Bunge Limited (BG)

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Bunge Ltd. (BG)

Q1 2009 Earnings Call

April 23, 2009 10:00 AM ET


Mark Haden - Investor Relations

Alberto Weisser - Chief Executive Officer and Chairman

Jacqualyn A. Fouse - Chief Financial Officer


Christopher Bledsoe - Barclays Capital

Christine Mccracken - Cleveland Research

Kenneth Zaslow - BMO Capital Markets

David Driscoll - Citi Investment Research

Vincent Andrews - Morgan Stanley

Robert Moskow - Credit Suisse

Christina Mcglone - Deutsche Bank



Good day everyone and welcome to today's Bunge Limited First Quarter 2009 Conference Call. Today's call is being recorded. At this time for opening remarks and introductions, I would like to turn the conference over to Mr. Mark Haden. Please go ahead.

Mark Haden

Thank you Beth and thank you everyone for joining us this morning. Welcome to Bunge Limited first quarter 2009 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 first quarter results. It can be found in the Investor Information section 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 measure 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 conditions. 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 first 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. The start to 2009 was more challenging than expected. Bunge's first quarter results reflect this. Retail fertilizer margins in Brazil suffered from aggressive price reductions by competitors, which drove sales prices below international levels. Many local retailers have been facing liquidity issues due to tighter credit.

Additionally, global demand for soybean meal was soft. Despite this difficult start, our confidence in the recovery in all our markets and a solid performance in the second half of the year remained strong.

We are working through our higher cost fertilizer inventory and the supply of fertilizer products in the Brazilian retail channel has been reduced by approximately 30%, since the end of 2008 and is approaching historical seasonal levels. Both of these facts should improve margins as the year progresses.

Higher commodity prices resulting from tighter global oilseed stocks are supporting farm economics, and should help stimulate sales of fertilizer products in the second half of the year when South America enters its major planting season.

Since mid-January, the USDA has reduced its estimates for global soybean production by nearly 15 million metric tons, mainly due to the weather related production issues in South America.

Global soybean meal consumption in the first quarter fell by roughly 6% compared to the same period in 2008. While this figure represents a relative improvement over the 9.5% year-over-year reduction in the fourth quarter of 2008, consumption was slightly lower than expected.

We are however seeing signs of stabilization in the poultry and pork industries and we estimate soybean meal demand for the calendar year to be up about 1% versus 2008.

Fears of lower demand for our core products have historically been short lived and the products and services that we and our industry provide are necessary in all types of economical climates.

Looking ahead, the world will need good harvest in North America in 2009 and South America in 2010 to alleviate tight agriculture commodity stocks and meet recovering demand. We believe Bunge is well positioned to benefit from these opportunities. I will now turn the call over Jackie who will discuss our quarterly results.

Jacqualyn A. Fouse

Good morning everyone. Thank you for being on the call this morning. Starting with the highlights from the Bunge Limited income statement and the segment results. Agribusiness volumes benefited from growth in our sugar business and the addition of our two new plants in Russia and the Ukraine.

This volume growth pushed the total Bunge Limited volume evolution into positive territory. Agribusiness EBIT was positively impacted by solid profits from our growing businesses around the world which posted results higher than last year, but these were more than offset by a loss for the quarter in oilseed processing as margins for soybeans were negatively affected by weak global demand and substitution by other products.

Fertilizer volumes for the quarter were sharply down versus an outstanding quarter last year in 2008. The quarter's fertilizer EBIT was significantly negatively impacted by our high cost inventories as well as the effect of heavy discounting of local process by retailers in Brazil.

These losses include a write down in inventory as of March 31st of $64 million and that write down is the result of using the same accounting methodology that we have consistently applied historically and was driven by the fact that local selling process in Brazil diverged from international prosperity during the quarter and as of the end of the quarter, fell below our cost.

The results also include approximately 150 million of FX recovery, so they are net of that. And that is out of the balance of about $250 million that we carried over from 2008.

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