Strong growth in agribusiness benefits Bunge in Q2

by Eric Schroeder
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WHITE PLAINS, N.Y. — Net income at Bunge Ltd. in the second quarter ended June 30 totaled $316 million, equal to $2.02 per share on the common stock, down 82% from $1,778 million, or $11.15 per share, in the same period a year ago. Last year’s results included a gain on the sale of fertilizer nutrients assets of $2,440 million.

Companywide second-quarter net sales of $14,488 million were up 32% from $10,974 million in the previous year’s second quarter.

“We posted good second-quarter results,” said Alberto Weisser, chairman and chief executive officer. “Agribusiness and food and ingredients did well in the quarter, and we anticipate a solid performance in these segments in the second half of the year. We also anticipate increased contributions from Sugar & Bioenergy and Fertilizer, as these two businesses enter their high-volume seasons.

“The agribusiness and food markets are characterized by steady overall growth, as well as natural volatility due to weather and other factors. 2011 has not been an exception. Global trade in grains and oilseeds is robust, and with the Black Sea region recently reopened for exports, we expect to see additional shifts in trade flows as the world adjusts to a new supply and demand relationship among regions.

“With our global asset network and excellent risk management capabilities, we are well positioned to capture this growth and respond to these changes. The recent addition of our first deep water port terminal on the Black Sea, which scaled up operations in Ukraine during the second quarter, makes our network even stronger.”

For Agribusiness, second-quarter EBIT soared to $319 million from $28 million, while sales rose 30% to $9,652 million from $7,406 million.

“Large harvests in South America benefited our grain business and oilseed processing operations in Brazil and Argentina,” Bunge said. “Performance in Europe and the U.S. improved compared to a challenging prior-year period. Risk management strategies worked well. Volume, while slightly higher in the quarter, continued to be impacted by lower merchandising and processing volumes in Europe due to the smaller crop production in the Black Sea region last year. Results in the quarter included a $37 million gain related to the sale of our interest in a European oilseed processing facility joint venture.”

The Edible Oil Products segment had earnings before interest and taxes of $30 million, which compared with a loss of $13 million in the previous year’s second quarter. Sales in the unit increased 39% to $2,200 million from $1,578 million.

For Milling Products, second-quarter EBIT was $22 million, up from $1 million in the previous year’s second quarter. Higher milling results were due to stronger margins in wheat and corn milling, Bunge said. Second-quarter sales increased 27% to $491 million from $386 million.

For Sugar & Bioenergy, second-quarter EBIT was $18 million, up sharply from $4 million a year ago. Second-quarter sales rose 47% to $1,420 million from $963 million.

In the Fertilizer segment, Bunge sustained a loss of $16 million, which compared with EBIT of $2,369 million in the previous year’s second quarter. Second-quarter sales rose 13% to $725 million from $641 million.

Companywide for the six months ended June 30, Bunge Ltd. had income of $548 million, or $3.51 per share, down from $1,841 million, or $11.67 per share, in the same period of fiscal 2010. Net sales were $26,682 million, up 25% from $21,319 million.

Looking ahead to the remainder of fiscal 2011, Drew Burke, chief financial officer, said Bunge expects a good second half with results weighted to the fourth quarter.

“The agribusiness markets will be characterized by the Northern Hemisphere harvests and continued strong global trade in response to the relatively tight supply situation,” Mr. Burke said. “We expect our agribusiness results to continue to be driven by our grain business. Oilseed processing margins in the U.S. should improve from current low levels when harvest commences and plants run at higher utilization. However, margins are likely to remain under some pressure due to excess processing capacity and the long tail of the South American harvest that will continue to attract export demand. In Europe, the smaller rapeseed crop due to poor weather may pressure margins. However, the sunseed harvest is expected to be large, providing an offset, as should imports from the Americas. Oilseed processing in China, which has been weak, is showing improvement and should continue to progress throughout the year as the market works through the excess supply.”

He added food and ingredients should continue to perform well, and the tough competitive environment currently prevailing in some edible oil markets is expected to improve.

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