Bunge's Q1 net income down 60% year-over-year to US$92M as sugar & bioenergy unit affected by lower ethanol margins, fertilizer results hurt by lower market prices, US$27M expense; net sales up 10% to US$1.34B

WHITE PLAINS, New York , April 26, 2012 (press release) – Good start to the year in agribusiness and food & ingredients segments

Results in sugar & bioenergy impacted by lower ethanol margins

Fertilizer results impacted by lower market prices and $27 million non-recurring item Financial Highlights

   
 

Quarter Ended

US$ in millions, except per share data

3/31/12

3/31/11

Volume (000 metric tons)

35,678

29,284

Net sales

13,446

$12,194

Total segment EBIT (a)

$138

$317

Agribusiness (b)

$197

$249

Sugar & Bioenergy

$(33)

$2

Edible Oil Products

$21

$34

Milling Products

$27

$33

Fertilizer (excluding notable item) (b)

$(47)

$(1)

Notable item (c)

$(27)

-

Net income attributable to Bunge

$92

$232

Earnings per common share-diluted

$0.57

$1.49

Earnings per common share – diluted

(excluding certain gains & charges) (a)

$0.69

$1.49

     
   

(a) 

Total segment earnings before interest and tax ("EBIT") and earnings per common share-diluted (excluding certain gains and charges) 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, respectively.

   

(b) 

Beginning in the first quarter of 2012, the management responsibilities for certain Brazilian port facilities were moved from the agribusiness segment to the fertilizer segment. Accordingly, amounts for prior periods presented have been reclassified to conform to the current period segment presentation.

   

(c) 

A $27 million provision related to a legacy environmental claim in Brazil dating back to 1998.

   

Overview

Alberto Weisser, Bunge's Chairman and Chief Executive Officer, stated, "We faced headwinds in the first quarter, as expected, but are confident that we will deliver strong results in 2012.

"Agribusiness and food & ingredients produced good results in the quarter.  Lower margins for ethanol depressed results in sugar & bioenergy.  Fertilizer margins were pressured by an environment of falling international prices, an inherent risk in this business.

"Looking ahead, margins should improve significantly in sugar & bioenergy with the new harvest and in fertilizer with the start of the traditional sales season later this year.  Market conditions in agribusiness indicate cause for optimism.  Supply and demand in oilseeds and grains is more balanced, which should support crush margins globally.  Export shipments in key crops are up compared to last year and the second half of the year promises to be active in the Northern Hemisphere.  Volatility should persist, but we feel confident that our risk management capabilities will enable Bunge to navigate the markets successfully."

First Quarter Results

Agribusiness
Grain merchandising benefited from a strong performance in South America due to the smaller U.S. grain harvests last fall, but results were lower when compared to an especially strong prior year period.  Higher oilseed processing results in Brazil and Canada were more than offset by lower results in the U.S. and Europe.  Increased volume in the quarter was primarily driven by higher grain merchandising and oilseed processing in Europe, the addition of new grain facilities in the U.S., and our two new oilseed processing facilities in Asia that commenced operations after the first quarter of last year.

Sugar & Bioenergy
The first quarter is the inter-harvest period in Brazil when sugarcane mills in the Center-South region are not operating and are selling sugar and ethanol inventories from the previous cane harvest.  The loss in the quarter was primarily due to lower ethanol margins stemming from high cost inventory that was carried into the year from 2011.  Brazilian market sales prices were pressured by a reduction in ethanol blending rates from 25% to 20% and increased volume of U.S. imports.   

Edible Oil Products
Results in the quarter were down when compared to an especially strong prior year period, primarily due to lower performance in the U.S. and in Brazil higher advertising expenses and challenges related to the implementation of a new SAP system that resulted in lost sales opportunities.  Volumes were higher primarily due to increases in Europe and the addition of new acquisitions in India, Brazil and the U.S.

Milling Products
Improved results in corn milling were more than offset by lower results in wheat milling, which experienced some challenges related to the implementation of a new SAP system that resulted in lost sales opportunities.

Fertilizer
Higher volumes were more than offset by lower margins, which were pressured by falling market prices in the quarter.  Results in our Moroccan joint-venture were also down in the quarter primarily due to lower international prices and scheduled maintenance.  First quarter 2012 results included a $27 million provision related to a legacy environmental claim in Brazil dating back to 1998.

Financial Costs
Interest expense decreased in the quarter due to lower average interest rates on debt.

Income Taxes
The effective tax rate for the quarter ended March 31, 2012 was 13% compared to 15% for the same period last year.

Cash Flow
Cash used by operations in the quarter ended March 31, 2012 was $302 million compared to cash provided by operations of $734 million in the same period last year. The lower cash flow primarily reflects higher uses of working capital due to recent increases in commodity prices.

Outlook

Drew Burke, Chief Financial Officer, stated, "We are expecting a strong 2012 in agribusiness.  It is currently the high season for oilseed processing in South America, and good global demand for protein meal and vegetable oil, as well as a pick-up in farmer selling following the recent increases in prices, should benefit oilseed processing margins in the region.  In the Northern Hemisphere, crush margins should improve from levels seen last year when the harvest begins in the second half of the year.  Like last year, China crush margins are expected to improve throughout the year.  In grain merchandising, tight global grain stocks and the potential for a record U.S corn crop should keep facilities running at high utilization levels come harvest.

"We are expecting to crush between 17 and 18 million metric tons of sugarcane this year, a slightly narrower range than previously communicated, which reflects the impact of dry weather in February and March.  We are continuing our aggressive planting program in 2012 and are on track to reach in excess of 70,000 hectares of planted sugarcane.  As a reminder, earnings in sugar & bioenergy reach their peak in the second half of the year.

"We expect a solid performance in food & ingredients with growth and positive contributions from new acquisitions.

"Farm economics are strong in South America and should result in higher fertilizer volumes.  This, combined with stabilizing prices, should provide a favorable environment when the buying season begins in the second half of this year.  Despite the challenging first quarter, we expect full-year results to exceed last year."

About Bunge Limited

Bunge Limited is a leading global agribusiness and food company with approximately 32,000 employees in more than 30 countries. Bunge buys, sells, stores and transports oilseeds and grains to serve customers worldwide; processes oilseeds to make protein meal for animal feed and edible oil products for commercial customers and consumers; produces sugar and ethanol from sugarcane; mills wheat and corn to make ingredients used by food companies; and sells fertilizer in North and South America. Founded in 1818, the company is headquartered in White Plains, New York.

Cautionary Statement Concerning Forward-Looking Statements

This press release contains both historical and forward-looking statements. All statements, other than statements of historical fact are, or may be deemed to be, forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These forward-looking statements are not based on historical facts, but rather reflect our current expectations and projections about our future results, performance, prospects and opportunities. We have tried to identify these forward-looking statements by using words including "may," "will," "should," "could," "expect," "anticipate," "believe," "plan," "intend," "estimate," "continue" and similar expressions. These forward-looking statements are subject to a number of risks, uncertainties and other factors that could cause our actual results, performance, prospects or opportunities to differ materially from those expressed in, or implied by, these forward-looking statements. The following important factors, among others, could affect our business and financial performance: industry conditions, including fluctuations in supply, demand and prices for agricultural commodities and other raw materials and products used in our business; fluctuations in energy and freight costs and competitive developments in our industries; the effects of weather conditions and the outbreak of crop and animal disease on our business; global and regional agricultural, economic, financial and commodities market, political, social and health conditions; the outcome of pending regulatory and legal proceedings; our ability to complete, integrate and benefit from acquisitions, dispositions, joint ventures and strategic alliances; our ability to achieve the efficiencies, savings and other benefits anticipated from our cost reduction, margin improvement and other business optimization initiatives; changes in government policies, laws and regulations affecting our business, including agricultural and trade policies, tax regulations and biofuels legislation; and other factors affecting our business generally. The forward-looking statements included in this release are made only as of the date of this release, and except as otherwise required by federal securities law, we do not have any obligation to publicly update or revise any forward-looking statements to reflect subsequent events or circumstances.

Additional Financial Information

The following table provides a summary of certain gains and charges that may be of interest to investors.  The table includes a description of these items and their effect on total segment EBIT, income from operations before income tax, net income attributable to Bunge and earnings per share for the quarter ended March 31, 2012 and 2011.

         

(In millions, except per share data)

Total Segment

EBIT

Income From

Operations

Before

Income Tax

Net Income

Attributable to

Bunge

Earnings Per

Share Diluted

Quarter Ended March 31:

 

2012

 

2011

 

2012

 

2011

 

2012

 

2011

 

2012

 

2011

                                 

Other income (expense) - net(1)

$

(27)

$

-

$

(27)

$

-

$

(18)

$

-

$

(0.12)

$

-

Total

$

(27)

$

-

$

(27)

$

-

$

(18)

$

-

$

(0.12)

$

-

                                 

 

 

Condensed Consolidated Statements of Income (Unaudited)

         
   

Quarter Ended

   

March 31,

(In millions)  

 

2012

 

2011

Net sales  

$

13,446

$

12,194

Cost of goods sold   

 

(12,925)

 

(11,555)

Gross profit  

 

521

 

639

Selling, general and administrative expenses  

 

(419)

 

(344)

Interest income  

 

26

 

21

Interest expense (2)

 

(62)

 

(72)

Foreign exchange gain (loss)  

 

66

 

42

Other income (expense) − net   

 

(29)

 

(8)

Income before income tax  

 

103

 

278

Income tax expense  

 

(14)

 

(43)

Net income   

 

89

 

235

Net (income) loss attributable to noncontrolling interest  

 

3

 

(3)

Net income attributable to Bunge  

 

92

 

232

Convertible preference share dividends  

 

(8)

 

(8)

Net income available to Bunge common shareholders  

$

84

$

224

Diluted earnings per common share  

$

0.57

$

1.49

Weighted–average common shares outstanding – diluted (3)

 

147

 

156

         

 

 

Consolidated Segment Information (Unaudited)

Set forth below is a summary of certain items in our condensed consolidated statements of  

income and volumes by reportable segment.  

         
 

Quarter Ended

 

March 31,

(In millions, except volumes)

2012

2011(4)

Volumes (in thousands of metric tons):

       

Agribusiness

 

30,650

 

24,211

Sugar & Bioenergy

 

1,331

 

1,438

Edible oil products

 

1,550

 

1,410

Milling products

 

1,046

 

1,243

Fertilizer

 

1,101

 

982

Total

 

35,678

 

29,284

Net sales:

       

Agribusiness  

$

9,317

$

8,102

Sugar & Bioenergy

 

881

 

1,061

Edible oil products

 

2,221

 

2,016

Milling products

 

427

 

500

Fertilizer

 

600

 

515

Total

$

13,446

$

12,194

Gross profit:

       

Agribusiness

$

352

$

400

Sugar & Bioenergy

 

8

 

32

Edible oil products

 

113

 

114

Milling products

 

56

 

57

Fertilizer

 

(8)

 

36

Total

$

521

$

639

Selling, general and administrative expenses:

       

Agribusiness

$

(215)

$

(175)

Sugar & Bioenergy

 

(44)

 

(38)

Edible oil products

 

(92)

 

(74)

Milling products

 

(31)

 

(28)

Fertilizer  

 

(37)

 

(29)

Total

$

(419)

$

(344)

Foreign exchange gain (loss):

       

Agribusiness

$

54

$

34

Sugar & Bioenergy

 

5

 

11

Edible oil products

 

(1)

 

(1)

Milling products

 

-

 

-

Fertilizer

 

8

 

(2)

Total

$

66

$

42

Segment earnings before interest and tax:

       

Agribusiness

$

197

$

249

Sugar & Bioenergy

 

(33)

 

2

Edible oil products

 

21

 

34

Milling products

 

27

 

33

Fertilizer

 

(74)

 

(1)

Total (5)

$

138

$

317

         

 

 

Condensed Consolidated Balance Sheets (Unaudited)

         
 

March 31,

December 31,

(In millions)

2012

2011

Assets

       

Cash and cash equivalents  

$

1,250

$

835

Trade accounts receivable, net

 

2,908

 

2,459

Inventories (6)

 

6,368

 

5,733

Other current assets  

 

4,225

 

4,101

Total current assets

 

14,751

 

13,128

Property, plant and equipment, net  

 

5,791

 

5,517

Goodwill and other intangible assets, net

 

1,185

 

1,113

Other non-current assets

 

4,123

 

3,517

Total assets

$

25,850

$

23,275

Liabilities and Equity

       

Short-term debt

$

758

$

719

Current portion of long-term debt  

 

47

 

14

Trade accounts payable

 

3,834

 

3,173

Other current liabilities

 

2,977

 

3,041

Total current liabilities

 

7,616

 

6,947

Long-term debt  

 

4,438

 

3,348

Other non-current liabilities  

 

1,026

 

905

Total equity

 

12,770

 

12,075

Total liabilities and equity

$

25,850

$

23,275

         

 

 

Condensed Consolidated Statements of Cash Flows (Unaudited)

 
             
 

Quarter Ended

 

March 31,

(In millions)

2012

   

2011

Operating Activities

           

Net income

$

89

   

$

235

Adjustments to reconcile net income to cash provided by (used for) operating activities:

           

Foreign exchange loss (gain) on debt

 

(15)

     

(43)

Depreciation, depletion and amortization

 

120

     

104

Other, net

 

2

     

1

Changes in operating assets and liabilities, excluding the effects of acquisitions:

           

Trade accounts receivable

 

(439)

     

(212)

Inventories

 

(549)

     

40

Trade accounts payable and accrued liabilities

 

653

     

342

Other, net

 

(163)

     

267

Cash provided by (used for) operating activities

 

(302)

     

734

Investing Activities

           

Payments made for capital expenditures

 

(224)

     

(207)

Acquisitions of businesses (net of cash acquired)

 

(98)

     

(62)

Proceeds from investments

 

18

     

16

Other, net

 

(17)

     

(29)

Cash provided by (used for) investing activities

 

(321)

     

(282)

Financing Activities

           

Net borrowings (payments) of short-term debt

 

38

     

(726)

Net proceeds (repayments) of long-term debt

 

1,031

     

510

Proceeds from sale of common shares

 

8

     

12

Dividends paid

 

(47)

     

(48)

Other, net

 

3

     

22

Cash provided by (used for) financing activities

 

1,033

     

(230)

Effect of exchange rate changes on cash and cash equivalents

 

5

     

12

Net increase (decrease) in cash and cash equivalents

 

415

     

234

Cash and cash equivalents, beginning of period

 

835

     

578

Cash and cash equivalents, end of period  

$

1,250

   

$

812

             

 

Reconciliation of Non-GAAP Measures

This earnings release contains certain "non-GAAP financial measures" as defined in Regulation G of the Securities Exchange Act of 1934.  Bunge has reconciled these non-GAAP financial measures to the most directly comparable U.S. GAAP measures below.  These measures may not be comparable to similarly titled measures used by other companies.

Total segment EBIT
Total segment EBIT is consolidated net income attributable to Bunge excluding interest income, interest expense and income tax attributable to each segment.

Total segment EBIT is a non-GAAP financial measure and is not intended to replace net income attributable to Bunge, the most directly comparable GAAP financial measure.  Total segment earnings before interest and tax (EBIT) is an operating performance measure used by Bunge's management to evaluate its segments' operating activities.  Bunge's management believes total segment EBIT is a useful measure of its segments' operating profitability, since the measure allows for an evaluation of the performance of its segments without regard to its financing methods or capital structure.  In addition, EBIT is a financial measure that is widely used by analysts and investors in Bunge's industries.  Total segment EBIT is not a measure of consolidated operating results under U.S. GAAP and should not be considered as an alternative to net income or any other measure of consolidated operating results under U.S. GAAP.

Below is a reconciliation of total segment EBIT to net income attributable to Bunge:

   
 

Quarter  Ended

 

March 31,

(In millions)

2012

2011

 

Total segment EBIT

$

138

$

317

 

Interest income

 

26

 

21

 

Interest expense

 

(62)

 

(72)

 

Income tax expense

 

(14)

 

(43)

 

Noncontrolling interest share of interest and tax

 

4

 

9

 

Net income attributable to Bunge

$

92

$

232

 
           

 

Earnings per common share-diluted (excluding certain gains & charges)
Below is a reconciliation to earnings per common share-diluted (excluding certain gains and charges) to earnings per common share-diluted. Earnings per common share-diluted (excluding certain gains and charges) is a non-GAAP financial measure and is not a measure of earnings per common share–diluted, the most directly comparable GAAP financial measure. It should not be considered as an alternative to earnings per share-diluted or any other measure of consolidated operating results under U.S. GAAP.

   
 

Quarter Ended

 

March 31,

   

2012

 

2011

Earnings per common share-diluted (excluding certain gains & charges)

$

0.69

$

1.49

Certain gains & charges (see Additional Financial Information section)

$

(0.12)

$

-

Earnings per common share-diluted

$

0.57

$

1.49

         

 

 

„ Notes

(1)

First quarter 2012 EBIT includes a $27 million provision in the fertilizer segment stemming from an environmental incident due to a sulfuric acid spill during vessel unloading in the south of Brazil in 1998.

 

(2)

Includes interest expense on readily marketable inventories of $17 million and $28 million for quarters ended March 31, 2012 and 2011, respectively.

 

(3)

Weighted-average common shares outstanding-diluted for the quarter ended March 31, 2012 excludes the dilutive effect of 4.6 million of outstanding stock options and contingently issuable restricted stock units because the effect of conversion would not have been dilutive.  Weighted-average common shares outstanding-diluted for the quarter ended March 31, 2012 excludes the dilutive effect of approximately 8 million weighted average common shares that would be issuable upon conversion of Bunge's convertible preference shares. 

 
 

Weighted-average common shares outstanding-diluted for the quarter ended March 31, 2011 excludes the dilutive effect of 2 million of outstanding stock options and contingently issuable restricted stock units because the effect of conversion would not have been dilutive.  Weighted-average common shares outstanding-diluted for the quarter ended March 31, 2011 includes the dilutive effect of 7.5 million weighted average common shares that would be issuable upon conversion of Bunge's convertible preference shares. 

 

(4)

Beginning in the first quarter of 2012, the management responsibilities for certain Brazilian port facilities were moved from the agribusiness segment to the fertilizer segment. Accordingly, amounts for prior periods presented have been reclassified to conform to the current period segment presentation.

 

(5)

See Reconciliation of non-GAAP Measures.

 

(6)

Includes readily marketable inventories of $4,627 million and $4,076 million at March 31, 2012 and December 31, 2011, respectively.

   

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