Bunge sees bumper South American crop lifting profits


Agribusiness giant Bunge expects a bumper South American crop to boost its processing business this year.

Squeezed processing margins in its core South American segment were the fly in the ointment, in the latest set of company results.

But surging sugar prices, and better earnings from the group's food business, helped Bunge top analyst expectations, sending shares soaring.

Growth in earnings expected

"We enter 2017 with confidence and expect strong growth in earnings," said Bunge chief executive officer Soren Schroder said.

Bunge's agribusiness suffered in 2016 thanks to smaller than expected crops, which encouraged farmers to hold on to supplies.

"Results decreased from last year, primarily due to lower results in our soy processing operations, reflecting tight bean supplies in South America and softer global soymeal demand due to competition from lower cost feed products," Bunge said.

This pushed down processing margins in South America, leaving earnings from the agribusiness segment down some 12% year-on-year in the last three months of 2016.

Bumper crop

But this picture is expected to change this year, Mr Schroder said, with bumper crops, including a record-large Brazilian crop.

"After disappointing crops in South America last year, the region is on track to produce record harvests this season, which aligns well with our footprint," he noted.

And Thomas Boehlert, Bunge's chief financial officer saw rising earnings from the agribusiness segment thanks to "large crops in South America, of which Brazilian farmers have a significant percentage remaining to price".

Mr Boehlert also noted "a return to more normal levels of soy meal inclusion in feed rations; and higher softseed crush margins due to the combination of greater seed supply and robust vegetable oil demand".

Earnings before interest and taxation from Bunges' agribusiness segment were expected to rise in 2017, to $895m-$1.05bn, compared to $782m last year.

Rising sugar profits

And despite the weak performance in the company's agribusiness segment in the last three months of 2016, profits in smaller segment rallied.

Profits from the company's food business surged 52%, while profits from the sugar and bioenergy segment tripled.

For sugar, Bunge said "increased results in the quarter were primarily driven by our sugarcane milling operation, where higher sugar and ethanol prices more than offset lower crush volumes".

Results beat expectations

Overall, the company's net profits rose 39% year-on-year, to $262m in the last three months of 2016.

Adjusted profits were reported at $1.70 a share, beating analyst expectations of $1.57 a share, and ahead of $1.49 a year ago.

Net sales rose 8.6% year on year in the same period, to $12.06bn, beating analyst expectations of $11.41bn.

Bunge shares were up 7.9% in morning deals in New York, at $5.41.


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