Strong global oilseed processing margins boost Bunge ag business

by Eric Schroeder
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WHITE PLAINS, N.Y. — Across the board gains in all its business units drove improved results at Bunge Ltd. in the second quarter. Net income at Bunge in the quarter ended June 30 totaled $272 million, equal to $1.81 per share on the common stock, up 147% from $110 million, or 75c per share, in the same period a year ago.

Net sales during the second quarter of fiscal 2014 were $16,793 million, up 8% from $15,491 million in the second quarter of fiscal 2013.

“We had a strong performance in the second quarter with all segments reporting higher year-over-year results,” said Soren Schroder, chief executive officer. “Strong global oilseed processing margins, driven by big crops and growing demand, led to significantly better results in agribusiness. Improved operational and commercial performance and the addition of our new wheat mills in Mexico contributed to a record quarter in food and ingredients. The results demonstrate the potential of this segment and the value of managing integrated oilseed and grain chains. Sugar and bioenergy performed as expected, due in part to our continued progress in containing costs and increasing productivity.”

Mr. Schroder said Bunge expects the momentum of the second quarter to carry through for the remainder of the year. As a result, the company expects to meet or exceed its targeted full-year combined returns in agribusiness and food and ingredients of 1.5 points above cost of capital, he said.

“In agribusiness, big Northern Hemisphere crops combined with strong global livestock economics should continue to drive demand and encourage trade,” Mr. Schroder said. “In food and ingredients, we expect continued strong results as our performance improvement initiatives reach greater scale. And in sugar and bioenergy, we are now entering the peak milling season and continue to forecast full year breakeven EBIT.”

For Agribusiness, second-quarter EBIT rose 83% to $311 million from $170 million, while sales increased 11% to $12,855 million from $11,566 million.

Bunge attributed the stronger agribusiness results to a strong global oilseed processing environment in most regions of the world. In the Southern Hemisphere, record soybean crops, strong export demand and good farmer selling led to solid processing margins, Bunge said, while strong softseed margins in Canada and soybean margins in Europe helped drive oilseed processing results in the Northern Hemisphere. U.S. soybean processing results were comparable to last year, Bunge noted, and results in China were down.

“Grain origination results were within expectations, but lower than last year primarily due to Brazilian farmers postponing commercialization of the safrinha corn crop as a result of the drop in market prices,” Bunge said. “Risk management results were comparable to last year and in line with expectations.”

The Edible Oil Products segment had second-quarter EBIT of $46 million, up 35% from $34 million, and sales of $2,099 million, down 12% from $2,376 million. Bunge said strong results in the quarter were driven by improved performances in Brazil and in Europe with both regions expanding margins and tightly managing costs and working capital. While margins expanded in North America, one-time costs in logistics due to backlogs and some short-term cost increases in maintenance led to lower results in the region, the company said.

For Milling Products, second-quarter EBIT was $44 million, up 52% from $29 million in the same period a year ago. Net sales for the quarter were higher, increasing 9% to $553 million from $509 million. Bunge said record results in the quarter were driven by strong performances in the company’s wheat milling operations in Brazil and Mexico. In Brazil, results benefitted from an increased focus on margins and driving greater efficiencies in plants and supply chain network. Milling results in Mexico reflected a new wheat milling acquisition and synergies from its integration with Bunge’s existing operation. Results in U.S. corn milling were lower than last year primarily due to lower margins, the company said, while results in rice milling were comparable to last year.

Bunge had second-quarter EBIT of $6 million in its Sugar & Bioenergy segment, which compared with a loss before interest and tax of $3 million during the second quarter of fiscal 2013. Net sales increased 26% to $1,186 million from $939 million.

In the six months ended June 30 overall net income at Bunge was $245 million, or $1.65 per share, down 12% from $280 million, or $1.90 per share, in the same period a year ago. Net sales were $30,254 million, down narrowly from $30,276 million.
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