Bunge Limited (BG)

Q3 2011 Earnings Call

October 27, 2011 10:00 am ET


Andrew J. Burke - Chief Financial officer and Global Operational Excellence officer

Mark Haden - Investor Relations

Alberto Weisser - Chairman and Chief Executive Officer


Kenneth B. Zaslow - BMO Capital Markets U.S.

Diane Geissler - Credit Agricole Securities (USA) Inc., Research Division

David Driscoll - Citigroup Inc, Research Division

Jeffrey D. Farmer - Jefferies & Company, Inc., Research Division

Robert Moskow - Crédit Suisse AG, Research Division

Christina McGlone - Deutsche Bank AG, Research Division

Christine McCracken - Cleveland Research Company

Vincent Andrews - Morgan Stanley, Research Division

Ryan Oksenhendler - BofA Merrill Lynch, Research Division



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Welcome to the Q3 2011 Bunge Limited Earnings Conference Call. My name is Monica and I'll be your operator for today's call. [Operator Instructions] Please note that this conference is being recorded. I would now like to turn the call over to Mark Haden. Mr. Haden, you may begin.

Mark Haden

Great. Thank you, Monica. Thank you, everyone, for joining us this morning. Welcome to Bunge Limited Third Quarter 2011 Earnings Conference Call.

Before we get started, I want to inform you that we have prepared a slide presentation to accompany our discussion. It can be found in the Investors section of our website, www.bunge.com, under Investor Presentations.

Reconciliations of non-GAAP measures disclosed verbally on this conference call to the most directly comparable GAAP financial measure are posted on our website in the Investors section.

I'd like to direct you to Slide 2 and remind you that today's presentation includes forward-looking statements that reflect Bunge's current views with respect to future events, financial performance and industry conditions. These forward-looking statements are subject to various risks and uncertainties. Bunge has provided additional information in its reports on file with the SEC concerning factors that could cause actual results to differ materially from those contained in this presentation and encourages you to review these factors.

Participating on the call this morning are Alberto Weisser, Bunge's Chairman and Chief Executive Officer; and Drew Burke, Bunge's Chief Financial Officer. I'll now turn the call over to Alberto, and he'll begin with Slide 3.

Alberto Weisser

Good morning, everyone. It was a difficult quarter with lower results in all segments except Fertilizer. This particular volatile period was marked by significant price movements and a combination of external factors that resulted in markets moving at times differently than underlying fundamentals. Managing risk in our agribusiness and sugar & bioenergy segments in this environment proved to be challenging. Lower than planned sugar milling volume, due to the impact of adverse weather conditions in each of the past 2 seasons on our sugarcane yield, also weighed on our results. However, looking forward, we expect results to improve in the fourth quarter and see optimistic signs for Bunge in 2012.

While the global macroeconomic environment presents uncertainties, there are reasons to expect resilience in our businesses. First, many of our products are basic staples needed to feed the world's growing population. USDA forecast that demand for global soybean meal and vegetable oil will increase by 5% and 4%, respectively. In fact, global vegetable oil consumption has increased for 31 straight years. Second, global commodity stocks-to-use ratios remain relatively tight, particularly in feed grains and vegetable oils. Even in this scenario of lower economic growth, the world needs additional supplies of crops. Prices should remain at attractive levels, providing farmers with good economics. Growing demand should encourage increased planting, increased fertilizer use and increased trade, which Bunge's global network is well equipped to handle.

We also expect a much stronger performance in our sugar & bioenergy segment in 2012. Sugar and ethanol prices in Brazil should remain strong due to the continued uncertainty about the development with the Brazilian center-south cane crop where approximately 90% of the country's sugarcane is grown, and importantly, the region needs to expand production to support global sugar trade and the growth in domestic ethanol demand. With those factors in mind, we are on track to have 50,000 hectares of newly planted sugarcane ready for the next harvest, which puts us near the top of the industry. This will provide needed raw material to operate our mills closer to capacity and enable us to demonstrate the potential of this business.

Fertilizer are getting closer to our targets for the business. We're managing risk in the business well. Volumes are picking up, and we are working on more opportunities to reduce costs. I'm confident that next year, this business will deliver on its potential.

Now we will turn it over to Drew, who will discuss our third quarter financial results and outlook.

Andrew J. Burke

Thank you, Alberto. Let's turn to Page 4. Our net income in the quarter was $140 million versus $212 million in a strong prior-year quarter. On a year-to-date basis, our net income was $688 million versus $339 million in the prior year adjusted for the $1.9 billion gain on the sale of our fertilizer and nutrients business and other notable items. Volume in the quarter increased from 34.6 million tons to 38 million tons, primarily due to higher processing and origination volumes in Brazil and more exports out of the Black Sea.

Agribusiness reported results of $159 million versus $313 million in a strong 2010 quarter. On a year-to-date basis, agribusiness has earned $731 million versus $463 million in the prior year. Adjusting for notable items, the comparison would be $694 million in 2011 versus $503 million in 2010. The decline in our agribusiness EBIT compared to the 2010 quarter results primarily from our grain merchandising business. 2010 had strong margins resulting from the supply dislocation related to the Black Sea drought. While volumes improved in 2011, margins interest management results were lower. Oilseed results were slightly above prior year as better results in Brazil were offset by reductions in North America and Asia.

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