巴克莱-美股-农业行业-美国农业：从农场到消费者-2020.6.30-66页.pdf

Equity Research 30 June 2020 CORE Barclays Capital Inc.and/or one of its affiliates does and seeks to do business with companies covered in its research reports.As a result,investors should be aware that the firm may have a conflict of interest that could affect the objectivity of this report.Investors should consider this report as only a single factor in making their investment decision.This research report has been prepared in whole or in part by equity research analysts based outside the US who are not registered/qualified as research analysts with FINRA.PLEASE SEE ANALYST CERTIFICATION(S)AND IMPORTANT DISCLOSURES BEGINNING ON PAGE 58.Restricted-Internal Americas Agribusiness From Farm to Consumer Initiating ADM and BG at OW We are initiating coverage on ADM and BG with both stocks rated Overweight:Global grain processors,in our view,are well positioned to capture future growth,as demand for agricultural products increases on the back of a growing population.ADM and BG both source raw materials from the most productive regions(North and South America),while having an extensive global logistics network,allowing both companies to connect farmers to consumers.While the industry is exposed to several risks,which should not be underestimated,we believe the very particular investment thesis of ADM and BG can create shareholder value.ADM(OW,$52 price target)Delivering on its transition from a commodity company to a value-added nutrition company:ADM,in our view,has taken the right steps in the past,reshuffling its portfolio and adding the value-added nutrition business to its portfolio.The segment not only fits well due to vertical integration,it should also allow ADM to grow sales at higher rates while expanding consolidated margins,as the business has an intrinsically higher earnings power.Although short-term risks related to trade,COVID-19,and weather,among others,can have an impact on results,we see in the medium term a higher level of profitability,which drives our$52 price target.BG(OW,$55 price target)Still in the early stages of its transition story:With over 200 years of history,BG very recently embarked on its transformation journey.In early 2019,BG put a new and motivated management team in place to lead the transition,and we expect the company to further deliver in 2020 on the early success of its restructuring.While BG is exposed to the same risks as ADM,we see its international diversification as one pillar for potentially more stability within the commodity-intense segments;that said,BG lacks a sizeable and higher-margin segment compared to ADM.With growing demand from China and Africa,North and South America will be the“natural suppliers”of agricultural products:In that particular context,we see ADM and BG best positioned to leverage their logistics capabilities to actually bring ingredients from farmers to consumers.Acting in a sustainable manner will be key,and we believe both companies recognize that sustainable agriculture will in the end benefit them,even if there is a cost at the beginning.Operating in one of the industries most exposed to climate change,ADM and BG have both emphasized sustainable and responsible agriculture activities,as in farming lies their future and neither company can afford to risk what they most need plenty of crops.INITIATING COVERAGE Americas Agribusiness NEUTRAL Unchanged For a full list of our ratings,price targets and earnings in this report,please see table on page 2 Americas Agribusiness Benjamin M.Theurer+52 55 5241 3322 BBMX,Mexico Antonio Hernandez,CFA+52 55 5241 3323 BBMX,Mexico Barclays|Americas Agribusiness 30 June 2020 2 Summary of our Ratings,Price Targets and Earnings Estimates in this Report Company Rating Price Price Target EPS FY1(E)EPS FY2(E)Old New 26-Jun-20 Old New%Chg Old New%Chg Old New%Chg Americas Agribusiness Neu Neu Archer Daniels Midland(ADM)N/A OW 38.93 N/A 52.00-N/A 2.57-N/A 3.14-Bunge Limited(BG)N/A OW 40.22 N/A 55.00-N/A 2.75-N/A 4.42-Source:Barclays Research.Share prices and target prices are shown in the primary listing currency and EPS estimates are shown in the reporting currency.FY1(E):Current fiscal year estimates by Barclays Research.FY2(E):Next fiscal year estimates by Barclays Research.Stock Rating:OW:Overweight;EW:Equal Weight;UW:Underweight;RS:Rating Suspended Industry View:Pos:Positive;Neu:Neutral;Neg:Negative Barclays|Americas Agribusiness 30 June 2020 3 CONTENTS EXECUTIVE SUMMARY.4 INDUSTRY OVERVIEW.6 Global Agriculture.6 African Swine Fever,Trade,COVID-19,Renewable Fuel Standards,and other topics.9 The long-term view.16 Industry risks.20 ARCHER-DANIELS-MIDLAND CO.22 ADM Just in the second inning of the nutrition game;initiate at OW.22 ADM at a glance.23 Financial performance and outlook.29 ADM management and corporate governance.32 ADM through an ESG investor lens.33 Company-specific risks.37 BUNGE.40 BG The restructuring opportunity;initiate at OW.40 BG at a glance.41 Financial performance and outlook.46 BG management and corporate governance.50 BG through an ESG investor lens.51 Company-specific risks.55 Barclays|Americas Agribusiness 30 June 2020 4 EXECUTIVE SUMMARY We are initiating coverage on global grain processors ADM(OW,$52 price target)and BG(OW,$55 price target).In our view,both companies are well positioned to benefit from growing demand for agricultural goods,which need to be processed and transported from their origins(mainly North and South America)to consumers worldwide.While the main segments for both companies(AG Services&Oilseeds in the case of ADM;Agribusiness in the case of BG)are highly exposed to commodities and ultimately have low margins,we believe ADM and BG have started a successful shift towards businesses offering more stable and higher levels of profitability.ADM,with its recent focus on Nutrition,is actually one step ahead,in our view,while in the case of BG,we believe a significant part of recent restructuring efforts is yet to bear fruit.As we have a fairly positive view on the broader protein supply chain,given increasing global protein consumption,we believe ADM and BG are well positioned to also benefit from this important structural demand driver.We believe that ADM,as a market leader in global agriculture,is set to benefit from a growing population and the need to bring food from farmers to consumers.The companys extensive logistics network,sourcing capabilities,and continuous divestments to focus on the core business,while still expanding its footprint,bode well for shareholder returns.Over the past few years,the companys focus on new operations and streamlining of existing operations has been bearing fruit,and we expect additional operating income growth lies ahead.With a healthy balance sheet,strong management team,and above industry average corporate governance,we believe ADM is just at the beginning of a long-term success story.While investors should not overlook short-term risks,due to the still high relevance of its AG Service and Oilseeds business(be it trade or simply demand related),we believe its strategic realignment and focus on“value added”nutrition will ultimately drive better returns.Additionally,ADM has shown a solid M&A track record,adding new business while keeping financial discipline and a focus on shareholder returns.In our view,BG is on track to deliver on its strategic realignment,offering an opportunity for still attractive upside potential from current levels despite certain short-term headwinds and ongoing exposure to underperforming businesses(mainly sugar/ethanol in Brazil).On the positive side,BG should ultimately benefit from increased demand for protein globally,which will drive demand for animal feed one of the key drivers of results representing the vast majority of its Agribusiness segment.Additionally,we have a structurally positive view on its food-related business,be it via the Edible Oils Segment or the Milling business.Yet there are some issues,which should not be overlooked.We believe BG still has to move forward on its strategic business review,further leveraging certain asset disposals,and the company will have to overcome short-term headwinds,mainly from demand-related disruption on the back of the COVID-19 pandemic.While BG has relatively high exposure to Brazil,its mainly confined to exports,with limited operations domestically,which we believe positions BG well to benefit from global trade opportunities in light of ongoing trade tensions between the U.S.and China.We use a mid-cycle EBIT margin assumption for our long-term DCF analysis,which in our view is the best way to look through commodity cycles.As demand from different industries is impacted by the COVID-19 pandemic,we believe structural shifts in the companies business models are more relevant and likely to drive longer-term better levels of profitability,ultimately supporting the upside potential we see for both ADM and BG.Grain processors are even further away from behaving like“Staples”companies than protein processors.Although demand for food is stable,many factors can impact the profitability of grain processors,which companies closer to the end of the value chain do not necessarily feel anymore.With that in mind,our recommendations are built on a long-term valuation approach;we do see significant short-term risks for ADM and BG,which could impact stock performance in the immediate short to medium term.Among those risks are trade conflicts(mainly U.S./China),the current COVID-19 pandemic,and a lack of additional boost from biofuel policies.While we do believe the 2020 U.S.crop to be big,grain prices remain fairly low,leaving farmers with little incentive to plant significant acreage in 2021,which could have adverse implications for volume among the core factors of profitability for grain processors.Big crops are better than small crops.Understanding grain processors might not be intuitive except for one main takeaway:big crops are better than small crops,and youd better hope that you are sourcing from the biggest.In this respect,BG is slightly better positioned than ADM,considering BGs broader international asset diversification and commodity flow exposure.However,we believe ADM is two steps ahead in the restructuring process and is building a more value-added(and higher-margin)Nutrition segment.Nonetheless,the commodity linked segments are the most relevant ones,and those can only flourish if the companies adapt to strict ESG rules.Barclays|Americas Agribusiness 30 June 2020 5 Why sustainability matters so much:In this report we put a special emphasis on relevant ESG criteria.Both companies are significantly exposed to risks around farming and sourcing of agricultural products.But both companies are also among the most exposed to risks around climate change,inviting questions around their commitment to sustainable agriculture.The effects from climate change on ADMs and BGs operations vary,but in our view the most prominent among them are:1)Bad crop seasons,due to droughts and/or excessive rainfall 2)Disruption of logistics,due to adverse weather conditions on land and sea(i.e.hurricanes,etc.)3)Unforeseen plagues due to higher average temperature impacting the quality and volume of crops 4)Increased cost of operations as governments could introduce stricter GHG related emission charges on the agricultural industry in general Both companies have policies in place for sourcing,including sustainable sourcing.That said,soy sourcing in South America and palm sourcing in Southeast Asia have been linked to illegal deforestation practices.While the companies have achieved a fairly high level of traceability of soy in South America,palm sourcing back to the farm is less transparent,and is one of the key factors independent sustainability analysis companies focus on.We are actually encouraged with both companies initiatives to engage with farming communities and deliver on strong corporate governance.ADM,in our view,screens slightly better on this count than BG,mainly because it has consolidated its sourcing from emerging markets,while BG is among the few companies trying to asses in more detail its environmental footprint.Other major industry risks include:1)Adverse short-term weather conditions:Extreme climate events such as droughts,heavy rainfall,or heat waves have been more frequent disruptors than before,and in our view present a risk as they become more frequent or take place with higher intensity.2)Trade conflicts:Government policies such as taxes,tariffs,duties,subsidies,incentives,and import and export restrictions could affect the industry by impacting trade flows;trade disputes are latent risks that could continue disrupting operations.Additionally,FX rates could influence competitiveness and trade,further affecting industry profitability.3)Raw material pricing:Raw materials are procured from thousands of growers,grain elevators,and wholesale merchants across the world,and despite not facing supplier concentration,prices are established on a short-term(less than one year)agreement or spot basis.4)Changing consumer trends:A structural shift in consumer trends could disrupt farmers operations and present a headwind for those who arent able to adapt,not only due to operating issues but also due to externalities like weather or regulation.A clear example of this trend is the alternative meat industry,which has the potential to disrupt the amount and type of crops planted.Additionally,as several products are used in the flavours and ingredients businesses,ADM and BG face risks from changing consumer preferences.Yet both companies are actively engaged in the alternative meat trend,and hence somewhat protected if the shift were to occur faster than in our base case.5)General supply chain/demand risks:As a large amount of grains are used as ingredients in livestock and poultry feed,companies face risks of lower demand from protein companies,as outbreaks of diseases like African Swine Fever could lead to lower feed demand.Barclays|Americas Agribusiness 30 June 2020 6 INDUSTRY OVERVIEW Global Agriculture Humans make up less than 0.5%of the planets“animals”in terms of weight,but consume a quarter of its agricultural production.Farming and civilization have coexisted throughout human history,and in analyzing the different factors that have determined and could continue weighing on the industrys success,we assess how ADM and Bunge are positioned to benefit from future opportunities while managing the risks that apply to agribusiness such as viruses,trade restrictions,environmental standards,and more.According to an OECD-FAO report,agricultural production is expected to grow 15%over the 2019-2028 decade,mostly on the back of yield improvements and higher production intensity,as agricultural land growth is expected to be mostly flat.This productivity improvement,despite population growth and relatively flattish per capita staples food consumption,is expected to keep agricultural real price