Bunge Limited: Reports First Quarter 2016 Results

White Plains / NY. (bl) Bunge Limited announced its financial results for the first quarter 2016, that ended 31 March 2016. First quarter total segment Ebit of 322 million USD was driven by strong performance in Agribusiness. Evolving agribusiness markets providing opportunities to leverage winning global footprint in the second half of the year. 2016 earnings growth expectation are intact, the company said in its news release.

Financial Highlights

USD in millions, except per share data	Q1/2016	Q1/2015
Total segment Ebit	USD 322	USD 373
Agribusiness	USD 282	USD 330
Oilseeds	USD 138	USD 242
Grains	USD 144	USD 88
Food + Ingredients	USD 52	USD 72
Sugar + Bioenergy	USD (14)	USD (23)
Fertilizer	USD 2	USD (6)
Net income (loss) per common share from continuing operations-diluted	USD 1.60	USD 1.58
Net income (loss) per common share from continuing operations-diluted, adjusted	USD 1.41	USD 1.58

.

Overview

Soren Schroder, Bunge’s Chief Executive Officer, stated, «In the first quarter, our Agribusiness team managed markets, margins, and logistics very well in a challenging environment.  In Food + Ingredients, we are seeing positive signs in Brazil with gains in both volume and market shares. Overall, results were better than expected, our return on capital continues well above WACC and we feel confident about growing earnings in 2016».

«Customer demand is strong and global soy processing margins are improving.  Smaller harvests in South America, due to recent adverse weather, are introducing new market dynamics.  These will generate headwinds in the second quarter, but also create the potential for us to leverage our winning global footprint more broadly over the course of the year.  Both U.S. crush margins and export flows should improve in the second half, and the possibility of dislocations has increased».

«Contributing to our strategy of expanding the share of earnings from value added products, we announced last week the acquisition of Walter Rau Neusser, a leading European supplier of mid-specialty oils and fats for foodservice and food processing customers. This acquisition strengthens our value added and innovation capabilities in these channels and has important synergies with our existing agribusiness network. In our best-in-class strategy, performance improvement programs delivered approximately 24 million USD toward our full-year expectation of 125 million USD».

First Quarter Results

Agribusiness: Agribusiness results benefited from good performances in South America and effective risk management strategies.

Lower Oilseeds results were due to a softer global soy processing environment.  Margins in the U.S. and Europe were negatively impacted by increased export competition from Argentina. Partially offsetting this decrease were improved results inArgentina, which benefited from increased farmer selling following the devaluation of the Peso. Soy processing results in Brazilwere good and comparable to last year. Oilseed trading + distribution results were similar to last year, benefiting from strong export flows out of South America.

In Grains, higher results in the quarter were largely driven by improved performances in grain trading + distribution and our port services operation, which benefited from increased South American exports. Higher volumes were primarily driven by increased origination in South America, which more than offset declines in the U.S.

First quarter results in 2015 benefited from approximately 70 million USD of mark-to-market reversals on contracts related to oilseed processing and bunker fuel hedges.

Edible Oil Products: Despite continued tough macro-economic conditions in Brazil, volumes recovered towards the end of the quarter and local currency margins were better than last year. India continued to experience double digit volume growth and margin expansion in local currency; however, currency translation from the weaker Indian Rupee offset the benefit.  Depressed economies, unfavorable currency translation and soft consumer demand impacted margins and volumes in Russia and Ukraine. Results in our North American business were comparable to last year, as strong volume growth in our value added downstream business was offset by lower refining margins. The quarter included a 12 million USD mark-to-market gain, which will reverse in the following quarters.

Milling Products: While segment volumes have recovered and are up 11 percent since Q2 2015, our Brazilian business continued to face currency translation headwinds and soft consumer demand, especially in the foodservice channel. Margins in local currency, however, improved, driven by higher productivity and better product mix.  The integration of the Pacifico acquisition is progressing well, and our world class greenfield mill in Rio de Janeiro is on track for start-up in the fourth quarter.  Higher results in North America were primarily due to improved performance in our value added categories and increased productivity in our U.S. operation. Our Mexican business delivered stronger volumes and productivity gains, but the impacts were offset by currency translation from the weaker Peso.

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.

Higher results in the quarter were primarily driven by our trading + distribution business, which benefited from higher volumes and margins. Results in sugarcane milling were as expected and slightly down from last year, primarily due to lower sales of sugar and ethanol resulting from our commercial decision to carry less inventory into the year than in 2015. Results and related development costs associated with our renewable oils joint venture was a loss of 6 million USD in the quarter.

Fertilizer: Improved results in the quarter were due to higher volumes and margins in our Argentine fertilizer operation and increased volumes at our Brazilian port facility. 2015 results were impacted by a strike at one of our Argentine plants.

Cash Flow

Cash generated by operations in the first quarter of 2016 was 77 million USD compared to cash generated of 308 million USD in the same period last year. The year-over-year variance reflects higher levels of working capital primarily related to the South American harvests and higher volumes and receivables in our Grain business. In line with our balanced approach to capital allocation, we repurchased 181 million USD of common stock during the first quarter and an additional 19 million USD during the second quarter.

Income Taxes

The effective tax rate for the quarter ended March 31, 2016 was 12 percent.  Excluding approximately 28 million USD of notable tax items, the effective tax rate was 23 percent. We continue to expect a full-year tax rate range of 25 to 29 percent.

Outlook

Drew Burke, Chief Financial Officer, stated, «In Agribusiness, demand for our core products is strong. The USDA is forecasting global soy meal and oil demand each to grow 7 percent this year, which should be supportive of soy processing margins.  Softseed processing margins should improve later in the year with the arrival of new crop seed supplies. Recent weather related changes to crop production in South America could present increased opportunities for our assets in the Northern Hemisphere. However, we expect headwinds in the second quarter as South American farmers and markets adjust to a scenario of lower production».

«In Food + Ingredients, we expect 2016 results to be higher year-over-year, driven by our operational excellence initiatives and recent acquisitions. We are cautiously optimistic that the improved volumes and margins we are currently seeing in our Brazilian operations will continue. We expect results to be weighted to the second half of the year».

«In Fertilizer, improved farmer economics in Argentina, due to the weaker Peso and the removal of export taxes on grains, should result in increased purchases of crop inputs later in the year».

«In Sugar + Bioenergy, our sugarcane crop is developing well, and considering our sugar price hedges and the Brazilian ethanol pricing outlook, we continue to expect 2016 to be a year of growth in earnings and cash flow. Similar to past years, results will be seasonally weak until the second half of the year».