Bunge Limited's CEO Discusses Q1 2012 Results - Earnings Call Transcript

Bunge Limited (BG)

Q1 2012 Earnings Call

April 26, 2012 10:00 am ET

Executives

Mark Haden -

Alberto Weisser - Chairman and Chief Executive Officer

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

Analysts

Christine McCracken - Cleveland Research Company

Christina McGlone - Deutsche Bank AG, Research Division

Lindsay Drucker Mann - Goldman Sachs Group Inc., Research Division

David Driscoll - Citigroup Inc, Research Division

Vincent Andrews - Morgan Stanley, Research Division

Tim J. Tiberio - Miller Tabak + Co., LLC, Research Division

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

Ian Horowitz - Topeka Capital Markets Inc., Research Division

Ryan Oksenhendler - BofA Merrill Lynch, Research Division

Christine Healy - Scotiabank Global Banking and Market, Research Division

Robert Moskow - Crédit Suisse AG, Research Division

Presentation

Operator

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

Mark Haden

Great. Thank you, John. And thank you, everyone, for joining us this morning. Welcome to Bunge Limited's First Quarter 2012 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 at 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 continued in -- 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. We faced headwinds in the first quarter, as expected, but are confident that we will deliver strong results in 2012. Agribusiness and Food Ingredients performed well. However, in Sugar & Bioenergy, lower margins for ethanol depressed results. And Fertilizer results were impacted by an environment of falling international prices, as well as a non-recurring item.

Looking ahead, market conditions in Agribusiness are better than they were at the beginning of the year. Supply and demand in oilseeds and grains is more balanced, and export shipments in key crops are up compared to last year, which should support volumes and margins globally.

Volatility should persist, but we feel confident that our risk management capabilities will enable Bunge to navigate the market successfully.

In Sugar & Bioenergy, margins should improve significantly with the new harvest, and we are confident we will meet expectations for the remainder of the year. And in the Fertilizer, we expect margins and volumes to improve with the start of the traditional sale season. But we clearly have more work to do here and continue to evolve our business model to yield better returns.

Now I will turn it over to Drew who will discuss our first quarter financial results and outlook.

Andrew J. Burke

Thank you, Alberto, and good morning, everyone. Let's turn to Page 4. Our net income for the quarter is $92 million versus $232 million in the prior year. The quarter does contain a notable item of $27 million. This charge relates to a Brazilian court case regarding an environmental incident which occurred in 1998. The charge is included in our Fertilizer business. If we adjust our net income for this notable item, our net income for the quarter would be $110 million.

Our earnings per share as reported is $0.57 per share and adjusted for the notable item, it is $0.69 per share. Our Agribusiness segment EBIT was $197 million versus a strong comparison of $249 million in the prior year. This result was in line with our outlook as stated during our last call. The major portion of the reduction was in oilseeds processing in the United States and Europe. U.S. margins continued to be impacted by low capacity utilization. Europe continued to be affected by low rapeseed gross margins due to the small crop.

Our grains business performed well but below prior year, led by strong results in South America. Agribusiness volumes increased significantly from 24 million metric tons in 2011 to 30 million tons in 2012. This increase reflected growth in our asset base, our new oilseed processing facilities in Asia, our new grain facilities in North America and our new ports in Ukraine and the Pacific Northwest, as well as higher grain merchandising volumes in Europe, which, last year, was impacted by the smaller crops in the Black Sea.

Sugar & Bioenergy reported a loss of $33 million versus a profit of $2 million in the prior year. The first quarter is the inter-harvest period in Brazil, and our mills were not operating. During this period, we sold product that has been carried over from the previous crop. Due to the low harvest last year, the industry carried ethanol inventories at a high cost. Prices did not increase to compensate for this as they were pressured by the reduction in the gasoline blend rate from 25% to 20% and the presence of imported ethanol from the U.S.

Fertilizer EBIT was a loss of $74 million in the quarter versus a $1 million loss in the prior year. The loss of $74 million includes the $27 million notable item discussed earlier. The majority of the remaining loss of $47 million was due to our Brazilian business and our Moroccan joint venture. The Brazilian loss was mainly due to weak margins, primarily caused by declining international prices. While contribution margins were positive, they were not high enough to cover our industrial and selling, general and administrative cost. Our Moroccan results were also impacted by lower margins and by a plant shutdown for scheduled maintenance.

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