Valuing Ag Processors (EV/EBITDA, ROIC)

Normalise First, Multiple Second

A multiple on last-twelve-months (LTM) EBITDA values a crusher at one point in its cycle. Its profit follows the board crush, the futures value of the meal and oil in a bushel of soybeans less the bean price, which can sit well above or below its long-run level; the crush margins guide builds a long-run board crush of $3.10/bu. The largest listed processors crush 36-52M MT of oilseeds a year, so any gap between this year’s crush and the long-run level goes straight into EBIT.

So rebuild EBITDA at long-run crush and grain prices, value the cash flows in a DCF with working capital as its own line, cross-check with a through-cycle EV/EBITDA multiple, and test returns against the cost of capital. The figures below come from the Excel model that comes with the primer, which values a fictional merchant crusher and ingredients processor at illustrative long-run prices set in June 2026.

The crusher keeps 45% of a $3.10/bu board and pays $0.95/bu to run its plants, leaving $0.445/bu. With a flat $900M from buying and trading grain, its mid-cycle EBITDA is $1.49B, and that is the figure the multiple applies to. The crush margins guide walks through the arithmetic.

Through-Cycle EV/EBITDA Band

The primer and model use a band of 6-10× mid-cycle EBITDA for ag processors and traders, with 7.5× for the illustrative crusher. The band is a stated assumption, not a market statistic.

For a steady business the DCF and the multiple agree. The fictional ingredients processor has $3.0B of revenue, a 20% EBITDA margin, growth of 2.5% a year, ROIC of 14.4%, net debt of $600M (1.0× EBITDA) and a 9.5× exit multiple. Its ten-year DCF gives $25.4 a share and the multiple $25.5.

DCF Headline, Multiple Cross-Check

A crusher is different: the two methods land far apart. The model’s crusher starts at a trough board crush of $2.40/bu and returns to $3.10 over four years. Its DCF gives $4.87 a share; the multiple on mid-cycle EBITDA gives $10.33. The gap has two parts:

Most of the gap is the second part. At 7.5× mid-cycle EBITDA the multiple implies cash flows growing 2.6% a year for ever, but this crusher’s mid-cycle ROIC sits below its 9% cost of capital, and growth at returns below the cost of capital destroys value. The multiple pays for growth that loses money.

ROIC-vs-WACC Spread

The spread between return on invested capital (ROIC) and the weighted average cost of capital (WACC) says whether reinvestment adds value. The model sets WACC at 9.0%, an illustrative assumption.

Readily marketable inventory (RMI) is grain and oilseed stock that trades on exchanges and can be sold at a quoted price, so lenders treat much of it as near-cash. Taking it out of capital lifts the crusher’s return by two points, which is why merchants often publish two ROIC figures.

Listed companies define ROIC their own way. ADM, Bunge and Ingredion each publish a headline and an adjusted figure, and the adjustments differ, so compare returns only on one definition. The ROIC vs adjusted ROIC guide sets out what each adjustment removes.

Darling Ingredients and The Andersons publish no FY2025 ROIC, so work from what they file: Combined Adjusted EBITDA of $1,026M and leverage of 2.90× on its bank-covenant measure at Darling; adjusted EBITDA of $337.3M and long-term debt to adjusted EBITDA of 1.8× at The Andersons.

Working Capital Belongs in the Cash Flows

Shaving the multiple to allow for working capital is a guess; a line in the cash flows measures it. The model funds the crusher’s working capital at 10% of revenue each year, so a rising crush absorbs cash inside the DCF. The working capital guide shows how to read a merchant’s inventories, RMI and two leverage ratios from its filings.

Segment Mix Decides What to Normalise

Each listed processor earns most in a different place, mapped in the value chain guide.

One multiple across the group blends unlike earnings; normalise each segment on its own driver first.

The Sequence

1. Set long-run crush and grain prices. The crush guide’s illustrative set is soybeans $11.20/bu, meal $300/st (per short ton of 2,000 lb) and oil 70¢/lb, giving $3.10/bu.
2. Build mid-cycle EBITDA from throughput times the net margin at those prices.
3. Run a DCF that moves from the starting point back to mid-cycle and funds working capital each year.
4. Cross-check with a through-cycle multiple (6-10×; 7.5× for the illustrative crusher) and ask what growth it implies.
5. Test ROIC against the cost of capital. Below it, a multiple above invested capital pays for cash flow the business does not earn.