Bunge Results Spur More Merger Talk; Plans Exit of Sugar, Renewable Oil Businesses

Bunge Ltd., White Plains, N.Y., reported a fourth-quarter loss available to common shareholders of $69 million ($0.48 per diluted share) on sales of $11.6 billion, down from the year-ago income of $262 million ($1.82 per share) on sales of $11.8 billion, respectively, spurring further speculation the company might soon merge with Archer Daniels Midland or former suitor Glencore Plc. EBIT remained a positive $55 million, but was still down from the year-ago $403 million.

Full-year EBIT was only $436 million, down from 2016’s $1.14 billion, with Bloomberg reporting that 2017’s EBIT performance was the lowest by Bunge since the company posted a loss in 2009. Full-year net income was $126 million ($0.89 per share) on sales of $45.8 billion, down from 2016’s $709 million ($5.01 per share) and $42.7 billion, respectively.

“While industry headwinds persisted through the end of the year, we made good progress in 2017 towards our strategic objectives by taking proactive steps to improve our cost structure and create a more balanced business,” said CEO Soren Schroder. Still, he told analysts on Feb. 14 that he was not forecasting a quick rebound in the company’s large Agribusiness segment.

Schroder said that Bunge is preparing its sugarcane milling business for separation, and that it is in advanced discussions to sell its interest in its renewable oils joint venture to its partner. In addition, he said the company is exiting its sugar trading activities.

Schroder is doing little to quell rumors about merger or takeover speculation, according to Bloomberg. While he has declined to comment on any merger discussions, he reiterated in an interview with Bloomberg that the agricultural trader is open to options, including some kind of regional deal. “We still feel, as we have for a long time, that there’s room for regional-type consolidation and partnerships,” he said Feb. 14. “That’s been the case throughout the company’s history, whether it’s in South America or in the U.S.”

Years of bumper harvests have swollen grain inventories, depressed prices, and reduced the volatility crop handlers rely on for trading opportunities. Bunge told investors that the first-quarter will be “soft.”

Schroder said Bunge is unlikely to make any big acquisitions in the “short term, but we’re always open for partnerships.” He added that investors are pleased that the outlook for agriculture markets is showing signs of improvement, and he thinks he still has the confidence of Bunge’s board of directors. “Long-term investors in Bunge realize that our footprint is irreplaceable,” Schroder said. “It’s what we’ve been building very thoughtfully over many, many years, and has an enduring, lasting value.”

Volumes Up, Margins Down for Bunge Fertilizer

Bunge’s Fertilizer segment reported higher fourth-quarter volumes and revenues, though a decline in EBIT and gross profits. The company said higher volumes and lower costs in its Argentine fertilizer business were offset by a decrease in margins. Fourth-quarter 2016 results also included an $11 million benefit from the reversal of a provision related to tariffs on natural gas.

Bunge projects 2018 Fertilizer EBIT of $25 million.

*Volumes in 000 mt; others $/millions