Bunge grows on 'robust livestock economics', shows big jump in Q2 profits
The oilseed and grain group reported second quarter earnings before interest and taxes (EBIT) of $418 million, which was up $179m on 2013.
Soren Schroder, Bunge CEO, said while the group’s agribusiness results were driven by good crush margins, all divisions posted higher year over year results.
He said expectations are high that the momentum of Q2 will carry through for the remainder of the year “and that we will meet or exceed our targeted full-year combined returns in agribusiness and food and ingredients of 1.5 points above cost of capital.”
Strong softseed and soybean margins
In the southern hemisphere, record soybean crops, strong export demand and good farmer selling led to solid processing margins in Q2, said Bunge.
“Our team in Brazil continued to do an excellent job in managing logistical flows of crops through a complicated interior structure resulting in lower transportation and execution costs.”
The group said Q2 oilseed processing results were also higher in the northern hemisphere led by strong margins in soft seed in Canada and in soybean in Europe, but US soybean processing earnings were comparable to last year.
Results in China were down, it added.
Its grain origination results were reported to be “within expectations, but lower than last year” due, in the main, to the decision of Brazilian farmers to postpone commercialization of the safrinha corn crop on lower market prices.
Robust livestock economics
The agri-giant predicts meal demand to continue to be supported by greater usage of corn in feed formulations.
And Drew Burke, CFO, said he expects strong trading in commodities due to the combination of lower crop prices and robust livestock economics.
“Crops in North America and Europe are developing well, supporting good forward soybean and softseed processing margins in these regions.
After a strong period of farmer selling in South America, we expect a slower pace in the second half of the year.
While this would reduce utilization in the region, it should provide additional export opportunities for the US and Europe. It will also skew results more towards the fourth quarter,” he said.
