UPDATE 4-Bunge dinged by U.S. drought, says CEO to retire

Thu Feb 7, 2013 3:02pm EST

* Bunge swings to unexpected quarterly loss

* Excluding charges, results miss Wall St view

* CEO Alberto Weisser to retire after 14 years

* Shares tumble 9 percent

By Tom Polansek

CHICAGO, Feb 7 (Reuters) - Agribusiness giant Bunge Ltd on Thursday admitted the historic U.S. drought had tripped up its well-connected risk management team and also said its chief executive will step down.

The disclosures came as Bunge, one of the world's top agricultural trading houses, reported it swung to an unexpected loss in the quarter ended Dec. 31. Excluding one-time charges, the resulting profit was still well below a year ago and average Wall Street forecast.

Bunge's risk management team contributed to the weak results by rushing to buy soybeans and corn in the United States last year amid concerns that harvests would be slashed by the worst drought in 56 years, outgoing CEO Alberto Weisser said in an interview.

The team ended up overpaying in October, as crop prices declined later in the autumn and winter as supply fears eased.

"We were seeing that it would be tighter than it really was," Weisser said about the supply of crops. "We had a direction to our buyers that we ended up buying more early."

Bunge is among the four large players, known as the ABCD, that dominate the flow of agricultural commodities around the world. The others are Archer Daniels Midland Co, Cargill Inc and Louis Dreyfus.

Bunge's miscalculation on crop buying was a surprise due to its vast network of grain merchants and showed how the widespread drought caught traders off guard.

The company still recorded a record profit of more than $1 billion for its agribusiness sector for the year.

"You have sometimes quarters where you don't get it exactly right," Weisser said on a conference call with analysts. "Have we made a mistake? Yes. Have we learned from it? Yes."

DEPARTING CEO

Weisser will retire June 1 after transforming Bunge into one of the world's largest agricultural trading houses from a regional operator over 14 years as CEO.

He said he had been planning his succession for a few years and will serve as executive chairman through the end of the year.

Soren Schroder, CEO of Bunge North America, will replace Weisser.

"This is the right choice at the right time," Weisser said. "That is true for Bunge and for me personally."

Schroder, a former employee of rival Cargill, has led Bunge's North America operations since 2012 and developed its agribusiness franchise in Europe and the Middle East. He said he planned no major changes to the company's strategies.

"FLAT-OUT DISAPPOINTMENT"

Strong global demand for oilseeds has recently helped agricultural traders and processors rebound from a tough environment early last year and in 2011, when grain prices often swung on economic concerns instead of supply and demand fundamentals.

However, Bunge reported a net loss of $610 million, or $4.17 per share, in the quarter, compared with a profit of $245 million, or $1.65 per share, a year earlier.

Adjusted earnings were 57 cents per share, below analysts' estimates of $2.36 per share.

The fourth quarter included a series of charges totaling $683 million, primarily from the sugar and bioenergy business.

Revenue rose 9 percent to $17.04 billion.

"I feel like this quarter was a flat-out disappointment," Citi analyst David Driscoll said.

Bunge shares sank 9.6 percent by 1:30 p.m. CST (1930 GMT).

By contrast, ADM on Tuesday reported a six-fold increase in earnings after U.S. soybean operations ran at record capacity during the quarter ended Dec. 31.

Cargill said last month that "more fundamentally driven markets" helped it quadruple earnings in the quarter ended Nov. 30, with results buoyed by gains in global commodities trading and oilseed processing.

SOUTHERN EXPOSURE

Bunge's strong presence in South America could give it an advantage over U.S.-focused ADM this year because farmers in Brazil and Argentina are expected to harvest large crops of soybeans and sugar cane.

Weisser downplayed concerns about dryness hurting grain and soy output in Argentina, which drove soybean futures to a seven-week high at the Chicago Board of Trade earlier this week.

With nearly ideal weather in Brazil, South America will still harvest a massive crop, he said.

The U.S. Department of Agriculture will update its global supply and demand forecasts on Friday.