July 30, 2012


Bunge expects good Q2 earnings on grain supplies squeeze


While missing revenue outlooks for first half of 2012, Bunge forecast a "strong" performance in the second half as squeeze on grain supplies favours them and fulfils its potential.


The transport-to-fertiliser group - one of the ABCD of top Western agricultural trading houses with Archer Daniels Midland, Cargill and Louis Dreyfus - flagged a benefit to international enterprises from the weak crop supplies expected following weather damage to crops in, notably, the US and the former Soviet Union.


"In times of tight commodity stocks and price volatility, farmers depend on a trusted outlet for their crops, commercial customers rely on a responsive supplier, and the world requires flexible trade that can move products smoothly and safely," Alberto Weisser, the Bunge chairman and chief executive, said.


For Bunge, a "diverse product portfolio and global asset network enable us to provide these services in the most challenging of times", Weisser said.


Drew Burke, the Bunge finance director, said, "Considering the smaller US corn harvest, global grain demand will be met by a variety of products from different geographies.


"With our global network of ports and elevators, our grain merchandising operations should perform well in this environment."


The group forecast a further boost from its Brazil-based sugar operations, where weather conditions have "improved" after excessive rains which have delayed the cane harvest so far in 2012-13, if raising hopes for yields later in the season.


"While the heavy rainfall negatively impacted our results this past quarter, it benefits the development of the sugarcane" Burke said.


"We feel increasingly more confident in our ability to mill at capacity in 2013," while standing by a forecast crush of 17 million-18 million tonnes of cane in 2012.


The comments come the day after cane industry group Unica revealed that the cane harvest in Brazil's Centre South region, where Bunge operates, had in the first half of July risen above year-ago levels for the first time this season.


Analysts including Czarnikow and Safras & Mercado have sounded upbeat notes on Centre South cane output for the rest of the year. In the April-June quarter, Bunge's sugar division recorded an operating loss of US$28 million, compared with a profit of US$18 million a year before, and representing a second successive quarter in the red.


Profits also declined in the edibles oils division, to US$2 million from US$30 million. Group earnings fell to US$274 million or US$1.20 a share on an underlying basis, from US$316 million, or US$1.78 a share, a year before. Analysts had expected a US$1.34-a-share result in the latest period, according to a Thomson Reuters poll.


Bunge also forecast "strong export demand" ahead for its US oilseed processing products, following the disappointing South American harvest. And Burke said that the group's "European sunseed and Canadian rapeseed processing operations should benefit from the combination of large crop production and increased oil and meal demand due to tightness in the global soy and European rapeseed supply".


However, European rapeseed processing margins, hurt by high prices of the oilseed, would "remain under pressure". In China, while oilseed processing "will likely remain challenging, we expect margins to improve later in the year as the market works through excess inventory in the country".


Bunge shares closed up 4.9% at US$64.81 in New York.

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