Bunge: posts 63 million USD profit in Q1/2010

White Plains / NY. (bl) Agricultural giant Bunge Limited reported a profit of 63 million USD in the first quarter, compared with a loss of 195 million USD in the prior-year quarter. The company reported sales of 10,3 billion USD for the quarter ended March 31, up twelve percent from 9,2 billion USD a year earlier. «Bunge´s first quarter improved significantly from where we were this time last year», Chairman and Chief Executive Alberto Weisser said in a statement (PDF).

Agribusiness: Better results in agribusiness were primarily due to solid performance in oilseed processing, which benefited from higher margins in most geographies. Grain origination results were lower largely due to the tight soybean situation in Brazil and slow farmer selling during the early stages of the harvest. Distribution benefited from strong soybean demand from China. SG+A in the quarter increased primarily due to stronger local currencies in our foreign operations. Foreign exchange losses of 41 million USD, primarily in the Brazilian subsidiary, from US-Dollar-denominated financing of working capital, were offset by the positive impact of foreign exchange on valuations of commodity inventories included in gross profit. First quarter results included 14 million USD of impairment and restructuring charges related to the closure of an older, less efficient oilseed processing facility in the United States.

Sugar + Bioenergy: The quarter was characterized by the closing of the Moema acquisition in February, including the application of related purchase accounting adjustments. At closing, assets and liabilities of Moema were recorded on the opening balance sheet at fair value, including sugar and ethanol inventories from the 2009 harvest and forward sales that were stepped up to prevailing market prices. This step-up represents additional costs of 19 million USD for the full year, most of which was recognized in the first quarter. Results in the first quarter also included eleven million USD of transaction-related expenses in connection with the acquisition. Additionally, our sugar trading + merchandising business performed well in a volatile period.

Fertilizer: Results improved significantly from the prior year as the high cost inventory that impacted the business throughout 2009 has been sold. Retail performance, however, was weaker than expected due to lower margins and volumes, as farmers slowed purchases in the second half of the quarter and we maintained pricing. Noncontrolling interest increased in the quarter due to higher results at Fosfertil. First quarter results included four million USD of restructuring charges in our retail business in Brazil and approximately 23 million USD lower depreciation in nutrients due to the classification of these assets as held for sale.

Edible Oil Products: Results were lower than in first quarter 2009 because they no longer include results from our joint venture interest in Saipol, which we sold in the fourth quarter of that year. On a comparable basis, performance this quarter improved due to stronger results in North America and in our Brazilian margarine business. SG+A in the quarter increased primarily due to stronger local currencies in our foreign operations.

Milling Products: Lower results in the quarter were primarily due to lower margins and higher operating expenses in wheat milling. Margins were impacted by increased local competition following the large Brazilian wheat harvest. Higher operating expenses were primarily due to the impact of the stronger Brazilian real. First quarter results included three million USD of impairment and restructuring charges related to the closure of a corn oil extraction line that was co-located with the oilseed processing facility that is being closed in the United States.

Financial Costs: Interest expense increased in the quarter due to higher average debt levels and a higher blended cost of borrowings resulting from debt assumed in the Moema transaction, which carried higher interest rates.

Income Taxes: The effective tax rate for the quarter ended March 31, 2010 was ten percent compared to an income tax benefit of 34 million USD in the same period of last year.

Cash Flow: Cash provided by operating activities in the first quarter was 760 million USD compared to cash used by operations of 363 million USD in the same period of last year. The increase was due to higher net earnings from operations and lower working capital requirements resulting primarily from higher trade payables in the fertilizer segment.

Outlook

Jacqualyn Fouse, Chief Financial Officer: «Looking ahead, big crops in South America should ease the tight supply situation and provide ample product for our agribusiness segment to originate, process and transport. The USDA is forecasting global demand for soybean meal to grow by four percent and vegetable oil to grow by five percent. However, the year will not be free of challenges as we may see some pressure on margins from increased oilseed processing capacity in North America. The Brazil sugarcane harvest has commenced and our mills are operating. Retail fertilizer should improve in the second half of the year as the pace of farmer purchases picks up closer to planting, but will be below our expectations. Food + ingredients is expected to perform as planned. In light of this outlook, we are revising our 2010 full-year earnings guidance to 5,30 USD to 5,80 USD per share. This guidance takes into consideration 33 million USD of notable items, 19 million USD net impact related to the purchase accounting step-up of inventories and forward sales associated with the Moema acquisition and anticipated integration costs. It also assumes an effective tax rate of 14 percent to 18 percent, and is based on an estimated weighted average of 160 million USD shares outstanding on a fully diluted basis, which includes assumed dilution relating to our convertible preference shares. This guidance excludes the gain on the sale of fertilizer nutrients, which is expected to close in the second quarter of the year».

Info: https://www.bunge.com/public/pdfs/1Q10combinedrelease.pdf