ROIC vs Adjusted ROIC in Ag Processing

The Gap Measures a Definition

Archer-Daniels-Midland (ADM), Bunge and Ingredion each publish two returns on capital. The gap between each pair measures what the second definition removes, and says nothing about how well the business ran. At ADM the adjusted figure takes charges such as impairments and restructuring, its specified items, out of the earnings and moves the capital a little. Ingredion’s does the same and also swaps net income for operating income after tax. At Bunge it takes grain and oilseed inventory out of the capital. Each company also builds its first figure its own way, so two companies’ returns compare only after both are rebuilt on one definition.

Return on invested capital (ROIC) is after-tax operating earnings divided by the capital that shareholders and lenders have put into the business. No accounting standard defines it. Each company chooses the earnings line, what counts as capital and how the capital is averaged, then shows the arithmetic in a reconciliation table. Darling Ingredients and The Andersons, the other two listed processors covered here, publish no ROIC at all.

FY2025, Two Returns per Company

Years to 31 December 2025. ADM and Bunge measure the trailing four quarters and average capital over the four quarter-ends; Ingredion averages two year-ends. Bunge’s ROIC is itself adjusted: it already leaves out certain gains and charges and mark-to-market timing differences, the swings in the value of hedges and inventory that reverse when the trades settle.

What Each Company Puts In

A return is earnings divided by capital, and each reconciliation shows which of the two the adjustment moved.

ADM adds charges back to the earnings. Its ROIC earnings are net earnings attributable to ADM, $1,078M, plus $339M of interest on borrowings after tax. Its capital is equity, excluding outside shareholders’ stakes in subsidiaries, plus interest-bearing debt, with no cash netted off. The adjusted figure adds back $582M of specified items after tax: $776M of impairment, exit, restructuring and settlement charges, including the settlement of an SEC investigation, less $194M of gains and tax items. ADM also adjusts its capital for specified items, but by only $146M, so the earnings explain almost all of the 1.8-point gap.

Bunge takes inventory out of the capital. Readily marketable inventories (RMI) are agricultural commodities such as soybeans, meal, oil, corn and wheat that Bunge carries at market value because they trade in active markets and can be sold without further processing. AROIC removes the RMI Bunge holds for merchandising, $8,251M on average over the four quarters and about a third of its capital. It also removes the interest on the debt that funds that inventory, $455M before tax ($350M after) at a 5.51% average cost of debt, which is why the adjusted earnings are lower than the first figure’s. Bunge’s reason for the measure is that this inventory expands and contracts with the seasons, commodity prices and trading opportunities. The same inventory earns a 70% credit against debt in Bunge’s adjusted leverage ratio, which the working capital guide explains.

Ingredion changes the earnings line. Its ROIC divides net income by average net debt and equity. Net income is struck after interest, so the numerator has already paid the lenders whose money sits in the denominator. Adjusted ROIC puts back tax, $37M of financing costs, $5M of other non-operating expense and $12M of restructuring and impairment charges net of other gains, then taxes the result at a 25.8% adjusted effective rate. The result is adjusted operating income after tax, divided by the same capital. Ingredion also nets its $1,030M of cash at the end of 2025 off its debt. ADM counts its debt gross, and Bunge adjusts its capital for cash only once, for the $4,550M it held for the Viterra acquisition at 30 June 2025.

A Fictional Merchant, Three Ways

When the inventory’s funding cost is charged too, as Bunge does, taking the inventory out lifts a return only in proportion to how far the return beats that funding cost. A fictional merchant crusher shows why. It has $16,000M of invested capital, $5,000M of it readily marketable inventory. It crushes 40 million tonnes of oilseeds a year at a net margin of $0.445 a bushel and earns $900M from origination, so its mid-cycle EBITDA is $1,489M. After $500M of depreciation and 25% tax, its operating earnings are $741M.

The middle column is how the Excel model shows the merchant’s return without its inventory: the capital shrinks and the earnings stay put. The right-hand column follows Bunge’s method. The merchant borrows at 5.5% before tax to carry its inventory, close to Bunge’s 5.51%, so $206M a year of after-tax interest leaves the earnings along with the inventory. The uplift is the return less that after-tax funding rate of 4.125%, scaled by inventory over the capital left: (4.63% − 4.125%) × 5,000 ÷ 11,000 = 0.23 of a point. A merchant earning well above its funding cost would gain far more.

Against the model’s 9% cost of capital the merchant falls short on all three. Removing the inventory does not close the shortfall once the cost of capital is adjusted to match. The lower-cost debt behind the inventory leaves too, so the cost of the capital that remains rises from 9% to 11.2%.

Same Company, Two Years

A gap can halve without any change in definition. Recast onto the method Bunge adopted on 1 July 2025, so both years share one basis, its FY2024 ROIC and AROIC were 10.1% and 12.6%, a gap of 2.5 points, against 1.2 points in FY2025. In both years the inventory came to about 48% of the capital left once it was removed. What moved was the return: it fell towards the inventory’s after-tax funding cost, which was 4.9% in FY2024 and 4.2% in FY2025, so removing the inventory added less. Its FY2025 figures include Viterra, the grain merchant it bought, from 2 July 2025.

Where the adjustment is to earnings, the gap follows the year’s charges. Ingredion’s was 1.9 points in 2024, 12.9% against 14.8%, a year with $109M of impairments, mostly for three plant closures, and a $90M gain on selling its South Korea business. In 2025 it was 0.5 of a point.

What Neither Figure Tells You

Neither figure ranks the three companies. The earnings lines, the capital bases and the averaging all differ, and Bunge’s first figure is already adjusted. A comparison means rebuilding each return from its reconciliation on one earnings line and one capital base. The specialty chemicals ROIC guide builds a return from filed figures where a company publishes none.

Nor does an adjusted figure show whether the excluded items were one-offs. ADM excluded $539M of specified items after tax in FY2024 as well as the $582M in FY2025. Charges that recur at that size behave more like a running cost than an exception, and only the unadjusted figure carries them.

Cash is another matter. A merchant’s inventory and receivables can absorb cash in a year of solid earnings, as the working capital guide shows. And neither says what a return is worth. Setting a return against a cost of capital, and carrying it into a multiple, is the job of the valuation guide.