Shares of Bunge Ltd., St. Louis, surged after the company released results on Oct. 28 that beat analyst estimates and included improved guidance. Earnings for 2020 are now expected to come in at $6.25-$6.75 per share, excluding notable items and mark-to-market timing differences, up from $5.00 per share promised in June.
Third-quarter results came in at $2.47 per common share (adjusted net income-diluted) versus the average analyst estimate for earnings of 20 cents, and $1.28 a share for the same period last year. Profits were driven by record Brazilian exports and better soybean processing margins. Trading margins have improved as a weaker currency spurs Brazilian farmers’ sales, China loads up on American crops, and soy processing margins rebound.
Bunge has been cutting costs, shedding underperforming assets, and buying back shares in a bid to turn its business around. The return to fat profits is a stark turnaround for an agriculture industry that had gotten used to thin margins and the lack of volatility traders need to thrive, noted a Bloomberg report.
China has bought a record amount of corn, and sales of American soybeans to the Asian nation are running at their highest in data going back to 1991. Soybean processing profits have improved in the U.S. as Argentina farmers hold back their crops and dry weather in Brazil boosts prices.
Bunge shares on Oct. 28 shot up as high as 8.6 percent to $60.50, but later settled down to close at $58.06, a 4 percent increase over prior day trading.
“Looking into next year, we expect many of the favorable trends to continue with demand for our products remaining strong,” said Bunge CEO Greg Heckman. “We also expect additional global demand for vegetable oil from the growth of biofuels.”
Heckman took Bunge’s top job last year, and since then he has announced the sale of most of Bunge’s U.S. grain elevators to a unit of Japanese cooperative Zen-Noh, sold the Brazilian margarine business to JBS SA, and formed a joint venture with BP Plc for its struggling sugar and ethanol business. Bunge expects further divestment announcements before year-end.
Bunge labels its Sugar & Bioenergy segment as non-core and eventually expects to sell off its stake or form an IPO. Bunge said higher Fertilizer segment results reflected improved performance in its Argentine operations driven by higher margins, partially offset by lower volumes. The company now expects full-year Fertilizer adjusted results to be slightly higher than last year.
Fertilizer third-quarter gross profit was $30 million on net sales of $153 million, up from the year-ago $28 million and $178 million, respectively. Adjusted EBIT was $29 million, up from the year-ago $22 million. Volumes were off at 485,000 mt from 512,000 mt.
Fertilizer nine-month gross profit was up at $61 million on net sales of $324 million from the year-ago $44 million and $355 million, respectively. Adjusted EBIT was $53 million, up from $30 million. Volumes were up slightly, to 1.04 million mt from 1.01 million mt.
Bunge-wide third-quarter net income attributable to the company was $262 million on net sales of $10.2 billion, versus the year-ago loss of $1.49 billion and $10.3 billion, respectively. Adjusted EBIT was $512 million, up from $279 million.
Nine-month net income was $594 million on sales of $28.8 billion, up from the year-ago loss of $1.23 billion and $30.4 billion. Adjusted EBIT was $1.18 billion, up from $793 million.