White Plains / NY. (bl) Bunge Limited announced its financial results for the first quarter 2015. Summary: Total segment EBIT of 373 million USD, up 298 million USD versus last year. Agribusiness and Food + Ingredients off to good starts with favourable full-year outlooks. Expect Sugar + Bioenergy to end year Ebit and free cash flow positive. Repurchased 200 million USD of common shares during the quarter.
Chief ExecutiveSoren Schroder: «We had a good start to the year with strong results in Agribusiness and Food + Ingredients and an improvement in Sugar + Bioenergy».
«Our Agribusiness operations in North America, Europe and Brazil performed well, capitalizing on strong soybean crushing margins and executing high margin oilseed export programs. Food + Ingredients continued to make progress with its commercial and operational excellence programs, largely offsetting the impacts of significant foreign currency devaluations and slowing economies in certain markets».
«Looking ahead, demand remains solid. Soybean harvests in South America are historically large, which aligns well with our footprint, and farmers in the region have much of their harvests remaining to be priced. Farmers in the Northern Hemisphere are expected to plant large crops, which should drive high asset utilizations later in the year. We also continue to press ahead in driving greater efficiency and unlocking value through our performance improvement initiatives, which is evident in our results. The rolling four quarter ROIC for our core Agribusiness and Food + Ingredients operations is 10.7 percent, tracking well above its seven percent cost of capital. We expect strong returns to continue through the course of the year, while also growing earnings on a trajectory to reach our 2017 target of 8.50 USD per share».
«We continue to follow our strategy of investing in our core businesses. Earlier this month, we announced the creation of a joint venture to invest in the Canadian Wheat Board. This investment, which provides access to high quality Canadian grain, improves the balance of our global grain network and provides greater market opportunities for Canadian growers. We remain committed to our balanced approach to capital allocation, and during the first quarter we bought back 200 million USD of common shares».
Agribusiness had a strong first quarter in both Oilseeds and Grains. In Oilseeds, North American processing and global oilseed trading + distribution were the largest contributors to the improved performance. North American processing benefited from high crush margins resulting from strong global demand and higher volume. Results in our trading + distribution business were higher as we executed oilseed export programs at attractive margins. Processing results in Brazil were good. Higher soybean processing results in Europe were more than offset by weak softseed performance caused by slow farmer selling. Results in Asia were higher as soy processing margins in China improved from the depressed levels seen for most of 2014.
In Grains, higher results in the quarter were largely due to improved performance in global trading + distribution, which benefited from improved risk management and lower ocean freight costs. Grain origination results in Brazil were strong, having experienced a significant pick up in volume during March with the devaluation of the real, but were lower than last year. Grain origination results in most other regions were down, primarily due to slow farmer selling.
In the first quarter, we realized approximately 70 million USD of gains from mark-to-market reversals on contracts which negatively impacted Q4. The remaining ten million USD that impacted the fourth quarter should mostly reverse in Q2 as we execute on the contracts.
Edible Oil Products
Results in the quarter were significantly higher than the prior year, primarily driven by North America and Europe. Our U.S operations benefited from the combination of higher margins and lower costs, reflecting our initiatives to improve asset efficiency and margins. In Europe, results benefited from effective commercial strategies and our ongoing focus on costs which largely offset the impacts of devaluing currencies and slowing economies in certain markets. Results in Brazil were comparable to last year as our commercial and operational improvement programs helped offset the impacts of currency devaluation, slowing economic growth and higher energy prices.
Higher results in the quarter were driven by improved performance in wheat milling. Our Mexican operations benefited from higher margins, additional synergies from the integration of the mills we acquired from Altex and the recovery of mark-to-market losses on foreign exchange which were incurred in the fourth quarter. Results in our Brazilian wheat milling operations were slightly higher than last year as our continued focus on operational and commercial improvements more than offset the impacts of foreign currency translation. In U.S. corn milling, results were slightly lower due to a decrease in volumes.
Sugar + Bioenergy
The first quarter is the inter-harvest period in Brazil when sugarcane mills in the Center-South region typically do not operate for most of the quarter and are selling sugar and ethanol inventories from the previous sugarcane harvest. Improved results in sugarcane milling were primarily driven by better margins, due to higher prices of sugar and ethanol in local currency, and lower costs. Results in our trading + distribution business were down slightly. In our biofuel joint-ventures, lower results in the U.S. more than offset higher results in Argentina. Last year´s results were impacted by approximately 31 million USD of temporary mark-to-market losses related to hedges on our forward sugar sales.
Lower results in the quarter were primarily due to lower margins in our Argentina operations resulting from a strike during the quarter which shut down one of our plants and required an increase in higher cost imports. The situation has been resolved and the facility is now operating normally. Imports at our Brazilian port were also down compared to last year.
Cash generated by operations in the first quarter 2015 was 308 million USD compared to cash used of approximately 1.1 billion USD in the same period last year. The year-over-year variance reflects higher earnings, lower commodity prices and our continued focus on optimizing working capital.
The tax rate for the quarter ended March 31, 2015 was approximately 26 percent.
Drew Burke, Chief Financial Officer, stated, «Agribusiness had a solid start to the year and the full-year outlook is favourable. With the arrival of South American crops, global export demand is shifting to this region. In Oilseeds, processing margins have improved in Brazil and Argentina and should remain good through September when export demand begins to shift back to North America. North America and Europe are entering their slow season where processing margins and utilizations will decrease. Livestock margins have recently improved in China supporting good crush margins and a favourable outlook for the remainder of the year. In Grains, South American farmers produced record crops, much of which remains to be sold. Farmers in the Northern Hemisphere are expected to plant large crops this spring, which should drive strong asset utilization and exports later in the year. However, in the near term, farmer selling has been slow, which if it persists, could shift earnings into the second half of the year».
«In Food + Ingredients, we expect 2015 results to be considerably higher year-over-year, driven by our operational excellence initiatives. However, the strong U.S. Dollar and slowing economies in certain markets could cause the amount of increase to be less than we earlier expected».
«In Sugar + Bioenergy, our sugarcane crop is developing well and product prices are at levels that give us confidence that we will finish the year profitable and free cash flow positive. 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».