5
Engineering
Maintenance
Dept 1Supt.
Dept 2Supt.
Dept NSupt.
Const. Supvs.1-N
Project Engineers1-NProcess
EngineerProcess Engineer
Process Engineer
Shift Supv.4-5
Shift Supv.4-5
Shift Supv.4-5
Maintenance Supt.
Reliability Engineer
Shift Supv.4-5
Shift Supts.4-5
Process Engineer
Process Engineer
Process Engineer
Shift Supv.4-5
Shift Supv.4-5
Shift Supv.4-5
Dept 1Supt.
Dept 2Supt.
Dept NSupt.
Wet Mill Superintendent
Dry Mill SuperintendentSafety
Plant Manager
66
We’re Improving Safety Performance
67
Each Kernel of Corn ContainsMultiple Value Streams
Oil: 1.75 lbs/bu
Fiber: 8.75 lbs/bu
56 lbs/bu total, 15.5% H2O= 47.3 lbs/bu dry matter
Starch: 31.5 lbs/bu
Protein: 5.3 lbs/bu
68
Dry Milling Is Simpler but Less Flexible
69
Wet Milling Is Flexible but Capital Intensive
70
Increasing Grind Rates Maximize the Value of Existing Assets
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
72
We Are Improving Capital Project ManagementEnhancing 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
73
Cedar Rapids, IA - Adding Ethanol Dry Mill
Cogen
Wet Mill
Dry Mill
Red Star
Process ProductsWet Dry 42 55 CS 97DE Sorb Starch Ethanol Other
X CIP X X X X X X X
74
Clinton, IA - Adding Cogen and PHA
Feedhouse
Cogen PHA
Process ProductsWet Dry 42 55 CS 97DE Sorb Starch Ethanol Other
X X X X X X X
Wet Mill
75
Columbus, NE - Adding Ethanol Dry Mill and CoGen
Cogen
Wet MillDry Mill
Process ProductsWet Dry 42 55 CS 97DE Sorb Starch Ethanol Other
X CIP X X X X
76
Decatur, IL - Our Largest Corn Plant
CogenWet Mill
BioProducts
Corp
Process ProductsWet Dry 42 55 CS 97DE Sorb Starch Ethanol Other
X X X X X X
Propylene Glycol
77
Marshall, MN
Process ProductsWet Dry 42 55 CS 97DE Sorb Starch Ethanol Other
X X X X X
Ethanol
Wet Mill
Refinery
78
Peoria, IL - Our Largest Dry Mill
Ethanol
Dry Mill
Process ProductsWet Dry 42 55 CS 97DE Sorb Starch Ethanol Other
X X
79
Ethanol
Dry Mill
Walhalla, ND - Our Smallest Corn Plant
Process ProductsWet Dry 42 55 CS 97DE Sorb Starch Ethanol Other
X X
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
81
Q&A
Corn Processing Business
Corn Processing Operations
82
Plant Tour Video
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
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