* 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 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
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
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
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
Analysts had expected the company to earn $1.34 per share,
on revenue of $15.79 billion, according to Thomson Reuters