UPDATE 2-Bunge reports Q4 profit, sugar unit under active review

Thu Feb 13, 2014 1:31pm EST

By Tom Polansek

CHICAGO Feb 13 (Reuters) - Bunge Ltd, one of the world's largest agricultural trading houses, is still in the early stages of reviewing whether to sell its $2 billion Brazilian sugar business, the company's chief executive said on Thursday.

Bunge, a major agricultural force in South America, has hired bankers from Morgan Stanley to help with the review and is exploring a number of options, CEO Soren Schroder said in an interview after the company reported it had turned a profit in the fourth quarter. Shares rose 0.6 percent to $76.08.

The "book value" for the sugar milling unit is $2 to $2.5 billion, Chief Financial Officer Drew Burke told analysts on a conference call. It would cost more than $3 billion to replace the assets.

Schroder, who took the helm at Bunge in June, last year signaled plans to shed the loss-making business, which has suffered from poor crop weather and low global sugar prices.

He told analysts on a conference call to discuss quarterly earnings that he did not know when the review would be complete.

"We will tell you when we know something," Schroder said.

Investors were eager for news about the review after waiting in vain for years for the sugar unit to contribute meaningfully to Bunge's bottom line.

The company, a major agricultural force in South America, has reduced the headcount in the sugar unit by 10 percent since May 2013 and will continue to try to cut costs, Burke told analysts. Investments in the segment during the review will be limited to maintenance and select projects that improve its "cost structure," he said.

"Investors have sort of held your stock for the last few years with the promise that sugar's going to get better," Diane Geissler, analyst for CLSA, told Bunge executives on the conference call. "That's never really materialized for shareholders."

Bunge is among four large players known as the "ABCD" companies that dominate the flow of agricultural goods around the world, along with Archer Daniels Midland Co, Cargill Inc and Louis Dreyfus Corp.

The company reported net earnings of $115 million, or 78 cents per share, compared with a year-earlier net loss of $610 million, or $4.17 per share.

Adjusted earnings from continuing operations were $1.35 per share, compared with 50 cents a year earlier.

Revenue fell to $16.38 billion from $17.04 billion.

Analysts expected earnings of $2.15 a share on revenue of $16.15 billion, according to Thomson Reuters I/B/E/S.

Net sales dropped in the agribusiness segment, Bunge's largest business, and in the sugar unit. The company recorded about $10 million in restructuring and impairment charges related to "improving the cost structure" of Brazilian sugar milling operations.

"The quarter was a messy one below the line, but operating performance was decent," JP Morgan analyst Ann Duignan said.

Bunge has the potential to earn record profits in the agribusiness segment in 2014 because large U.S. harvests have replenished crop supplies after years of poor production, Schroder said.

Bunge's profits come from buying, selling, transporting and processing crops. Farmers in the fourth quarter limited the benefit Bunge could reap from the large U.S. harvests by refusing to sell corn until prices rise.

Oilseed processing margins were strong in North America, Europe and China due to robust demand, large harvests and a lack of exports from South America, which is typically a large oilseed supplier, according to Bunge.

Global demand should remain strong because falling crop prices will encourage livestock producers to buy oilseeds, which can be crushed into animal feed, the company said.