Bunge: Reports Third Quarter 2016 Results

White Plains / NY. (bl) Bunge Limited announced its financial results for the third quarter 2016, that ended 30 September 2016. The company reports a GAAP EPS of 0.79 USD versus 1.42 USD last year. Agribusiness was impacted by low farmer selling in South America, reducing grain origination and soy crushing results. The company announces a strong performances in Food + Ingredients and Sugar + Bioenergy. Bunge expects a solid fourth quarter and strong earnings growth in 2017.

Financial Highlights

USD in millions, except per share data	Q3/2016		Q3/2015		9M-2016		9M-2015
Net income attributable to Bunge	USD	118	USD	239	USD	474	USD	588
Net income (loss) per common share from continuing operations-diluted	USD	0.79	USD	1.42	USD	3.24	USD	3.53
Net income (loss) per common share from continuing operations-diluted, adjusted (a)	USD	0.73	USD	1.24	USD	2.98	USD	3.36
Total Segment Ebit (a)	USD	213	USD	414	USD	740	USD	954
Certain gains + (charges) (b)	USD	14	USD	47	USD	2	USD	62
Total Segment Ebit, adjusted (a)	USD	199	USD	367	USD	738	USD	892
Agribusiness (c)	USD	83	USD	322	USD	545	USD	786
Oilseeds	USD	79	USD	106	USD	273	USD	411
Grains	USD	4	USD	216	USD	272	USD	375
Food + Ingredients+nbsp;(d)	USD	72	USD	45	USD	159	USD	146
Sugar + Bioenergy	USD	35	USD	3	USD	21	USD	(32)
Fertilizer	USD	9	USD	(3)	USD	13	USD	(8)

(a) 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 and ROIC are non-GAAP financial+nbsp;measures. Reconciliations to the most directly comparable U.S.
(b) Certain gains + (charges) included in Total Segment Ebit.+nbsp; See Additional Financial Information for detail.
(c) See footnote 11 of Additional Financial Information for a description of the Oilseeds and Grains businesses in Bunge’s Agribusiness segment.
(d) Includes Edible Oil Products and Milling Products segments.

Overview

Soren Schroder, Bunge’s Chief Executive Officer, stated, «Challenging market conditions and slow farmer selling led to a lower than expected quarter in Agribusiness. However, performance improvement efforts and better pricing drove higher results in Food + Ingredients and Sugar + Bioenergy. Year to date, we have delivered over 90 million USD of cost and efficiency benefits toward our full-year target of 125 million USD. We are also taking important steps to execute our strategy and for 2017 see strong growth potential in our Agribusiness, Foods and Sugar Milling businesses.

«Two acquisitions announced during the quarter will expand our Food + Ingredients platform and enhance our winning Agribusiness footprint. Grupo Minsa, a leading corn flour producer, will complement our existing wheat milling business in Mexico and increase our value added offerings to B2B customers in the U.S. New oilseed processing plants in Northern Europe will bring 2 million metric tons of additional capacity, extend our integrated value chain into key destinations and expand our presence in specialty markets for non-GMO soy and other products. Both acquisitions are good fits that further optimize our flows and logistics.

«We expect a solid fourth quarter and are confident about our growth prospects in 2017. Northern Hemisphere oilseed processing and export elevation margins are up with the arrival of harvests and should remain healthy into next year. Brazil and Argentina should produce record harvests, and with a relatively small volume of crops sold in advance, we expect active commercialization during the first half of next year. In addition, global demand and trade should remain robust. We expect Food + Ingredients will build upon its successes in lowering costs, increasing operational efficiencies and expanding market share. Sugar + Bioenergy should continue to benefit from a lower cost structure and higher sugar prices».

Third Quarter Results

Agribusiness: The combination of smaller than expected soy and corn crops in South America, due to adverse weather, and slow farmer selling negatively impacted our Brazilian and Argentine origination and soy processing results. Historically, Brazilian farmers price a portion of their next year’s production during the third quarter prior to planting, but with the change in market conditions farmers deferred sales in hope of higher prices. Also impacting Grains was lower risk management contributions as last year’s results benefited from the recovery of approximately 50 million USD of losses on open positions from the second quarter. In North America and Europe, results in Grains were comparable to last year as higher origination and export volumes were largely offset by lower margins. In Oilseeds, U.S. and European soy processing volumes and margins were down compared to a very strong prior year due to softer meal demand. Results in the third quarter of 2015 included a 47 million USD pre-tax gain on the sale of North American grain assets.

Edible Oil Products: Higher earnings in the third quarter were primarily driven by improved performances in Brazil and Europe. In Brazil, volumes and profits were up in most key categories despite the tough market conditions, reflecting actions to grow market share, contain costs and tighten integration with upstream Agribusiness. In Europe, higher results were driven by reduced costs and more favorable product mix. Slightly higher results in Asia were driven by improved product mix of specialty oils and fats in India. Results in North America were comparable to last year as lower margins were offset by higher volumes and decreased industrial costs driven in part by recent footprint restructuring.

Milling Products: Higher results in Brazil were the primary driver of improved performance in the quarter. Volumes benefited from the contribution of our recently acquired Pacifico mill and additional market share gains. Higher margins were driven by increased efficiency, improved product mix and favorable raw material sourcing. Volumes and margins in Brazil are back to levels achieved in 2014 prior to the country’s economic crisis. Partially offsetting these improvements, results in Mexico were lower due to the combination of the devaluation of the peso and competitive pressures.

Sugar + Bioenergy: Higher results in the quarter were primarily driven by our sugarcane milling operation, which benefited from higher sugar and ethanol prices and volumes. Results in our trading + distribution business were also higher, driven by improved margins that more than offset lower volumes. Results in our biofuel joint ventures were comparable to last year. We incurred 7 million USD of losses in the quarter associated with our renewable oils joint venture.

Fertilizer: Higher results in the quarter were primarily driven by improved performance in our Argentine fertilizer business, which benefited from higher farmer purchases in support of increased planting of wheat and corn.

Cash Flow

Cash generated by operations in the nine months ended September 30, 2016 was 635 million USD compared to cash generated of 527 million USD in the same period last year. The year-over-year increase reflects lower secured advances to suppliers due to the slower pace of farmer selling in Brazil.

Income Taxes

The effective tax rate for the nine months ended September 30, 2016 was 19%. Excluding approximately 39 million USD of favorable notable tax items, the effective tax rate was 26%.

Outlook

Drew Burke, Chief Financial Officer, stated, “The agribusiness environment has improved with the arrival of harvests in the Northern Hemisphere, driving higher margins and utilizations in our North American and European oilseed processing and grain handling operations. Soybean meal demand should increase as feed formulations normalize, reflecting robust underlying demand for proteins. Slow farmer selling in South America is likely to persist through the end of the year.

«In Food + Ingredients, we expect 2016 Ebit of 230 to 240 million USD. Our improved outlook reflects higher margins and volumes resulting from our performance improvement initiatives and a more stable economic environment in Brazil.

«In Sugar + Bioenergy, we expect 2016 Ebit of 60 to 70 million USD. Our improved outlook reflects better than expected ethanol prices and assumes normal seasonal weather patterns.

«In Fertilizer, we expect 2016 Ebit to be approximately 30 million USD, which is slightly down from our earlier expectation due to lower margins.

«We expect our full-year tax rate, excluding notables, to be slightly more favorable than our previous expectation and fall in the lower end of our 25 to 29% range.

«With this year’s turnaround in Food + Ingredients, Sugar + Bioenergy and Fertilizer, we see the potential for significant earnings growth in 2017 as Agribusiness returns to historical levels of performance, supported by growing protein demand, record crops in South America, and the fact that Brazilian farmers have only priced small percentages of their next year’s soy and corn crops».