UPDATE 3-Weak fertilizer prices pressure Bunge profits
* Bunge income falls 60 percent from a year ago * Fertilizer prices weakened, pressuring profits * Soft fertilizer market also clips Potash Corp By Tom Polansek CHICAGO, April 26 (Reuters) - Bunge Ltd's first-quarter income sank a greater-than-expected 60 percent from a year ago under pressure from falling fertilizer prices, pushing down shares for the world's top soybean processor. Weak fertilizer markets also clipped Potash Corp of Saskatchewan, the world's top fertilizer maker. A nearly 60 percent decrease in its shipments of the crop nutrient potash led to a 33 percent decline its first-quarter profit. Fertilizer demand and prices softened earlier this year as farmers delayed purchases in protest of high costs. Bunge, which buys and resells fertilizer produced by companies like Potash Corp, was caught holding the bag, as it had fertilizer in storage that was devalued by the decline in prices. Bunge shares were down 3.5 percent at 65.09. Potash Corp was down 1.2 percent at 42.25. "When fertilizer prices go up, we benefit. When prices go down, obviously we suffer," said Alberto Weisser, Bunge's chairman and chief executive officer, in an interview. Bunge, the world's top soybean processor, is one of four large players, known as the ABCD companies, that have traditionally dominated business in agricultural markets. The others are Archer Daniels Midland Co, Cargill and Louis Dreyfus. The slump came after Bunge reported better-than-expected profits in February, following weak results from rivals ADM and Cargill. Cargill this month reported a rebound in earnings after its worst quarter in a decade, led by record profits in its global food ingredient businesses and stronger results in energy trading. FERTILIZER UNCERTAINTY For Bunge, higher sales volumes in fertilizer in the last quarter were more than offset by lower margins. The company expects to recover, as "farm economics are strong in South America and should result in higher fertilizer volumes," said Drew Burke, chief financial officer. Bunge reported a first quarter profit of $92 million, or 57 cents a share, down from $232 million, or $1.49 a share, last year. Excluding costs for a legacy environmental claim in Brazil and other adjustments, earnings were 69 cents a share. Bunge listed a $27 million charge in the fertilizer segment due to a sulfuric acid spill in the south of Brazil in 1998. Revenue of $13.45 billion was up from $12.2 billion a year earlier. Analysts polled by Thomson Reuters expected a $1.18 per share profit on $13.25 billion of revenue. Overall, the company said it expected results for 2012 to beat those of 2011. Still, investors focused on poor results in fertilizer. Weisser said their attention was misplaced, as fertilizer only accounts for about 5 percent of profits during a typical year. "There's an incredible amount of searching, or inspection that investors are doing on the sugar and fertilizer," Citi analyst David Driscoll said. "These things are almost a distraction." Potash Corp helped fuel concerns about fertilizer by trimming its estimate for global potash demand for 2012 and lowering forecasts for its shipments and profits. It predicted demand for potash will strengthen for the rest of the year after a slower-than-expected start. Mosaic Co, another fertilizer maker, said demand for fertilizer has "increased sharply" in the past month. BUNGE SUGAR UNIT DIPS Profits in Bunge's sugar and bioenergy business were down from a year ago because of lower ethanol margins, "stemming from high-cost inventory that was carried into the year from 2011," according to the company. Market sales prices in Brazil were pressured, in part, by an increase in imports from the United States. The sugar and bioenergy business has been in focus as Standard & Poor's Ratings Services this week raised its outlook for Bunge to positive from stable. S&P warned it could revise the outlook back to stable if Bunge did not sustain earnings and weakness persisted in the sugar and bioenergy segment. Results for Bunge's agribusiness unit, its largest segment, were down from "an especially strong" first quarter last year, according to the company. The unit buys, sells, transports, stores and processes bulk grains and soybeans. Bunge said improving margins for soy crushing in the Northern Hemisphere and China should help lift the unit.
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