Bunge called time on its ill-fated foray in Brazilian sugar,
revealing that it was considering "all alternatives" for the business, after blaming
the poor performance of the division for a slump to a $137m quarterly loss.
The US-based agribusiness, one of the ABCD of agricultural
trading giants with Archer Daniels Midland, Cargill and Louis Dreyfus, revealed
it had lost patience with a business which it entered in 2009, spending some of
the proceeds of a fertilizer sale, but which has continued to struggle.
In the July-to-September quarter, the sugar and bioenergy business
notched up an operating loss of $37m, and was due to remain in the red during
the current quarter – implying, another, annual loss in 2013.
And while Bunge forecast the division would reap a profit in
2014, it would be "difficult" for it to hit an operating profit target of $8-10
Soren Schroder, Bunge's newly-appointed chief executive,
said: "Bunge's overall success has to be defined by consistent value creation
"Given the challenges facing the Brazilian industry, we have
commenced a comprehensive process to explore all alternatives to optimise the
value of this business."
He blamed the division's continued poor performance on a cocktail
of "suboptimal weather and low global sugar prices, as well as the structural
headwinds of domestic cost inflation and capped ethanol prices.
"These conditions make it difficult for the sector to
generate consistent profit and appropriate returns," Mr Schroder said.
'Continue to be
Sugar prices have in fact revived over the last couple of
months, lifted by ideas that demand is stronger than had been appreciated, and
by the rains which have slowed the Brazilian cane harvest and cut sugar levels
in the crop.
However, even the revival in sugar prices proved a setback
to Bunge in prompting losses on hedges marked to market prices "as sugar
futures rallied in late September", adding to setbacks from lower-than-expected
cane volumes and sugar concentrations, termed ATR in the industry.
Drew Burke, the Bunge finance director, added that the group's
cane crush would "continue to be challenged by low sugarcane ATR for the rest
of the crop.
"Last year's average ATR was near historic lows and this
year it is expected to be below that level," he said, adding that harvest delays
meant the group would be forced to leave some cane in fields.
Into the red
The comments come two days after Czarnikow warned of the
financial hardship besetting Brazilian mills, a dynamic the sugar merchant signalled
may support prices of the sweetener.
Bunge reported a loss of $137m for the period, including a
$415m in one-off charges, reflecting in the main a change in the value of tax
allowances against the loss-making Brazilian sugar business.
The loss was equivalent to $1.66 per share. Analysts had
expected earnings of $2.21 per share.