February 10, 2012

 

 

With cautious optimism, Bunge Ltd and Corn Products International on Thursday (Feb 9) forecast a growing demand for crops and grain products in 2012.

 

The companies reported better-than-expected quarterly profits, emerging as bright spots in the agricultural arena following weak results from trading giants Archer Daniels Midland Co (ADM) and Cargill Inc.

 

Bunge and Corn Products shares were up 5% and 1.7%, respectively, in early afternoon. Bunge, the world's top oilseed processor, fared better than its trader peers in volatile markets and lingering global economic uncertainty.

 

The company reported a fourth-quarter profit of US$254 million, or US$1.65 a share, compared with US$301 million, or US$1.95 a share, a year earlier. It predicted "good results" in a "challenging" environment in 2012.

 

Macroeconomic woes continued to pressure Bunge's agribusiness unit, its largest segment, and could prevent growth in the unit this year, Chairman and CEO Alberto Weisser said. The segment buys, sells, transports, stores and processes bulk grains and soy.

 

Volatile trading and economic uncertainty have sapped revenue of agricultural giants, an abrupt change for top traders that would normally prosper during volatile times by using their vast global networks to exploit opportunities.

 

Some merchandisers have been caught flatfooted by swings in crop prices, moves that were driven by the euro zone crisis and not by supply and demand factors.

 

Earnings before interest and tax of Bunge's agribusiness segment fell to US$273 million in the quarter from US$381 million a year before.

 

ADM last week reported overall earnings of US$80 million for the last quarter, or 12 cents a share, down from US$732 million or US$1.14 a share.

 

Cargill in January revealed the quarter that ended November 30 was its worst since 2001, singling out poor performance in trading operations for dragging down stronger earnings in its food and agricultural division.

 

ADM and Cargill have both announced plans to cut their global workforces.

 

Higher prices and volumes in sugar cane milling and better results in oilseed processing in Asia, Europe and South America helped Bunge's profit.

 

Bunge predicted soy processing will remain difficult in the US in 2012. Soy processors in general have suffered because margins for global soy crushing have been under pressure due to excess capacity.

 

Yet crop losses due to a drought in South America could improve US crush margins, as some buyers are shifting business to the US, Weisser said.

 

Fourth-quarter profit for Corn Products International, which makes starches, sweeteners and food ingredients raised to US$1.22 per share, from 67 cents a share, a year ago. Excluding items, the corn refiner earned US$1.11 a share, beating market expectations of US$1.08 per share.

 

Corn Products managed to pass on higher corn costs to its customers in its latest quarter. Benchmark US corn prices on the Chicago Board of Trade struck an all-time record near US$8 a bushel in June, but are now holding steady around US$6-7.

 

Westchester, Illinois-based Corn Products projected full-year adjusted earnings of US$5 to US$5.25 per share and said it expects net sales to reach US$7 billion in 2012. Analysts, on average, were expecting earnings of US$5.10 per share, on revenue of US$6.75 billion, according to Thomson Reuters.

 

Corn Products shares were up 1.7% at US$57.39 on the New York Stock Exchange on Thursday afternoon. Bunge shares were up 5% at US$62.75.