Agribusiness giant Bunge expects a bumper South American
crop to boost its processing business this year.
Squeezed processing margins in its core South American
segment were the fly in the ointment, in the latest set of company results.
But surging sugar prices, and better earnings from the group's
food business, helped Bunge top analyst expectations, sending shares soaring.
Growth in earnings
"We enter 2017 with confidence and expect strong growth
in earnings," said Bunge chief executive officer Soren Schroder said.
Bunge's agribusiness suffered in 2016 thanks to smaller than
expected crops, which encouraged farmers to hold on to supplies.
"Results decreased from last year, primarily due to lower
results in our soy processing operations, reflecting tight bean supplies in
South America and softer global soymeal demand due to competition from lower
cost feed products," Bunge said.
This pushed down processing margins in South America, leaving
earnings from the agribusiness segment down some 12% year-on-year in the last
three months of 2016.
But this picture is expected to change this year, Mr
Schroder said, with bumper crops, including a record-large Brazilian crop.
"After disappointing crops in South America last year, the
region is on track to produce record harvests this season, which aligns well
with our footprint," he noted.
And Thomas Boehlert, Bunge's chief financial officer saw
rising earnings from the agribusiness segment thanks to "large crops in South
America, of which Brazilian farmers have a significant percentage remaining to
Mr Boehlert also noted "a return to more normal levels of
soy meal inclusion in feed rations; and higher softseed crush margins due to
the combination of greater seed supply and robust vegetable oil demand".
Earnings before interest and taxation from Bunges' agribusiness
segment were expected to rise in 2017, to $895m-$1.05bn, compared to $782m last
Rising sugar profits
And despite the weak performance in the company's
agribusiness segment in the last three months of 2016, profits in smaller
Profits from the company's food business surged 52%, while
profits from the sugar and bioenergy segment tripled.
For sugar, Bunge said "increased results in the quarter were
primarily driven by our sugarcane milling operation, where higher sugar and
ethanol prices more than offset lower crush volumes".
Overall, the company's net profits rose 39% year-on-year, to
$262m in the last three months of 2016.
Adjusted profits were reported at $1.70 a share, beating analyst
expectations of $1.57 a share, and ahead of $1.49 a year ago.
Net sales rose 8.6% year on year in the same period, to $12.06bn,
beating analyst expectations of $11.41bn.
Bunge shares were up 7.9% in morning deals in New York, at $5.41.