Bunge: Reports Q4 and Full Year 2012 Results

White Plains / NY. (bl) Bunge Limited announced its fourth quarter and full year 2012 results. Alberto Weisser, Bunge´s Chairman and Chief Executive Officer: «The fourth quarter was weaker than expected, but looking at the full year, agribusiness achieved record Ebit of over one billion USD in a challenging, volatile period. On an adjusted basis, this exceeded last year´s record year by 20 percent. After a slow beginning to the year, food + ingredients recovered and delivered a solid second half. And in fertilizer we took the important strategic step of agreeing to sell our Brazilian business for 750 million USD. This divestiture will create a more streamlined complement to our agribusiness operations with lower price risk. Sugar + bioenergy, however, continued to be challenged by negative margins in our Brazilian ethanol operations and the lingering impact of weather on sugar-cane yields and ATR. While the non-cash impairment charge to goodwill that we were required to take under U.S. GAAP accounting rules is disappointing, it does not change our positive view of the business and our optimism about its future growth opportunities».

«Looking to 2013, the agribusiness environment is robust. The world needs to rebuild grain and oilseed stocks to meet growing consumption. Crops in South America are developing well and are expected to reach record levels. In combination with expected strong export demand, this will stress local grain transport and handling infrastructure more than usual, particularly in Brazil. In these environments, the value of our services and network of elevators, processing plants and port terminals increases as we are able to provide market access for farmers and deliver the right products to customers when and where they are needed. In sugar + bioenergy, we reached our sugar-cane planting target of nearly 70 thousand hectares in 2012, which combined with our planting programs in previous years, should allow us to operate our mills at capacity in 2013. We expect our food + ingredients segment to build upon its recent momentum and extract even greater value from the business».

Fourth Quarter Results

Results in the quarter included after-tax non-cash charges of 683 million USD that reduced net income attributable to Bunge from continuing operations by 385 million USD and discontinued operations by 298 million USD.

• In connection with our annual goodwill impairment testing, we recorded an after-tax goodwill impairment charge of 339 million USD in our sugar + bioenergy segment resulting primarily from the current difficult industry market conditions. The impairment is a non-cash charge and does not affect the Company´s current or future operations.
• As a result of our entry into an agreement in December 2012 to sell our Brazilian fertilizer business, the results of this business, net of tax, have been classified as discontinued operations. In addition, the assets and liabilities of the business that are included in the sale have been classified as held for sale. Due to this pending sale, we recorded a deferred tax valuation allowance of 266 million USD. We have also recorded an after-tax provision of 32 million USD related to long-term Brazilian farmer receivables, as we believe the sale of the business will negatively impact our ability to collect those outstanding amounts from farmers. At closing, we expect to record a gain on the sale transaction.
• During the quarter, we sold at a discount certain long-term recoverable tax assets in Brazil for 31 million USD in cash, which resulted in an after-tax loss of 49 million USD. On a pre-tax basis this charge negatively impacted Ebit in agribusiness by 66 million USD and edible oil products by seven million USD. In addition, we entered into an agreement to sell certain legal claims in Brazil. This transaction closed in January 2013 and is expected to result in an after-tax gain of approximately 40 million USD, which we will recognize in the first quarter 2013.

Agribusiness

On an adjusted basis, higher oilseed processing results in North and South America were offset by lower results in Asia and European soft-seed processing. Grain trading + merchandising benefited from corn export programs out of South America and Eastern Europe and slightly higher results out of North America; however, results were short of expectations primarily due to weak U.S. grain export volumes and risk management strategies that were not as profitable as expected in the quarter.

Sugar + Bioenergy

Bunge´s eight mills crushed 1,5 million metric tons more sugar-cane in the quarter than in the prior year. Despite lower ATR levels, our unit production costs decreased, reflecting our efficiency improvement activities and sales volumes increased. However, this was offset by lower ethanol and sugar prices, which were on average down approximately 20 percent. Risk management strategies were less effective in the quarter, which impacted results in our trading + merchandising business. Performance in our U.S. ethanol joint ventures was also lower than last year.

Edible Oil Products

Adjusting for charges, results in the quarter were primarily driven by higher packaged oil margins in Brazil and Europe and our 2012 acquisition in India. Results in the quarter included a 16 million USD valuation adjustment for certain value added taxes in Brazil.

Milling Products

Higher results in wheat milling, which benefited from improved margins and contributions from our 2012 acquisition in Mexico, were more than offset by lower results in corn milling and rice milling, which experienced lower margins. Results in the quarter included a six million USD valuation adjustment for certain value added taxes in Brazil.

Fertilizer

Results in our ongoing fertilizer operations were lower in both Argentina and in our Morocco joint venture.

Cash Flow

Cash generated in the fourth quarter 2012 was approximately 2,4 billion USD compared to cash generated of 1,3 billion USD in the same period last year. For the full year, cash used by operations was 455 million USD compared to cash generated of 2,6 billion USD in 2011. The year-over-year variance primarily reflects higher commodity prices.

Income Taxes

The effective tax rate, excluding our discontinued fertilizer business and the sugar + bioenergy impairment for the year ended December 31, 2012 was approximately 19 percent compared to six percent last year. The higher tax rate primarily reflects earnings mix.

Outlook

Drew Burke, Chief Financial Officer, stated, «We expect a much improved year in 2013. In agribusiness, the combination of tight global supplies and large crops in South America should make this region the principal supplier of soybean, soy products and grain exports until Northern Hemisphere harvests begin later in the year. At that time we expect a similar situation to develop in the Northern Hemisphere. Considering our global network of assets, expertise in managing risk and export capabilities this market environment fits us well».

«For the first time, in sugar + bioenergy we expect to have sufficient sugar-cane to be able to operate our mills at our 21 million tons of capacity. This higher level of crush, as well as an expected improvement in ATR, should significantly reduce our unit production costs. We expect results in this segment to be significantly higher and weighted toward the second half of the year due to the seasonality of the Brazilian sugar-cane harvest».

«In food + ingredients, we expect the solid performance in the second half of 2012 to continue. We should benefit from the full-year results of our acquired wheat mill in Mexico and the start-up of operations at our new multi-oil refining facility in India and our new refining and packaging facility in Decatur, Alabama, both of which should improve our operating efficiencies».

«Additionally, we expect the following for 2013: 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 17 percent to 20 percent».