CHICAGO – ADM plans to drive continued earnings growth to $6 to $7 per share by 2025 through a plan unveiled at the Chicago-based company’s 2021 global investor day on Dec. 10.
“We delivered on the commitments we laid out at our last investor day: building a better ADM, dampening volatility of earnings and cash flows, and expanding base earnings by almost 50% from $3 to our new normalized baseline of $4.50 per share,” said Juan Luciano, chairman and chief executive officer. “Now, with a premier Nutrition business and a repositioned portfolio that is well-aligned with enduring global trends, we’re powering strong, high single-digit percentage annualized earnings growth toward our new target milestone target of $6-$7 per share by 2025.”
ADM detailed targets it has set under a five-year plan. The company will shoot for net incremental operating profit growth of $1.2 billion, which would translate to high single-digit percentage earnings-per-share growth from a current normalized baseline of $4 to $4.50 per share to a new baseline of $6 to $7 by 2025. The company expects growth in all three business units with a target of $1.25 billion to $1.5 billion in operating profit for Nutrition by 2025.
The meat alternatives and the dairy alternatives categories could spur growth in ADM’s Nutrition business unit as could ingredients designed to benefit the gut microbiome.
Global retail sales in alternative meats and dairy alternatives could surpass $100 billion by 2030, said Leticia Goncalves, president of Global Specialty Ingredients for ADM, during the global investor day presentation. The company offers more than 30 sources of alternative proteins and plans to grow in the alternatives categories in three ways, she said.
“First, we are innovating in ingredients, processing and systems,” Ms. Goncalves said. “We are investing in the next-generation technologies such as cell base, microbial fermentation. We're also upgrading our technical capabilities to provide customers with protein nutrition systems rather than just single ingredients, such as what we've done in our recent plant-based innovation lab in Singapore.”
Second, ADM will expand global capabilities to improve product mix, margins and geographic mix. Third, the company will transform its go-to-market approach to focus on market segments.
“We are driving more cross-selling of our entire Human Nutrition portfolio, Flavors, Specialty Ingredients, Health & Wellness and Foods,” Ms. Goncalves said.
Postbiotics could drive ADM’s expansion in the microbiome area, said Mark Lotsch, president of Global Health & Wellness for ADM.
“We, at ADM, are convinced that the health of the gut microbiome is key to drive holistic health, and the National Institutes of Health here in the United States has provided the scientific evidence for that, that has since triggered a lot of research in that space, and exactly here, is where our science is anchored in the gut microbiome, the epicenter of tomorrow's health and wellness,” he said.
Postbiotics, which are heat-stable, may be added to foods and beverages to modulate the gut landscape.
Gregory A. Morris, senior vice president and president of ADM’s Agricultural Services and Oilseeds business unit, gave ADM’s views on the business unit over the next five years.
“We believe market forces, including inflation, will create a negative impact of about $300 million, which will more than offset with our productivity initiatives adding $500 million,” he said. “Our innovation initiatives will add an additional $200 million, leading us to a 2025 baseline earnings range of $2.7 billion to $3.1 billion.”
The business unit produces over 20 billion lbs of vegetable oil per year with 30% going to biofuels and 70% to be used in food applications.
“Global demand for vegetable oil-based biofuels is going to grow significantly as the world looks for lower-carbon solutions to petroleum-based fuels,” Mr. Morris said.
ADM’s Carbohydrate Solutions business unit currently has an operating profit baseline of $700 million to $900 million, said Christopher M. Cuddy, president of the business unit. Bio-solutions will be a growth engine over the next five years
“We expect some headwinds, negative forces, inflation, $500 million, offset by productivity and innovation of $400 million and $200 million, respectively, all this in a mature market for high-fructose corn syrup and ethanol that will lift our new baseline earnings to $800 million to $1.1 billion by 2025,” he said.
Dextrose could be a prime ingredient for growth in the business unit. In the United States ADM has five corn wet mills that have a daily capacity to produce about 50 million lbs of dextrose per day, or about 20 billion lbs annually, said Todd A. Werpy, chief science officer for ADM. Dextrose is a primary feedstock for fermentation to produce sustainable materials as well as other fermentation products, he said. ADM also developed technology for producing lactic acid from dextrose.
Companywide, ADM’s shareholder value creation should include a continued dividend payout ratio of 30% to 40% of earnings and about $5 billion in share repurchases, absent significant other uses of cash. A target of 10% return on invested capital will continue. That percentage is above the company’s long-term weighted average cost of capital of 7%.
ADM, which already has set targets for scope 1 and scope 2 greenhouse gas emissions, announced it aims to reduce scope 3 GHG emissions by 25% by 2035 from a 2019 baseline.
“Customers are turning to ADM for help with their scope 3 commitments,” Mr. Morris said. “Petroleum customers want to drive down the carbon intensity of the vegetable oil that they use for feedstock in products like renewable green diesel, and because the majority of carbon in the ag supply chain comes from the farm, sustainable farming practices are a major part of this work. So thanks to our pharma relationships, our integrated value chain, our global footprint, ADM is uniquely positioned to help manage an increasingly complex value chain.”