Net income in the second quarter ended June 30 was $72 million, equal to 51¢ per share on the common stock, down 34% from $109 million, or 78¢ per share, in the same period a year ago. Net sales, meanwhile, increased 10% to $11.645 billion from $10.541 billion.
Bunge slashed hopes for earnings from it core trading and oilseeds processing division, citing dents to Brazilian margins as flagged by rival Archer Daniels Midland – but said that hedging had protected its sugar profits from weak prices.
“The second quarter was profitable across all segments with good performance in Foods and Sugar, but overall, below expectation as Agribusiness lagged well behind its historical range,” Soren W. Schroder, chief executive officer, said during an Aug. 2 conference call with analysts. “Oils did well globally with important customer wins and growth in added value.
We’re building a leading platform in B2B globally, a market segment that continues to grow at (3%) per annum, and with increasing opportunities for Bunge to differentiate in the eyes of customers and consumers. Milling offsets some of the gains in Food & Ingredients, as significantly lower flour demand combined with increased competition from the unusually large domestic wheat crop in Brazil, weighed on both volumes and margins.”
The downgrade came as the group reported an 89% plunge to $18m in operating profits for the division in the April-to-June quarter, as Bunge revealed a further dent from the “slow” Brazilian farmer selling which, in boosting competition by processors for supplies, has “negatively impacted margins”.
EBIT in the Agribusiness segment totaled $18 million in the second quarter, down sharply from $168 million in the same period a year ago. The decline reflected a $54 million decrease in oilseeds and a $108 million decrease in grains.
Net sales increased 10% to $8.298 billion, while volumes moved up 6.5% to 36.173 million tonnes.
“The decrease in grains was primarily the result of weaker results in origination and distribution. While volume increased primarily in the U.S., margins remained under pressure in South America and in destinations with customers only covering short-term needs. Overall, Agribusiness results were lower than a comparable period last year primarily as weaker margins and negative mark-to-market impacts were only partially offset by higher volumes and improved risk management results.”