White Plains / NY. (bl) Bunge Limited announced its financial results for the second quarter 2015. Summary: Total adjusted segment Ebit of 152 million USD, down 266 million USD versus last year. Agribusiness lower due to weak soft-seed processing and trading + distribution results. Food + Ingredients impacted by market slowdown in Brazil. YTD total adjusted segment Ebit of 525 million USD, up 32 million USD versus last year. Combined Agri-Foods rolling 4Q ROIC of 9.6 percent; 2.6 points over WACC. Expect strong 2H in Agribusiness, improvement from 1H in Foods and combined full year Agri-Foods ROIC of ~10 percent.
Soren Schroder, Bunge’s Chief Executive Officer, stated, «Conditions in the second quarter were more challenging than expected. In Agribusiness, we experienced weak softseed margins, slow farmer selling outside of Brazil and a difficult trading + distribution environment. In Food + Ingredients, margins and volumes came under dramatic pressure in our Brazilian businesses, especially Edible Oils, as consumers adjusted to an environment of increasing unemployment, inflation and currency devaluation.
«Looking ahead to the second half of the year, we expect full-year Agribusiness Ebit to exceed one billion USD. Demand for soy meal and soy oil remains solid, supporting a promising soy crush outlook. The Brazilian safrinha corn crop is large and current local prices are encouraging famers to sell. Based on present crop conditions in the Northern Hemisphere there should be ample supplies to drive high asset utilizations and an expansion in global trade. Food + Ingredients will show improvement from the first half of the year, but will fall short of last year’s second half. Sugar + Bioenergy is moving into its seasonally stronger period when sugar and ethanol production increases, and based on current strong domestic ethanol consumption in Brazil, we have increased confidence that we will end the year Ebit and cash flow positive.
«We also continue to make strides in driving greater efficiency through our performance improvement initiatives, having generated approximately 50 million USD of year-to-date benefits. The rolling four quarter ROIC for our core Agribusiness and Food operations is 9.6 percent, continuing to track well above our seven percent cost of capital, and we expect returns of approximately ten percent for the full year».
Outlook
Drew Burke, Chief Financial Officer, stated, «We expect a strong second half in Agribusiness with full year segment results exceeding one billion USD. In Oilseeds, margins are good in South America and in the U.S., solid underlying demand for soymeal and soyoil should continue to support a favorable crushing environment. While China soy crush margins have come down from the levels seen for most of the second quarter, they are well above where they were for most of last year. European sunseed crush margins should improve with the arrival of harvest; however, rapeseed margins may continue to be hampered by smaller production and low vegetable oil prices.
«In Grains, the Brazilian safrinha corn harvest is underway and with the recent devaluation of the Brazilian real, farmer selling has picked up for both corn and soybeans. Farmers in the U.S. and Black Sea have planted large crops, and based on current growing conditions should provide ample supplies to drive high asset utilizations. While global grain supply and demand should be in relative balance, the reduced production in certain Northern Hemisphere regions could provide pockets of supply dislocation opportunities.
«In Food + Ingredients, we expect improvement from first half levels. In Europe, margins should improve as new oilseed crops reset raw material costs. In the U.S., we will continue to leverage the benefits from our performance improvement programs, and in Brazil, we are taking additional cost saving measures to address current market conditions. While our Brazilian food business will likely continue to face near term challenges, we expect to see improvement as we move through the year.
«In Sugar + Bioenergy, our sugarcane crop continues to develop well with favorable weather. Based on current strong domestic demand for ethanol in Brazil, we are confident that we will finish the year profitable and free cash flow positive».
