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Good morning and welcome to the ADM second quarter 2026 earnings conference call. As a reminder, this conference call is being recorded. I would now like to introduce your host for today's call, Kate Walsh, Director Investor Relations for ADM. Ms. Walsh, you may begin.
Welcome to the second quarter of 2026 earnings conference call for ADM. Our prepared remarks today will be led by Juan Luciano, Chair of the Board and Chief Executive Officer; and Monish Patolawala, our Executive Vice President and Chief Financial Officer. We have prepared presentation slides to supplement our remarks on the call today, which are posted to the Investor Relations section of the ADM website and through the link to our webcast. Some of our comments and materials may constitute forward-looking statements that reflect management's current views and estimates of future economic circumstances, industry conditions, company performance and financial results. These statements and materials are based on many assumptions and factors that are subject to numerous risks and uncertainties. ADM has provided additional information in its reports on file with the SEC concerning assumptions and factors that could cause actual results to differ materially from those presented in these materials. Unless otherwise required by law, ADM assumes no obligation to update any forward-looking statements due to new information or future events. In addition, during today's call, we will refer to certain non-GAAP or adjusted financial measures. Reconciliations of these non-GAAP financial measures to the most directly comparable GAAP financial measures are available in our earnings press release and presentation slides, which can be found in the Investor Relations section of the ADM website. I will now turn the call over to Juan.
Thank you, Kate. Hello, and welcome to all who have joined the call. Please turn to Slide 4, where we have outlined this quarter's performance highlights. Today, ADM reported adjusted earnings per share of $1.84 and total segment operating profit of $1.5 billion for the second quarter of 2026. Our trailing four-quarter adjusted ROIC was 7.8% and cash flow from operations before working capital changes was $1.8 billion for the first half of 2026. Total segment operating profit increased significantly compared to the prior year quarter, driven by several positive factors, including robust commercial and operational execution by our team, a constructive biofuels margin environment, elevated global energy prices and momentum in Nutrition, led by Flavors and progress in Specialty Ingredients. Based on our first half performance and a constructive outlook for the second half, we are again raising our full-year 2026 adjusted EPS guidance now to a range of $5.15 to $5.60, up from the previous guidance range of $4.15 to $4.70. As we look to the second half of the year, we are focused on continuing to deliver on our financial and operational commitments and that same discipline extends to how we allocate capital and return value to our shareholders. During the second quarter, we paid our 378th consecutive quarterly dividend, and we remain steadfast in our commitment to creating and returning value to our stakeholders. Please turn to Slide 5. The second quarter of this year was an important one for us, and the team once again delivered while progressing our 2026 priorities. I'll run through a few highlights. During the quarter, energy markets were supportive of North American biofuel margins following the finalization in March of the renewable volume obligations for 2026 and 2027. Additionally, global energy volatility was also supportive of biofuel, including crush margins. Our business executed well across our asset footprint amid this constructive backdrop, increasing global oilseed processed volumes by close to 5% compared to the prior year period, driven by higher asset utilization. Ag Services also delivered strong results in the second quarter, driven by the team strategically leveraging ADM's global asset network in a complex operating environment to deliver value across the agricultural supply chain. South American operations also benefited from the grain export terminal in Barcarena, Brazil, returning to full operations, along with increased soybean export, which were supported by higher farmer selling. North American ethanol margins were robust in the second quarter as favorable economics incentivized higher domestic blend rates. Additionally, elevated global energy prices, coupled with lower U.S. corn prices enabled U.S. ethanol to be price competitive globally, which provided a favorable U.S. industry-wide export backdrop. Our Nutrition business contributed to robust operating profit results this quarter, led by Flavors and supported by progress at Decatur East and benefits from our portfolio actions in Animal Nutrition. Flavors sales grew across every key region with particular strength in EMEA, and we delivered a record quarter for Flavors in Asia Pacific. To summarize, in AS&O, our team executed well in a complex and volatile environment, strategically leveraging ADM's global asset footprint to drive margin and volume uplift in Ag Services, capture strong crush margins in a constructive biofuels environment and delivered nearly 5% crush volume growth year-over-year. In Carb Solutions, ethanol production rose in a strong margin environment, and we sequestered 337,000 metric tons of carbon this quarter. In Nutrition, the team built on the momentum in the first quarter with continued improvement in both Human Nutrition and Animal Nutrition. The robust cash flow that our business generates funds our capital allocation and growth priorities. Our growth plan focuses on accretive targeted organic investments across our platform where we see the most compelling opportunities such as expanding domestic crushing and ethanol capacity at existing facilities. Given the strength of biofuel demand, we have identified 4 U.S. crush facilities for this first phase of expansion, which together are expected to deliver a meaningful increase in our North American capacity. Additionally, we are building out precision fermentation capabilities and expanding our natural colors footprint to capitalize on the shift toward cleaner labels and higher plant protein reformulations already underway. Our growth plan is built upon the foundation of operating safely and responsibly. That commitment runs through everything we do. And I'm proud that 2 of our North American facilities were recently recognized by Workplace Safety Awards and were recently inducted into Illinois Manufacturing Association's Hall of Fame. That same commitment to our people shapes how we think about the world around us. While the commercial environment has supported our results, I will be remiss not to acknowledge the conflict in the Middle East and the escalation of conflict between Russia and Ukraine. Our thoughts are with all those affected. We have operations in Ukraine and the safety and security of our employees in the region remain our primary concern. While we expect any disruption to our Ukrainian operation to have limited financial impact to ADM, the region is an important contributor to global food security and further disruption to grain export could weigh on global grain stocks and increased food prices. As for what this means for our business, navigating global disruptions is not new to ADM, and we will remain focused on executing on our 2026 priorities and delivering on our long-term plan. Please turn to Slide 6 to discuss our long-term growth plans. We are making purposeful investments now in the platform set to drive the next phase of our growth. As we have outlined before, the next wave of value creation runs through 5 distinct pathways that include a mix of near-term drivers already showing up in our results and longer-term opportunities that will keep scaling. Importantly, each sits in a market we know well, tied to customers' needs we understand and with the infrastructure largely in place to deliver. I'll take a few moments now to highlight our Advanced Nutrition platform in more detail, where we are developing innovative solutions as customers shift from artificial to natural ingredients, particularly in North America, where we believe we are well positioned to capitalize on this structural change in the food we eat. One of the more exciting near-term opportunity is the transition from artificial to natural colors. We believe this represents a total addressable U.S. market of roughly $1 billion in revenue, and our target is to capture $80 million to $100 million of operating profit for ADM over time as we partner with our customers to launch new solutions. We have a well-established global colors business that helped bring similar solutions to our European customers over a decade ago. Our experienced team is well suited to provide a full suite of solutions to our customers as they navigate the complexities with color, flavor and functionality changes across products of various scales from craft to industrial scale production. Our natural colors pipeline has grown significantly year-to-date with several notable customer wins. I highlight 2 contracts that we recently signed, both to convert artificial red, yellow and orange shades to natural alternatives, one across a well-known packaged food line, the other in flavored beverages. These wins reflect the shift toward cleaner labels, we believe ADM is well positioned to capture and that will add durable recurring sales as the product reach store shelves. Natural colors represent just one of several growth engines built into our business. Together with the organic projects we are executing today, they build an enduring growth pipeline that is expected to compound over the years ahead. I want to close by recognizing the people who make all of this possible and to thank the ADM team for all their hard work and everything they do each day to strengthen our company. It is their commitment to executing on our immediate priorities while advancing our long-term strategy that is the foundation of our success in a shifting global landscape. With that, I will hand it to Monish to walk you through our second quarter financials and full-year outlook.
Thank you, Juan, and I wish you all a very good morning. Please turn to Slide 7. AS&O segment operating profit for the second quarter of 2026 was $867 million, up 129% compared to the prior year quarter. Included in the second quarter results was around $100 million of net positive mark-to-market and timing impacts, led by a net positive impact in crushing, a modest net positive benefit attributable to Ag Services and partially offset by a net negative impact attributable to refined products and other of around $50 million. The Ag Services subsegment in the current quarter generated operating profit of $293 million, representing an increase of 159% compared to the prior year quarter. The increase was primarily as a result of strategically leveraging ADM's global asset network in a complex operating environment to deliver value across the agricultural supply chain. In addition, we benefited from improved performance in South America, partially as a result of the Brazilian export terminal in Barcarena returning to full operation. For the Crushing subsegment, operating profit was $363 million for the quarter, an increase of approximately $330 million from the prior year quarter as the business performed well in a constructive biofuels margin environment. The constructive margin environment was driven by higher domestic demand resulting from the RVO policy, combined with higher global energy prices. Additionally, crush results for the quarter include positive mark-to-market and timing impacts. Further, as Juan mentioned, manufacturing performance further improved year-over-year with global crush volumes increasing close to 5%. Additionally, soybean meal sales remained strong throughout the quarter, driven by elevated global demand for pork and poultry, which led to a record quarter for the U.S. and Brazilian soybean meal exports. Lastly, included in this quarter's results are insurance proceeds related to Decatur East of approximately $20 million. For the Refined products and other subsegment, operating profit was $151 million, down by 3% compared to the prior year quarter. The year-over-year decrease was largely attributable to net negative mark-to-market and timing impacts driven by improved refining margins as a result of RVO and global energy volatility in North America and Europe. Margins were somewhat pressured in South America due to oversupply conditions. For our investment in Wilmar, equity earnings were $60 million for the quarter, down 22% compared to the prior year quarter. Turning now to Slide 8. For the second quarter, Carbohydrate Solutions segment operating profit was $411 million, representing an increase of 22% compared to the prior year quarter. In Starches and Sweeteners, operating profit was $326 million, up 7% year-over-year. Ethanol margin strength, including policy incentives, drove the improvement. Strength in ethanol more than offset the ongoing pressure in liquid sweetener volumes and margins, which were most pronounced in North America. Further, starch demand stabilized during the quarter, while global wheat milling volumes remained relatively stable in a more competitive environment. In the Vantage Corn Processor subsegment, operating profit was $85 million, representing a $52 million increase from the prior year quarter as our corn dry-milling ethanol operations benefited from stronger ethanol margins, along with support from policy incentives and effective risk management. Overall, base ethanol EBITDA margins for the quarter were higher both sequentially and compared to the prior year quarter. Now turning to Slide 9. For Nutrition, segment revenues in the second quarter were $1.9 billion, down 5% compared to the prior year quarter and inclusive of foreign exchange gains. Human Nutrition revenue decreased by 4% against the prior year quarter that included a $55 million benefit from a contract cancellation in Health and Wellness. Animal Nutrition revenue decreased by 6% year-over-year, primarily reflecting our previously disclosed portfolio actions and the formation of the Akralos joint venture. Nutrition segment operating profit was $172 million for the second quarter, representing an increase of 51% compared to the prior year quarter. Human Nutrition operating profit was $139 million, up 51% compared to the prior year quarter, driven primarily by the growth in Flavors. Progress with the Decatur East plant also contributed to positive year-over-year results. Animal Nutrition operating profit was $33 million for the quarter, up 50% compared to the prior year quarter, primarily attributable to ongoing improvements and benefits from portfolio actions taken during 2025. Corporate expense declined year-over-year, driven by lower interest expense this year and the nonrecurrence of prior year impairment losses, partially offset by higher performance-based compensation this year. Now turning to Slide 10. For the first half of 2026, ADM generated cash flow from operations before working capital of approximately $1.8 billion. We continue to be very disciplined in the areas in which we invest. During the first half of 2026, we invested $466 million in our footprint and maintain our expectations of full-year 2026 CapEx being in the range of $1.3 billion to $1.5 billion. During the quarter, we distributed $256 million in dividends, marking our 378th consecutive quarter of paying a dividend. Our dividends and organic growth projects continue to be core to our capital allocation priorities, and we will continue to be very disciplined with respect to bolt-on M&A opportunities that complement our core businesses. Our net leverage ratio at June 30 was 1.6x. Our year-end net leverage ratio expectations remain at approximately 2x. Additionally, given the strength of our balance sheet, cash flow generation and leverage position, we are evaluating a return to opportunistic share repurchases later this year. Now turning to Slide 11, where we have provided updated details regarding our 2026 outlook. Earlier today, as Juan mentioned, we raised our outlook for 2026 adjusted EPS to a range of $5.15 to $5.60, up from the previous range of $4.15 to $4.70. In addition to our year-to-date performance, our raised guidance was based on 3 primary factors. First, we anticipate our team will continue delivering successfully against our plan through the balance of the year. Second, we expect the favorable margin backdrop across our crushing and ethanol businesses to hold throughout the second half of this year. And third, we expect Nutrition to continue improving operating performance while capturing growth opportunities. As a reminder, the fourth quarter is the seasonal low for our Flavors business. Additionally, our guidance range reflects a number of assumptions. For AS&O, we are assuming that China continues buying North American soybeans, which is expected to benefit our Ag Services subsegment. We have seen good progress thus far with China well underway with executing on its commitment to buy 25 million tons of U.S. soybeans in 2026. For crushing and RPO, we expect the constructive biofuels environment to support strong growth year-over-year throughout the second half of this year, further supported by the realization of the reversal of net negative mark-to-market and timing impacts that we are carrying from the first half of the year. As a reminder, we do not include new mark-to-market and timing impacts in our forward guidance. Additional adjustments could arise in future quarters depending on where commodity prices move. For Carb Solutions, we expect strength in ethanol margins, including policy incentives to continue to more than offset the softness we are seeing primarily in liquid sweeteners. As a result, we are raising our net benefit from 45Z to approximately $250 million for 2026, up from our prior expectations of approximately $150 million. Our year-over-year momentum for Nutrition remains intact with operating profit increasing primarily as a result of higher flavor sales, measured progress with Decatur East and improvements in Animal Nutrition. In corporate, we expect cost to be higher than in 2025, driven primarily by performance-based compensation, along with continued investments in research and development and automation and digitization. And just a quick reminder on modeling incentive compensation. All incentive compensation adjustments are recorded in corporate during the year with the impact to our operating segments occurring when the non-equity-related payments are made in the first quarter of 2027. As always, we continue to closely monitor external factors across the macroeconomic, geopolitical policy and overall trade environment with particular attention to the impact volatility could have on our second half results. We also continue to progress our enterprise-wide cost saving programs and remain on track to achieve our targeted aggregated cost savings of $500 million to $750 million over the 3- to 5-year period, which commenced in 2025. And I'll take a moment to highlight progress across the corporate functions in driving reductions in transaction costs. Just to give you a couple of examples, in finance, under an umbrella that we call frictionless finance, we have paired lean methodology with daily management to systematically reduce cost across our transactional processes. Accounts payable is a clear example. Daily management routines surfaced recurring friction in the invoice to pay cycle and the global shared services team has reduced cost per transaction by roughly 25% since the beginning of the year. Within Global Technology, we are consolidating to fewer core platforms, eliminating waste and resetting cost structures with our vendor partners. We are building deeper strategic relationships with fewer vendors. And the global technology team also has line of sight to meaningful savings over the next few years while increasing investments in digital advancements and cybersecurity. In summary, the second quarter reflected strong commercial and operational execution by the team in a complex, but constructive global trade and biofuels environment with solid growth momentum in nutrition, all of which contributing positively to results. We expect the second half of this year will represent more than half of our operating profit for 2026 with the potential for the third quarter to be higher than the fourth quarter, largely dependent on how executed crush margins develop in the fourth quarter. In closing, I want to thank our ADM team members for the focus, discipline and execution they brought to this quarter. It is their hard work in delivering strong commercial and operational performance across all 3 segments and generating the cash flow that funds our priorities. This positions us well to raise our outlook and continue navigating a dynamic global landscape while delivering on our financial commitments and creating and returning value to our stakeholders. With this, I'll hand it back over to Juan.
Thanks, Monish. To recap, our second quarter results reflect a marked step-up in our earnings, driven by a constructive biofuels environment, strong commercial and operational execution and momentum in Nutrition. That combination allow us to again raise our full-year 2026 outlook. Beyond 2026, we have compelling growth engines already embedded in the business, the organic investment we're making across our platform and the 5 growth pathways we have outlined, including the Natural Colors opportunity I discussed today. We're excited about the strength of this organic growth plan, while we continue to be very disciplined with respect to bolt-on M&A. As we execute the journey ahead, we will remain steadfast in our commitment to creating and returning value to our stakeholders. And finally, before we open the call up for questions, I would like to welcome Jeff Rowe to ADM, who will assume the newly created role of Executive Vice President and Chief Operating Officer, effective August 17. Jeff brings more than 30 years of experience driving growth, operational excellence and commercial success. He joins us from Syngenta, where he serves as CEO of one of the world's largest agricultural technology companies with more than 50,000 employees across over 90 countries. A fifth-generation Illinois farmer, Jeff is a proven industry leader whose appointment complements an already strong management team and builds on ADM's momentum around driving innovation and delivering on our long-term growth plan. With that, we'll take your questions now. Operator, please open the line.
分析師問答
Your first question comes from the line of Manav Gupta from UBS.
First, congrats on a very strong quarter and another guidance raise. You continue to surprise the Street on the upside. My question here is as I understand, sir, and you can let me know if the understanding is wrong, the reason you are moving ahead with some of these debottlenecking facilities at existing plants is because the actual cost in dollars per tonne will be significantly less than if these were actually greenfield expansions. So by moving ahead with this brownfield expansions, your return on investment will be materially higher versus if these actually were going to be greenfield expansions. Could you actually talk about that a little?
Sure, Manav. Good morning to you. And I will pass the congrats to the team. Of course we are always looking for opportunities to deploy capital wisely. As you know, our capital allocation, that's the priority, cost and growth part of the organic plan is the first one also with dividends. So as part of that, in crush, we have been expanding, we expanded last year in Brazil where capital intensity is cheaper in Brazil to be implemented. So we expanded two and we completed Uberlandia this year. In the U.S. we have identified 10 plants with potential for capacity unlocks. When we look at the overall portfolio, the capital intensity is about one quarter of what it will cost to build greenfield. So certainly very attractive opportunities. We have decided to have a phased approach to allow for offramps or to see how the industry develops over time. So in this what we call phase 1, we have announced 4 of those 10 plants we are moving forward which of course are the most attractive returns. That is still keeping within our range of CapEx from $1.3 billion to $1.5 billion. At times when we find these opportunities that are very compelling, we might go a little bit higher than that. At times like last year when we did not find anything, we were a little bit lower than that. But nothing that swings completely the range. This phase 1, although it's early on, it could be in the range of $100 million overall for the 4 plants. So it's not huge. So we feel very good about that. And as we are building these both in North America and Brazil because these are markets where there are strong domestic biofuels markets and they are very favorable in terms of margins. We are also looking at potentially debottlenecking in ethanol that are driven mostly by our operational excellence efforts as we continue to drive yields and cost improvements in the ethanol plants. Naturally, some of that yields some debottlenecking on that. So, we are very good about the strength of our organic plan.
I would just add to Juan's comment that the other benefit of this debottlenecking is manufacturing cost, Manav. And as you know there is a lot of fixed cost at these plants and the more the throughput the average cost per unit comes down. So all that adds to a very good return in addition to the volume that we get.
Perfect. Well understood, Monish. My second and quick follow-up is can you talk a little bit about the Broadwing project? We see it as something which is a milestone for industrial decarbonization. Can you talk a little bit about that project and the benefits of that project? Thank you.
Yes. We have a strategy of decarbonization and that's a very important project to bring low carbon intensity energy and steam into Decatur. So it's a large project, we continue to move forward with that and as I said, it is one of the several elements that we have in our decarbonization path. A reminder, we have been leaders in carbon capture and sequestration that we started about 11 years ago in our wells. We are pleased that I think we sequestered 337,000 tons of carbon in this quarter up from 300,000 the last quarter. So again, it's just a multi-year program and we continue to decarbonize and drive based on our sustainability trend that we have put together as part of the strategy about 10 years ago. So, we continue to execute on the strategy and the plans as per schedule.
Your next question comes from the line of Heather Jones with Heather Jones Research.
Congratulations on the quarter. I wanted to start with Ag Services — that was much stronger than I was anticipating, and given that tensions in the Ukraine area have escalated, if China continues their bean purchases as you are assuming, do you think Q2 is a high point for the year or could Q3 and Q4 look better than Q2?
Heather, a lot going on in the world as you know. We continue to praise the team in Ag Services and the system we have. From my experience, the market rewards our footprint and our flexibility and all the assets that we have whether it is transportation and options for origination and destination. Our role is to make sure that food shows up wherever it needs to show up. At times of crisis or disruptions the team can flex much more and use the optionality that we have built in the model. So as you said, weather across the world is threatening some crops. There are issues right now with China especially for corn and maybe wheat and rice where it has become too hot and too dry. Ukraine has ceased export through the sea. We have had incidents with vessels and terminals and the whole industry is in the same phase. So it is very difficult to get crews to come to pick up vessels. I would say China continues to buy from the U.S.; I think China wants to honor the commitment of 25 million tons of soybeans this year and certainly there may be purchases of sorghum or barley later on that are less political than corn. I would say probably our services will be slightly lower in Q3 than in Q2 for our own reasons. But Q4 will depend on how exports come into the U.S. and how much we can build in sorghum and corn programs on top of the soybean program that seems to be building for the later part of the year. The team continues to execute well. Global trade results were higher in Q2 driven by very strong commercial execution taking advantage of some favorable market conditions. We continue to have improved destination marketing margins in Asia and good grain trading results. Transportation ran well, including ocean freight and domestic freight. All the elements have been performing well.
Okay. Regarding RVO, I understand biodiesel margins have been strong for obvious reasons. Could you discuss the refining margin backdrop for vegetable oils, which I believe have been relatively weak, and how you expect that to evolve over the year as EU biofuel policy and the RVO are fully implemented? How are you thinking about that setup?
Heather, I would go back to the same comment we made about RPO. We are seeing constructive margins in total. For Q2, we were lower year-on-year, driven by a negative mark-to-market that we took in Q2 that impacted the results of RPO. From a capacity perspective, we see the industry doing a pretty good job restarting capacity and the plants are running well. Ultimately, as we said, we are watching a lot of factors in the market—macroeconomics, geopolitical issues, inflation—that may determine what food oil margins do as well as biofuels. Right now we see a constructive biofuels market, and we expect that to continue. Therefore, the assumption is that these mark-to-markets will reverse from Q2 into Q3 and Q4, and then we continue to have a constructive market. Ultimately, it will depend on what happens with all the factors we've discussed.
Your next question comes from the line of Ben Theurer with Barclays.
Monish, also from my side, congrats on a very strong second quarter. So my first question would really like to dig in and understand a little bit as you think about the back half and then maybe early into 2027, you said you've done, obviously, a little bit of a release on MTM. You still have something built into it. But as you look into the overall environment, particularly biofuel policies, et cetera, if you would have to stretch for the second half a little bit the high end versus the low end of your new guidance, just wanted to understand what is like the scenario to get it closer to that 5.5, 5.60? And what would be a scenario to be more like on the lower end of the 5? And how you think about this then moving into '27, if you have some preliminary thoughts as to the cadence of growth in 2027? That would be my first question.
Sometimes the good results underscore the difficulties of the environment and how many decisions we need to get right. The first condition is the team continuing to deliver against the plan. We think the favorable margin backdrop across biofuels will continue; we see that in policies around the world. There has been disruption in energy markets that has benefited us this year and there is some structural support. We also expect Nutrition to continue improving operational performance. We are lapping Q2, which is our strongest quarter. Q3 we like for flavors; Q4 is a seasonal low for flavors. If you think about what will drive us to the higher side of the range, our assumptions include Ag Services benefiting from China continuing to buy North American soybeans—around 1 million tons per week—and good exports of corn and milo. Crushing is a large mover: North America crushing is roughly 90% locked for Q3 and about 30% open for Q4. Much will depend on the levels we execute in Q4. For Carb Solutions, ethanol margin strength is expected to offset liquid sweetener softness. We continue to raise our net benefit from 45Z as we see more clarity from implementing processes and verification; we moved from about $150 million to $250 million. Nutrition momentum should continue with higher flavor sales and progress at Decatur East and Animal Nutrition. External variables—Ukraine, weather including a potential El Niño, Middle East conflict, oil price volatility—could affect results. Also remember we do not forecast future mark-to-market; we expect accumulated mark-to-market to revert largely in the second half, mostly in Q3. Q4 will depend on crush margins execution. Looking forward to 2027, we feel good about debottlenecks and the five growth platforms that span multiple horizons. We feel good about where we are and where we're going.
Perfect. That was very complete. And actually, one quick follow-up: you talked in today's presentation in a little more detail about the transition to natural colors, which you mentioned as part of these value-creation pathways. As you think about it, and I know it's still early, how quickly do you think your customers will need to launch new products and adopt these more natural colors instead of artificial chemical colors? And given the expertise you're bringing from Europe and applying here in the U.S., which could allow you to leverage that experience and potentially gain market share with your customers, how should we think about this?
This opportunity fits us well. We did it before in Europe and we are prepared. These conversions are not always one-to-one replacements because pH and stability affect colors differently, so customers often need to redefine formulations when changing a color. That makes the process take longer and customers are prudent, implementing changes in sequence across product lines. From a supply chain perspective, this staggered approach is beneficial because it avoids a single-day large supply shock. We have projects in our pipeline. We estimate a roughly $1 billion U.S. market over time and a target to capture $80 million to $100 million of operating profit for ADM. It will happen over a few years; we have a pipeline and are executing against it. As products are launched and customer acceptance grows, adoption should accelerate. Early days, but we feel very good about it.
Your next question comes from the line of Pooran Sharma with Stephens.
Congrats on the results to you, Juan and to the whole team. I wanted to maybe understand outlook a little bit better. And Monish, you alluded to the back half being predicated on higher crush margins, higher ethanol margins. I believe in the past, you used to give us the crush margin levels that are kind of assumed in the back half. I was wondering if we were able to get that level of detail here. And then just on the follow-up, I just want to make sure I heard this correctly. On the coverage, you said 90% covered for Q3 and about 30% covered for Q4. Is that correct?
That's correct for North America crushing. Globally, we are more like 70% covered for Q3 and a little bit lower for Q4.
Pooran, to answer your question on guidance, Q2 was an important quarter and the team executed well, capturing commercial and operational opportunities. We increased manufacturing volume from crush by nearly 5%. If you take our first half, which is around $2.55, our second half will definitely be higher than the first half if we hit the $5.15 to $5.60 guide, which we feel good about. Regarding cadence, there's a possibility Q3 will be higher than Q4, driven by the booked crush positions for Q3, continued execution in Nutrition, and strong ethanol which offsets lower liquid sweeteners volumes. How Q3 becomes higher than Q4 will largely depend on where crush margins get locked in for Q4 since we are currently 30% locked in for North America Q4. When modeling, look at cash margins in Q3 and Q4. Based on everything we see right now, we believe $5.15 to $5.60 is a good guide and we'll keep you posted as things evolve.
Your next question comes from the line of Andrew Strelzik with BMO Capital Markets.
The first one is on the 45Z outlook, which continues to move higher. Can you talk about kind of what's underpinning that? And do you feel like now kind of we've reached the appropriate level? And then my real question is more on the Nutrition segment and primarily on Human Nutrition, catering is back, it seems like the momentum in Human Nutrition is kind of rolling. How should we think about the durable growth rate of that subsegment? And you've talked about colors, but kind of what are some of the other opportunities or drivers moving forward?
On 45Z, we increased our full year expectation from $150 million to $250 million. Every month we get better line of sight into realizing the benefits as we complete carbon intensity verification and build operational processes across our ethanol plants. This is complex: carbon intensity scores are plant-specific and depend on prevailing wages, the amount of carbon sequestered, production volumes, operational excellence improvements, debottlenecks and industry pricing. We think $250 million is the best estimate today and could improve with additional operational improvements. Regarding Nutrition and Human Nutrition, beyond colors there are many drivers. We saw strong flavors performance in Asia, growing about 20% year-over-year with local customer wins. Specialty Ingredients is improving, including progress at Decatur East; these plants are complex and progress is ongoing. Emulsifiers are doing better, and we're seeing traction in postbiotics. The supplements segment has been pressured by consumer affordability, with some consumers shifting to functionalized food and beverages, but opportunities remain. We also see growing interest in fiber. There are multiple elements driving growth. While it's hard to assign a precise durable growth rate, we have previously suggested mid-single-digit growth for flavors over the medium term. Operational leverage should drive operating profit to grow somewhat faster than revenue.
Your next question comes from the line of Steven Haynes with Morgan Stanley.
Bunch of things covered, but maybe I could ask a question on precision fermentation. You're talking about on the natural color side of it, $80 million to $100 million uplift from operating profit. Can you maybe put the precision fermentation piece of it in context with that and maybe what the time frame might be for seeing an uplift from that growth opportunity as well?
We are believers that to feed a growing population we'll need animal proteins, vegetable proteins and microbial-based protein. Precision fermentation is a platform we are building with many synergies to ADM. We are a fermentation company and have fermenters that can be utilized, plus we can supply dextrose from Carb Solutions. We needed to prove feasibility, quality, growth rates and margins. We have two projects demonstrating that with EVERY and Bond: EVERY for egg replacement and Bond for lamb for pet food. We are also planning to launch at least one natural color based on precision fermentation to reduce supply chain pressure for natural products. It is synergistic and we see a lot of potential. I am not comfortable providing a number to compare to the $80 million to $100 million natural colors target because these are early days and we need to respect customer forecasts and confidentiality. But we are very excited about the potential for ADM in the years to come.
Understood. And then a quick follow-up on insurance proceeds. Maybe I misheard, but was there a benefit from that in the quarter? And then is there anything else expected for the balance of the year on that front?
You heard it right. We received $20 million of insurance proceeds for Decatur East that show up in our AS&O segment. We are still working with insurance providers and will keep you posted as we know more.
Your last question comes from the line of Matthew Blair with TPH.
Congrats on the strong results. It seems like the commentary on starches has improved as the year has progressed. I remember you being somewhat cautious on starches at the beginning of the year. I think today, you mentioned that starches demand is stabilizing. Is that a fair characterization? And if so, are you seeing better trends in the cardboard or beer? Or what's helping out starches?
Yes, we see stabilization in the starch market. Industrial demand such as packaging and corrugated boxes is doing better, which offsets what is happening with liquid sweeteners. This highlights the importance of deriving many products from corn—there are many nonfood or feed uses for corn derivatives that we have been developing in biosolutions. Those businesses are profitable and growing, adding resilience to the portfolio. That resilience is reflected in our cash flow generation. We remain focused on investing organically and given our strong financial position, we may evaluate opportunistic share repurchases later this year.
There are no further questions at this time. I will now turn the call back to Ms. Kate Walsh for closing.
Thank you all for joining the call today. We appreciate your continued interest and support of ADM and wish you a great rest of your day. Goodbye.
This concludes today's call. Thank you for attending. You may now disconnect.