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1ST HALF: BUNGE'S SALES EVEN, EARNINGS DROP 19%
Source: Bunge news release

To read the entire report, click here.


  • Total segment EBIT of $418 million, up $179 million vs. last year

  • Full-year outlook remains positive, expecting to meet or exceed targeted combined agribusiness-food ROIC of 1.5 points over WACC

  • Agribusiness results driven by good crush margins and execution of trade flows

  • Food & ingredients generated record quarterly earnings
    Strategic review of sugarcane milling operation is progressing


Soren Schroder, Bunge's Chief Executive Officer, stated, "We had a strong performance in the second quarter with all segments reporting higher year-over-year results. Strong global oilseed processing margins, driven by big crops and growing demand, led to significantly better results in agribusiness.

Improved operational and commercial performance and the addition of our new wheat mills in Mexico contributed to a record quarter in food & ingredients. The results demonstrate the potential of this segment and the value of managing integrated oilseed and grain chains. Sugar & bioenergy performed as expected, due in part to our continued progress in containing costs and increasing productivity.

"We expect the momentum of the second quarter to carry through for the remainder of the year and that we will meet or exceed our targeted full-year combined returns in agribusiness and food & ingredients of 1.5 points above cost of capital. In agribusiness, big Northern Hemisphere crops combined with strong global livestock economics should continue to drive demand and encourage trade. In food & ingredients, we expect continued strong results as our performance improvement initiatives reach greater scale. And in sugar & bioenergy, we are now entering the peak milling season and continue to forecast full year breakeven EBIT.

"The strategic review of our sugarcane milling business is progressing. We are running the business free cash flow neutral as we explore various alternatives. We remain committed to completing the review and achieving the best result for shareholders.

"During the quarter we returned $108 million to Bunge's shareholders through our share repurchase program."

Second Quarter Results

Agribusiness

A strong global oilseed processing environment in most regions of the world was the primary driver of higher results in the quarter. In the Southern Hemisphere, record soybean crops, strong export demand and good farmer selling led to solid processing margins. Our team in Brazil continued to do an excellent job in managing logistical flows of crops through a complicated interior structure
resulting in lower transportation and execution costs.

Oilseed processing results were also higher in the Northern Hemisphere led by strong softseed margins in Canada and soybean margins in Europe. U.S. soybean processing results were comparable to last year. Results in China were down. Grain origination results were within expectations, but lower than last year primarily due to Brazilian farmers postponing commercialization of the safrinha corn crop as a result of the drop in market prices. Risk management results were comparable to last year and in line with expectations.

Edible Oil Products

Strong results in the quarter were driven by improved performances in Brazil and in Europe with both regions expanding margins and tightly managing costs and working capital. While margins expanded in North America, one-time costs in logistics due to backlogs and some short-term cost increases in maintenance led to lower results in this region. Results in Argentina were flat with last year; results in Asia were slightly lower.

Milling Products

Record results in the quarter were driven by strong performances in our wheat milling operations in Brazil and Mexico. In Brazil, results benefitted from an increased focus on margins and driving greater efficiencies in our plants and supply chain network. Milling results in Mexico reflected our new wheat milling acquisition and synergies from its integration with our existing operation. Results in U.S. corn milling were lower than last year primarily due to lower margins. Results in rice milling were comparable to last year.

Sugar & Bioenergy

Higher results in our sugarcane milling and biofuels businesses more than offset lower results in our trading & merchandising operation. Improved performance in sugarcane milling was driven by higher crush volumes, increased energy sales, improved Brazilian ethanol prices and approximately $10 million of mark-to-market gains related to hedges on our forward sugar sales. The second quarter is typically a weak period for milling operations as it marks the beginning of the sugarcane harvest in the Center-South of Brazil when the sugar content of the sugarcane is at its lowest level.

Consequently, mills produce less sugar and ethanol per unit of sugarcane milled than they will in the second half of the year when the yield increases. Results in our biofuels business were higher than last year, primarily due to the favorable ethanol margin environment in the U.S. and the contribution from our new corn wet milling joint venture in Argentina. Weaker results in our trading & merchandising business were primarily due to lower margins.

Fertilizer

Results in the quarter were higher than last year, and our fertilizer operations continue to serve a critical role in support of our South American agribusiness operations.

Cash Flow

Cash used by operations in the six months ended June 30, 2014 was $791 million compared to cash used of $513 million in the same period last year. The year-over-year variance primarily reflects seasonal working capital increases related to South American harvests and a significantly lower level of working capital for the year ended December 31, 2013 when compared to the year ended December 31, 2012.

Income Taxes

The effective tax rate for the six months ended June 30, 2014, was approximately 36% compared to 29% for the six months ended June 30, 2013. The higher tax rate primarily relates to earnings mix. We continue to expect our full-year tax rate to be approximately 23%.

Outlook

Drew Burke, Chief Financial Officer, stated, "We expect a solid second half of the year. In agribusiness, demand for agricultural commodities should remain strong due to the combination of lower crop pricesand robust livestock economics. Crops in North America and Europe are developing well, supporting good forward soybean and softseed processing margins in these regions. After a strong period of farmer selling in South America, we expect a slower pace in the second half of the year. While this would reduce utilization in the region, it should provide additional export opportunities for the U.S. and Europe.

It will also skew results more towards the fourth quarter.

"In food & ingredients, we expect the strong momentum to continue. We have the seasonally strong period of the year in front of us and expect additional contributions coming from our performance improvement initiatives.

"In sugar & bioenergy, we continue to expect full-year segment results to be about breakeven and are managing the business to be free cash flow neutral. We are entering the seasonally stronger period of the year as crush and ATR levels increase. We expect to have sufficient cane to crush in line with industrial capacity. However, at the end of June we were about 35% through the harvest, so weather remains an important factor both in ATR evolution and the length of the processing season.


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