* Bunge Q2 sales $15.09 bln vs est $15.79 bln
* Adj EPS $1.20 vs est $1.34
* Expects demand to temper in the near term
* Says sugar plantations to turn profitable in Q3
* Says large South American crops to bring relief in spring
By Juhi Arora
July 26 (Reuters) - Bunge Ltd sees its sugar and fertilizer units steering growth in the second half of year after high raw material costs and a crippling drought in the U.S. Midwest dragged down the agricultural processor's quarterly results.
But Bunge's shares, which have shed about 15 percent of their value over the last year, rose 4 percent to $64.33 after the company said it would start making a profit on its sugarcane plantations in the current quarter ending Sept. 30.
The company, among the top sugar and ethanol producers, has been trying to improve performance in the segment by planting more sugarcane to feed two new mills in Brazil.
The company's sugar and bioenergy business, which contributes about 7 percent to its total sales, posted a loss of $28 million at the end of the second quarter due to rains that interrupted production at its Brazilian operations.
Bunge said it expects to crush between 17 million and 18 million metric tons of sugarcane this year, and was on track to reach this year's planting target of about 70 thousand hectares of sugarcane.
The company is also banking on its fertilizer business to perform well in the back half of the year as it expects about 60 percent of the fertilizer volume to be sold between July and December -- the high-volume period in South America.
Fitch Rating in May said the company's sugar and bioenergy and retail fertilizer business "have yet to materially contribute to Bunge's earnings, although improvement is anticipated in 2012."
Volumes in the fertilizer segment increased from last year, but margins continued to be affected by high cost inventories from earlier in the year, when international prices fell.
Fertilizer companies had experienced a softness in demand as farmers delayed purchases in protest of high costs. Bunge was especially hurt as it had fertilizer in storage that was devalued by the decline in prices.
DROUGHT HURTS QUARTER
The company still expects a tempering of near-term demand among commercial customers at its main agribusiness as the drought drives up prices of commodity futures, but said relief would arrive in the spring with large crops from farmers in South America.
U.S. corn and soybean prices rose to record highs last Friday on worries about crop damage, extending the biggest gains in more than two years, as scorching temperatures and a relentless drought baked crops in America's heartland.
The U.S. Midwest, where most of the country's corn and soy are grown, is enduring its worst drought since 1956.
Bunge, the world's largest 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 Inc and Louis Dreyfus Corp.
Net income in the second quarter ended June 30 fell to $274 million, or $1.78 per share, from $316 million, or $2.02 per share, a year earlier.
Excluding certain one-time items, the company earned $1.20 per share in the quarter. Sales rose about 4 percent to $15.09 billion.
Analysts had expected the company to earn $1.34 per share, on revenue of $15.79 billion, according to Thomson Reuters I/B/E/S.