White Plains, N.Y.-Bunge Ltd. said Jan. 13 that it is lowering its earnings expectations for the full year ended Dec. 31, 2008. The revised preliminary earnings estimate is approximately $1.06 billion, or $7.70 per share, down significantly from earlier guidance of $11.60-$11.90 per share. Weak fourth-quarter results were impacted by soft demand for soybean meal and oil due to challenging economic conditions in end markets and substitutions of other agricultural commodity products. Farmers were reluctant sellers of crops in expectation of higher prices, while credit constraints affected the Brazilian farm sector and limited sales of fertilizer. Fertilizer segment performance was also impacted by foreign exchange losses of approximately $225 million from the 18 percent devaluation of the Brazilian real on U.S. dollar-denominated financing of working capital during the fourth quarter. Unlike in agribusiness, where inventories are marked to market, offsetting gains in fertilizer inventories are expected to occur in future quarters when these inventories are sold. Bunge expects to record an after-tax charge of approximately $160 million related to counterparty risk in its agribusiness segment. Depressed economic conditions and significant declines in agricultural commodity, freight, and energy prices have adversely affected certain customers and counterparties. “In the fourth quarter, demand fell more than we anticipated,” said Jacqualyn Fouse, Bunge CFO. “Periods of soft demand are typically short lived in our industry, and we expect to see fundamentals improve during 2009. The USDA forecasts global soybean meal consumption to be flat and vegetable oil to increase 4 percent in 2009 as compared to 2008. Stocks-to-use ratios of agricultural commodities remain near historically low levels. The recent increase in agricultural commodity prices has improved farm economics. This is encouraging farmers to sell their crops and should stimulate purchases of crop nutrients during the year. We are taking further steps to lower costs and improve the efficiency of our asset network. At the same time, the stronger U.S. dollar should benefit the cost structures of our foreign operations. We enter 2009 with a comfortable liquidity position, which should help us to take advantage of opportunities that may arise during this volatile economic period. Our preliminary expectation for 2009 earnings is in the range of $6.90 to $7.60 per share.” Bunge will release fourth quarter results Feb. 5.
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