Agribusiness giant Bunge has booked a jump in third-quarter income, which more than doubled as sales benefited from rising grain prices.
The company said net earnings in the three months to the end of September rose to US$289m, up from $140m. This marks the first year-on-year increase in earnings since the first quarter of 2011.
Sales at the grain trader rose 11% to $17.29bn, up from $15.62bn.
The group revealed that a stronger performance from its agricultural unit offset a decline at its bioenergy division, which was hit by lower sugar crops.
Bunge said its oilseed processing business saw an improved performance in North America, Asia and Europe, while its grain division was boosted by strong demand which it was able to meet using supplies from Latin America.
However, the company warned the poor grain harvest and continued volatility would continue to shape market conditions. According to CEO Alberto Weisser, a "record" harvest is required to rebuild grain supplies.
"The current market environment, shaped most notably by the severe U.S. drought, has been and will continue to be volatile and complex for everyone who participates in our industry," he said.
"Bunge's role is to help farmers and customers manage through this environment, by providing market access for crops and delivering the right products when and where they are needed. We are confident that the company's core strengths - geographic balance, a diverse product portfolio, an experienced team and a strong balance sheet - enable us to fulfill this role effectively and profitably."
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25 Oct 2012 10:30 GMT
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Bunge Reports Third Quarter Results
WHITE PLAINS, N.Y., Oct. 25, 2012 /PRNewswire/ -- Bunge Limited (NYSE: BG)
Total segment EBIT of $441 million, an increase of $250 million compared to Q3 2011
Strong Agribusiness results, volumes up 15%
Sugar & Bioenergy results impacted by $39 million impairment charge related to a U.S. corn ethanol joint-venture
Excluding charge, results in Sugar & Bioenergy improved year-over-year due to higher milling margins
Overview
Alberto Weisser, Bunge's Chairman and Chief Executive Officer, stated, "Bunge delivered significantly stronger third-quarter results than in the prior year. Agribusiness operations posted solid results, and Food & Ingredients and Fertilizer showed improved performance from the challenging first half of the year. Results in Sugar & Bioenergy on a comparable basis were higher than last year, but below the potential of this business. Our continued sugarcane planting and other cost reduction efforts which will result in increased sales volumes and lower unit costs will help us realize this potential. We are making steady progress, and remain optimistic for a strong performance in the 2013 crop year.
"The current market environment, shaped most notably by the severe U.S. drought, has been and will continue to be volatile and complex for everyone who participates in our industry. Stocks of corn and soybeans are tight, and the world is adjusting typical trade flows. Bunge's role is to help farmers and customers manage through this environment, by providing market access for crops and delivering the right products when and where they are needed. We are confident that the company's core strengths - geographic balance, a diverse product portfolio, an experienced team and a strong balance sheet - enable us to fulfill this role effectively and profitably.
"The world needs record crops to rebuild stocks, and today's high prices are sending a strong signal to farmers, especially in South America, to plant. Early indications are that soybean production will be at record levels. As new crops are harvested, we should see a more balanced supply-demand situation, which will be good for consumers and for the market overall."
Third Quarter Results
Agribusiness
Operations in all geographies performed well in the quarter. Higher oilseed processing results were driven by North America, Europe and Asia, which experienced a challenging year-ago period. Oilseed processing in South America also performed well. Our grain merchandising operations benefited from the combination of strong export demand and large South American grain supplies. Higher volumes in the quarter reflect contributions from our investments in additional grain and port facilities in the U.S. and strong export demand.
Sugar & Bioenergy
Sugarcane milling performance improved from last year, generating a slight profit in the quarter primarily due to higher sugar margins. However, results were lower than we would normally expect for the seasonally strong third quarter primarily due to lower sales volume caused by port congestion, and lower sugar content of harvested cane, which led to reduced production volumes and increased unit costs. While improved from last year, our trading & merchandising business reported a loss. Results in the quarter included an impairment charge of $39 million related to a North American corn ethanol joint venture.
Edible Oil Products
Higher results in our European and Brazilian businesses more than offset lower results in our North American operations. Results in the quarter benefited from our new acquisitions. Results in 2011 included a $6 million gain on the sale of an idled facility in North America.
Milling Products
Higher earnings in the quarter were primarily driven by improved margins in wheat milling. Our wheat mill in Mexico, in which we acquired a majority interest in the second quarter of 2012, also contributed to results.
Fertilizer
Results in Fertilizer showed considerable improvement compared to its performance during the first half of the year, but trailed last year due to lower margins in our Brazilian business.
Financial Costs
Interest expense increased in the quarter primarily due to higher average borrowings, mostly resulting from the higher prices of agricultural commodity inventories which drove higher average working capital levels.
Income Taxes
The effective tax rate for the nine months ended September 30, 2012 was 20% compared to 8% for the same period last year. The higher effective tax rate primarily reflects earnings mix.
Outlook
Drew Burke, Chief Financial Officer, stated, "With soybean supplies in South America at low levels, oilseed processing will largely be driven by North America and Europe, which should benefit from strong export demand. Considering the tight supply environment, global grain demand will continue to be met by a variety of products from different geographies. With our global network of ports and elevators, our grain merchandising operations should continue to perform well.
"In Sugar & Bioenergy, we expect our milling business to continue to improve through the remainder of the year. We remain on track to reach our planting target of approximately 70 thousand hectares of sugarcane this year. This, combined with the steps we are taking to improve the efficiency of our operations, should enable us to operate our mills at full capacity in the 2013 crop year with lower unit production costs.
"Food & Ingredients should continue to improve from the challenging first half of the year.
"In Fertilizer, it is the seasonally stronger period in South America, but markets remain competitive."
Original source: Bunge Ltd
