November 1, 2017 / 10:22 AM / 21 days ago

Bunge sees lower full-year profit, better times in 2018

CHICAGO (Reuters) - U.S. agricultural giant Bunge Ltd (BG.N) on Wednesday forecast lower full-year earnings in its core agribusiness unit after posting a third-quarter profit that fell 28 percent on flat revenue.

The company said, however, that trading and processing next year would benefit from cost cutting and strengthening demand for oilseeds, a key driver of revenue. A global crops oversupply has hammered profits for grain trading and processing.

“The third quarter was better than the second and the fourth quarter will be better than the third,” Chief Executive Soren Schroder said in an interview.

“We are seeing crush margins come off the bottom and we have all of next year’s South American harvest commercialization of crops ahead of us,” he said.

Bunge shares climbed about 2 percent on Wednesday as quarterly results exceeded lowered Wall Street expectations and its 2018 outlook was more favorable than that of rival Archer Daniels Midland Co (ADM.N). The company also said it is considering an initial public offering of its Brazilian sugar business.

“After ADM results yesterday, the market was surprised that Bunge didn’t report quite as abysmal a result as ADM,” said Seth Goldstein, analyst with Morningstar.

ADM said quarterly earnings fell 44 percent from a year earlier on charges and did not see conditions improving next year.

Major grain companies are trying to diversify through acquisitions into higher-margin businesses, such as food ingredients, but results have been slow to offset the continued challenges to their trading businesses from the supply glut.

Quarterly operating profit for Bunge’s agribusiness unit, its largest, rose about 2.5 percent from a year earlier on gains in South America.

Bunge forecast 2017 agribusiness earnings before interest and taxes (EBIT) of $425 million to $500 million. That is half its February outlook for the business, which trades, stores and processes crops.

Schroder declined to comment on any discussions with commodities trader Glencore Plc (GLEN.L), which approached Bunge with a takeover offer in May.

Bunge’s net income available to shareholders fell to $84 million, or 59 cents per share, in the quarter from $116 million, or 83 cents per share, a year earlier.

Excluding items, it earned 75 cents per share, aboveanalysts’ estimate of 73 cents, according to Thomson Reuters I/B/E/S.

Net sales were flat at $11.42 billion.

Additional reporting by Akshara P in Bengaluru and Tom Polansek in Chicago; Editing by Saumyadeb Chakrabarty and Bernadette Baum

Our Standards:The Thomson Reuters Trust Principles.
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