RSS
Twitter
Linked In
News In
News
Linked In
RSS
https://twitter.com/Agrimoney
http://www.newsnow.co.uk/h/Industry+Sectors/Agriculture

You are viewing 1 of your 2 complimentary articles.

Register now to receive full access.

Already registered?

Login | Join us now

Bunge slashes agribusiness profit hopes, citing Brazil setbacks

Twitter Linkedin

Bunge slashed hopes for earnings from it core trading and oilseeds processing division, citing dents to Brazilian margins as flagged by rival Archer Daniels Midland – but said that hedging had protected its sugar profits from weak prices.

The ag trading giant – with Archer Daniels Midland, Cargill and Louis Dreyfus one of the ABCD group of sector leaders – slashed to $500m-650m, from $800m-925m, its forecast for full-year operating profits at its agribusiness division, its biggest earner.

The downgrade came as the group reported an 89% plunge to $18m in operating profits for the division in the April-to-June quarter, as Bunge revealed a further dent from the "slow" Brazilian farmer selling which, in boosting competition by processors for supplies, has "negatively impacted margins".

"Weak global margins and slower-than-expected farmer selling in South America led to a challenging second quarter in agribusiness," said Soren Schroder, the Bunge chief executive.

'Intense competition'

In grains, Bunge noted that Brazilian growers' slow crop sales had spurred "intense industry competition for supply to meet logistics commitments".

In oilseeds, the group flagged a dent to South American margins from "a combination of slow farmer selling and an oversupply of soymeal".

While the group forecast a "much-improved" second half of 2017 for the agribusiness division, with Brazilian grower now "proving willing sellers" as crop prices have shown some recovery, Thom Boehlert, the Bunge finance director, flagged some lingering headwinds yet.

"While South American soy crush margins have expanded, they, along with soy crush margins in Europe, are still below our earlier expectations," he said.

Mr Schroder said that although "consumption of soymeal and soyoil is strong, the crushing industry oversupplied the market during the second quarter, resulting in a meal surplus that is expected to weigh on margins through" the current July-to-September period.

'Facing headwinds'

In the milling division, in which the forecast for operating profit was cut to $210m-230m, from $245m-265m, Bunge also noted continuing setbacks from "soft consumer demand" in Brazil and Mexico.

"Our milling business, particularly in Brazil, is facing headwinds from contraction in flour consumption both in the industrial and food service segments," Mr Schroder said, after a quarter in which the division saw operating profits halve to $16m.

However, in the Brazil-based sugar unit, the group stood by expectations of full-year operating profits of $100m-120m, citing operational improvements, and forward sales which had protected Bunge from a drop of 25% so far this year in prices, as measured by New York futures.

An improvement in quarterly profits in sugar reflected "production that was hedged at higher prices than last year".

Earnings fall

The comments came as the group unveiled a 34% drop to $72m in earnings attributable to shareholders for the April-to-June quarter, despite a 10.5% rise to $11.65bn in sales.

Operating profits slumped by 64% to $75m, led by the plunge in agribusiness earnings, but the decline was offset in part by tax benefits, which saw the group put in a net tax benefit of $55m for the quarter, compared with a net expense of $39m a year before.

The earnings were equivalent to $0.17 a share, stripping out one-off factors, a result in line with market expectations.

By Mike Verdin

Twitter Linkedin
Related Stories

Soft commodities better bets than grains for 2018, says Commerzbank

Indeed, investors are overrating prospects for corn and wheat futures. But cocoa futures have scope for gains, and coffee could see a "price surge"

Evening markets: Brazilian travails send coffee, soybean and sugar futures lower

... while Canada’s crop upgrade sends wheat to a fresh contract low. But cotton spares blushes for ag bull, hitting a seven-month high

UN sees 'cereals boom' as it ditches idea of tighter world grain supplies

The all-important stocks-to-use ratio for world cereals will not fall after all in 2017-18, the UN FAO says, reporting an easing in food prices

Evening markets: Soybean futures reverse - despite soymeal resilience

Soybean futures lose bouyancy, although fare better than wheat, which sets fresh contract lows. Sugar tumbles even faster
Home | About | RSS | Commodities | Companies | Markets | Legal disclaimer | Privacy policy | Contact

© Agrimoney.com 2017

Agrimoney.com and Agrimoney are trademarks of Agrimoney Ltd
Agrimoney is part of the Briefing Media group
Agrimoney Ltd is registered in England & Wales. Registered number: 09239069