Operator: The next question comes from Salvator Tiano with Bank of America. Please go ahead.
Salvator Tiano: Yes. Thank you very much, Greg and John. So my first question is on the Argentinian drought and you didn’t mention the impact on crush margins. So I’m just wondering a little bit if you can provide some more details on this impact, both in Latin America crush margins, but also how it is impacting globally margins and meal and oil prices? And also, if you can comment a little bit on what you’re seeing on trade flows there? Because we’ve been reading that recently Argentina is starting to actually importing soybeans from Brazil to start making use of its spare crushing capacity. Thank you very much.
John Neppl: Sure. No, you’re exactly right. You’ve got to look at the entire global setup. And I think that’s one of the things that’s allowed us to perform in a variety of different situations the last few years is the great diversification and it’s the best risk management is the geographical footprint of Bunge. So as we look at Argentina, you’re right, the curves are going to be much lower it’s going to be very stressed from a crush margins and volumes are going to be lower because of the weather, right? That crop is small all year. To your comment, you’re hearing some beans moving into Argentina. We’ve heard those rumors as well that some people getting positioned when it’s close, that they’re securing supplies for safety.
So I think that’s how tight people think the S&Ds are going to be. What that means to the rest of the world is that we see soy margins in total going to be about the same in ’23 as is in ’22. We think the U.S. could be down slightly. The curve is currently down, right, versus last year, but that will continue to play out. China was a very tough last year with the COVID zero policy, and as it started to come out of COVID, we’ve seen a little better oil demand. We’ve seen the curves start to improve as well as the spot margins. So we’ll watch that. That will be a key one to watch how that demand accelerates here for the balance of the year as they come out of COVID, but it definitely looks better than last year. Brazil is up versus last year, very big bean crop coming in there.
And then in the EU, the curve looks better than last year. Part of that is less soybean meal imports, of course, coming out of South America and the other is we had a warm winter luckily, and we’ve got lower energy prices. And that will not only benefit soy, but that lower energy costs will benefit soft as well. And if you look at soft why we’re thinking about it on a year-over-year, those margins will be up versus ’22 in both North America and Europe on seed supply and then on better energy outlook in Europe. So a pretty good setup really for the Bunge portfolio here as we look at ’23.
Salvator Tiano: Perfect. Thank you. And just as a second question. We spoke — you spoke about the CapEx. I’m just wondering on the sustaining side. I think your guidance implies a 20% to 30% increase in — actually more 20% to 45% increase in sustaining CapEx. And I’m wondering why is that? Is it just inflation or anything else that has changed this year?
John Neppl: Yes. It’s certainly inflation is playing into just about everything on the CapEx side. But it’s also because of the timing of some of these bigger projects and our decision to reassess some of those, it’s given us an opportunity to maybe accelerate some of the maintenance work that we would have maybe pushed off for another year or two.
Salvator Tiano: Perfect. Thank you very much.
Operator: The next question comes from Steven Haynes with Morgan Stanley. Please go ahead.
Steven Haynes: Hi, and thanks for taking my question. Just wanted to ask kind of going back to some of the delays on the CapEx side of things. If you have any color on whether some of the potential RD customers are also seeing some delays in some of the projects that they’re planning to ramp up in the near future as well?
John Neppl: Yes. We haven’t heard, our conversations with industry participants is, we haven’t heard of anything around delaying projects specifically. Certainly, there have been, in the past year, some slowdowns in terms of the build, primarily driven more by the margins on the oil and gas side. But as far as we can see from our side, everybody is still committed with moving forward, as I’ve discussed before.
Steven Haynes: Okay. And then maybe just a quick second question, if I can, on maybe any updated thoughts on how you’re thinking about the sugar JV and plans to take strategic action there?
John Neppl: Yes. Look, we’re pleased with the way it’s been operating. But as we said before, we still don’t expect to hold that long term, and we continue to look at our options there. And we — hopefully, at some point down the road here, we have something to announce, but again, in the meantime, we’re focused on running it.
Steven Haynes: Thank you.
Operator: The next question comes from Robert Moskow with Credit Suisse. Please go ahead.
Robert Moskow: Hi. Good morning. Everything has been really asked, but maybe just one modeling question on the interest expense. It’s obviously a lot higher in ’23. Can I assume that, that will also, in ’23, be offset by your FX hedges on the gross margin side similar to Q4 or are they just not — or they’re not related to each other?
John Neppl : And you’re talking about overall interest expense increase, I didn’t catch the first part? But yes, some of it will be, not all of it. I mean some of that is just indicative of — when we went into 2022, three-month LIBOR was less than 0.5% and now it’s hovering around 4%-or-so. So, we’re starting the year on much higher rates, and so that will have an impact. There will be some higher rates in countries where we’re borrowing where we’re hedging against that. So, part of that will be offset in margin, but not all of it. Some of it will just be a symptom of starting out with higher rates this year.
Robert Moskow: Okay. Maybe a follow-up on refined oil. You said that international results in refined oil will probably be down year-over-year. Is there any specific reason for that? Like obviously, the U.S. is doing well. Is there any more color you can provide?
John Neppl: Yes, I think, look, it’s a reasonably modest decline from what was a really strong record year. And I think, I wouldn’t say we don’t believe there’s a way we could get back there. I think we’re just not — we’re not forecasting it at this point. We have a little bit better visibility into the U.S. S&Ds, and we feel stronger about that remaining strong. The rest of it, we’ll see. I mean we’ll certainly take the opportunity if it’s there, but it’s just hard to forecast that at this point.
Greg Heckman: Yes, we definitely got less visibility into the markets outside of North America. We’ve got a bigger book on there with food and fuel both in North America.
Robert Moskow: Thank you.
Operator: The next question comes from Ben Kallo with Baird. Please go ahead.
Ben Kallo: Great. Thanks for taking my question. And all the detail here. Just a question on the JV with Chevron. Could you just talk a little bit about any kind of requirements for capacity offtakes? I think you probably already said this before, but just the ACAP firm agreements on the offtake. And then has anything changed in your plans with the JV based on the IRA and whether renewable diesel incentives there or SAF incentives there? Thank you.
John Neppl : You Bet. Yes, Ben, when we started this JV, it was principally focused initially around the two assets, that went into the joint venture. And those are performing pretty well. And — but that was really a first step in looking at a number of opportunities for Chevron that we continue to look at. It takes time from a development standpoint to expand beyond that. But we’re very actively engaged with them. I’d say it’s been a great partnership. And I think we see a lot of opportunity down the road to continue to build on that.
