Oilseeds boost Bunge Q3

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The New York-based company reported results for the quarter and nine-month period ending September 30 on Wednesday [October 31].

Net income for the quarter was $365m, up from $92m for the third quarter of 2017, Bunge reported. For the first nine months of the year, net income was $332m, up from $220m.

Total segment earnings before interest and taxes (EBIT) for the quarter increased from $175m to $535m for the third quarter, said Thomas Boehlert, CFO with Bunge on an earnings conference call. The adjusted segment EBIT was $573m.

Bunge reported:

Total segment EBIT for the first nine months rose from $381m in 2017 to $667m this year. The adjusted EBIT was $775m, up from $422m last year.

Net sales for the quarter fell slightly from $11.42bn to $11.41bn for the quarter. For the first nine months, sales rose from $34.189bn in 2017 to $34.2bn.

Gross profit for the third quarter of 2018 was $918m, up from $489m in 2017. For the first nine months of the year it was $1.84bn, an increase from the $1.3bn in 2017.

The company also announced that it is increasing the savings target for its global competitiveness program by $25m, with the new goal of saving $175m this year.

“We also continue to improve the efficiency of our industrial operations with $65m delivered so far this year towards our full year target of $80m,​” said Soren Schroder, Bunge CEO. “This is a result of the commitment and hard work of all our colleagues to make Bunge even better and more competitive – a quest that will continue beyond achieving our initial goal.”

Looking forward, 2019 appears promising especially in regard to soybean and soft seed crush, along with demand and trade, efforts from Bunge Loders Croklaan and in milling, he said on the conference call.

Soybean trade

The company is in a good position to navigate global trade as it remains influenced by politics, said Schroder.

“Bunge is the leader in crush and B2B oils, a regional Americas leader in milling and a major player in global agricultural trade and distribution,” ​he said. “We have invested behind our strategy in crush, oils and milling, and we have a well-balanced footprint to source global trade.”

Long term, a trade deal between the US and China would be “positive for the industry,”​ he said. However, how a resolution would affect Bunge would depend on when it happened and what preceded it, he added.  

“It is not healthy to have the type of environment we have now,”​ he said. “You can see how it is skewing inventory build in certain regions and it’s putting pressure on prices and creating abnormal basis levels. … We believe that for global growth and trade and underlying protein demand, a resolution is a good thing for everybody.”

Demand for soybean meal is growing outside of China, and likely will grow in China in the future, he said. “Trade conflicts and shifts in trade flows in the interim are distorting, but it doesn’t change the long-term outlook,”​ he added.

Currently, however, Bunge is in a position to respond and profit should a resolution happen in the short or long term, he said. “In either situation, we will be able to navigate, we will be able to navigate well, but I hesitate to call it positive or negative this far in advance,”​ he added regarding what a potential resolution of the trade issues between the US and China would mean for Bunge.

Agribusiness, oilseeds and segment highlights

Within the company’s business segments, its agribusiness saw its results led by soy crush, said Schroder. Margins were about $50 per ton.

The quarter saw an increase in origination in Brazil and a higher than anticipated earning for grains, he said.  

“Our team navigated really well through a complicated market environment and is making sure we monetize the physical position in soybeans we built during the second quarter,”​ he said.

Overall, agribusiness adjusted results improved in the third quarter and both oilseeds and grains saw improvements, said Boehlert. Adjusted EBIT was $485m, up from $127m for the third quarter of 2017.

The adjusted EBIT for oilseeds was $367m, up from $88m this time last year, Bunge reported. Similarly, the adjusted third-quarter EBIT for grains was $118m, an increase from $39m in 2017.  

Soy crush margins improved, based on the demand for soybean meal, a drop in crush in Argentina from the drought, reduced US soybean prices as tariffs from China started and actions the company took to establish a soybean inventory in Brazil, said Boehlert.

“Strong soy crush margins moderated during the quarter in some regions, resulting in positive new market-to-market of approximately $155m at the end of the third quarter related to crush capacity commitments beyond the third quarter,​” he said. Bunge started the quarter with negative mark-to-market of $185m, he added.

In grains, results were supported by better origination in Brazil as commercialization increased, he said. In North America, origination results were better than last year, but “did not materially contribute to the overall results.”

Crushing results are expected to remain favorable for the rest of the year and the start of next year, said Schroder. But there continues to be uncertainty in origination volume stemming from low commodity prices, a strengthening Brazilian real and the freight situation.

However, Bunge is predicting that it will end the year toward the upper end of the outlook range it set of $800m to $1bn, he said.

In milling, results improved upon last year’s and there is an anticipation of a “good year”​ in 2019 based on the potential for increased grain imports, he said.

Adding board members

Bunge also announced the addition of three new directors to the board on Wednesday, said Schroder.

The new members include Paul Fribourg, chairman and CEO of Continental Grain Company; Gregory Heckman, founding partner of Flatwater Partners; and Henry “Jay” Winship, president of Pacific Point Capital, LLC. The board now has 14 members.

The new members were brought in to help the company navigate the current environment, Schroder said. A special committee formed by the board is set to evaluate current programs and approaches along with potential alternatives.

“There is a sense that we need to take a step back and look at everything we’ve done,”​ he said. “I’m absolutely convinced we’ve done many things very right – is it possible that we’ll come up with some new ideas? For sure.”

There is no deadline for the report the group will be putting together, he said.

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