Bunge Limited (BG)

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Bunge Ltd. (BG)

Q4 2009 Earnings Call

February 4, 2010 10:00 am ET

Executive

Mark Haden - IR

Alberto Weisser - CEO & Chairman

Jacqualyn Fouse - CFO

Analyst

Diane Geissler - CSLA

Ken Zaslow - BMO Capital Markets

Christina McGlone - Deutsche Bank

Christine McCracken - Cleveland Research

Vincent Andrews - Morgan Stanley

David Driscoll - Citi Investment Research

Presentation

Operator

Good day. Welcome to Bunge Limited's fourth quarter 2009 conference call. Today's call is being recorded. At this time for opening remarks and introductions I'd like to turn the call over to Mr. Mark Haden. Please go ahead, sir.

Mark Haden

Thank you, James. And thank you everyone for joining us this morning. Welcome to Bunge Limited fourth quarter 2009 earnings conference call.

Before we get started I want to inform you that we have prepared a slide presentation to accompany our discussion. It can be found in the investor information section of our website bunge.com under investor presentations.

Reconciliations for the 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 and 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 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

Thank you, Mark, and good morning, everyone. 2009 was a tough year for Bunge and we are clearly not happy about the fourth quarter. For the year fertilizer generated significant losses which stem from a difficult market characterized by high cost inventory and a weak price environment. Our lessons learned have shown that the retail industries approach to managing inventories needs to be improved. We have made changes to our business in Brazil with an aim to significantly reduce risks associated with price and foreign exchange volatility. We have constantly dated responsibility raw material sourcing and end product sales and we are working to reduce lead times on purchases and adjust our cost structure.

Agribusiness results for the quarter were lower than expected. Our operations in the US and Europe performed well, but these results were largely offset by losses in our whole South American value chain. That said for the full year agribusiness showed a solid performance in a volatile market. In agri-oils we produced strong results in the quarter as well as the year. The steps we have taken to improve efficiency, product mix and cost structure of this business are paying off. 2009 and the first month of 2010 was also time of significant strategic actions that leaves us well positioned for growth and solid returns in the future. We decided to sell our fertilizer in Brazil. This transaction will enable us to realize the full value of these operations and to redeploy our resources into our core agribusiness and food ingredients businesses. It will also help us to expand further and to complement our value chains such as sugar and bio-energy. Late in 2009 we took a big step to establish a larger presence in this value chain when we entered into agreements to acquire Moema. This will increase our sugarcane milling capacity to approximately 20 million tons per year.

Investing in our core businesses and expanding into complementary value chains are two parts of our corporate strategy which also calls for improving our efficiency and leveraging our unique operating model. On slide four you can see the strategic plans we have for our core businesses. First agribusiness, we are a leading oilseed processor and have a strong position in grains and will continue to build share in growth markets. Part of our work will involve expanding and improving our asset network. The actions we took in 2009 included launching construction of a state of the art export grain terminal in the US that will enable us to export larger volumes of grains and oilseeds to customers in Asia. We also began construction of an integrated soybean processing plant at Fumi port, the first of its kind in Vietnam.

Second, food ingredients. We are strengthening our edible oil business by improving our positions in key markets and moving into new geographies. We'll also offer new value added oil products and will maintain strong positions in wheat and corn dry milling. In 2009 we acquired Raisio margarine business in Finland and Poland which facilitated our entry into new European markets and will improve our efficiency. Finally fertilizer, this business will continue to make a meaningful contribution to our overall results, although a smaller one, and will serve as a valuable compliment to our agribusiness operations. Still we will work to optimize our regional businesses, strengthen our relationships with farmers and establish beneficial raw material supply arrangements. Our JV in Morocco is a good example of this last point. Last month we took an important step of acquiring Petrobras fertilizer business in Argentina which expands our product portfolio in that country.

Now to slide five. Our strategy also entails moving into a complementary value chains where there are opportunities for growth. Sugar and bioenergy is one of our priorities. This is an important market in which Bunge can excel. The big move we made with Moema will position us well to supply global and domestic demand for sugar and ethanol. Long term global sugar demand is growing at 3% per year and ethanol demand in Brazil is growing at 9%. We expect our larger sugar and bioenergy business to contribute strongly to our top and bottom lines in 2010. As we see additional opportunity to expand our milling capacity. We also consider Palm an attractive value chain and we will be looking to strengthen our food and ingredients portfolio as well.

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