Bunge profit slides 33%, merger vote pushed back

by Eric Schroeder
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WHITE PLAINS, N.Y. — Calling the third quarter a "volatile time in the global agribusiness and food markets," Bunge Ltd. on Thursday said it suffered a 33% decline in earnings in the third quarter ended Sept. 30. Net income in the third quarter was $234 million, equal to $1.70 per share on the common stock, down from $351 million, or $2.70 per share, in the same period a year ago.

Net sales, meanwhile, jumped 52% to $14,797 million from $9,729 million.

Despite the difficulties during the third quarter, Bunge said it expects to close out fiscal 2008 with a comfortable liquidity position and maintains its expectations for record full-year results.

"Current conditions in the global agribusiness market are clearly different than the extraordinary ones experienced in the first half of the year," said Alberto Weisser, chairman and chief executive officer. "Comparatively, recent results have been pressured by softer demand for feed inputs and slower farmer selling in certain regions, as well as by reduced sales of fertilizer in Brazil.

"We see the current market environment as relatively short-lived. The basic fundamentals of our industry remain intact and should generate compelling growth for companies with global asset networks and broad product offerings. World population and living standards in developing economies continue to rise, and non-food uses for agricultural commodities are expected to increase. We expect that these factors will contribute to a rebound in overall demand. At the same time, ending stocks of agricultural commodities remain below historic norms, which will encourage the markets to maintain commodity prices at levels that provide incentives to farmers to plant larger areas and buy the nutrients necessary to generate higher crop yields."

Agribusiness operating profit was $534 million in the third quarter, down narrowly from the same period a year ago when the company posted a profit of $538 million. Net sales in Agribusiness were $10,152 million, up 51%.

Bunge said results in Agribusiness were adversely affected by weaker demand for soybean products. In addition, slow farmer selling in the United States and Brazil due to the volatility of commodity and currency prices, as well as harvest delays in the United States, contributed to lower results in grain origination, Bunge said.

Operating income of the Fertilizer division was $543 million, up 122% from $245 million in the third quarter last year. Net sales were $1,899 million, up 53%.

Bunge said higher margins were more than offset by $215 million of foreign exchange losses resulting from the devaluation of the Brazilian real on U.S. dollar-denominated financing of working capital.

Milling products operating profit was $48 million on sales of $514 million in the third quarter, versus $45 million and $366 million, respectively, the year before.

Bunge said higher margins in wheat milling were offset by lower volumes in corn milling.

Operating profit for Edible oil products climbed 6% to $84 million on a 61% gain in sales to $2,232 million.

In connection with its sluggish earnings, Bunge said the company, along with Corn Products International, Inc., has pushed back their special shareholders meetings to vote on their proposed merger.

"Since the announcement of the merger, Corn Products and Bunge have been engaged in preparations for the integration of our two companies," Mr. Weisser said. "Bunge and Corn Products currently anticipate that the special shareholders’ meetings of both companies will be held in mid- to late-December, rather than in November as previously anticipated. We are disappointed in the performance of the stock prices of the two companies, but Bunge’s belief in the strategic rationale for the merger is unchanged."

The companies announced their intent to merge on June 23. On June 20, Bunge’s share price closed at $122.17. It rose to a high of $127.64 the day the merger was announced before closing at $110.70 that same day. The company’s stock opened at $35.25 on Oct. 23, the day third-quarter financials were released. Corn Products’ share price, meanwhile, closed June 20 at $42.90. It rose to $54.96 on June 23 before closing at $50.16. The company’s stock opened at $20 on Oct. 23.

Looking ahead, Bunge reiterated its full-year net income guidance for 2008 of $11.60 to $11.90 per share.

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