Bunge Ltd. moved into the loss column for fertilizer earnings before interest and tax (EBIT) at a negative $262 million, down 297 percent from the year-ago positive $133 million. Fertilizer gross profits fell 177 percent, to a negative $193 million from the year-ago positive $250 million.
The losses were attributed to lower selling prices, higher raw material and finished product inventory costs due to purchases made last year prior to the drop in international prices, and lower sales volumes compared to exceptionally strong volumes in the year-ago period. First-quarter results included an inventory write-down of $64 million.
Fertilizer net sales were off 41 percent, to $699 million from $1.2 billion. Volumes were off 23 percent, to 2.06 million mt from the year-ago 2.67 million mt.
“The start of 2009 was more challenging than expected,” said Alberto Weisser, Bunge chairman and CEO. “Retail fertilizer margins in Brazil suffered from aggressive price reductions by competitors, which drove sales prices below international levels. Additionally, global demand for soybean meal was soft. Despite this difficult start, our confidence in a recovery in our markets and a solid performance in the second half of the year remains strong.”
Weisser said Bunge is working through the higher-cost fertilizer inventory and that the supply of fertilizer products in the Brazilian retail channel has been reduced by approximately 30 percent since the end of 2008, approaching historical seasonal levels. He said both of these factors should improve margins as the year progresses. “Higher commodity prices, resulting from tighter global oilseed stocks, are supporting farmer economics, and should help stimulate sales of fertilizer products in the second half of the year when South America enters its next major planting season,” he added. He noted that the USDA has reduced its estimate for global soybean production by nearly 15 million mt, mainly due to weather-related production issues in South America.
Company-wide, Bunge had a first-quarter net loss of $176 million ($1.76 per share), down 155 percent from the year-ago net income of $322 million ($2.10 per share). Sales were down 26 percent, to $9.2 billion from $12.5 billion.
Due to the lower-than-expected first-quarter results and a more challenging near-term pricing environment in fertilizer, Bunge has revised its 2009 full year earnings guidance from $6.90-$7.60 per share to $4.90-$5.40 per share.