By Tom Polansek
CHICAGO Feb 13 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
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
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
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
"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,
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.