Bunge earnings, sales fall in quarter

by Eric Schroeder
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Soren Schroder, Bunge
Soren Schroder, c.e.o. of Bunge, said the company's Agribusiness EBIT is strong behind favorable soy processing margins.

WHITE PLAINS, N.Y. — Despite strong results within its Agribusiness unit, overall results at Bunge Ltd. were sluggish during the third quarter. Net income at Bunge in the quarter ended Sept. 30 totaled $229 million, equal to $1.56 per share on the common stock, down 19% from $284 million, or $1.90 per share, in the same period a year ago.

Net sales during the third quarter of fiscal 2015 were $10,787 million, down 21% from $13,676 million in the third quarter of fiscal 2014.

“Agribusiness delivered a good third quarter,” said Soren Schroder, chief executive officer. “The segment capitalized on favorable soy processing margins and increased farmer selling in Brazil, and generated solid risk management income. Food & Ingredients showed sequential improvement from the second quarter driven by our North American operations, but the tough economic environment in Brazil and rapid devaluation of the real continued to present challenges.

“Bunge's returns are strong, with a four quarter trailing ROIC in our core Agribusiness and Food operations of 10.3%, well above our 7% cost of capital. We continue to make progress in our performance improvement programs, which have generated approximately $75 million of benefits year-to-date, and pursue a balanced approach to capital allocation.”

During the third quarter, Bunge bought back $100 million of common shares, bringing the year-to-date total to $300 million. The company also made progress on improving its footprint in core businesses, and announced several bolt-on acquisitions, including Brazilian wheat processor, Moinho Pacifico, and U.S. specialty oil producer, Whole Harvest Foods.

“Pacifico is the largest port based wheat mill in Brazil, which along with our new mill under construction in Rio de Janeiro, will allow us to efficiently serve the growing needs of our customers as the Brazilian economy recovers,” Mr. Schroder said. “Whole Harvest Foods expands our North American specialty oil product offering in the fast growing natural ingredient category.”

For Agribusiness, third-quarter EBIT increased 98% to $369 million from $186 million, while sales decreased 22% to $7,718 million from $9,835 million.

Bunge said soybean processing in the United States, Brazil, Argentina and Europe benefitted from strong domestic and export demand for soy meal, while softseed processing results in Europe and Canada eased as farmers retained seed.

In grains, higher results primarily were driven by Bunge’s Brazilian grain origination operation, which experienced an increase in volume in the quarter with the devaluation of the Brazilian real.

The Edible Oil Products segment posted EBIT of $13 million, down 65% from $37 million a year ago. Sales fell 18% to $1,659 million from $2,016 million. Bunge said results in North America showed improvement due to higher margins in both refining and packaging operations.

For Milling Products, third-quarter EBIT was $32 million, down 14% from $37 million in the same period a year ago. Net sales for the quarter were lower, decreasing 22% to $400 million from $516 million. Bunge attributed the decrease in performance to lower results in its Brazilian wheat operations. Meanwhile, in North America, higher margins and volumes in the company’s Mexican wheat milling business more than offset the impact of currency devaluation and lower margins in the U.S. corn milling business.

Bunge had third-quarter EBIT of $3 million in its Sugar & Bioenergy segment, down sharply from $44 million a year ago. Net sales decreased 23% to $891 million from $1,154 million.

“Looking ahead, we expect over $1 billion in full-year Agribusiness EBIT and sequentially higher results in Food & Ingredients in the fourth quarter,” Mr. Schroder said. “Our food businesses in Brazil will continue to experience challenges for the remainder of the year, but, importantly, our complete integrated oilseed and grain value chains in the country should produce full year results that exceed last year. Sugar & Bioenergy should finish the year both EBIT and free cash flow positive. Demand for ethanol in Brazil has been strong; recent gasoline price increases have been supportive to ethanol pricing; and the significant devaluation of the Brazilian real has returned Brazil to its traditional role as the world’s low cost producer of sugar.”

In the nine months ended Sept. 30 overall net income at Bunge was $550 million, or $3.77 per share, up 4% from $529 million, or $3.58 per share, in the same period a year ago. Net sales were $32,375 million, down 26% from $43,930 million.
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