UPDATE 4-Bunge slashes 2009 profit forecast; stock slumps

Thu Oct 22, 2009 1:22pm EDT

* Q3 EPS $1.62; Street view $1.47

* Agribusiness results strong, fertilizer weak

* Cuts full-year outlook to $3.10-$3.50 per share

* Shares fall nearly 5 percent (Recasts, adds quotes, updates share price, adds byline)

By Karl Plume

CHICAGO, Oct 22 (Reuters) - Bunge Ltd (BG.N) slashed its 2009 profit forecast amid weak demand for its fertilizer, overshadowing better-than-expected quarterly earnings and sending its shares down nearly 5 percent.

Although New York-based Bunge projected a rosier 2010, near-term uncertainty helped to guide its shares lower, analysts said.

"They dramatically lowered guidance for the year, and the outlook for 2010 is still a little uncertain at this point," said Christina McGlone, analyst with Deutsche Bank Securities.

"Most people are valuing off of 2010, but where before they were giving them the benefit of the doubt, I think it has transitioned to a 'prove it' story."

Bunge's agribusiness and edible oils divisions posted strong results for the third quarter, but its fertilizer business, the largest in South America, posted its fourth consecutive quarterly loss.

The company reported on Thursday that third-quarter net profit fell to $232 million, or $1.62 per share, from $234 million, or $1.70 a share, a year earlier.

Analysts on average had expected $1.47 per share, according to Thomson Reuters I/B/E/S.

Revenue dropped 24 percent to $11.3 billion. Wall Street had expected $12.02 billion.

Bunge cut its full-year earnings forecast to a range of $3.10 to $3.50 per share, citing a weaker-than-anticipated near-term fertilizer outlook. It previously forecast $4.90 to $5.40.

"Fertilizer weakness will continue for the remainder of this year as it stems mainly from our high-cost average inventory versus the current pricing environment. We expect this to improve in 2010," said Jacqualyn Fouse, Bunge's chief financial officer.

FERTILIZER WOES

Poor fertilizer margins led to a $127 million net loss in the segment in the third quarter as sales in Brazil have been subdued by farmers' credit constraints. Also, farmers there are cutting back seedings of nutrient-intensive corn and cotton in favor of soybeans, which do not require as much fertilizer.

Fertilizer makers have been hit hard by falling prices and sluggish demand as farmers have scaled back applications after grain prices plunged from record highs last year.

Potash Corp of Saskatchewan (POT.TO), the world's largest fertilizer producer, reported an 80 percent decline in third-quarter profit on Thursday, and rival Mosaic Co (MOS.N) reported a 91 percent drop in fiscal first-quarter profit earlier this month. Others have posted similarly weak results.

However, Bunge and other fertilizer makers have expressed optimism that stronger farm profits in 2010 would boost use, while fertilizer margins should improve as high-cost inventories are sold off.

Bunge said agribusiness profit rose 73 percent to $294 million in the quarter, while edible oil product profit reached $35 million, compared with a year-earlier loss of $29 million.

Bunge said tight soybean supplies in drought-hit Argentina and strong demand for soybeans from China aided its U.S. and Brazilian grain origination businesses.

Bunge shares were down 4.6 percent at $63.81 in afternoon trading on the New York Stock Exchange. The stock hit a 7-1/2 week high early this week. (Reporting by Karl Plume; Editing by Lisa Von Ahn and John Wallace)

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