White Plains / NY. (bl) Agricultural giant Bunge Limited announces strong full-year results in agribusiness and food + ingredients. Alberto Weisser, Bunge´s Chairman and Chief Executive Officer: «In 2011 Bunge produced strong results in many parts of our business, but faced significant headwinds in others. On a combined basis, our agribusiness, edible oils and milling segments generated record full-year results of over 1,1 billion USD. However, reduced sugarcane production yields in Brazil due to back-to-back years of poor weather had a material impact on volumes in our sugar + bioenergy segment».
«2012 will present some challenges, especially early in the year. Despite this, we expect to generate good results for the full year. We see positive signs in the industry and have confidence in our business. The USDA forecasts global protein meal and vegetable oil demand to both grow at four percent this year. Production and trade of agricultural commodities are expected to increase. We reached our sugarcane planting target in 2011, which should enable us to produce significantly more sugar and ethanol and run our mills closer to capacity. And our global asset network, strong market positions and excellent team should enable us to benefit from opportunities as they arise during the year».
Fourth Quarter Results
Agribusiness: Higher oilseed processing results in Asia, Europe and South America were offset by weaker results in the U.S. Grain merchandising results were lower, compared to an extraordinarily strong period last year. Increased volume in the quarter was primarily driven by higher grain merchandising out of the Black Sea region, the addition of new grain facilities in the U.S., increased oilseed processing in Brazil and two new oilseed processing facilities in Asia which started up earlier in the year.
Sugar + Bioenergy: Improved performance in the quarter was primarily due to higher prices and volumes in sugarcane milling. Additionally, 2010 milling results were impacted by challenges related to the start-up of two of our mills. Merchandising results were slightly down in the quarter due to lower margins. While segment results improved from last year, performance was significantly below the potential of the business due to the impact of lower sugarcane yields from the lingering effect of poor weather in Brazil, which reduced the production of sugar and ethanol.
Edible Oil Products: Results in the quarter were flat with last year. The segment continued to perform well with strong results in Brazil and significantly improved results in Europe when compared to the previous two quarters.
Milling Products: Higher results in the quarter were mainly due to higher margins and volumes in corn milling, as well as the contribution of our U.S. rice milling business, which we acquired in December 2010. Fourth quarter 2010 results included a nine million USD impairment charge related to a long-term supply contract that accompanied an acquisition of a wheat mill.
Fertilizer: Results in the quarter were slightly lower than last year primarily due to a more challenging margin environment.
Financial Costs: Interest expense increased in the quarter primarily due to higher average interest rates on debt.
Cash Flow: Cash generated in the year ended December 31, 2011 was approximately 2,6 billion USD compared to cash used by operations of approximately 2,4 billion USD in the same period last year. The 5,0 billion USD year-over-year improvement primarily reflects lower commodity prices as well as higher earnings, excluding notable items. Also impacting cash flow in 2010 were payments of withholding taxes and transaction closing costs totalling 424 million USD related to the sale of the fertilizer nutrients business.
Income Taxes: The effective tax rate for the year ended December 31, 2011 was approximately five percent compared to 23 percent last year. The lower tax rate reflects earnings mix and the impact of the gain on the sale of our fertilizer nutrients assets in 2010.
Outlook
Drew Burke, Chief Financial Officer, stated, «We expect to produce good results in 2012, but recognize that the year will be challenging. Farm economics have been strong and farmers around the world have been responding with increases in planting. We recently saw this in South America and expect a similar response in the Northern Hemisphere later this year. Large crops, increased trade and the full-year contribution of our new export terminals should provide good volume growth for our global merchandising operation».
«With respect to oilseed processing, sunseed in Europe and canola in Canada should continue to perform well due to the large crops from this past harvest, tight supply of European rapeseed and growing demand for vegetable oil. European rapeseed and U.S. soybean processing will likely remain difficult until harvests later this year when raw material flows more freely and facilities run at higher utilizations. Margins in South America should improve with the coming harvest. Demand for soymeal and soyoil should remain strong in China; however, volatility in margins will likely continue due to industry overcapacity».
«In sugar + bioenergy, we expect to see a significant improvement in results. We plan to mill 17 to 19 million metric tons of sugarcane for the full year, which is less than our 21 million metric tons of industrial capacity, but represents a substantial increase over 2011 levels of approximately 14 million metric tons. Our results in this segment will be weighted toward the second half of the year due to the seasonality of the Brazilian sugarcane harvest».
«Our food + ingredients business has been a steady contributor to earnings over the past three years and we expect it to continue to be in 2012. Current conditions are challenging in fertilizer, but good farm economics should be supportive of demand over the course of the year. We expect a significant improvement in results that will be second half weighted, driven by higher volume and additional cost reductions. Additionally, we expect the following for 2012: depreciation, depletion and amortization of approximately 575 million USD; capital expenditures of approximately 1,2 billion USD, approximately 25 percent of which will be invested in maintenance, safety and environmental projects; and a full year tax rate of eight to ten percent».
