WHITE PLAINS, N.Y. — For Bunge Ltd., the past few years have been a continual stream of investments and joint ventures meant to expand the company’s global footprint. More recently, the pace has picked up.
During a July 28 conference call with analysts to discuss second-quarter results, Soren Schroder, chief executive officer of Bunge, said the company will start up its new flour mill in Rio de Janeiro, Spain, in September. Bunge first announced plans to build the mill in April 2014.
The construction of the mill is strategic. The states of Minas Gerais, Rio de Janeiro and Espirito Santo form one of the regions where the company is focusing its investments to modernize its operations, expand its production capacity and meet the needs of the growing market. Once operational, Bunge will have three of the largest mills in Latin America, strategically located in Fluminense, Suape and Ponta Grossa.
The new mill is expected to grind more than 600,000 tonnes of wheat per year.
Mr. Schroder said the new mill fits in nicely with the recently acquired Moinho Pacifico. Located in Santos, Brazil, Moinho Pacifico is one of the largest wheat flour millers in the country.
“(These moves) put us in a strong position to compete as the Brazilian market stabilizes,” Mr. Schroder said. “In Mexico and the U.S. our milling footprint is strong and diversified, and with the new product offerings we are well placed to grow earnings in our global milling segment.”
In addition to the flour mills in Brazil, Bunge earlier in the week said it is building on its joint venture with Amaggi in the country. The j.v., Unitapajós, began in 2014, to operate on the route known as the Northern Corridor via the Tapajós waterway in Brazil.
“Together we will share the export terminal at Barcarena and transshipment station in Miritituba to ensure the facilities operate at the highest levels of utilization and efficiency,” Mr. Schroder said.
Beyond Brazil, Bunge earlier this year inaugurated a crushing facility in Mykolaiv, Ukraine, and also sold 45% of its equity in its Vietnam crush operations to Wilmar, creating a three-party joint venture with Bunge and Wilmar as equal 45% shareholders and Quang Dung — a leading soybean meal distributor in Vietnam and majority owner of Green Feed, a growing Vietnamese feed milling business — retaining its existing 10% stake in the operations.
Bunge reported on July 28 that earnings for the second quarter of 2016 were $121 million, up 41% from $86 million in the same period of last year. Net sales, which declined for the eighth straight quarter, were down 2.2% to $10,541 million from $10,782 million in the same quarter a year earlier.
Higher Agribusiness results in the quarter were primarily due to improved performances in Grains, which benefited from strong growth in destination volumes and solid risk management, Bunge said. Earnings increased to $168 million from $164 million. Higher margins and volumes in Bunge’s South American ports and services operations also contributed to the improved results. Grain origination in Brazil was an important contributor to the quarter. However, results were lower than last year due to slower farmer selling from the combination of market volatility and smaller-than-expected crops. Origination margins in both Argentina and the United States remained soft. Net sales in the Agribusiness segment were $7,524 million, down from $7,744 million in the same period a year ago.
In Oilseeds, strong meal and oil demand supported soy crush margins in Brazil and the United States, but were offset by lower results in Argentina crushing and weaker results in oilseed trading and merchandising. Canadian and European soft seed results remained weak, but the outlook for new crop margins improved. Second-quarter results included approximately $40 million of mark-to-market hedging gains related to oilseed processing, which are expected to largely reverse in the third quarter when the contracts are executed, Bunge said. Oilseeds earnings for the quarter fell 11% to $56 million from $63 million. Results in the quarter included a $12 million pre-tax impairment charge related to the remaining unamortized carrying value of certain patents. Results in the second quarter of 2015 included a $30 million pre-tax reversal of an export tax contingency in Argentina.Earnings in the Milling Products segment increased to $33 million from $20 million. Bunge said all of its major businesses — Brazil and Mexico wheat milling and U.S. corn milling — reported earnings increases during the quarter. Net sales were $422 million, up from $409 million in the same period a year earlier.