Bunge sees earning rise, new operating model start in Q1

By Aerin Einstein-Curtis

- Last updated on GMT

© GettyImages/Tashatuvango
© GettyImages/Tashatuvango

Related tags Bunge oilseeds ASF

Agribusiness, oilseeds boost first quarter results for Bunge, even as the company starts a new global operating system.

The New York-based company released details regarding its first quarter performance and new operating structure on Wednesday [May 8]. The results covered the period through March 31.

The company is in the process of making some internal changes including in staffing positions, said Greg Heckman, CEO with Bunge Limited. “Over the last three months I’ve worked with the team to tighten up how we operate and better manage the inherent value at risk,”​ he added.

“Bunge has a powerful global franchise in oilseeds and oils, we’re the number one crusher in the world with the largest South American footprint, strong positions in other countries and a new and evolving oils platform combined with our worldwide grains distribution network and regional milling footprint this provides us with unmatched scale and expertise,”​ he said on the investors’ call.  

However, to move the company forward Bunge is shifting to a global operating model from its current regional structure, he said. “This new structure will simplify how we operate, drive greater transparency and accountability, reduce costs and support our renewed focus on customers and execution.”

Overall the company reported $45m in net income for the quarter, an improvement on the $21m loss witnessed during the same period.

The gross profit for the period was $437m, up from $384m last year, the company said.

Results for the first quarter were “in line”​ with company expectations, said Heckman.

However, the influence of the African Swine Fever (ASF) outbreak in China and the ongoing trade uncertainty between the US and China remain unclear, he said.

“ASF has caused the largest decline of animal protein supplies in recent memory – decline equal to the entire US swine herd and the full impact of the disease remains to be seen,” ​he said. “The most recent USDA forecast suggests global soybean inventories will exceed 1.7m metric tons by September 1, a record high, additionally most of these inventories remain in the hands of producers and we believe future producer marketing patterns will be affected by how the US-China trade discussions evolve. While these dynamics should create a positive catalyst for our global diverse footprint, the timing and magnetite of these potential benefits remain unclear.”

Segment highlights

Total segment earnings before interest and tax (EBIT) were $151m, up from $61m in 2018, said Thom Boehlert, Bunge CFO. The adjusted total segment EBIT was $166m, again an increase from $85m.

The agribusiness segment saw an adjusted EBIT of $120m increasing from $52m the previous year, he said. “Both quarters were negatively impacted by crush margin and mark to market timing effects,”​ he added.

Within the segment, oilseeds returns were $98m, compared to a loss of $34m in 2018, the company reported.

“Both soy and soft crush volumes were slightly higher than last year,” ​said Boehlert. “Soy crush margins were higher as we locked in a significant portion of our first quarter production last year before margins weakened.”

“Margins were higher in North America, Brazil and Europe but lower in China, due to the effects of the African swine fever, and Argentina, which was negatively impacted by farmer retention of soybeans,”​ he added.

However, grains brought in $22m, down from $86m reported in the first quarter of 2018, he said. The drop was primarily linked to lower origination volumes and margins in both North and South America.

“In North America, results were negatively impacted by weather-related disruptions, farmer retention and reduced export demand to China,”​ he said. “In Brazil, farmer selling was limited amid a decrease in premiums related to crop size and lower export demand due to the ASF.”

Results in grain trading and distribution also dropped based on volumes and margins, said Boehlert.

“Both origination and distribution were somewhat lackluster in the first quarter with the lack of US-China trade news and the continued spread of ASF,” ​he said. “In total, we estimate that the challenging US weather conditions during the quarter negatively impacted the agribusiness segment results by approximately $20m.”

The food and ingredients segment saw and EBIT of $68m, an increase from $54m, he said. Sugar and bioenergy had an adjusted loss of $23m, which was similar to the $20m loss in the first quarter of last year.

However, fertilizer brought in $1m, up from the $1m loss last year, he said.

Internal reorganization

Bunge is shifting its global operating model to be aligned with the company’s commercial focus including handling and processing, risk management and optimization and managing physical product flows, it said.

The move is a turn away from the regional and 'matrix-based' system used previously, said Heckman.

Effective immediately, the agribusiness segment of the company will be managed by Raul Padilla, Christos Dimopoulos and Brain Zachman.

Padilla, who was the president, South America and sugar and bioenergy will become the president of global operations, the company said. Dimopoulos who was the president of agribusiness will become the president of global supply chains.

Zachman was the president of global risk management, and will continue in that role, the company said.

Aaron Buettner, senior vice president of Bunge Loders Croklaan, is set to stay in that role but report directly to Heckman as part of an ongoing effort to grow the company’s food and ingredients business, Bunge said.

Pierre Mauger, currently the company’s president of Europe and Asia will become the chief transformation officer, Bunge said. Both Todd Bastean, president, North America, and Gordon Hardie, president of food and ingredients are set to retire following the transition period.

Additionally, it was announced during the call that John Neppl has been appointed as Bunge’s new CFO starting on May 29.

Current CFO, Thom Boehlert, is set to stay with the company during the transition period, the company said.

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