1ST QTR: BUNGE SALES DOWN 8%, NET INCOME DROPS 93%
May 6, 2014
Source: Bunge news release
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Soren Schroder, Bunge's Chief Executive Officer stated, "The first quarter was slower than expected, but our outlook for the remainder of the year is positive. Results in the quarter were primarily impacted by losses in our grain trading & distribution business that are behind us and a temporarily depressed crushing environment in China.
"The global agribusiness and food markets, despite some challenges, look strong with solid demand and crush margins in most regions. Soybean harvests in South America are large, and farmers, particularly in Argentina, have increased their commercialization of crops.
Our team in Brazil is doing a first-rate job managing market risks and optimizing logistics flows, which has positioned us well for executing on this harvest. Farmers in the Northern Hemisphere are expected to plant large crops this spring, which should drive strong asset utilization and exports later in the year.
"We continue to target full-year, combined returns in agribusiness and food & ingredients at 1.5 points above cost of capital. Our global operational improvement programs and working capital management initiatives are progressing well.
The Bunge team is focused on delivering strong, long-term shareholder value through improved operational performance in our core businesses, disciplined capital management, and a balanced approach to capital allocation.
"We are actively pursuing strategic alternatives for the Brazilian sugarcane business with the goal of maximizing value for shareholders. We are also continuing with cost and productivity improvements at our mills, which will become evident through the crushing season.
During the quarter we returned $92 million to Bunge's shareholders through our share repurchase program and expect to repurchase another $108 million during the second quarter."
First Quarter Results
Strong grain origination results in Brazil, which benefited from the early stages of a record harvest, were offset by losses in our trading & distribution operations, where our commercial and risk management strategies anticipated lower grain prices. The combination of deteriorating U.S. winter wheat conditions and Black Sea political volatility caused prices to rise, pressuring margins.
Additionally, ocean freight costs in our trading & distribution operation were above market as we executed higher priced vessels that were toward the end of their time charter contracts. Strong oilseed processing margins in Europe, Brazil and the U.S. led to improved results, despite a weak crushing environment in China. Year ago results included a gain of $16 million related to the sale of certain legal claims in Brazil.
Sugar & Bioenergy
The first quarter is the inter-harvest period in Brazil when sugarcane mills in the Center-South region typically do not operate and are selling sugar and ethanol inventories from the previous sugarcane harvest.
Results in both our cane milling and trading & distribution businesses were lower than last year. In sugarcane milling the primary drivers of the difference were approximately $31 million of mark-to-market losses related to hedges on our forward sugar sales and higher start-up costs, which last year were mostly incurred in the second quarter due to the later start to the milling season.
Results in our trading & merchandising business were lower than a strong year-ago period. 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.