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Bunge Limited: Reports Fourth Quarter 2016 Results

White Plains / NY. (bl) Bunge Limited announced its financial results for the fourth quarter and financial year 2016, that ended 31 December. Overview:

  • Q4 GAAP EPS of 1.83 USD versus 1.31 USD last year, 1.70 USD versus 1.49 USD on an adjusted basis
  • Higher results driven by Food + Ingredients and Sugar + Bioenergy
  • Combined Agri-Foods trailing four quarter ROIC of 8.6 percent; 1.6 points over WACC
  • Operating cash flow of 1’904 million USD; adjusted funds from operations of 1’477 million USD (a)
  • Continue to expect strong earnings growth in 2017

Financial Highlights

Quarter Ended Year Ended
USD in millions, except per share data 12/31/16 12/31/15 12/31/16 12/31/15
Net income attributable to Bunge USD 271 USD 203 USD 745 USD 791
Net income (loss) per common share from continuing operations-diluted USD 1.83 USD 1.31 USD 5.07 USD 4.84
Net income (loss) per common share from continuing operations-diluted, adjusted (a) USD 1.70 USD 1.49 USD 4.67 USD 4.83
Total Segment Ebit (a) USD 403 USD 294 USD 1’143 USD 1’248
Certain gains + (charges) (b) USD 41 USD (43) USD 43 USD 19
Total Segment Ebit, adjusted (a) USD 362 USD 337 USD 1’100 USD 1’229
Agribusiness (c) USD 237 USD 268 USD 782 USD 1’054
Oilseeds USD 134 USD 185 USD 407 USD 596
Grains USD 103 USD 83 USD 375 USD 458
Food + Ingredients (d) USD 70 USD 46 USD 229 USD 192
Sugar + Bioenergy USD 30 USD 10 USD 51 USD (22)
Fertilizer USD 25 USD 13 USD 38 USD 5
(a) Total Segment earnings before interest and tax (“Total Segment Ebit”); Total Segment Ebit, adjusted; net income (loss) per common share from continuing operations-diluted, adjusted funds from operations and ROIC are non-GAAP financial measures. Reconciliations to the most directly comparable U.S. GAAP measures are included in the tables attached to this press release and the accompanying slide presentation posted on Bunge’s website.
(b) Certain gains + (charges) included in Total Segment Ebit. See Additional Financial Information for detail.
(c) See footnote 23 of Additional Financial Information for a description of the Oilseeds and Grains businesses in Bunge’s Agribusiness segment.
(d) Includes Edible Oil Products and Milling Products segments.

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Overview

Soren Schroder, Bunge’s Chief Executive Officer, stated, «Bunge had a solid fourth quarter to end a challenging year. Higher Food + Ingredients and Sugar + Bioenergy results in 2016 reflect our team’s hard work to drive structural improvements to increase the underlying competitiveness of our businesses. Agribusiness faced a very competitive global market environment, but finished strong. Our 2016 adjusted ROIC in our core Agribusiness and Food operations was 8.6 percent, 1.6 points over our cost of capital.

«Our efforts to drive long term, sustainable value are on track. In 2016 we delivered 135 million USD of cost and efficiency benefits, exceeding our target by 10 million USD. Adjusted Funds from Operations were approximately 1.5 billion USD, 61 million USD higher than last year. We returned 457 million USD to shareholders through dividends and share repurchases, and capex of 784 million USD was below our 850 million USD guidance and is tracking approximately 275 million USD below our 2014 to 2017 target, reflecting disciplined capital allocation. We expanded our value added Food + Ingredients’ capabilities with bolt-on M+A in Europe and strengthened our winning Agribusiness footprint through joint ventures in Brazil, Vietnam and Canada. We expect our previously announced Northern European soy crush and Mexican corn milling acquisitions to close, respectively, in the first and second quarters of 2017.

«We enter 2017 with confidence and expect strong growth in earnings. After disappointing crops in South America last year, the region is on track to produce record harvests this season, which aligns well with our footprint. In addition, global soybean processing margins, which were under pressure during most of 2016, are improving, and soft seed margins are better in both North America and Europe. We expect Food + Ingredients to increase its share of value added products and to grow volumes. In Sugar + Bioenergy, our sugar is hedged at higher prices and Brazilian ethanol prices should be supported by favorable supply and demand. Importantly, we will also continue to drive our performance improvement programs, expecting 100 million USD of incremental benefits in 2017».

Fourth Quarter Results

Agribusiness Results decreased from last year, primarily due to lower results in our soy processing operations, reflecting tight bean supplies in South America and softer global soymeal demand due to competition from lower cost feed products. Results in our European and Canadian softseed processing operations increased, driven by large crops, solid vegetable oil demand and our new Ukrainian plant, which started up earlier this year. Improved performance in Grains was largely driven by higher results in our U.S. operations, which benefited from record corn and soybean crops that increased origination and export volumes and margins, as well as lower costs resulting from our footprint optimization efforts. Our global teams effectively managed risk during the quarter; however, contributions from risk management were lower than last year.

Edible Oil Products Increased results in the fourth quarter were primarily driven by improved performance in Brazil, reflecting higher margins in all major product categories, share gains and lower costs. In India, increased sales of higher margin specialty bakery products contributed to its improved performance. Results in North America were down as higher results in Canada were more than offset by lower U.S. results. Performance in Europe was comparable to last year.

Milling Products Higher results in the quarter were primarily due to increased volumes and margins in Brazil, which benefited from the contribution of our recently acquired Pacifico mill, market share gains and improved product mix. Partially offsetting these improvements were lower results in North America, driven by the translation impact of the stronger U.S. Dollar on our Mexican operations and lower margins in our U.S. corn milling business.

Sugar + Bioenergy Increased results in the quarter were primarily driven by our sugarcane milling operation, where higher sugar and ethanol prices more than offset lower crush volumes. Results in our trading + distribution business were down due to lower volumes and margins. Results in our biofuel joint ventures were higher due to improved volumes and margins. We incurred a 7 million USD loss in the quarter associated with our renewable oils joint venture.

Fertilizer Higher results in the quarter were driven by improved volumes in our Argentine fertilizer business that slightly offset lower margins. Results in the quarter also benefited from the reversal of an 11 million USD provision related to tariffs on natural gas consumption.

Cash Flow Cash generated by operations in the year ended December 31, 2016 was 1’904 million USD compared to cash generated of 610 million USD in 2015. The year-over-year increase was primarily driven by lower levels of working capital reflecting increased payables and decreased secured advances to farmers. Adjusted funds from operations of 1’477 million USD was 61 million USD higher than the year ago period of 1’416 million USD.

Income Taxes The effective tax rate for year ended December 31, 2016 was 22 percent. Adjusting for net gains and charges, the effective tax rate was approximately 24 percent.

Outlook Thomas Boehlert, Chief Financial Officer, stated, «Our full-year 2017 outlook remains largely consistent with the assumptions that we provided at our December investor day. In Agribusiness, we expect Ebit to return to historical range of 895 to 1’050 million USD, driven by large crops in South America, of which Brazilian farmers have a significant percentage remaining to price; a return to more normal levels of soy meal inclusion in feed rations; and higher softseed crush margins due to the combination of greater seed supply and robust vegetable oil demand. We expect Agribusiness to start the year slow and progressively improve as volumes and margins pick up in South America.

«In Food + Ingredients, we expect segment results to improve sequentially as we progress through the year, resulting in Ebit of 270 to 290 million USD. Our outlook for year-over-year improvement reflects higher margins and volumes resulting from our performance improvement initiatives, more favorable product mix of higher value added products and full year contributions from our new wheat mills in Brazil.

«In Sugar + Bioenergy, we expect 2017 Ebit of 100 to 120 million USD. Our outlook for year-over-year improvement reflects our actions to improve cane yields, sugar prices hedged at higher levels, a favorable ethanol supply-demand balance in Brazil, and assumes normal seasonal weather patterns. Similar to past years, results will be seasonally weak in the first half of the year.

«In Fertilizer, we expect Ebit of approximately 30 million USD.

«Additionally, we expect the following for 2017: a tax rate range of 24 to 27 percent; net interest expense in the range of 200 to 225 million USD; depreciation, depletion and amortization of approximately 550 million USD; and capital expenditures of 750 to 800 million USD».