White Plains / NY. (bl) Bunge Limited, a leader in agriculture, food and ingredients, reported Q4 2019 and full-year 2019 results.
- Full-year 2019 GAAP EPS of USD (9.34) versus USD 1.57 in the prior year; USD 4.58 versus USD 2.72 on an adjusted basis
- Q4 GAAP EPS of USD (0.48) versus USD (0.51) in the prior year; USD 1.27 versus USD 0.08 on an adjusted basis
- Agribusiness results driven by excellent execution and a better than expected market environment
- Food + Ingredients results benefited from improved performance in North America and Asia, as well as favorable timing differences
- Substantial progress on key priorities in 2019 – streamlined portfolio; implemented disciplined approach to risk management; improved operations and created new operating model
Overview
Greg Heckman, Bunge’s Chief Executive Officer, commented, «We finished 2019 on a strong note, driven by solid operating performance and market conditions that moved in our favor during the quarter. The improvements we’ve made to our business and our more rigorous approach to risk management enabled us to adapt quickly and benefit from upside opportunities.
«As we look back across 2019, our team executed well despite the complex environment and the substantial changes that are underway at Bunge. Looking ahead to 2020, we will remain nimble and prudent in order to maximize the earnings potential of our global platform, while continuing to optimize our portfolio and operations.»
Financial Highlights
| Quarter Ended December 31, | Year Ended December 31, | |||||||||||||
| USD in millions, except per share data | 2019 | 2018 | 2019 | 2018 | ||||||||||
| Net income (loss) attributable to Bunge | USD | (51) | USD | (65) | USD | (1,280) | USD | 267 | ||||||
| Net income (loss) per common share from continuing operations-diluted | USD | (0.48) | USD | (0.51) | USD | (9.34) | USD | 1.57 | ||||||
| Net income (loss) per common share from continuing operations-diluted, adjusted (a) | USD | 1.27 | USD | 0.08 | USD | 4.58 | USD | 2.72 | ||||||
| Total Segment Ebit (a) | USD | 44 | USD | 70 | USD | (891) | USD | 737 | ||||||
| Certain gains + (charges) (b) | (239) | (37) | (2,014) | (144) | ||||||||||
| Total Segment Ebit, adjusted (a) | USD | 283 | USD | 107 | USD | 1,123 | USD | 881 | ||||||
| Agribusiness (c) | USD | 177 | USD | 55 | USD | 639 | USD | 709 | ||||||
| Oilseeds | USD | 41 | USD | 112 | USD | 410 | USD | 584 | ||||||
| Grains | USD | 136 | USD | (57) | USD | 229 | USD | 125 | ||||||
| Food + Ingredients (d) | USD | 84 | USD | 73 | USD | 287 | USD | 235 | ||||||
| Sugar + Bioenergy | USD | 52 | USD | (48) | USD | 73 | USD | (105) | ||||||
| Fertilizer | USD | 26 | USD | 27 | USD | 55 | USD | 42 | ||||||
| Other (e) | USD | (56) | USD | – | USD | 69 | USD | – | ||||||
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| (a) | Total Segment earnings before interest and tax (“Total Segment Ebit”); Total Segment Ebit, adjusted; Net income (loss) per common share from continuing operations-diluted, adjusted; and Adjusted funds from operations are non-GAAP financial measures. Reconciliations to the most directly comparable U.S. GAAP measures are included in the tables attached to this press release and the accompanying slide presentation posted on Bunge’s website. See Note 14 for a reconciliation of Cash provided by (used for) operating activities to Adjusted funds from operations. |
| (b) | Comprised of certain gains + (charges) included in Total Segment Ebit which may be of interest to investors. See Additional Financial Information and notes included herein for further details. |
| (c) | See Note 13 for a description of the Oilseeds and Grains businesses in Bunge’s Agribusiness segment. |
| (d) | Includes Edible Oil Products and Milling Products reportable segments. |
| (e) | Represents amounts attributable to corporate and other items, including Bunge Ventures, not allocated to the reportable segments. |
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Fourth Quarter Results
Agribusiness
Higher segment results in the quarter reflected improved execution, particularly in managing risk throughout the Company’s value chains.
In Oilseeds, softseed results improved when compared to last year due to strong oil demand. Lower soy processing results in the U.S., Europe and Asia were partially offset by higher results in South America. Results were negatively impacted by approximately USD 95 million of mark-to-market reversals on soy crushing contracts, which favorably impacted the third quarter. An increase in soy crush margins during the fourth quarter resulted in new mark-to-market losses on forward contracts; however, these losses were largely offset by mark-to-market gains on forward hedges related to our softseed and palm oil pipeline that serves our downstream Edible Oils customers. Improved results in oilseed trading and distribution were primarily due to better positioning.
In Grains, higher results were primarily driven by origination in South America. Brazilian farmer selling increased as local prices improved. In Argentina, farmers accelerated sales in anticipation of a change in export taxes. Ocean freight results benefited from good fleet positioning and management.
Edible Oil Products
Higher results in North America and Asia were largely offset by lower results in South America. Results in Europe were comparable with last year. Excluding approximately USD 13 million of favorable timing differences related to hedges that are expected to reverse in 2020, results were slightly lower than prior year.
Milling Products
Segment performance for the quarter was similar to the prior year as higher results in Mexico were offset by lower results in the U.S. and Brazil.
Sugar + Bioenergy
Results for this segment reflect Bunge’s 100 percent ownership through November 2019. In December, we completed the formation of the Brazilian Sugar and Bioenergy 50/50 joint venture with BP.
Higher results in the quarter were primarily due to improved agricultural yields and operational execution that drove lower unit costs, as well as higher ethanol pricing and higher sugar pricing and volume. Results benefited from approximately USD 38 million of lower depreciation when compared to last year due primarily to the business being classified as held for sale.
Fertilizer
Fertilizer results in the quarter were in line with the prior year.
Cash Flow
Cash used by operations in the year ended December 31, 2019 was USD 814 million compared to cash used of approximately USD 1.3 billion in the same period last year. Adjusting for the beneficial interest in securitized trade receivables, cash provided by operating activities was USD 475 million compared with cash provided by operating activities of USD 645 million in the prior year. This decrease was primarily driven by higher working capital. Adjusted funds from operations was approximately USD 1.1 billion for the year ended December 31, 2019.
Cash proceeds before customary closing adjustments of USD 775 million, received as part of the formation of the Brazilian Sugar and Bioenergy 50/50 joint venture with BP, were largely used to pay down debt.
Income Taxes
For the year ended December 31, 2019, income tax expense was USD 86 million. Adjusting for all notable items, the effective tax rate for the year ended December 31, 2019 was approximately 16 percent. The lower than expected tax rate was primarily due to earnings mix.
Outlook
Taking into account the current margin environment and lack of visibility into the back half of the year, we expect full-year 2020 EPS to be broadly in line with 2019, when excluding notable items, our gain on Beyond Meat and the depreciation benefit in the Sugar + Bioenergy segment.
In Agribusiness, full-year results are expected to be down from 2019. Actual origination, processing and distribution margins will evolve based upon the fulfillment of U.S.-China trade agreements, crop sizes and farmer commercialization.
In Food + Ingredients, full-year results in Edible Oils and Milling are expected to be similar to the prior year, excluding approximately USD 13 million of favorable Q4 timing differences, which are expected to negatively impact 2020.
In Fertilizer, full-year results are expected to be down from a particularly strong prior year and more similar to 2018.
In Sugar and Bioenergy, market fundamentals have improved versus 2019, driven by sustained Brazilian ethanol market prospects and better sugar prices.
Additionally, the Company expects the following for 2020: an adjusted annual effective tax rate in the range of 19 percent to 23 percent; net interest expense of approximately USD 230 million; capital expenditures in the range of USD 400 to USD 450 million; and depreciation and amortization of approximately USD 465 million.
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