Vikram Luthar
Chief Financial Officer at Archer-Daniels-Midland
Thank you, Juan.
Please turn to Slide six. The Ag Services & Oilseeds team continues to deliver exceptional results in a dynamic environment, leading to an extremely strong performance in the first half of 2023, surpassing the outstanding first half of the prior year. Q2 results were strong, but slightly below the prior year period. Ag Services results were in line with the strong second quarter of 2022.
South American origination results were higher year-over-year as the team delivered record volumes and higher margins on strong export demand, leveraging our strategic investments to expand port capacity to capitalize on the record Brazilian soybean crop.
Results for North America origination were slightly lower year-over-year, driven by lower export volumes due to large South America suppliers. Our execution in destination marketing as well as effective risk management continued to deliver strong global trade results, though lower than the record quarter last year.
In our crushing subsegment, results were much lower than the record result from the second quarter last year. Global soy crush margins remained strong but were lower year-over-year in all regions due to softer demand for both meal and oil and a tight U.S. soybean carryout. This was partially offset by strong softseed margins and higher volumes supported by a strong Canadian canola crop and use of our flex capacity in EMEA. Additionally, there were approximately $195 million of negative mark-to-market timing effects in the current quarter that are expected to reverse as the contracts execute in future periods.
Refined products and other results were significantly higher than the prior year period, achieving a record second quarter. North America results were higher, driven by strong food oil demand and improved biodiesel volumes.
In EMEA, strong export demand for biodiesel and domestic food oil demand supported stronger margins. Additionally, there were approximately $90 million of positive mark-to-market timing effects in the current quarter that are expected to reverse as the contracts execute in future periods. Equity earnings from Wilmar were lower versus the second quarter of 2022.
Looking ahead for the third quarter, we anticipate solid results in Ag Services & Oilseeds. We expect strong demand for grain exports to be heavily weighted towards South America and our Brazilian origination footprint. We anticipate strong volumes and margins for soy and canola crush based on the tight Argentine crop and improving demand outlook for meal and oil. We expect RPO to perform well but have significant reversals of timing impacts from the second quarter, leading to lower net execution margins.
Slide seven, please. Carbohydrate Solutions delivered strong results in Q2, but lower than the record second quarter of last year. The Starches and Sweeteners subsegment, including ethanol production from our wet mills, capitalized on a solid demand environment during the quarter. North America Starches and Sweeteners delivered volumes and margins similar to the prior years, and ethanol margins were solid as industry stocks moderated but lower relative to the prior year.
Q2 results were negatively impacted due to unplanned downtime at one of our corn germ plants. In EMEA, the team effectively managed margins to deliver improved results. The global wheat milling business posted higher margins, supported by steady customer demand.
BioSolutions continued on its excellent growth trajectory with 22% revenue growth year-over-year. Vantage Corn Processors results were lower due to lower year-over-year ethanol margins. The prior year period also included a onetime $50 million benefit from the USDA biofuel producer recovery program.
We continue to make progress on our initiatives to decarbonize the Carbohydrate Solutions footprint including our definitive agreement with Tallgrass to sequester carbon from our Columbus, Nebraska facility and continued progress on decarbonizing our Decatur complex through additional carbon capture and sequestration wells, as well as ultra-low-carbon intensity, electricity and steam generation. These are key steps in enabling us to produce low CI feedstocks for use in many applications for our major CPG customers and underpinning our growth opportunities, such as FAF, BioSolutions and our lactic acid polylactic acid joint venture with LG Chem. Looking ahead for the third quarter, we expect continued steady demand in margins for our starches, sweeteners and wheat flour products. Ethanol margins are also expected to remain solid.
On Slide eight, Nutrition results were significantly lower than the prior year's record quarter. Human Nutrition results were slightly up year-over-year on a constant currency basis. Our Flavors business posted record results in Q2, growing revenues and EBITDA margins due to improved mix and pricing in EMEA, as well as improving demand in North America. Flavors will be a significant growth engine for Human Nutrition for the remainder of the year and will act as a pace setter for the rest of our portfolio. Customer innovation in beverage is beginning to accelerate, and our value proposition is driving our sales pipeline to its largest ever.
Growth in Flavors was offset by lower year-over-year results in Specialty Ingredients. While there has been softening of demand for plant-based proteins, particularly for the alternative meat space, other categories like alternative dairy snacks and baked goods as well as specialized nutrition are providing growth opportunities. Although still a small OP contributor, Health and Wellness is seeing demand recovery in probiotics and is benefiting from geographic expansion opportunities offered through ADM's global footprint and customer relationships.
Our largest challenge in 2023 has been in the Animal Nutrition business where significantly lower amino acid margins and softer global feed demand has affected volumes driving much lower results. Over the past several months, we have made important adjustments to align the business to this environment, including simplifying our brands and go-to-market strategy, consolidating facilities and optimizing our footprint, rightsizing the workforce in association with these changes and aligning the reporting structure to enhance synergies. We are also refocusing our efforts to increase offerings in the higher-margin specialty feed and ingredients areas. We believe these actions will lead to improved commercial and operational performance, supporting profitable growth when market fundamentals improve.
When looking at Nutrition as a whole, we now expect 2023 results to be similar to the prior years, as we expect growth in Human Nutrition to be offset by lower results in Animal Nutrition. However, given the increase in customer innovation we've seen in our Flavors business and our recent wins in pipeline growth across Human Nutrition, as well as the actions we are taking in Animal Nutrition, we remain confident about the future outlook and growth prospects for Nutrition.
Slide nine, please. Other business results were significantly higher than the prior year quarter due to improved ADM investor services earnings on higher net interest income. Captive insurance improved on premiums from new programs, partially offset by increased claim settlements. In corporate results, net interest expense for the quarter increased year-over-year, primarily on higher short-term interest rates. Unallocated corporate costs of $262 million was similar versus the prior year as lower health insurance costs were offset by increased global technology spend.
Other corporate was unfavorable versus the prior year, primarily due to foreign currency hedges. We still project corporate costs to be approximately $1.5 billion for the year. The effective tax rate for the second quarter was -- of 2023 was approximately 18%, in line with the prior year. For the full year, we still expect our effective tax rate to be between 16% and 19%.
Next slide, please. Through the second quarter, we had strong operating cash flows before working capital of $2.5 billion. We allocated $600 million to capital expenditures as well as returned $1.5 billion to shareholders through share repurchases and dividends. We continue to have ample liquidity with nearly $13 billion of cash and available credit, and our leverage ratios are low with an adjusted net debt-to-EBITDA ratio at 1.0.
Our strong balance sheet and credit ratings provide a stable financial footing for ADM to pursue our strategic growth initiatives while also returning capital to shareholders. We still anticipate $1.3 billion of capital expenditures in 2023. As Juan mentioned, we have already completed the $1 billion of share repurchases that we announced in January this year. We intend to continue our share repurchase program, subject to other strategic uses of capital. Based on our very strong first half, we are raising our full year earnings outlook to around $7 per share with potential for even more upside.
Juan?
