White Plains / NY. (bl) Bunge Limited, a leader in agriculture, food and ingredients, reported its financial results for the quarter ended June 30 (Q2/2019).
- Q2 GAAP EPS of USD 1.43 versus USD (0.20) in the prior year; USD 1.52 versus USD 0.10 on an adjusted basis
- Results include USD 135 million net unrealized gain on Bunge Ventures’ stake in Beyond Meat Inc.
- Agribusiness benefited from approximately USD 70 million in timing differences in soy crush, along with increased soy crush volumes, partly offset by lower structural margins
- Food + Ingredients largely in-line as strength in Edible Oils offset weakness in Milling
- Achieved major portfolio optimization milestone with announcement of Brazilian sugar JV with BP
Chief Executive Greg Heckman: «The second quarter benefited from timing differences and the contribution from a venture investment. Operating results in core businesses were generally in-line with our outlook. We remain committed to improving operational performance, optimizing the portfolio and strengthening financial discipline. To that end, we are pleased that subsequent to quarterend, we reached agreement with BP on a 50/50 JV for our sugar and bioenergy business in Brazil.
«We continue to strengthen our team with strategic and experienced hires, including Chief Financial Officer John Neppl and Chief Risk Officer Robert Wagner, both of whom joined Bunge during the second quarter. Together, we are focused on delivering results and enhancing shareholder value over the long term.»
Financial Highlights
| USD in millions, except per share data | Q2/2019 | Q2/2018 | H1-2019 | H1-2018 | |||||||||
| Net income(loss) attributable to Bunge | USD | 214 | USD | (12) | USD | 259 | USD | (33) | |||||
| . | |||||||||||||
| Net income(loss) per common share from continuing operations-diluted | USD | 1.43 | USD | (0.20) | USD | 1.71 | USD | (0.39) | |||||
| . | |||||||||||||
| Net income(loss) per common share from continuing operations-diluted, adjusted [1] | USD | 1.52 | USD | 0.10 | USD | 1.90 | USD | 0.04 | |||||
| . | |||||||||||||
| Total Segment Ebit [1] | USD | 354 | USD | 71 | USD | 505 | USD | 132 | |||||
| Certain gains +(charges) [2] | (16) | (46) | (31) | (70) | |||||||||
| Total Segment Ebit, adjusted [1] | USD | 370 | USD | 117 | USD | 536 | USD | 202 | |||||
| Agribusiness [3] | USD | 189 | USD | 118 | USD | 309 | USD | 170 | |||||
| Oilseeds | USD | 164 | USD | 140 | USD | 262 | USD | 106 | |||||
| Grains | USD | 25 | USD | (22) | USD | 47 | USD | 64 | |||||
| Food + Ingredients [4] | USD | 49 | USD | 46 | USD | 117 | USD | 100 | |||||
| Sugar + Bioenergy | USD | (9) | USD | (40) | USD | (32) | USD | (60) | |||||
| Fertilizer | USD | 6 | USD | (7) | USD | 7 | USD | (8) | |||||
| Other [5] | USD | 135 | USD | – | USD | 135 | USD | – | |||||
- 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; Adjusted funds from operations and ROIC are non-GAAP financial measures.
- Certain gains + (charges) included in Total Segment Ebit. See Additional Financial Information for detail.
- See footnote 11 for a description of the Oilseeds and Grains businesses in Bunge’s Agribusiness segment.
- Includes Edible Oil Products and Milling Products segments.
- Represents amounts attributable corporate and other items not allocated to the reportable segments.
Second Quarter Results
Agribusiness
In Oilseeds, structural soy crush margins were lower due to the combination of farmer retention of soybeans in anticipation of higher prices and increased meal availability with the return of Argentine supply. However, second quarter results benefited from approximately USD 70 million of timing differences in soy crush as margins decreased in many markets toward the end of the quarter. As we execute on these contracts, mainly in the third quarter, we expect these gains to reverse. Oilseed trading + distribution results were lower than last year.
In Grains, origination results improved in South America, which benefited from lower costs and more favorable logistics. This more than offset lower results in North America, which was negatively impacted by the combination of extreme weather and low export demand due to the U.S.-China trade dispute. While results in trading + distribution were not a contributor to the quarter, performance was better than last year.
Edible Oil Products
Improved results in the quarter were primarily driven by higher margins in South America due to a better supply-demand balance. In North America, stronger demand contributed to better results versus last year. Results in Europe and Asia were comparable to last year.
Milling
The decline in segment performance was mainly driven by Brazil, where results were impacted by lower volumes and margins as consumers remained price sensitive, particularly in the food service channel. Results in the U.S. and Mexico were slightly lower than last year.
Sugar + Bioenergy
Higher sugarcane milling results were primarily driven by lower costs and increased ethanol volumes and prices, partially offset by lower sugar volume and margins. In 2018 results were impacted by a USD 26 million loss in sugar trading + distribution, primarily due to both unwinding activity in preparation for exiting the business and a USD 14 million bad debt charge.
Fertilizer
Stronger results in the quarter were primarily driven by our Argentine operation, which benefited from higher volumes and prices, as well as lower costs. Results in the year ago quarter were negatively impacted by foreign exchange on imported fertilizer inventory resulting from the devaluation of the Argentine peso.
Cash Flow
Cash used by operations in the six months ended June 30, 2019 was USD 1.1 billion compared to cash used of approximately USD 3.5 billion in the same period last year. The year-over-year variance was primarily due to a decrease in inventory. Trailing four-quarter adjusted funds from operations was approximately USD 1.4 billion as of the quarter ended June 30, 2019.
Income Taxes
Income taxes for the quarter ended June 30, 2019 were USD 60 million.
Outlook
Based on current market conditions, the Company’s view on 2019 full-year consolidated results has not changed from its previously disclosed outlook, originally provided on February 21, 2019. This outlook excludes the impact of the USD 135 million net unrealized gain from Bunge Ventures’ investment in Beyond Meat.
In Agribusiness, based on the current soy crush margin environment, 2019 full-year results would be expected to be lower than 2018. Actual soy crush margins over the course of the year are likely to evolve based on U.S.-China trade discussions, crop sizes and farmer commercialization. Based on the current softseed crush margin environment, results would be slightly higher than last year, driven by strong oil demand. Improvements in risk management and in how we operate should support higher results in Grains compared with last year.
In Food + Ingredients, full-year results in Edible Oils should benefit from 12 months of ownership of Loders Croklaan, as well as increased synergies from the integration of our B2B businesses. Favorable Milling operating environments in Brazil and the U.S. are likely to be partially offset by more challenging conditions in Mexico.
In Sugar + Bioenergy, based on normal weather and forward price curves for sugar and ethanol, full-year 2019 results would be expected to be about break-even. As in past years, results will be seasonally weighted to the second half.
In Fertilizer, based on the current market environment, full-year results would be lower than last year.
Additionally, the Company expects the following for 2019: A tax rate in the range of 22 percent to 26 percent; net interest expense in the range of USD 290 to USD 310 million; capital expenditures of approximately USD 550 million, of which approximately USD 115 million is related to sugarcane milling; and depreciation, depletion and amortization of approximately USD 650 million.
