Bunge issues surprise Q2 profit warning

20.07.2017

The agricultural commodities merchant Bunge has made a surprise profit warning as woes deepen in its grain and oilseed trading business.

The company, which operates a global network of silos, ports and crushing plants, said Wednesday that profits would be “below the low end” of estimates in the second quarter. It scheduled a conference call for investors Thursday.

The disclosure will fan speculation that Bunge could become takeover target. The stock fell 3.4 per cent after exchange hours in New York.

Glencore, the Swiss-based commodities powerhouse, in May said it approached Bunge about a business combination. Soren Schroder, Bunge’s chief executive, has discussed the need for consolidation in the grain handling industry as plentiful crops depress industry profit margins.

Credit Suisse this week put the odds of a buyout at 50 per cent. Glencore’s interest “makes this one of those times for shareholders where the worse it gets for Bunge’s results, the better it might get for the stock price as the probability of a takeout goes higher or the company pursues more aggressive avenues to create shareholder value,” the bank wrote.

Bunge said its adjusted second quarter earnings, due for release on August 2, would be “modestly profitable” and blamed “challenging global agribusiness market conditions.”

Bunge is a dominant buyer of soyabeans and corn from Brazil, where farmers have hoarded crops in hopes of receiving higher prices. The company cited “unprecedented farmer retention in South America” as one reason for lower profits.

The company also announced a $250m cost-cutting programme and said it would reduce its planned 2018 capital spending to $650m from $750m.



The Financial Times


 

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