ST. LOUIS, MISSOURI, US — After two years of reorganizing, rightsizing the portfolio and getting the balance sheet where it needs to be — the so-called “fix” phase, Bunge Ltd. is ready to embark on the “growth” phase, said Gregory A. Heckman, chief executive officer.
The fix phase, Heckman said, was all about growing earnings and improving the underlying earning power of the business to grow off of. In the growth phase, Bunge gets to focus on expanding its footprint and building out its capabilities.
“Now we get to the fun stage, right?” Heckman told participants during the BMO Capital Markets Growth and ESG Conference held virtually on Dec. 7.
With the right network, operating model and people, Bunge is now positioned to “get maniacally focused externally,” Mr. Heckman said. This next phase for Bunge will mean “pulling every growth lever,” he added.
Specifically, Heckman said all options are on the table for growth, including organic projects, brownfield projects, greenfield projects and mergers and acquisitions of all sizes.
“Those are all open to us, and we’ll let the numbers drive where we should go,” he said.
He said M&A and debottlenecking will get to the ground more quickly, while brownfield and greenfield projects will take some time to yield contributions to earnings.
“But if you look at the refined and specialty oils platform … we’ve got the ability now to margin up some of the things that we did in commodities before,” he explained. “None of them are big, but they’re all in our adjacencies, right? So, the lecithins and the tocopherols and some of the things that we’re doing in infant nutrition also work in … senior nutrition and sports nutrition. We continue to move the ball on all those things. And as we make progress, those are all places that fit for organic investment and/or bolt-on acquisitions.”
On the plant protein side, Bunge is serving its customers and finding success with lipids, Heckman said. He also said the company has invested in its Creative Solutions Center to be able to work with not only its lipids, but also its plant proteins, and in many cases is working with customers to put those two products together.
“So as we work with those customers backwards, many of those names you know today on the existing CPGs and some of those on the disruptors and the new customers, helping them because they’re worried about long term when they see their own demand forecast that they’re going to have enough supply,” he said.
Heckman said Bunge has made some minority investments to gain access to technology and has looked at larger M&As, although the latter have traded at high prices. The plan, though, is to stay disciplined, he said.
“We think we’ll probably create value there by doing something on the brownfield or greenfield side, when it makes sense and to grow with those customers over time,” he said. “So the plant protein will be a longer build. We’ll enjoy that in the lipids now, we’ll enjoy the plant protein piece later.”
Bunge also remains fully engaged in its biggest business — supplying renewable feedstocks, including both products and services, Mr. Heckman said.
He said the company is looking at all the opportunities going forward on its renewable fuel joint venture formed in September with the Chevron Corp. As part of the JV, Bunge is expected to contribute its soybean processing facilities in Destrehan, Louisiana, US, and Cairo, Illinois, US. Chevron, San Ramon, California, US, is expected to contribute about $600 million in cash to the joint venture, which aims to establish a reliable supply chain from farmer to fueling station for both companies. The two companies anticipate approximately doubling the combined capacity of the facilities to 7,000 tons per day by the end of 2024.
“We’ll begin to look at a number of opportunities with them and possibly others that could take us from developing all of the things that are going to be important to meeting the demand on the renewable diesel side and on renewable fuels, and that will be developing cover crops,” Heckman said. “It may be building pretreatment at one of our refineries or at a different location, to develop the lowest cost model to source all of these other low CI (carbon intensity) feedstocks. Because there will be some different flows in how those work and blended into corn oils or assimilated with those to get leverage of the logistics of soy or canola oil. And we think that those are places that we’ve absolutely got a right to play. And with a partner like Chevron, we’re excited about those things developing over time.”
Moving forward, Heckman said the velocity of change and the amount of change being seen in the renewable fuels industry is like nothing ever seen before.
“I’m not sure we’ve ever seen it in our careers, and we just think, with our footprint and our operating model and our focus in this space, we’re in the best position to take advantage of that, to serve the customers on both the food, the feed and the fuel because they’re all trying to lower their CI score, and that will take us working all the way down the value chain, including with our farmer customer at the production level to change practices and to create regenerative ag,” he said.