Bunge Profit Disappoints on Weaker Oilseed-Crush Margins

February 11, 2016 09:45 AM
Bunge Profit Disappoints on Weaker Oilseed-Crush Margins

Bunge Ltd., the world’s largest oilseed processor, posted lower-than-expected fourth-quarter earnings after U.S. soybean processing margins fell and Brazilian demand weakened for food products such as margarine and wheat.

Profit excluding one-time items was $1.49 a share, the White Plains, New York-based company said Thursday in a statement, trailing the $1.56 average of 10 estimates compiled by Bloomberg. Sales dropped to $11.1 billion from $13.2 billion, missing the $11.6 billion average estimate.

The spread between the cost of soybeans and the price of oil and meal produced from the oilseed -- the so-called crush margin -- sank in December to a seven-month low. Bunge said oilseed-processing income fell as U.S. crush margins “softened” in anticipation of increased Argentine supply, echoing comments earlier this month from competitor Archer-Daniels-Midland Co.

Profit from from Bunge’s food and ingredients segment fell 45 percent. Chief Executive Officer Soren Schroder said the unit will continue to experience “difficult” conditions in Brazil, where the economy is shrinking.

Bunge is also one of the world’s largest crop traders. Grains earnings were hurt primarily because of reduced volumes in the U.S., where farmer selling slowed in the face of stiffer competition in the export market, the company said.

Non-U.S. crop exporters have been helped by the stronger dollar. American soybean exports will drop 8.3 percent in the current crop year while Brazil’s shipments gain 13 percent, the Department of Agriculture said in a report Tuesday.

“Northern Hemisphere oilseed processing margins and grain exports will be pressured until markets adjust to the increased level of global supplies," Schroder said in the statement.

There were some bright spots for Bunge in the quarter. In contrast to the northern hemisphere, soy processing margins were higher in Brazil and Argentina. Its sugar and bioenergy segment in Brazil improved with higher milling results as well as better ethanol and sugar prices.

"Improved farmer selling in Argentina will allow us to operate our crushing and port assets at higher utilizations," Schroder said.

Net income rose to $1.30 a share compared with a 43-cents loss a year earlier.

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