Archer Daniels Midland Co.

Our stable outlook on ADM reflects our expectation for modestly improving leverage following recent challenging business conditions and the Neovia acquisition. We expect ADM to sustain debt to EBITDA below 2.5x over the next several quarters before improving closer to or below 2x by fiscal yearend 2020. Growth from ongoing investments in the company's nutrition segment and continued reduction of operating costs will also benefit EBITDA over the next 12- 24 months. This, coupled with our expectation that ADM will manage its capital expenditures (capex) and share repurchases more cautiously, should steadily lessen leverage. We could lower our rating if the weak operating performance that plagued ADM in 2019 returns for an extended period of time (more than 18 months),

...Archer Daniels Midland Co. (ADM) remains committed to managing shareholder returns to restore leverage to its long-term targets. The combination of closing on the Neovia Group acquisition in first-quarter 2019 and weak first-half operating performance in its carbohydrates solutions segment led to a temporary midyear spike in debt to EBITDA to 2.8x (well above our expectations of near or below 2x during normalized operating conditions), which ADM partially restored to 2.3x by fiscal yearend 2019. We expect the higher leverage to be temporary as 2020 EBITDA should rebound closer to 2018 levels, reflecting the company's improved operating execution in starches and sweeteners, a modest recovery in North American grain exports, and continued growth in its expanded nutrition segment. In addition, ADM remains committed to restoring leverage to its low 2x target in 2020 by cautiously managing shareholder returns. We expect share repurchases to remain muted and only offset stock option dilution,...

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