Bunge reports weak Q1 results

Bunge reports weak Q1 results

Bunge posts loss due to grain trading and China's weak crushing environment.

BUNGE recently released its 2014 first-quarter results, revealing a net loss of $13 million, significantly down from a profit of $180 million a year ago (Table).

Results in the quarter were primarily affected by losses in the grain trading and distribution business and a temporarily depressed crushing environment in China, according to Soren Schroder, Bunge chief executive officer.

During a conference call last week, Schroder said the company had expected a lower price environment for the grain markets, particularly wheat, but poor weather conditions and political unrest in the Ukraine sent prices higher and resulted in a loss.

"The first quarter was slower than expected, but our outlook for the remainder of the year is positive," he said.

Schroder said the global agribusiness and food markets look strong, with solid demand and crush margins in most regions.

"Soybean harvests in South America are large, and farmers, particularly in Argentina, have increased their commercialization of crops," he explained. "Our team in Brazil is doing a first-rate job managing market risks and optimizing logistics flows, which has positioned us well for executing on this harvest. Farmers in the Northern Hemisphere are expected to plant large crops this spring, which should drive strong asset utilization and exports later in the year."

Bunge said its Agribusiness segment had strong grain origination results in Brazil, which benefited from the early stages of a record harvest. However, these were offset by losses in the trading and distribution operations, where commercial and risk management strategies anticipated lower grain prices.

The company explained that the combination of deteriorating U.S. winter wheat conditions and Black Sea political volatility caused prices to rise, pressuring margins. Additionally, ocean freight costs in its trading and distribution operation were above market costs.

Strong oilseed processing margins in Europe, Brazil and the U.S. led to improved results, despite a weak crushing environment in China. Year-ago results included a gain of $16 million related to the sale of certain legal claims in Brazil.

The Sugar & Bioenergy segment had lower first-quarter results in both the cane milling and trading and distribution businesses. In sugarcane milling, the decrease was primarily driven by approximately $31 million of market-to-market losses related to hedges on forward sugar sales and higher start-up costs, which last year were mostly incurred in the second quarter due to the later start to the milling season. Results in the trading and merchandising business, meanwhile, went against a strong year-ago period.

Results for the Biofuels business were higher than last year primarily due to the favorable ethanol margin environment in the U.S. and the contribution from Bunge's new corn wet milling joint venture in Argentina.

Results in Edible Oil Products reflected normal seasonal weakness and were lower than last year. Improved performances in the company's U.S., European and Asian businesses were more than offset by lower results in Brazil and Canada. Both the Brazilian and Canadian operations focused on achieving better margins. The Canadian results were also affected by lower volumes, primarily due to the effects the severe winter weather and rail logistics issues had on demand.

Bunge's Milling Products division posted higher margins in the Brazilian wheat milling business, driven by a continued focus on extracting higher value through an improved product and channel mix and tight cost controls. These gains more than offset lower volumes of lower-margin sales.

Wheat milling results in Mexico benefited from the new Altex acquisition, which performed to plan in the quarter. Results in rice milling were comparable to last year, while U.S. corn milling results were lower than last year primarily due to lower margins and higher energy costs.

Improved results for the Fertilizer segment were primarily driven by better performance in Bunge's Brazilian port operation.

"We remain confident about the full year. Demand for our products in most regions has been strong, and we expect these conditions to persist throughout the year," Bunge chief financial officer Drew Burke said.

 

Bunge first-quarter results, million $

 

2014

2013

Net sales

13,461

14,785

Agribusiness

10,093

10,774

Sugar & Bioenergy

844

1,113

Edible Oil Products

1,928

2,297

Milling Products

535

535

Fertilizer

61

66

Total segment earnings

75

323

Net income

(13)

180

Earnings per share ($)

(0.15)

1.21

 

Volume:86 Issue:19

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