Strong fourth quarter benefits Bunge

by Eric Schroeder
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Bunge
In the fourth quarter, Bunge's net income increased 39% to $262 million.

WHITE PLAINS, N.Y. — A solid fourth quarter helped soften the blow of a challenging 2016 at Bunge Ltd.

Net income available to Bunge common shareholders in the year ended Dec. 31, 2016, was $709 million, equal to $5.07 per share on the common stock, down 4% from $738 million, or $4.84 per share, in the same period a year ago. Net sales for the full year fell to $42,939 million from $43,455 million in fiscal 2015.

In the fourth quarter, though, net income increased 39% to $262 million, or $1.82 per share, up from $188 million, or $1.30 per share, in the same period a year ago. Net sales also improved, rising 8.6% to $12,059 million from $11,105 million.

Soren Schroder, Bunge
Soren Schroder, c.e.o. of Bunge

“Bunge had a solid fourth quarter to end a challenging year,” said Soren Schroder, chief executive officer. “Higher Food & Ingredients and Sugar & Bioenergy results in 2016 reflect our team’s hard work to drive structural improvements to increase the underlying competitiveness of our businesses. Agribusiness faced a very competitive global market environment, but finished strong. Our 2016 adjusted ROIC in our core Agribusiness and Food operations was 8.6%, 1.6 points over our cost of capital.”

Adjusted segment earnings before interest and taxes (EBIT) in the company’s Agribusiness segment totaled $782 million in the full year, down 26% from $1,054 million in fiscal 2015. Net sales for the full year also were lower, slipping to $30,214 million from $31,267 million. During the fourth quarter, adjusted segment EBIT decreased 12% to $237 million, while sales rose nearly 6% to $8,344 million.

Within the Agribusiness segment, adjusted EBIT for Oilseeds totaled $407 million in fiscal 2016, down from $596 million in fiscal 2015, while adjusted EBIT for Grains fell to $375 million from $458 million.

Bunge said the softer fourth-quarter results primarily reflected lower results in the company’s soy processing operations, reflecting tight bean supplies in South America and softer global soymeal demand due to competition from lower cost feed products. Meanwhile, results in the company’s European and Canadian softseed processing operations increased, driven by large crops, solid vegetable oil demand and a new Ukrainian plant, which started up earlier this year, Bunge said.

Stronger performance in Grains during the fourth quarter largely was driven by higher results in U.S. operations, which benefitted from record corn and soybean crops that increased origination and export volumes and margins, as well as lower costs resulting from footprint optimization efforts, Bunge said.

Segment EBIT in Bunge’s Milling Products unit totaled $131 million in fiscal 2016, up 27% from $103 million in fiscal 2015. Sales for the full year also improved, rising to $1,647 million from $1,609 million. During the fourth quarter, EBIT totaled $24 million, up from $15 million a year ago, while sales increased 7% to $404 million from $379 million.

In the company’s Edible Oil Products unit, segment EBIT totaled $112 million for the full year, up sharply from $59 million in fiscal 2015. Net sales increased 2% to $6,859 million from $6,698 million. During the fourth quarter, segment EBIT jumped to $46 million from $16 million, while sales increased to $1,901 million from $1,724 million in the same period a year ago.

Reflecting on the company’s results, Mr. Schroder said Bunge’s efforts to drive long-term, sustainable value are on track.

“In 2016 we delivered $135 million of cost and efficiency benefits, exceeding our target by $10 million,” he said. “Adjusted funds from operations were approximately $1.5 billion, $61 million higher than last year. We returned $457 million to shareholders through dividends and share repurchases, and capex of $784 million was below our $850 million guidance and is tracking approximately $275 million below our 2014-2017 target, reflecting disciplined capital allocation.

“We expanded our value-added Food & Ingredients’ capabilities with bolt-on M.&A. in Europe and strengthened our winning Agribusiness footprint through joint ventures in Brazil, Vietnam and Canada. We expect our previously announced Northern European soy crush and Mexican corn milling acquisitions to close, respectively, in the first and second quarters of 2017.”

As a result of its efforts, he said Bunge enters fiscal 2017 with confidence, and the company expects strong growth in earnings.

“After disappointing crops in South America last year, the region is on track to produce record harvests this season, which aligns well with our footprint,” Mr. Schroder said. “In addition, global soybean processing margins, which were under pressure during most of 2016, are improving, and soft seed margins are better in both North America and Europe.”
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