Juan Luciano: Yeah. Thank you, Tom. Listen, North America refining margins are lower in this quarter. I think if you look at last year, the high priced oils were impacted by supply chain disruptions from the Russia-Ukraine war. So I would say this is a more normalized environment. We have also some positive timing impacts due to the pronounced RIN and HVO market movements, pulling forward some of those gains. I would say when we look at the forward quarter, we see remain refining margins to remain strong, but maybe a decline from the elevated highs we saw in 2022 on the early part of this year. Biodiesel margins are also coming out of the highs, as maybe the RIN value component of margin has declined as the industry is building a bank of rings.
So we still have not seen a significant pull from the RD demand that it’s been building but we maintain our expectation of how much it’s going to be built there. So we think that is coming. The other thing you need to think about oil is that demand for food oil is very strong and has rebounded. And there are expectations now that with El Nino, we might have and with the natural maturity of the plantations in the — in Southeast Asia that we might have a little bit less supply of palm oil and all that. So although, we are coming off the highs, we continue to be constructive about margin stabilizing at a strong level in the RPO area.
Tom Palmer: Right. Thank you.
Operator: Thank you. Our next question comes from Adam Samuelson of Goldman Sachs. Your line is open. Please go ahead.
Adam Samuelson: Yes. Thank you. Good morning, everyone. I was hoping to — maybe dig in on the Carb Solutions outlook and maybe if you could just parse the non-ethanol pieces a little bit more. And I think in the prepared remarks, you alluded to kind of a favorable start to contracting in North America sweeteners and starches and maybe elaborate on what you are actually seeing there, maybe better frame kind of the incremental capital investments to come in that business. Obviously, there’s a lot of transformation work happening in that business. That’s not all much kind of come to fruition in the near term, but better contextualize kind of what the actual level of investment that you’ve already committed to there, there is? And if I could just ask a clarifying question on the last point on RPO. How much was the timing benefit in the third quarter?
Vikram Luthar: About $95 million.
Adam Samuelson: Thank you.
Vikram Luthar: So on the Carb Solutions question, Adam, I think it’s important to just frame it. The liquid sweetener volumes have been steady. And this has happened throughout this year. Almost every quarter, we’ve said that. So the demand has been pretty resilient, and the margin structure has been strong. The other thing that’s actually helpful is strong exports to Mexico as well as higher sugar prices. The specialty volumes in North America have been a bit soft, but with the improved mix and pricing, our margins have actually expanded. The BioSolutions market, we’re actually extending into new applications, and that revenue growth year-to-date is 23%. Wheat flour demand has been resilient. The optimization I referred to in my comments, has actually helped improve the cost structure and expand margins.
As on all you know what’s going on in ethanol. It as goes, the margin structure there is very supportive given domestic demand, blend economics, strong U.S. exports, as well as the fact that we’ve got a significant — actually higher domestic driving miles. Now when you think about next year, I mean we’re well set up for the Q4 ’23, and I already talked about that. It’s a little early to say, but based on the strong finish that we anticipated in 2023, and early ’24 contracting in North America, sweeter and starches, we are optimistic for solid volumes and our ability to actually maintain and potentially even expand margins in our core starches and sweeteners portfolio. We’ll tell you more in our February call, but going in, the outlook is constructive and similarly for ethanol, that tends to be volatile.
But right now, the general trends to be supportive of a higher-for-longer ethanol margin environment.
Adam Samuelson: Thank you.
Operator: Thank you. Our next question comes from Ben Bienvenu of Stephens. Ben, your line is now open. Please go ahead.
Ben Bienvenu: Thanks so much. Good morning, everybody. I have kind of a two-pronged question. One is — one, you’ve kind of hit bits and pieces and Vikram as well with the nutrition commentary of the overall business outlook into 2024. The kind of implicit takeaway is, we should still expect kind of very strong and above what, I guess, we would think of as mid-cycle earnings power in 2024, albeit it’s early to make that call in 2024. So correct me if I’m wrong there. But two, when you think about allocating capital at this point in the cycle, how does that change, if at all, with what you’ve been doing over the last several years, and you’ve been picking up your buyback activity, how should we be thinking about that as we move through this period of time as well? Thank you.
Juan Luciano: Yeah. Thank you, Ben. Good question. Listen, we see 2024 with a lot of optimism. We’re working through the plan right now, as you can imagine at this time of the year. We continue to see the strength of Ag Services and Oilseeds and Carb Solutions continuing. Ag Services and Oilseeds, we have seen some fundamental structural changes. And I think that that’s a multiyear trend. So we’re going to see higher crush margins, at least in the United States for quite a while. And our Ag Services business continued to grow around the world in the — with the strength of destination marketing and that exacerbated concern about food security that bring — brought by all the geopolitics and the weather events and the pandemic and all that continues and continue to enhance margins for us to the service we provide around the world.
So we see that business being very solid and very strong contributor. Carb Solutions, I think that Vikram touched a little bit on the dynamics of the contracting for next year. But beyond that, I think that you have to remember that we are having different uses. We are finding new demand for those products that will do two things, will grow as revenue into new categories like, we’re seeing in BioSolutions that is growing double-digits. But it’s also going to tighten up the supply for the existing products. So that will be constructive to margins over time, and we’ve seen that already, so those are the two. And I think Nutrition and Vikram went into a lot of detail into that and all the different pieces. And we’re very confident we’re going to go back to growth next year.
This year, maybe you call it the past that refreshes, we took a pause this year. But the fundamental innovation engine that we have, that’s our differentiation. That continues to resonate strongly, whether it’s in Health & Wellness in what we are seeing in Flavors or the specialty pieces of Animal Nutrition or the demand generation impact, where the markets are normal and we apply that properly, we are winning more than our fair share, and we’re growing faster than the competitors. So we see that with a lot of optimism for next year. When we think about how that correlates to our thinking of how to deploy capital, the priority to deploying capital is in our investment plan, and we have been doing that both in OpEx and in CapEx. Unfortunately, CapEx continues to be higher, inflationary pressure there, whether it’s non-power or supply of raw materials, make us take a second look at a lot of the capital.
And I think that Vikram has reflected on some of the adjustments that we made, maybe to Specialty Ingredients and other. So we’re taking a look at that, and we’re reviewing as always in our capital discipline on every project. But we have many opportunities in front of us, and we’re going to continue to fund them. We have increased our return to shareholders. Certainly, our cash flow generation is very strong. And to be honest, when we see some of the pivot we are doing even in Carb solution with some of these opportunities, they are not hugely loading our CapEx, if you will. Some of these things where there is the pipeline for decarbonization is with partners, whether it’s the LG Chem or other joint ventures are also partnerships. So it’s not that taxing in our CapEx budget, if you will.
So we think that we’re going to continue to increase the return to shareholders. And we’ve been opportunistic looking at, of course, the M&A environment. And to be candid, we participate in many. We have many items on the fire, but the reality is that valuations have not come down, and we plan to continue to keep our discipline in that regard. So we continue to be opportunistic in that and we look at that. I think Vikram will make a comment on this one.
