Bunge Limited (BG)

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Bunge Limited (BG)

Q4 2008 Earnings Call Transcript

February 5, 2009 10:00 am ET

Executives

Mark Haden – IR

Alberto Weisser – Chairman and CEO

Jackie Fouse – CFO

Analysts

Vincent Andrews – Morgan Stanley

Christina McGlone – Deutsche Bank

Ken Zaslow – BMO Capital Markets

Jason English – JP Morgan

Christine McCracken – Cleveland Research

Chris Bledsoe – Barclays

Robert Moskow – Credit Suisse

Scott Bennett [ph] – Citi Investment Research

Steve Byrne – Bank of America

Presentation

Operator

Good day everyone, and welcome to the Bunge Limited fourth quarter 2008 conference call. Today’s call is being recorded. At this time for opening remarks and introductions, I’d like to turn the conference over to your host, Mr. Mark Haden. Please go ahead, sir.

Mark Haden

Thank you, Elizabeth, and thank you everyone for joining us this morning. Welcome to Bunge Limited fourth quarter 2008 earnings conference call. Before we get started I wanted to inform those of you who may not have seen it in the press release this morning that we have prepared a slide presentation to accompany our discussion of the fourth quarter results. It can be found in the Investor Information of our website, www.bunge.com, under Investor Presentation.

Reconciliations of non-GAAP measures disclosed orally on this conference call to the most directly comparable GAAP financial measures are posted on our website in the Investor Information section.

I’d like to direct you to slide two and remind you that today’s presentation includes forward-looking statements that reflect Bunge’s current views with respect to future events, financial performance, and industry condition. These forward-looking statements are subject to various risks and uncertainties. Bunge has provided additional information in its reports on file with the SEC concerning factors that could cause actual results to differ materially from those contained in this presentation, and encourages you to review these factors.

Participating on the call this morning to discuss our fourth quarter results are Alberto Weisser, Bunge’s Chairman and CEO; and Jackie Fouse, Bunge’s Chief Financial Officer.

And now I will turn the call over to Alberto.

Alberto Weisser

Good morning everyone. 2008 was a remarkable year and one of the most volatile in recent memory. Throughout it all, the Bunge team performed well. Our employees produced record earnings of over $1 billion and cash flow from operations of $2.5 billion. They executed well as exemplified by the strategic and prudent use of working capital during periods of record high commodity prices, and kept a steady eye on the future by making new investments and creating new partnerships.

For example, we are very excited about our new sugar and ethanol joint ventures with Itochu in Brazil. In an industry that is dynamic to begin with, but specially in such a volatile year it is rare that everything will go right. We had a few setbacks in ‘08, but we start ‘09 in a strong position.

The weak global economy will pose challenges, but we have a solid balance sheet, comfortable liquidity, confidence in our team and optimism about improvements in the market. First, fears of low demand for our core products are generally short-lived. These are staple products necessary to feed the world's growing population. We anticipate demand for soybean meal to improve over the drastic reductions seen in the fourth quarter, when customers were reducing capacity, drawing down existing meal inventories, and using lower-cost feed ingredients.

Our estimates for the 2009 calendar year indicate soybean meal demand growth of about 1.5% when compared to 2008. We also expect demand for vegetable oils to increase about 4% in the calendar year, although soy could continue to face competition from other oils.

Second, global commodity stocks remain tight, and this reality is being exacerbated by weather issues in South America. Even with lower economic growth, the world will need additional supplies of crops. Current futures prices indicate that the market will provide incentives for farmers to plant and should help encourage fertilizer use. In addition, during periods of tight stocks, there is always the possibility that changes in supply and demand will create interesting opportunities for companies with a global presence and integrated operations.

During the year, we will continue to take steps to lower costs and improve the efficiency of our asset network. We expect that the stronger US dollar should benefit the cost structures of our foreign operations. We are also investing for the long term in our core businesses and in complementary value chains, such as sugar, but were managing our projects prudently in light of today's volatile conditions.

I will turn over the call to Jackie, who will discuss our quarterly and year-end results.

Jackie Fouse

Good morning everyone. Thank you for being on the call this morning. Moving on to slide three of the presentation, we will start with some highlights from the income statement. The year of 2008 was a record of profit and cash flow year for Bunge and we finished the year with EPS of $7.73, 30% growth over 2007.

The fourth quarter was characterized by a difficult demand environment and we saw that particularly reflected in oilseed processing, fertilizer, and foods where volumes all suffered. Fourth-quarter profits were negatively impacted by lower gross margins across all segments, mostly due to per unit margins with the exception of fertilizer, which was volume driven.

Profits were also adversely affected by provisions for customer and counterparty risks and negative foreign exchange on fertilizer US dollar financing of working capital. With respect to the effective tax rate, fourth-quarter losses in fertilizer significantly impacted the rate for the quarter and for the full year, as we saw a major shift in income between higher tax and lower tax jurisdictions versus what we had seen up until that point.

Read the rest of this transcript for free on seekingalpha.com