Bunge Reports Third Quarter 2015 Results

WHITE PLAINS, N.Y., Oct. 29, 2015 /PRNewswire/ -- Bunge Limited (NYSE: BG)

• Total adjusted segment EBIT of $367 million, up $51 million vs. last year
• Combined Agri-Foods trailing four quarter ROIC of 10.3%; 3.3 points over WACC
• YTD total adjusted segment EBIT of $892 million, up $83 million vs. last year
• Higher tax rate impacting EPS
• Expect Agribusiness 2015 full-year EBIT to exceed $1B; continued improvement from Q3 in Foods, and combined full-year Agri-Foods ROIC of ~10%

Financial Highlights

Overview

Soren Schroder, Bunge's Chief Executive Officer, stated, "Agribusiness delivered a good third quarter.  The segment capitalized on favorable soy processing margins and increased farmer selling in Brazil, and generated solid risk management income.  Food & Ingredients showed sequential improvement from the second quarter driven by our North American operations, but the tough economic environment in Brazil and rapid devaluation of the real continued to present challenges.

"Bunge's returns are strong, with a four quarter trailing ROIC in our core Agribusiness and Food operations of 10.3%, well above our 7% cost of capital. We continue to make progress in our performance improvement programs, which have generated approximately $75 million of benefits year-to-date, and pursue a balanced approach to capital allocation.

"During the third quarter, we bought back $100 million of common shares, bringing the year-to-date total to $300 million, while making progress on improving our winning footprint in our core businesses. We announced bolt-on acquisitions during the quarter that included Brazilian wheat processor, Moinho Pacifico, and U.S. specialty oil producer, Whole Harvest Foods. Pacifico is the largest port based wheat mill in Brazil, which along with our new mill under construction in Rio de Janeiro, will allow us to efficiently serve the growing needs of our customers as the Brazilian economy recovers. Whole Harvest Foods expands our North American specialty oil product offering in the fast growing natural ingredient category. 

"Looking ahead, we expect over $1 billion in full-year Agribusiness EBIT and sequentially higher results in Food & Ingredients in the fourth quarter. Our food businesses in Brazil will continue to experience challenges for the remainder of the year, but, importantly, our complete integrated oilseed and grain value chains in the country should produce full year results that exceed last year. Sugar & Bioenergy should finish the year both EBIT and free cash flow positive.  Demand for ethanol in Brazil has been strong; recent gasoline price increases have been supportive to ethanol pricing; and the significant devaluation of the Brazilian real has returned Brazil to its traditional role as the world's low cost producer of sugar."   

Third Quarter Results

Agribusiness
In Oilseeds, soybean processing in the U.S., Brazil, Argentina and Europe were the largest contributors to the quarter, benefitting from strong domestic and export demand for soy meal. Softseed processing results in Europe and Canada were down as farmers retained seed. Results in oilseed trading & distribution were lower than last year's strong performance. 

In Grains, higher results were primarily driven by our Brazilian grain origination operation which experienced a significant pick-up in volume in the quarter with the devaluation of the real. Grain origination results in other origins were similar to last year and did not make a significant contribution to results due to slow farmer selling. Results in grain trading & distribution which included the recovery of approximately $50 million of losses on open positions at the end of Q2, were good and similar to last year.

Our global team managed risk well during the quarter as both grain and oilseed prices declined, reflecting good crops and inventory build-up in most regions. Higher segment volumes were primarily due to our soy processing operations in the U.S., Argentina and Asia.  Third quarter 2014 results were impacted by approximately $80 million in temporary mark-to-market hedging losses in our oilseed processing and distribution operations, which reversed later in the year when we executed the contracts.

Edible Oil Products
Results in North America showed improvement due to higher margins in both our refining and packaging operations.  In Brazil, margins and volumes were pressured due to the rapid contraction of consumer demand and the significant devaluation of the real.  While volumes are rebuilding from lower levels, margins will take time to recover.  Results in our European operation were also down in the quarter largely due to the weak economic environment in certain countries, which more than offset the savings from our performance improvement initiatives.

Milling Products
Improved performance in North America was more than offset by lower results in Brazil.  Our Brazilian wheat milling business was impacted by lower margins in U.S. dollars and volumes due to the rapid contraction of consumer demand, particularly from the food service channel, and the significant devaluation of the real.  In local currency, our team managed to hold margins similar to last year levels; however, the weak economic conditions have made it difficult to push through higher prices to cover higher local costs and currency impacts. In North America, higher margins and volumes in our Mexican wheat milling business more than offset the impacts of currency devaluation and lower margins in our U.S. corn milling business.  Rice milling results were comparable to last year. Third quarter results reflect the recovery of approximately $4 million of mark-to-market losses on foreign exchange, which were incurred in the second quarter.   

Sugar & Bioenergy
Results were lower in both sugarcane milling and trading & merchandising.  In milling, lower prices and sucrose content in the cane (ATR), more than offset higher volume.  While production volume was up this year, it was lower than expected due to excess rain in September, which limited the number of milling days. In trading & merchandising, lower margins more than offset higher volumes compared to a particularly strong prior year period.  Results in our biofuel businesses were comparable to last year.  Results in the quarter were impacted by a $5 million loss from our Brazilian renewable oils joint venture.  We also incurred a mark-to-market loss of $7 million related to forward sugar hedges, which are expected to reverse in Q4, whereas last year results included mark-to-market gains related to hedges on our forward sugar sales of $12 million and gains on foreign currency hedges.

Fertilizer
The loss in the quarter was due to lower volumes and margins in our Argentine operations resulting from reduced planting of corn and wheat.  Results in our Brazilian port operation were also down due to lower fertilizer imports and currency translation.

Cash Flow
Cash generated by operations in the nine months ended September 30, 2015 was $633 million compared to cash generated of $1.1 billion in the same period last year. The year-over-year variance primarily reflects higher levels of inventory and farmer advances due to greater year-over-year farmer selling in the Americas, which more than offset higher earnings.

Income Taxes
Excluding approximately $25 million of certain discrete tax items, the effective tax rate for the nine months ended September 30, 2015 was approximately 30%.  The increase from the six months ended June 30, 2015 rate of 26% was due to earnings mix. 

Outlook

Drew Burke, Chief Financial Officer, stated, "In Agribusiness, strong underlying demand for soymeal and oil will continue to support a favorable U.S. and Brazilian soy crushing environment.  European sunseed crush margins have improved in certain countries with the arrival of harvest; however, rapeseed and Canadian canola margins continue to be pressured by weak demand and a reluctant farmer. 

"With the arrival of new crops, utilizations in our North American grain operations are picking up, although export margins are weak due to farmer retention and increased global competition. Our Brazilian grain handling assets, on the other hand, should benefit from strong export flows of corn due to this year's large safrinha crop. 

"In Food & Ingredients, we expect sequential improvement from Q3 as we move into the seasonally strongest quarter. In Europe, margins will improve as new oilseed crops reset raw material costs. In North America, we expect continued good performance.  And while results in Brazil should improve with seasonality, we will likely continue to face challenges expanding margins and increasing volumes in an environment of extremely low consumer confidence. 

"In Sugar & Bioenergy, strong domestic demand and an improving price outlook for ethanol in Brazil gives us confidence that we will finish the year profitable and free cash flow positive.

"We are increasing our full-year effective tax rate forecast from 26% to a range of 28 to 30% excluding discrete tax items. The higher rate reflects a change in our expected mix of earnings to higher tax jurisdictions.  

"We are decreasing our 2015 capex forecast from $875 million to approximately $750 million due to the timing of spend on certain long-term projects in Agribusiness and Food & Ingredients.  The approximately $125 million difference will carry over into 2016 and 2017."

Conference Call and Webcast Details

Bunge Limited's management will host a conference call at 10:00 a.m. EDT on October 29, 2015 to discuss the company's results.

Additionally, a slide presentation to accompany the discussion of results will be posted on www.bunge.com.

To listen to the call, please dial (866) 436-9172.  If you are located outside the United States or Canada, dial (630) 691-2760.  Please dial in five to 10 minutes before the scheduled start time.  When prompted, enter confirmation code 40968200.  The call will also be webcast live at www.bunge.com.

To access the webcast, go to "Webcasts and Events" in the "Investors" section of the company's website.  Select "Q3 2015 Bunge Limited Conference Call" and follow the prompts.  Please go to the website at least 15 minutes prior to the call to register and download any necessary audio software.

A replay of the call will be available later in the day on October 29, 2015, continuing through November 28, 2015.  To listen to it, please dial (888) 843-7419 or, if located outside the United States or Canada, dial (630) 652-3042.  When prompted, enter confirmation code 40968200.  A replay will also be available at "Past Events" in the "Investors" section of the company's website.

About Bunge Limited

Bunge Limited (www.bunge.com, NYSE: BG) is a leading global agribusiness and food company operating in over 40 countries with approximately 35,000 employees.  Bunge buys, sells, stores and transports oilseeds and grains to serve customers worldwide; 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 ingredients used by food companies; and sells fertilizer in South America.  Founded in 1818, the company is headquartered in White Plains, New York.

Cautionary Statement Concerning Forward-Looking Statements

This press release contains both historical and forward-looking statements. All statements, other than statements of historical fact are, or may be deemed to be, forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These forward-looking statements are not based on historical facts, but rather reflect our current expectations and projections about our future results, performance, prospects and opportunities. We have tried to identify these forward-looking statements by using words including "may," "will," "should," "could," "expect," "anticipate," "believe," "plan," "intend," "estimate," "continue" and similar expressions. These forward-looking statements are subject to a number of risks, uncertainties and other factors that could cause our actual results, performance, prospects or opportunities to differ materially from those expressed in, or implied by, these forward-looking statements. The following important factors, among others, could affect our business and financial performance: industry conditions, including fluctuations in supply, demand and prices for agricultural commodities and other raw materials and products used in our business; fluctuations in energy and freight costs and competitive developments in our industries; the effects of weather conditions and the outbreak of crop and animal disease on our business; global and regional agricultural, economic, financial and commodities market, political, social and health conditions; the outcome of pending regulatory and legal proceedings; our ability to complete, integrate and benefit from acquisitions, dispositions, joint ventures and strategic alliances; our ability to achieve the efficiencies, savings and other benefits anticipated from our cost reduction, margin improvement and other business optimization initiatives; changes in government policies, laws and regulations affecting our business, including agricultural and trade policies, tax regulations and biofuels legislation; and other factors affecting our business generally. The forward-looking statements included in this release are made only as of the date of this release, and except as otherwise required by federal securities law, we do not have any obligation to publicly update or revise any forward-looking statements to reflect subsequent events or circumstances.

Additional Financial Information

The following table provides a summary of certain gains and charges that may be of interest to investors. The table includes a description of these items and their effect on continuing operations for total segment EBIT, net income (loss) attributable to Bunge and earnings per share for the quarters ended September 30, 2015 and 2014.

„Reconciliation of Non-GAAP Measures

This earnings release contains certain "non-GAAP financial measures" as defined in Regulation G of the Securities Exchange Act of 1934.  Bunge has reconciled these non-GAAP financial measures to the most directly comparable U.S. GAAP measures below.  These measures may not be comparable to similarly titled measures used by other companies.

Total segment EBIT

Total segment EBIT is a non-GAAP financial measure and is not intended to replace net income (loss) attributable to Bunge, the most directly comparable GAAP financial measure. Total segment EBIT is an operating performance measure used by Bunge's management to evaluate its segments' operating activities.  Bunge's management believes total segment EBIT is a useful measure of its segments' operating profitability, since the measure allows for an evaluation of the performance of its segments without regard to its financing methods or capital structure.  In addition, EBIT is a financial measure that is widely used by analysts and investors in Bunge's industries.  Total segment EBIT is not a measure of consolidated operating results under U.S. GAAP and should not be considered as an alternative to net income (loss) or any other measure of consolidated operating results under U.S. GAAP.

Below is a reconciliation of total segment EBIT to net income attributable to Bunge:

Earnings per common share-diluted (excluding certain gains & charges and discontinued operations)

Below is a reconciliation of earnings per common share-diluted (excluding certain gains and charges and discontinued operations) to earnings per common share-diluted. Earnings per common share-diluted (excluding certain gains and charges and discontinued operations) is a non-GAAP financial measure and is not a measure of earnings per common share–diluted, the most directly comparable U.S. GAAP financial measure. It should not be considered as an alternative to earnings per share-diluted or any other measure of consolidated operating results under U.S. GAAP.

Notes

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SOURCE Bunge Limited