Bunge Limited: Reports Second Quarter Results

White Plains / NY. (bl) Bunge Limited, a leading global agribusiness and food company, announced its second quarter results. Summary: Total segment Ebit of 403 million USD, including gains on transactions of 121 million USD – Agribusiness produced strong results – Sugar + Bioenergy results lower than expected as rains delayed harvest – Food + Ingredients impacted by lower margins; Fertilizer results as expected.

Overview

Alberto Weisser, Bunge´s Chairman and Chief Executive Officer, stated, «Bunge´s Agribusiness operations performed well in a volatile environment, but Sugar + Bioenergy, which was impacted by adverse weather conditions and Food + Ingredients delivered lower than expected earnings. Looking ahead, we expect a strong second half of 2012».

«Weather is always an important variable in the agribusiness and food industries, but this year it is particularly significant. Global stocks of corn and soybeans are already tight and a severe drought in the U.S. has lowered expectations for a replenished supply this fall and driven commodity futures prices to record levels. As the world adjusts to these developments we are likely to see a tempering of near- term demand among commercial customers, the emergence of non-traditional trade flows both within regions and globally, as well as massive planting by farmers in the Southern Hemisphere. Large crops next spring from farmers in South America will help provide relief to a stressed market».

«We expect Bunge will have a strong second half of the year, not only because we are confident in our businesses and our approach, but also because we are confident that the role we play as a company is both meaningful and valued. In times of tight commodity stocks and price volatility, farmers depend on a trusted outlet for their crops, commercial customers rely on a responsive supplier and the world requires flexible trade that can move products smoothly and safely from where they are to where they need to be. Bunge´s strong balance sheet, efficient operations, diverse product portfolio and global asset network enable us to provide these services in the most challenging of times».

«Of course, record commodity prices spark concern for the food security of vulnerable communities. However, while corn and soybean stocks are low, global stocks of other key staples, including wheat and rice, are at more comfortable levels. The availability of these crops, combined with rational approaches by governments to domestic food, agriculture and trade policies, fast response from aid agencies and cooperation from industry, should help the world respond quickly and effectively to potential issues».

Second Quarter Results

Agribusiness: Results in the quarter were primarily driven by strong performances in oilseed processing and grain merchandising in our South American operations. Results in our European merchandising business, which benefited from the addition of our new Ukrainian port terminal, also improved and contributed to the higher volume in the quarter. The addition of grain facilities in the U.S. related to our new grain export terminal in the Pacific Northwest and oilseed processing capacity expansions in Asia that came on-stream last year also contributed to the increase in volume. Results in the quarter included an 85 million USD gain on sale of our minority stake in Solae. Results in the second quarter of 2011 included a 37 million USD gain related to the sale of our interest in a European oilseed processing facility joint venture.

Sugar + Bioenergy: Rainy weather in the center south of Brazil interrupted milling operations and reduced the sugar content of harvested sugarcane. This led to lower than expected industrial volumes and higher unit costs, which contributed to the loss in the quarter. These impacts exacerbated what is normally a seasonally weak period. Results in 2011 benefited from unusually high ethanol prices resulting from the tight supply situation in Brazil. Lower volumes in the quarter were primarily related to our merchandising business.

Edible Oil Products: Performance was weaker in most regions, primarily due to lower margins in packaged oil resulting from volatile raw material prices. The quarter included an impairment charge of approximately five million USD related to the closing of a European margarine plant as part of a facilities consolidation program to improve efficiency.

Milling Products: Lower results in the quarter were primarily due to the combination of lower margins in wheat milling and continuing challenges related to the completed implementation of a new SAP system in Brazil that impacted volumes and margins. Results in the quarter included a gain of 36 million USD arising from the acquisition of the remaining interest in a Mexican wheat milling business in which we previously held a minority investment.

Fertilizer: Results in Fertilizer showed considerable improvement from the first quarter, but trailed last year as higher volume was more than offset by lower margins. While margins were lower, they improved throughout the quarter as the business worked through its high cost inventory following the decrease in international prices earlier in the year. Results in the second quarter of 2011 were adversely impacted by approximately 17 million USD of net charges primarily related to inventory adjustments and bad debt in our Brazilian business.

Financial Costs: Interest expense increased in the quarter primarily due to higher average borrowings, mostly resulting from the higher prices of agricultural commodity inventories which drove higher average working capital levels.

Income Taxes: The effective tax rate for the six months ended June 30, 2012 was 19 percent compared to eleven percent for the same period last year. The higher effective tax rate primarily reflects earnings mix and the gain on sale of our minority stake in Solae.

Outlook

Drew Burke, Chief Financial Officer, stated, «We expect continued overall strong performance in Agribusiness in the second half of the year, though demand could slow with the higher prices. Due to tight soybean supplies in South America, oilseed processing in the U.S. should benefit from strong export demand when harvest commences. Our European sunseed and Canadian canola processing operations should benefit from the combination of large crop production and increased oil and meal demand due to tightness in the global soybean and European rapeseed supply. We expect rapeseed processing margins to remain under pressure. While processing in China will likely remain challenging, we expect margins to improve later in the year as the market works through excess inventory in the country. Considering the smaller U.S. corn harvest, global grain demand will be met by a variety of products from different geographies. With our global network of ports and elevators, our grain merchandising operations should perform well in this environment, meeting our customers´ supply needs».

«In Sugar + Bioenergy, we expect significantly improved results as we have entered the seasonally stronger period and weather conditions in Brazil have improved. We expect to crush between 17 and 18 million metric tons of sugarcane this year and we are on track to reach this year´s planting target of approximately 70 thousand hectares of sugarcane. While the heavy rainfall negatively impacted our results this past quarter, it benefits the development of the sugarcane and we feel increasingly more confident in our ability to mill at capacity in 2013».

«Food + Ingredients should show considerable improvement as pricing comes in line with raw material costs, though margins may remain under some pressure. In Fertilizer, farm economics are strong and South America is entering its high-volume period with approximately 60 percent of the expected volume to be sold between July and December. Lastly, we are increasing our full year effective tax rate expectation to a range of 17-20 percent to reflect our expected mix of earnings and the transaction gain in the second quarter».

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