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Bunge Cuts 2010 Profit Forecast as Soybean Margins Shrink; Shares Plunge
Bunge Ltd., the world’s second- largest sugar trader, reduced its full-year earnings forecast after soybean-processing margins shrank in the U.S. and South America. The shares dropped the most in 21 months.
Profit excluding some one-time items will be $3.25 to $3.50 a share this year on lower second-quarter earnings, weaker oilseed processing and restructuring in Brazil, Jacqualyn Fouse, chief financial officer of the White Plains, New York-based company, said today on a conference call with analysts. Bunge had previously forecast earnings of $5.30 to $5.80, and analysts had projected $5.25, the average estimate in a Bloomberg survey.
“The miss was broad-based across all segments, though agribusiness, sugar, and fertilizer were the clear underperformers,” Vincent Andrews, a New York-based analyst at Morgan Stanley, said in a report today.
Bunge said its oilseed margins were pressured as costs rose with increased demand from China and slower-than-expected sales from South American and European farmers. The company said in a statement it expected more balanced supply and demand for soybeans in the quarter given a record South American crop.
“We obviously have to deliver to our customers around the world,” Chief Executive Officer Alberto Weisser said on the conference call. “Slow farmer selling was a particular challenge.”
Net Income
Second-quarter net income rose more than fivefold to $1.78 billion, or $11.15 a share, from $313 million, or $2.28, a year earlier, the company said in the statement. Bunge closed the sale of its Brazilian fertilizer business to Vale SA in May, resulting in a gain of $1.9 billion, the company said. Second- quarter revenue was little changed at $11 billion.
Bunge’s sugar mills produced less sweetener and ethanol per unit of cane in the second quarter than they will in the rest of the year because yields are typically lowest during the beginning of the harvest in the Center-South of Brazil, the company said.
The retail fertilizer business in Brazil was weaker than expected partly because of competition pressuring margins and lost sales opportunities, Bunge said.
Bunge dropped $7.68, or 14 percent, to $46.29 at 4:15 p.m. in New York Stock Exchange composite trading, the biggest drop since Oct. 2, 2008. Bunge has fallen 27 percent this year.
Cargill Inc. is the world’s largest sugar trader.
To contact the reporter on this story: Shruti Date Singh in Chicago at ssingh28@bloomberg.net.
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