Bunge Limited (BG)

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Bunge Limited (BG)

Q3 2012 Earnings Call

October 25, 2012 10:00 am ET

Executives

Mark Haden

Alberto Weisser - Chairman and Chief Executive Officer

Andrew J. Burke - Chief Financial Officer and Global Operational Excellence Officer

Analysts

Christine McCracken - Cleveland Research Company

Vincent Andrews - Morgan Stanley, Research Division

Kenneth B. Zaslow - BMO Capital Markets U.S.

Cornell Burnette

Christine Healy - Scotiabank Global Banking and Markets, Research Division

Tim J. Tiberio - Miller Tabak + Co., LLC, Research Division

Ryan Oksenhendler - BofA Merrill Lynch, Research Division

Ian Horowitz - Topeka Capital Markets Inc., Research Division

Robert Moskow - Crédit Suisse AG, Research Division

David Driscoll - Citigroup Inc, Research Division

Presentation

Operator

Welcome to the Q3 2012 Bunge Earnings Conference Call. My name is Kim, and I will be your operator for today's call. [Operator Instructions] Please note that this conference is being recorded. I will now turn the call over to Mr. Mark Haden. Mr. Haden, you may begin.

Mark Haden

Thank you, Kim, and thank you, everyone for joining us this morning. Welcome to Bunge Limited's Third Quarter 2012 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 Investors section of our website, bunge.com, under Investor Presentations.

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

I'd like to direct you to Slide 2 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 are Alberto Weisser, Bunge's Chairman and Chief Executive Officer; and Drew Burke, Bunge's Chief Financial Officer.

I'll now turn the call over to Alberto.

Alberto Weisser

Good morning, everyone. We had a good third quarter. Agribusiness results were solid, and I'm especially pleased because it was a very balanced performance, with contributions from all geographies in all product lines.

We now have 6 years of strong growing consistent performance in Agribusiness as a consequence of our approach to growth, which has focused on expanding in 3 areas: geographies, portfolios and value chains. This approach is one that has made the business balanced and resilient through changing conditions and difficult market environments.

I'm also pleased that Food & Ingredients and Fertilizer showed improved performance from the challenging first half of the year, and results in Sugar & Bioenergy, on a comparable basis, were higher than last year, but below the potential of this business.

Our continued sugarcane planting and other cost reduction efforts, which will result in increased sales volume and lower unit cost, will help us realize this potential. We are making steady progress and remain optimistic for a strong performance in the 2013 crop year.

Regarding the continuing effects of the U.S. drought, the current market environment has been and will continue to be volatile and complex for everyone who participates in our industry, including farmers, processors and the livestock industry.

Stocks of corn and soybeans are tight, and as a result, the world is adjusting to typical trade flows. Bunge's role is to help farmers and customers manage through this environment by providing market access for crops and delivering the right products when and where they are needed.

We have the core strength, geographic balance, a diverse product portfolio, an experienced team and a strong balance sheet that will enable us to fulfill this role effectively and profitably. The world needs record crops to rebuild stocks, and today's high prices are sending a strong signal to farmers, especially in South America, to plant. Early indications are that soybean production will be at record levels. And as new crops are harvested, we should see a more balanced supply/demand situation, which will be good for consumers and for the market overall.

I will now turn the call over to Drew, who will take you through the quarter and our outlook.

Andrew J. Burke

Thank you, Alberto. Let's turn to Page 3 and our earnings highlights. Our total segment EBIT for the quarter was $441 million versus $191 million in the prior year. This result was driven by a strong performance in Agribusiness with the third quarter EBIT of $406 million versus the prior year of $149 million.

Earnings were strong across all geographies in both our oilseed processing and merchandising businesses. Oilseed processing results were good in all regions, with significant year-on-year improvement in North America, Europe and Asia. Grain origination results were particularly strong in South America, and our distribution business in Europe, the Middle East and Africa performed well.

Our Agribusiness volumes continue to show growth with a 15% increase over the prior year quarter to 35.8 million tonnes. On a year-to-date basis, volumes have grown 19% to 101 million tonnes. This growth has been primarily driven by our investments in North American grain handling and port assets and our European origination and distribution businesses.

Our Sugar & Bioenergy business recorded a loss of $47 million in the quarter. This amount includes an impairment charge of $39 million related to a U.S. corn ethanol joint venture. Without this charge, the business recorded a loss of $8 million as a profit in our industrial business was offset by a loss in our merchandising business, where we didn't generate sufficient gross margin to cover our operating costs. Both of these businesses performed better than the prior year.

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