Bunge earnings climb 49% in '07

by Eric Schroeder
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WHITE PLAINS, N.Y. — Bunge Ltd. posted net income of $778 million in the fiscal year ended Dec. 31, equal to $5.95 per share on the common stock, up 49% from $521 million, or $4.28 per share, in fiscal 2006. Net sales soared 71% to $44,804 million from $26,274 million. The strong full-year results came despite a difficult fourth quarter in which profit was weighed down by restructuring and other charges.

During the year, the company incurred impairment and restructuring charges of $78 million, including $30 million in the agribusiness segment, $35 million in the edible oil products segment and $13 million in the milling products segment. Offsetting the decline was a $22 million gain on the sale of assets.

A year earlier, Bunge sustained restructuring and impairment charges of $24 million.

"2007 was an outstanding year," said Alberto Weisser, chairman and chief executive officer. "Bunge leveraged its integrated, global operations, leading positions in key markets and good teamwork to produce record results.

"In 2007, the agribusiness and fertilizer markets were characterized by improved structural conditions. Demand for Bunge’s end products grew and farm economics in Brazil strengthened. Our risk management strategies performed well in a dynamic market, and we were well-positioned to serve customers during a period marked by significant supply dislocations."

While reflecting on 2007, Mr. Weisser said some of the same conditions that made the past year successful should continue in 2008.

"The U.S.D.A. forecasts higher global protein meal and vegetable oil demand, as well as strong demand for and trade in other agricultural commodities," he said. "Crop prices should remain high, promoting input purchases by farmers. Not all market forces are working in Bunge’s favor, however. For example, the strong real will increase local costs in our Brazilian businesses, and higher input costs could pressure margins in fertilizer and edible oils during the year."

Mr. Weisser said Bunge will continue to invest for growth and efficiency, and has been pleased with how its asset network is growing and becoming more balanced.

Despite overall success during the full year, results for the fourth quarter were challenging. In the fourth quarter ended Dec. 31, net income fell 7% to $245 million, or $1.82 per share, down from $264 million, or $2.12 per share. Meanwhile, sales rose 82% to $14,018 million.

Operating profit in the company’s Milling Products segment fell 55% to $31 million. For the fourth quarter, the segment posted a loss of $14 million, which compared with operating profit of $21 million in the fourth quarter a year ago. Higher raw material and operating costs in wheat milling more than offset improved results in corn milling. Another factor in the fourth-quarter decline was a $13 million impairment charge related to the closing of a wheat milling facility in Brazil. Net sales in the segment climbed 41% to $1,361 million for the year and advanced 66% to $417 million for the quarter.

Operating profit in the Agribusiness segment rose 447% in the year to $624 million, up from $114 million. Fourth-quarter profit, meanwhile, jumped to $264 million from $75 million in the same period a year ago. Bunge said stronger agribusiness results were driven by improved performance in South America and North America, which benefited from higher oilseed processing and grain origination margins and volumes.

Sales in the Agribusiness segment rose 79% to $33,877 million during the year, and for the fourth quarter gained 92% to $10,481 million.

The Edible Oil Products division sustained a loss of $10 million in the year, down sharply from an operating profit of $58 million in fiscal 2006. For the quarter, Bunge suffered a loss of $13 million, which compared with operating income of $8 million in the same period a year ago. Fourth-quarter results included $29 million of impairment and restructuring charges, primarily related to the closing of edible oil facilities in Eastern Europe.

Sales in the Edible Oil Products division rose 48% in the year to $5,622 million, and for the fourth quarter were up 76% to $1,840 million.

Jacqualyn Fouse, chief financial officer, said Bunge expects 2008 net income guidance of $830 million to $870 million, representing $6.01 to $6.30 per share.

Following the announcement of its results, Bunge shares fell 12% to $108.18 in early trading Feb. 7.

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