White Plains / NY. (bl) Bunge Limited announced its first quarter 2013 results. The company announced a total segment Ebit of 260 million USD, up 30 percent versus last year on an adjusted basis. Agribusiness managed challenging markets well, but the results are lower than last year. Sugar + bioenergy and food + ingredients are off to a good start, the company said in a statement.
Alberto Weisser, Bunge´s Chairman and Chief Executive Officer stated, «We had a solid first quarter. Our agribusiness team performed well, managing risk in a volatile market environment characterized by tight global supplies and challenging Brazilian logistics. We are pleased to see sugar + bioenergy get off to a good start to the year and that food + ingredients continued its strong performance from the second half of last year».
«Looking ahead, agribusiness markets are transitioning from ones of tightness to more comfortable supplies. Customer inventory pipelines are lean and in need of restocking, so demand should remain strong. Farmers in South America responded with record production and farmers in the Northern Hemisphere are expected to respond similarly. The logistics congestion in Brazil is improving, but delays will continue to persist until the U.S. harvest later this year. We see positive signs in sugar + bioenergy as the weather in the Center-South of Brazil has been ideal for cane development and early readings of ATR, the sugar content in the cane, are on track to return to more normal levels. We expect food + ingredients results to continue to improve throughout the year».
Improved oilseed processing results in the quarter were more than offset by lower results in grain merchandising. Our merchandising business benefited from strong global demand for Brazilian corn and soybean exports; however, lower grain origination in Argentina and the Northern Hemisphere due to tight supplies adversely impacted results. Soybean processing was higher in all geographies with the largest contribution coming from the U.S., which benefited from strong export demand due to tight supplies and delays in South American harvests. Results in softseed processing in Canada and Europe were lower due to margin pressure from weather-related supply shortages and slow farmer selling.
Sugar + Bioenergy
The first quarter is the inter-harvest in Brazil when sugarcane mills in the Center-South region typically do not operate until the end of the quarter and are selling sugar and ethanol inventories from the previous sugarcane harvest. Results were higher in the quarter due to improved performance in all parts of the segment. Sugarcane milling benefited from the combination of lower inventory costs and higher average ethanol prices. Due to heavy rains during the month, the start-up of some of our mills was postponed. This weather delay will have a positive impact on the development of the sugarcane, but a portion of the start-up costs associated with the mills will shift to the second quarter. Trading + merchandising benefited from higher volumes and margins on export programs and good risk management. U.S. biofuels benefited from higher results in our ethanol joint venture due to improved margins.
Edible Oil Products
Higher results in the quarter were primarily due to improved performance in Brazil, which experienced a challenging prior-year period and in India, which more than offset lower results in North America and Europe.
Higher results in the quarter were primarily due to improved performance in our Brazilian wheat milling business, which experienced a challenging prior-year period and contributions from our 2012 acquisition in Mexico, which more than offset lower results in corn milling.
Results in our ongoing fertilizer operations were higher in both Argentina and in our Morocco joint venture.
Cash generated by operations in the first quarter 2013 was approximately 103 million USD compared to cash used of 302 million USD in the same period last year. The year-over-year variance primarily reflects the combination of higher earnings and lower inventories.
The effective tax rate for the quarter ended March 31, 2013, excluding our discontinued fertilizer business and 31 million USD of discrete tax items for the period, was approximately 18 percent.
Drew Burke, Chief Financial Officer, stated, «We remain confident about 2013, though results will be more back-end weighted than previously expected. Demand for agricultural commodities has been strong, which should continue to draw exports out of South America and assuming large crops in the Northern Hemisphere, prices should moderate, spurring additional consumption and restocking of inventory. However, slow commercialization of crops by farmers in South America is shifting volume to future periods. Similarly, our oilseed processing and merchandising operations in North America and Europe are being impacted by the combination of tight supplies and farmers holding on to their crops until they have more visibility into the progress of their new crops».
«In sugar + bioenergy, with the favourable weather and development of our sugarcane plantations during the inter-crop period, we are confident that we will have sufficient cane to operate at capacity this season. Additionally, ATR is showing early signs of returning to more normal levels, which combined with our expected higher crush should significantly reduce our unit production costs. Additionally, changes in Brazilian energy policy that will be in effect this year should improve the economics of producing ethanol, offsetting weaker sugar prices. Due to the seasonality of the Brazilian sugarcane harvest, we expect results in this segment to be weighted toward the second half of the year».
«In food + ingredients, following the strong start to the year, we expect the solid performance to continue and results to progressively improve throughout the year. We should extract greater value from our recent acquisitions and improve our operating efficiencies with the start-up of operations at our new multi-oil refining facility in India and our new refining and packaging facility in Decatur, Alabama. Lastly, the pending sale of the Brazilian fertilizer business remains on-track to close this year».