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Thriving Bunge surfs wave of upbeat grain market forces

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Bunge name-checked an array of tailwinds, from improving oilseed crush margins in China to synergies from a Mexican acquisition, as it unveiled earnings ahead of forecasts, and upbeat hopes for the rest of 2015.

The trading house – with Archer Daniels Midland, Cargill and Louis Dreyfus one of the ABCD group of ag giants – unveiled a strong bounce back to profit for the January-to-March quarter, with earnings of $263m compared with a loss of $13m a year before.

The earnings, equivalent to an underlying $1.58 per share, well exceeded market expectations of a $1.14-per-share result.

"We had a good start to the year," said Soren Schroder, the Bunge chief executive, highlighting improved profitability in all the group's four major divisions.

'Considerably higher results'

And Bunge was upbeat over prospects too, saying that the outlook for its agribusiness division, responsible for about three-quarters of revenues, was "favourable".

In the food and ingredients division, "we expect 2015 results to be considerably higher year-over-year", Drew Burke, the Bunge chief financial officer, said, although highlighting the dent to prospects in some markets from a stronger dollar.

In February, Mr Burke had forecast "continued improved performance" in the division.

He restated an expectation that the group's Brazil-based sugar and bioenergy business would run in the black this year, noting that its "sugar cane crop is developing well".

'Strong crushing margins'

The group highlighted a number of supports to its performance, including, in the January-to-March period, "strong soybean crushing margins" and "high-margin oilseed export programmes".

Oilseed results were particularly strong in North America, where Bunge noted "high crush margins resulting from strong global demand and higher volume".

In Mexico, milling results benefited from synergies achieved as Bunge integrated mills bought from Altex last year, besides from a recovery of mark-to-market foreign exchange losses which dented results for the October-to-December quarter.

Meanwhile, in South America, "processing results were good" in Brazil, where grain origination picked up last month too, with weakness in the real raising, in local terms, the value of crops denominated in dollars.

'Large crops'

And looking ahead, Mr Burke forecast that processing margins in Argentina and Brazil "should remain good through September", helped by strong crops supplies.

Much of the strong South American crops "remains to be sold" too, implying opportunities in marketing ahead.

Meanwhile, in the important Chinese market "livestock margins have recently improved in China supporting good crush margins and a favourable outlook for the remainder of the year".

And while profitability in European and North American crush operations will come under seasonal pressure for now, as supplies from last year's harvests dwindle, "farmers in the northern hemisphere are expected to plant large crops this spring, which should drive strong asset utilisation and exports later in the year".

Bunge shares lost early gains to close down 0.8% at $86.37 in New York.


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