Bunge Ltd. reported an 85 percent increase in fertilizer earnings before interest and tax (EBIT) for the first quarter ending March 31, 2010, though they were still in the loss column, at $40 million versus the year-ago negative $262 million. First-quarter fertilizer gross profit was a positive $61 million on sales of $699 million, versus the year-ago gross loss of $193 million on sales, which were also $699 million.
Fertilizer sales volumes during the first quarter were up 12 percent, to 2.3 million mt from the year-ago 2.06 million mt. Chief Financial Officer Jacqualyn Fouse told analysts that overall volume growth was good, though it was concentrated in the nutrient business, which is being sold to Vale (GM Feb. 1, p. 1) in the second quarter. “Retail saw lower volumes and market share during this quarter as we maintained pricing and farmers slowed their purchases in the second half of the quarter.”
Bunge said average fertilizer inventory costs are now below market prices. Results included $4 million of restructuring charges in the retail business in Brazil, and $23 million lower depreciation in nutrients due to the classification of these assets as held for sale.
Bunge said 2010 is a transition year for the company’s fertilizer sector as it works through the separation of its nutrient production business, which is being sold from its remaining retail business. The sale is expected to garner $3.5 billion in after-tax proceeds. The company expects to take $1.5 billion of the proceeds to pay down debt.
Bunge expects its retail fertilizer business to improve in the second half as the pace of farmer purchases picks up closer to planting, but says it will still be below expectations.
Company-wide, Bunge reported net income of $80 million ($.31 per share) on sales of $10.34 billion, up from the year-ago loss of $176 million ($1.76 per share) on sales of $9.2 billion. Citing the outlook for fertilizer and possible margin pressure from oilseed processing, the company is revising its 2010 outlook down to $5.30-$5.80 per share from the $5.75-$6.25 given in February. This excludes the gain on the sale of the company’s fertilizer nutrient business, expected in the second quarter.