CHICAGO (Reuters) - Bunge Ltd (BG.N) is exiting the global sugar trading business and has identified “a few interested parties” in the business as it moves to concentrate on its grains and oilseeds operations, the company’s chief executive said on Wednesday.
Bunge is getting out of sugar trading and distribution after reporting a fourth-quarter loss, which increased pressure on CEO Soren Schroder to improve results at the 200-year-old agricultural merchant that has received takeover approaches from Archer Daniels Midland Co (ADM.N) and Glencore Plc (GLEN.L).
Schroder told Reuters he thinks Bunge’s sugar trading business should have value to other industry members.
“We’ve got a few interested parties so that will be our first path of action,” he said in an interview.
Schroder declined to name the interested parties.
Bunge is a major player in the global sugar industry, both as a trader and as a producer.
Trading “was historically positive” for the company, Citigroup analyst David Driscoll said on a Bunge conference call. “I’m not exactly clear why you’d really want to shut that one down,” he said.
Bunge has been seeking to get out of the sugar milling business in top-grower Brazil since 2013 as a supply glut has pushed prices lower and made it tough for industry participants to turn a profit. Its eight Brazilian mills can produce sugar and ethanol and have a capacity of more than 20 million tonnes, according to Bunge’s website.
The milling business will “have its own direction” from the trading business, Schroder told Reuters.
Bunge has struggled to generate enough gross margin to cover costs in sugar, Schroder said on the conference call with analysts. Last year was a tough year for traders and producers, with raw sugar prices tumbling more than 20 percent.
“We simply decided that it was time to really focus on what’s core to us, which is agribusiness, foods, grains and oilseeds and get on with it in a good way,” Schroder said on the call.
Large grain traders that make money by buying, selling, storing and shipping crops have grappled in recent years with global oversupplies. Thin margins have squeezed core commodity trading operations, including those of ADM, Bunge, Cargill Inc [CARG.UL] and Louis Dreyfus Co [LOUDR.UL], which dominate the grain industry and are known as the “ABCDs” because of their initials.
Bunge has declined to comment on the takeover approach from ADM, which wound down its global sugar trading in 2015 and sold a Brazilian mill a few years ago. Bunge rebuffed Glencore’s approach last year.
Reporting by Tom Polansek and P.J. Huffstutter in Chicago and Chris Prentice in New York; Writing by Caroline Stauffer; Editing by Alistair Bell and Tom Brown