* Adjusted Q3 EPS 86 cents vs $2.26 year ago
* Poor margins, forex loss from tumbling Brazil currency
* Volatile commodities markets impacted risk management
* Shares rise 5.6 pct on positive outlook
By Karl Plume
Oct 27 Agricultural processor Bunge Ltd
put a brave outlook on a profit slump on Thursday, cheering
investors after a quarter in which whipsaw markets and
Brazil-related sugar losses cut earnings by a third.
Following the most volatile quarter since the financial
crisis for many commodities, Chief Executive Alberto Weisser
said the trading giant had been forced to pass up some
opportunities in markets that had become divorced from supply
He joined Cargill Inc'sGreg Page in bemoaning
the whipsaw trading and global economic uncertainty that has
sapped revenues, an abrupt change for two top agricultural
traders who would normally prosper during volatile times by
using their vast global networks to exploit opportunities.
"Prices were not reflecting underlying fundamentals. It
makes positioning much more challenging so we all operated much
more cautiously," Weisser said as the White Plains-based firm
posted a 34 percent decline in earnings.
"We walked away from some business that in a different
environment we might have executed. We conducted much more
back-to-back transactions. Counterparty exposure became a
concern. So as a result, margins and merchandising were lower,"
Bunge's shares, which have lagged behind its peers over the
past month, rose 5.6 percent, outpacing the broader market as
investors took heart in signs that demand for its products was
growing and crop supplies were rising with the Northern
Hemisphere's harvest, which should bolster margins.
But rivals also rallied, with Archer Daniels Midland Co up 4.5 percent and Corn Products International
climbing 8 percent on buoyant commodity prices.
Bunge, the world's largest oilseed processor and among the
top sugar and ethanol producers, pinned its profit short-fall
on drought-reduced sugar milling volumes and a $29 million
foreign exchange loss due to the Brazilian real's 16 percent
plunge last quarter.
Bunge's sugar and bioenergy segment, centered in top sugar
exporter Brazil, posted a $43 million loss in the third
quarter, compared with a profit of $34 million a year earlier.
VOLATILE MARKETS WEIGH
Unusually volatile markets and broader economic uncertainty
complicated Bunge's risk management strategies and strained
margins in its agribusiness and sugar and bioenergy segments.
Weisser also heaped some blame on increasingly
unpredictable U.S. Agriculture Department crop reports, closely
followed by markets around the world, which at times left grain
traders with more questions than answers.
"There were a lot of complex uncertain external factors --
weather, macro uncertainties, crop reports to name a few --
which influenced the commodity markets during the quarter,
which made it much more challenging to navigate," he said.
Bunge's woes followed an even deeper 66 percent decline in
profits at leading private trading firm Cargill, which cited
"the persistently high degree of uncertainty in the global
economic environment, which injected turbulence into commodity
markets and limited prudent trading opportunities."
Benchmark U.S. corn prices on the Chicago Board of
Trade struck an all-time record near $8 a bushel in June, only
to tumble 23 percent by the end of the month. Two months later,
prices came within 40 cents of the record high but plunged
another 22 percent over the next five weeks.
Soybeans were on a similar rollercoaster ride,
notching a two-year high of more than $14.50 a bushel in late
August then diving 21 percent to a one-year low a month later.
Agribusiness, Bunge's largest segment, posted a net profit
of $159 million, down 49 percent from an uncommonly strong
third quarter a year ago. Edible oils profit slipped 3 percent,
while milling products profit fell 38 percent.
Bunge's revenue increased, but margins narrowed as costs
for many of the raw farm products the company buys, sells and
processes into food, animal feed and fuel soared to multi-month
peaks during the quarter, then later plunged.
Bunge, reported a net profit of $140 million, or 89 cents
per share, compared with $212 million or $1.36 per share a year
Excluding one-time items, earnings fell year-on-year to 86
cents per share from $2.26, while revenue rose to $15.62
billion from $11.66 billion a year ago.
Analysts, on average, had expected earnings of $1.58 per
share, according to Thomson Reuters I/B/E/S.