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Strong Agribusiness performance drives Bunge Q1 results

First-quarter results better than expected, and company "confident about growing earnings in 2016."

Bunge Ltd. announced financial results for its fiscal 2016 first quarter, with total segment earnings of $322 million driven by strong performance in Agribusiness (Table).

Bunge chief executive officer Soren Schroder noted, "In the first quarter, our Agribusiness team managed markets, margins and logistics very well in a challenging environment. In Food & Ingredients, we are seeing positive signs in Brazil, with gains in both volume and market shares."

He said first-quarter results overall were better than expected, and "we feel confident about growing earnings in 2016."

Schroder added that although the company is seeing strong customer demand and better global soy processing margins, smaller South American crop harvests caused by adverse weather "are introducing new market dynamics. These will generate headwinds in the second quarter but also create the potential for us to leverage our winning global footprint more broadly over the course of the year. Both U.S. crush margins and export flows should improve in the second half."

First-quarter results by segment

Agribusiness. Results in Bunge's Agribusiness segment benefited from good performances in South America and effective risk management strategies.

Lower oilseeds results were due to a softer global soy processing environment. Margins in the U.S. and Europe were negatively affected by increased export competition from Argentina, which were partially offset by improved results in Argentina that benefited from increased farmer selling following the devaluation of the peso. Soy processing results in Brazil were good and comparable to last year. Oilseed trading and distribution results were similar to last year, benefiting from strong export flows out of South America.

Higher results in grains during the quarter were largely driven by improved performances in grain trading and distribution and Bunge's port services operation, which benefited from increased South American exports. Higher volumes were primarily driven by increased origination in South America, which more than offset declines in the U.S.

Food & Ingredients. For the segment's edible oil products business, Bunge said despite continued tough macroeconomic conditions in Brazil, volumes recovered towards the end of the quarter, and local currency margins were better than last year.

In India, the company continued to experience double-digit volume growth and margin expansion in local currency, but the currency translation from the weaker Indian rupee offset the benefit.

Depressed economies, unfavorable currency translation and soft consumer demand affected margins and volumes in Russia and Ukraine.

Results in Bunge's North American business were comparable to last year, as strong volume growth in its value-added downstream business was offset by lower refining margins. The quarter included a $12 million market-to-market gain, which will reverse in the following quarters.

For the segment's milling products business, while volumes have recovered and are up 11% since the second quarter of 2015, Bunge's Brazilian business continued to face currency translation headwinds and soft consumer demand, especially in the foodservice channel. Margins in local currency improved, however, driven by higher productivity and a better product mix. The company said integration of the Pacifico acquisition is progressing well, and the greenfield mill in Rio de Janeiro, Brazil, is on track for start-up in the fourth quarter.

Higher results in North America were primarily due to improved performance in the value-added categories and increased productivity in the U.S. operation. Bunge said its Mexican business delivered stronger volumes and productivity gains, but the impacts were offset by currency translation from the weaker peso.

Sugar & Bioenergy. The inter-harvest period in Brazil occurs during the company's first quarter. This is when sugarcane mills in the center-south region typically do not operate for most of the quarter and are selling sugar and ethanol inventories from the previous sugarcane harvest.

Higher results in the quarter were primarily driven by the trading and distribution business, which benefited from higher volumes and margins. Results in sugarcane milling were as expected and slightly down from last year, primarily due to lower sales of sugar and ethanol resulting from Bunge's commercial decision to carry less inventory into the year than in 2015. Results and related development costs associated with the renewable oils joint venture came to a loss of $6 million in the quarter.

Fertilizer. Improved results in the quarter were due to higher volumes and margins for the fertilizer operation in Argentina and increased volumes at the port facility in Brazil. In addition, the 2015 results were affected by a worker strike at one of Bunge's plants in Argentina.


Looking ahead, Bunge chief financial officer Drew Burke noted that demand is strong for the core Agribusiness products. With the U.S. Department of Agriculture forecasting global demand for soybean meal and soybean oil each to grow 7% this year, it should be supportive of soy processing margins.

"Softseed processing margins should improve later in the year with the arrival of new-crop seed supplies," Burke said. "Recent weather-related changes to crop production in South America could present increased opportunities for our assets in the Northern Hemisphere. However, we expect headwinds in the second quarter as South American farmers and markets adjust to a scenario of lower production."

For the Food & Ingredients segment, 2016 results are expected to be higher on the year, driven by operational excellence initiatives and recent acquisitions. "We are cautiously optimistic that the improved volumes and margins we are currently seeing in our Brazilian operations will continue," Burke said. "We expect results to be weighted to the second half of the year."

In the Fertilizer segment, he said improved farmer economics in Argentina due to a weaker peso and removal of export taxes on grains should lead to increased purchases of crop inputs later in the year.

In the Sugar & Bioenergy segment, Burke said Bunge's sugarcane crop is developing well, so "considering our sugar price hedges and the Brazilian ethanol pricing outlook, we continue to expect 2016 to be a year of growth in earnings and cash flow. Similar to past years, results will be seasonally weak until the second half of the year."

Based in White Plains, N.Y., Bunge Ltd. is a leading global agribusiness and food company operating in more than 40 countries. Bunge buys, sells, stores and transports oilseeds and grains; processes oilseeds to make protein meal for animal feed and edible oil products for commercial customers and consumers; produces sugar and ethanol from sugarcane; mills wheat, corn and rice to make food ingredients, and sells fertilizer in South America.

Bunge first-quarter financial highlights  (million $)















Food & Ingredients**



Sugar & Bioenergy






Total segment EBIT*



Net income per common share from continuing operations ($):







*EBIT = total segment earnings before interest and tax.

**Includes edible oil products and milling products businesses.

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