Bunge raised its 2020 earnings guidance, after its second quarter results trounced market forecasts, as “favourable positioning” in grains and oilseeds helped a resurgence in agribusiness profits.
The agribusiness giant - which in May cut its profits guidance, sending its shares plunging – on Wednesday said that it was now “increasing” its earnings outlook “to reflect our stronger-than-expected” results for the April-to-June period.
While still stopping short of issuing a group earnings forecast, the revision reflected largely improved expectations for Bunge’s core agribusiness division, which was now expected this year to improve on its 2019 performance.
The group had previous guided investors to expect agribusiness results “down from 2019”.
For the edible oils division - at the heart of May’s profits downgrade, thanks to the dent to foodservice and biodiesel demand stemming from the Covid-19 pandemic - Bunge said it was now expecting “modest improvement compared to our previous outlook”.
The group issued the upgrade as it announced results for what chief executive Greg Heckman termed “an outstanding second quarter”, for which the group unveiled a jump to $512m in earnings, up from $205m a year before, and despite a drop of 6.3% to $9.46bn in net sales.
“These results would be strong in any environment, let alone a pandemic,” Mr Heckman said.
Adjusted earnings per share soared to $3.88 from $1.52 in the same period of 2019, and well ahead of market expectations of a $1.32-per-share result.
Bunge shares rose by 4.7% to $46.69 in early deals in New York, their highest in nearly four months.
The profits rise reflected in the main a quadrupling to $843m in adjusted operating profits in the agribusiness division, which covers operations from origination to transport to many processing operations, including oilseeds crushing.
While the improvement reflected in part one-time mark-to-market boosts, reversing losses which undermined headline figures in the January-to-March quarter, Bunge noted too a boost to soybean processing results from “higher margins in South America, Europe and Asia”, with improved results in softseeds such as rapeseed too.
Results in the division’s grains operations, were helped by “increased farmer selling in Brazil”, which boosted crop origination, and a “strong quarter” for shipping.
In both oilseeds and grains, Bunge highlighted a boost to trading results from “increased margins and favourable positioning”.
Fertilizers vs sugar
Operating profits rose too in the group’s edible oils division, by 19% to $51m, as the easing of Covid-19 lockdowns revived demand from foodservice and biodiesel customers, while an improved Brazilian performance led profits growth of 11% to $30m in milling products.
A tripling to $19m in adjusted operating profits in fertilizers “reflected improved performance in our Argentine operation”, as the country’s growers “accelerated purchases in anticipation of higher local prices”.
The comments follow a caution in USDA briefing overnight of “economic stresses” in Argentine agriculture, in the faces factors such as raised grain export taxes.
Bunge’s sugar interests, now hived off into a joint venture with BP, did see a marked deterioration in its results, reflecting $70m in foreign exchange losses caused by the depreciation in Brazil’s real.
Bunge added that the tie-up’s outlook “has declined from the previous forecast to reflect the impact of foreign exchange volatility in the first half of the year”.