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Bunge Profits Climb
NEW YORK - Jul 29/10 - SNS -- Bunge reported net income of U.S. $1,778 million on sales of $10,974 million for the second quarter ending June 30, compared to net income on $313 million on revenue of $10,994 million during the same three month period last year.
This lifted net income for the first half of the fiscal year to $1,841 million on sales of $21,319 million, compared to net income of $118 million on sales of $20,192 million during the same six-month per last year.
Alberto Weisser, Bunge's Chairman and Chief Executive Officer belives that during the second half of the 2010 calendar year demand for sgribusiness products "should be stronger and Northern Hemisphere harvests will contribute to new market conditions. Sugar and ethanol production will peak as the harvest progresses and sugar content yields improve, and fertilizer will enter its seasonally strong period in the Southern Hemisphere."
Reuslts in Bunge's oilseed processing, grain origination and distribution in all regions were lower than those of an exceptionally strong period last year. Slow farmer selling, combined with stronger than expected soybean export demand from China and excess capacity in some regions, created a tight supply situation that pressured margins in South America and the U.S. Our commercial and risk management strategies, especially in oilseeds, had anticipated more balanced supply and demand in the quarter, considering the record soybean crops in South America.
Slow farmer selling also impacted European softseed processing results and our grain origination and distribution businesses in most regions. Second quarter results included $4 million of restructuring charges relating to the consolidation of Bunge's Brazilian operations.
B.Sugar, BioTech, Fertilizer
Sugar and bioenergy results were in line with expectations. Higher results in sugarcane milling due to the addition of the Moema mills and positive trading results were offset by start up costs associated with the expansion and construction of mills. The second quarter is typically the weakest period for this segment, as it marks the beginning of the sugarcane harvest in the Central-South of Brazil when the sugar content of the cane is at its lowest level. Consequently, Bunge's mills produced less sugar and ethanol per unit of cane milled than they will in the second half of the year when the yield increases. Higher SG&A reflects the addition of Moema and $3 million of restructuring charges related to the consolidation of Bunge's Brazilian operations.
Higher fertilizer results were due to the gain on the sale of Bunge's Brazilian fertilizer nutrients assets, which was completed during the quarter. Performance in Bunge's Brazilian retail business, however, was weaker than expected due to the combination of aggressive competitor pricing, which pressured margins, and disruptions resulting from the separation of Bunge's nutrients business from retail, which resulted in higher operating costs and lost sales opportunities.
As a result of the sale of nutrients, Bunge is restructuring this business so it is more focused, with a leaner cost structure, a different commercial approach and stronger connections to agribusiness. Noncontrolling interest increased in the quarter due to higher results at Fosfertil. The second quarter included a charge of $37 million recorded in cost of goods sold related to an inventory valuation adjustment as a consequence of the nutrients assets sale. The second quarter of 2009 included the reversal of a $32 million provision recorded in SG&A related to transactional taxes in Brazil as a result of new legislation.
Edible Oil Products
Results in the quarter were adversely impacted by $2 million of restructuring charges mostly related to the consolidation of Bunge's Brazilian operations, $21 million of provisions in SG&A related to an expiring tax credit and customer promotional allowances in Bunge's Brazilian business and a $2 million decrease as a result of the sale of Bunge's joint venture interest in Saipol in the fourth quarter of last year. On a comparable basis, performance this quarter improved due to higher results in Bunge's margarine businesses in Brazil and Europe.
Higher corn milling results were more than offset by lower wheat milling margins due to increased local competition as a result of a large Brazilian wheat crop. Second quarter results included $3 million of restructuring charges recorded in SG&A related to the consolidation of Bunge's Brazil operations. The second quarter also included $5 million of provisions recorded in SG&A primarily related to customer promotional allowances in wheat milling.
CONSOLIDATED STATEMENTS OF INCOME
(In millions, except per share data and percentages)
(Unaudited)
Quarter Ended Percent
-------------
June 30,
--------
2010 2009 Change
---- ---- ------
Net sales $10,974 $10,994 -%
Cost of goods sold (10,549) (10,582) -%
------- -------
Gross profit 425 412 3%
Selling, general and
administrative expenses (415) (309) 34%
Gain on sale of fertilizer
nutrients assets (Note 1) 2,440 - 100%
Interest income 23 40 (43)%
Interest expense (Note 2) (101) (66) 53%
Foreign exchange gain (49) 320
Other income (expense)--net (3) (1)
--- ---
Income from operations before
income tax 2,320 396 486%
Income tax expense (542) (79) 586%
---- ---
Income from operations after
income tax 1,778 317 461%
Equity in earnings of affiliates 9 5 80%
--- ---
Net income 1,787 322 455%
Net income attributable to
noncontrolling interest (9) (9) -%
---
Net income attributable to Bunge 1,778 313 468%
Convertible preference share
dividends (20) (20)
--- ---
Net income available to Bunge
common $1,758 $293 500%
shareholders ====== ====
Earnings per common share -
diluted (Note 3):
Earnings to Bunge common
shareholders $11.15 $2.28 389%
====== =====
Weighted-average common shares
outstanding-diluted (Note 3) 159,448,713 137,576,049
=========== ===========
Six Months Ended Percent
----------------
June 30,
--------
2010 2009 Change
---- ---- ------
Net sales $21,319 $20,192 6%
Cost of goods sold (20,349) (19,645) 4%
------- -------
Gross profit 970 547 77%
Selling, general and
administrative expenses (762) (603) 26%
Gain on sale of fertilizer
nutrients assets (Note 1) 2,440 - 100%
Interest income 42 76 (45)%
Interest expense (Note 2) (179) (133) 35%
Foreign exchange gain (99) 301
Other income (expense)--net (3) (8)
--- ---
Income from operations before
income tax 2,409 180 1,238%
Income tax expense (551) (45) 1,124%
---- ---
Income from operations after
income tax 1,858 135 1,276%
Equity in earnings of affiliates 9 11 (18)%
--- ---
Net income 1,867 146 1179%
Net income attributable to
noncontrolling interest (26) (28) (7)%
--- ---
Net income attributable to Bunge 1,841 118 1,460%
Convertible preference share
dividends (39) (39)
--- ---
Net income available to Bunge
common $1,802 $79 2,181%
shareholders ====== ===
Earnings per common share -
diluted (Note 3):
Earnings to Bunge common
shareholders $11.67 $0.64 1,723%
====== =====
Weighted-average common shares
outstanding-diluted (Note 3) 157,710,543 122,919,727
=========== ===========
Note 1: See the Additional Financial Information section.
Note 2: Includes interest expense on readily marketable inventories
of $20 million and $21 million for the quarter ended June 30, 2010
and 2009,
respectively, and $33 million and $28 million for the six months
ended June 30, 2010 and 2009, respectively.
Note 3: Weighted-average common shares outstanding-diluted for the
quarter and six months ended June 30, 2010 excludes the dilutive
effect of
approximately 3 million outstanding stock options and contingently
issuable restricted stock units because the effect of the conversion
would not have
been dilutive. Weighted-average common shares outstanding-diluted
for the quarter and six months ended June 30, 2010 includes the
dilutive effect
of approximately 14.6 million weighted average common shares that
would be issuable upon conversion of Bunge's convertible preference
shares.
Weighted-average common shares outstanding-diluted for the quarter
ended June 30, 2009 includes the dilutive effect of 14.6 weighted
average common
shares that would be issuable upon conversion of Bunge's convertible
preference shares because the effect of the conversion would have
been dilutive.
There were no weighted average common shares of outstanding stock-
based payment awards that would be issuable upon conversion of the
convertible
preference shares, included in the earnings per common share-diluted
calculation for the six months ended June 30, 2009 because they
would not have
been dilutive.
CONSOLIDATED SEGMENT INFORMATION
(In millions, except volumes and percentages)
(Unaudited)
Set forth below is a summary of certain items in Bunge's consolidated
statements of income and volumes by reportable
segment.
Quarter Ended Percent
June 30,
--------
2010 2009 Change
---- ---- ------
Volumes (in thousands of
metric
tons):
Agribusiness 29,197 32,024 (9)%
Sugar & Bioenergy 2,788 1,573 77%
Fertilizer 1,965 2,426 (19)%
Edible oil products 1,493 1,382 8%
Milling products 1,108 1,100 1%
----- -----
Total 36,551 38,505 (5)%
====== ======
Net sales:
Agribusiness $7,406 $7,902 (6)%
Sugar & Bioenergy 963 402 140%
Fertilizer 641 841 (24)%
Edible oil products 1,578 1,472 7%
Milling products 386 377 2%
--- ---
Total $10,974 $10,994 -%
======= =======
Gross profit:
Agribusiness $270 $488 (45)%
Sugar & Bioenergy 46 17 171%
Fertilizer (11) (212) 95%
Edible oil products 86 83 4%
Milling products 34 36 (6)%
--- ---
Total $425 $412 3%
==== ====
Selling, general and
administrative
expenses:
Agribusiness $(200) $(190) 5%
Sugar & Bioenergy (36) (7) 414%
Fertilizer (49) (18) 172%
Edible oil products (97) (71) 37%
Milling products (33) (23) 43%
--- ---
Total $(415) $(309) 34%
===== =====
Gain on sale of
fertilizer nutrients $2,440 $-
assets ====== === 100%
Foreign exchange gain
(loss):
Agribusiness $(36) $138
Sugar & Bioenergy (2) -
Fertilizer (9) 183
Edible oil products (2) (1)
Milling products - -
--- ---
Total $(49) $320
==== ====
Equity in earnings of
affiliates:
Agribusiness $3 $3 -%
Sugar & Bioenergy (3) (2) (50)%
Fertilizer 8 1 700%
Edible oil products - 2 (100)%
Milling products 1 1 -%
--- ---
Total $9 $5 80%
=== ===
Noncontrolling interest:
Agribusiness $(13) $(6)
Sugar & Bioenergy 4 3
Fertilizer (8) (5)
Edible oil products (1) -
Milling products - -
--- ---
Total $(18) $(8)
==== ===
Other income/(expense):
Agribusiness $4 $2
Sugar & Bioenergy (5) 2
Fertilizer (2) (2)
Edible oil products 1 (3)
Milling products (1) -
--- ---
Total $(3) $(1)
=== ===
Segment earnings before
interest
and tax:
Agribusiness $28 $435 (94)%
Sugar & Bioenergy 4 13 (69)%
Fertilizer 2,369 (53) n/m
Edible oil products (13) 10 n/m
Milling products 1 14 (93)%
--- ---
Total (Note 1) $2,389 $419 470%
====== ====
Reconciliation of total
segment
earnings before interest
and tax:
Total segment earnings
before interest and tax $2,389 $419
Interest income 23 40
Interest expense (101) (66)
Income tax expense (542) (79)
Noncontrolling interest
share of interest and
tax 9 (1)
--- ---
Net income attributable
to Bunge $1,778 $313
====== ====
Depreciation, depletion
and
amortization:
Agribusiness $(45) $(46) (2)%
Sugar & Bioenergy (32) (3) 967%
Fertilizer (9) (34) (74)%
Edible oil products (20) (17) 18%
Milling products (7) (5) 40%
--- ---
Total $(113) $(105) 8%
===== =====
Six Months Ended Percent
June 30,
--------
2010 2009 Change
---- ---- ------
Volumes (in thousands of
metric
tons):
Agribusiness 54,335 58,221 (7)%
Sugar & Bioenergy 4,551 3,009 51%
Fertilizer 4,264 4,487 (5)%
Edible oil products 2,932 2,776 6%
Milling products 2,392 2,263 6%
----- -----
Total 68,474 70,756 (3)%
====== ======
Net sales:
Agribusiness $14,051 $14,144 (1)%
Sugar & Bioenergy 1,988 793 151%
Fertilizer 1,340 1,540 (13)%
Edible oil products 3,151 2,962 6%
Milling products 789 753 5%
--- ---
Total $21,319 $20,192 6%
======= =======
Gross profit:
Agribusiness $599 $700 (14)%
Sugar & Bioenergy 68 18 278%
Fertilizer 50 (405) 112%
Edible oil products 185 162 14%
Milling products 68 72 (6)%
--- ---
Total $970 $547 77%
==== ====
Selling, general and
administrative
expenses:
Agribusiness $(368) $(340) 8%
Sugar & Bioenergy (65) (14) 364%
Fertilizer (101) (75) 35%
Edible oil products (173) (133) 30%
Milling products (55) (41) 34%
--- ---
Total $(762) $(603) 26%
===== =====
Gain on sale of
fertilizer nutrients $2,440 $- 100%
assets ====== ===
Foreign exchange gain
(loss):
Agribusiness $(77) $117
Sugar & Bioenergy 7 1
Fertilizer (25) 186
Edible oil products (4) (3)
Milling products - -
--- ---
Total $(99) $301
==== ====
Equity in earnings of
affiliates:
Agribusiness $7 $2 250%
Sugar & Bioenergy (2) (8) 75%
Fertilizer 3 1 200%
Edible oil products - 14 (100)%
Milling products 1 2 (50)%
--- ---
Total $9 $11 (18)%
=== ===
Noncontrolling interest:
Agribusiness $(15) $(14)
Sugar & Bioenergy 6 4
Fertilizer (35) (18)
Edible oil products (4) (4)
Milling products - -
--- ---
Total $(48) $(32)
==== ====
Other income/(expense):
Agribusiness $4 $(2)
Sugar & Bioenergy (5) 2
Fertilizer (3) (4)
Edible oil products 1 (4)
Milling products - -
--- ---
Total $(3) $(8)
=== ===
Segment earnings before
interest
and tax:
Agribusiness $150 $463 (68)%
Sugar & Bioenergy 9 3 200%
Fertilizer 2,329 (315) n/m
Edible oil products 5 32 (84)%
Milling products 14 33 (58)%
--- ---
Total (Note 1) $2,507 $216 1,061%
====== ====
Reconciliation of total
segment
earnings before interest
and tax:
Total segment earnings
before interest and tax $2,507 $216
Interest income 42 76
Interest expense (179) (133)
Income tax expense (551) (45)
Noncontrolling interest
share of interest and
tax 22 4
--- ---
Net income attributable
to Bunge $1,841 $118
====== ====
Depreciation, depletion
and
amortization:
Agribusiness $(91) $(86) 6%
Sugar & Bioenergy (46) (5) 820%
Fertilizer (24) (66) (64)%
Edible oil products (40) (34) 18%
Milling products (14) (9) 56%
--- ---
Total $(215) $(200) 8%
===== =====
Note 1: Total segment earnings before interest and tax ("EBIT") is a
non-GAAP measure and is not intended to replace net
income attributable to Bunge, the most directly comparable GAAP
measure. The information required by Regulation G under
the Securities Exchange Act of 1934, including the reconciliation to
net income attributable to Bunge, is included under the
caption "Reconciliation of Non-GAAP Measures."
CONDENSED CONSOLIDATED BALANCE SHEETS
(In millions)
(Unaudited)
June 30, December 31, June 30,
2010 2009 2009
---- ---- ----
ASSETS
Current assets:
Cash and cash equivalents $2,771 $553 $489
Trade accounts receivable 2,489 2,363 2,098
Inventories (1) 4,571 4,862 6,690
Deferred income taxes 145 506 321
Other current assets (2) 2,980 3,499 3,728
----- ----- -----
Total current assets 12,956 11,783 13,326
Property, plant and equipment, net 4,651 5,347 4,584
Goodwill 960 427 376
Other intangible assets, net 191 170 114
Investments in affiliates 584 622 781
Deferred income taxes 966 979 978
Other non-current assets 1,786 1,958 1,649
----- ----- -----
Total assets $22,094 $21,286 $21,808
======= ======= =======
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Short-term debt $172 $166 $1,035
Current portion of long-term debt 271 31 294
Trade accounts payable 3,278 3,275 3,361
Deferred income taxes 68 100 104
Other current liabilities 2,345 2,635 3,096
----- ----- -----
Total current liabilities 6,134 6,207 7,890
Long-term debt 3,401 3,618 3,921
Deferred income taxes 115 183 145
Other non-current liabilities 757 913 942
Total Bunge shareholders' equity 11,408 9,494 8,111
Noncontrolling interest 279 871 799
--- --- ---
Total equity 11,687 10,365 8,910
------ ------ -----
Total liabilities and shareholders'
equity $22,094 $21,286 $21,808
======= ======= =======
Note 1: Includes readily marketable inventories at fair value of
$3,205 million, $3,380 million and $4,344 million at June 30,
2010, December 31, 2009 and June 30, 2009 respectively.
Note 2: Includes marketable securities of $74 million, $15 million
and $20 million at June 30, 2010, December 31, 2009
and June 30, 2009, respectively.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In millions)
(Unaudited)
Six Ended
June 30,
--------
2010 2009
---- ----
OPERATING ACTIVITIES
Net income $1,867 $146
Adjustments to reconcile net income to cash
used for operating activities:
Foreign exchange loss (gain) on debt 225 (359)
Gain on sale of fertilizer nutrients assets (2,440) -
Impairment of assets 12 -
Bad debt expense 16 23
Depreciation, depletion and amortization 215 200
Stock-based compensation expense 34 16
Recoverable taxes provision 1 37
Deferred income taxes 202 (104)
Equity in earnings of affiliates (9) (11)
Changes in operating assets and liabilities,
excluding the effects of acquisitions:
Trade accounts receivable (645) 361
Inventories (80) (528)
Prepaid commodity purchase contracts (126) (211)
Secured advances to suppliers 67 257
Trade accounts payable 522 (1,111)
Advances on sales 20 21
Unrealized net gain/loss on derivative
contracts 15 213
Margin deposits 153 (279)
Accrued liabilities 179 (69)
Other-net (387) (356)
---- ----
Cash used for operating activities (159) (1,754)
INVESTING ACTIVITIES
Payments made for capital expenditures (547) (346)
Acquisitions of businesses (net of cash
acquired) (133) (19)
Proceeds from sale of fertilizer nutrients
assets 3,886 -
Cash disposed in sale of fertilizer nutrients
assets (106) -
Proceeds from investments 28 60
Proceeds from disposal of property, plant and
equipment 3 5
Related party loans (7) (19)
Investments in affiliates (2) -
Change in restricted cash - (28)
Cash provided by (used for) investing
activities 3,122 (347)
FINANCING ACTIVITIES
Net repayments in short-term debt with
maturities of 90 days or less 219 364
Proceeds from short-term debt with maturities
greater than 90 days 267 784
Repayments of short-term debt with maturities
greater than 90 days (852) (625)
Proceeds from long-term debt 132 2,857
Repayment of long-term debt (306) (1,754)
Proceeds from sale of common shares 2 1
Repurchase of common shares (86) -
Dividends paid to preference shareholders (39) (39)
Dividends paid to common shareholders (60) (46)
Dividends paid to noncontrolling interest - (8)
Other 22 (3)
--- ---
Cash (used for) provided by financing
activities (701) 1,531
Effect of exchange rate changes on cash and
cash equivalents (44) 55
--- ---
Net increase (decrease) in cash and cash
equivalents 2,218 (515)
Cash and cash equivalents, beginning of period 553 1,004
--- -----
Cash and cash equivalents, end of period $2,771 $489
====== ====
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