Bunge Plunges After Profit Disappoints Amid `Tough' Markets

  • Outlook for only `modest' '16 `spooked everyone,' analyst says
  • Slumping Brazil economy hurts food demand; soy margins shrink

Bunge Ltd., the world’s largest oilseed processor, dropped the most in seven years after reporting lower-than-expected fourth-quarter earnings and the outlook from Chief Executive Officer Soren Schroder disappointed investors.

“The markets will be tough in 2016,” Chief Financial Officer Drew Burke said Thursday on a conference call. CEO Schroder cited slowing economies in emerging markets, while the dollar’s strength erodes prospects for U.S. exports. He said a full-year profit target of $8.50 a share is in the “line of sight” beyond 2017 without giving a specific time.

Fourth-quarter profit excluding one-time items was $1.49 a share, the White Plains, New York-based company said in a statement. That trailed the $1.56 average of 10 analysts estimates compiled by Bloomberg. Sales dropped to $11.1 billion from $13.2 billion, missing the $11.6 billion average estimate. Markets probably won’t recover until the second half of this year, Schroder said. Net income in 2015 was $4.83 a share.

In 2016, analysts on average expected profit to jump to $6.30 a share, and now the company forecasts a “modest” increase in earnings, sending the stock tumbling, Bryan Z. Agbabian, the San Francisco-based sector head for agricultural equities at Allianz Global Investors, said in a telephone interview.

‘Spooked Everyone’

“That spooked everyone,” he said. “They were hoping to hear more positive commentary.”

In Brazil last quarter, the economic slump cut volumes and margins in the food business, Bunge said. Expansion in China’s soybean processing hurt margins, and the dollar’s rally and increasing production in countries including Argentina damped U.S. exports, Schroder said on the call.

Bunge plummeted 18 percent to close at $47.79 in New York, the biggest decline since Oct. 2, 2008. The shares have slumped 48 percent in the past 12 months.

The company is one of the world’s largest crop traders. In 2015, a Bloomberg measure of corn, soybean and wheat prices tumbled 19 percent, the most since 2008. This year, the gauge has dropped 0.3 percent.

Oilseed-processing profit fell in the fourth quarter as U.S. margins “softened” in anticipation of increased supplies from Argentina, Bunge said. That matched comments this month from rival Archer-Daniels-Midland Co.

Profit from Bunge’s food and ingredients unit fell 45 percent in the fourth quarter from a year earlier. Grain earnings were hurt mostly because of reduced volumes in the U.S., where sales slowed in the face of stiffer competition in export markets, the company said.

(An earlier version of this story corrected the attribution in the second paragraph to cite the CFO.)

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