Bunge's 3Q15 Sales Were Down, but Margins Were Up
(Continued from Prior Part)
Agribusiness
In this part, we will review Bunge’s (BG) segment performance. Soybean processing in the US, Brazil, Argentina, and Europe were the largest contributors to the company’s oilseeds segment during the quarter, benefiting from strong domestic and export demand for soy meal. The soft seed processing segment’s results in Europe and Canada were down as farmers retained seed. Results in oilseed trading and distribution were lower than last year’s strong performance. In the grains segment, higher results were primarily driven by the company’s Brazilian grain origination operation, which experienced a significant spike in volume in the quarter with the devaluation of the real.
Bunge’s global team managed risk well during the quarter as both grain and oilseed prices declined, reflecting a good crop and inventory buildup in most regions. Higher segment volumes were primarily due to the company’s soy processing operations in the US, Argentina, and Asia.
Edible oil products
Results in North America showed improvement due to higher margins in both the company’s refining and packaging operations. In Brazil, margins and volumes were pressured due to the rapid contraction of consumer demand and the significant devaluation of the real. Results from European operations were also down in the quarter, largely due to the weak economic environment in certain countries, which more than offset the savings from the company’s performance improvement initiatives.
Milling products
Improved performance in North America was more than offset by lower results in Brazil. The company’s Brazilian wheat milling business was impacted by lower margins in US dollars and volumes due to the rapid contraction of consumer demand, particularly from the food service channel, and the significant devaluation of the real.
In North America, higher margins and volumes in the company’s Mexican wheat milling business more than offset the impacts of currency devaluation and lower margins in the US corn milling business. Rice milling results were comparable to last year, reflecting the recovery of ~$4 million of mark-to-market losses on foreign exchange, which were incurred in the second quarter.
Sugar and bioenergy
Results were lower in both sugar cane milling as well as trading and merchandising. While production volume was up this year, it was lower than expected due to excess rain in September, which limited the number of milling days. In trading and merchandising, lower margins more than offset higher volumes compared to a particularly strong prior-year period. Results of the company’s biofuel businesses in the quarter were impacted by a $5 million loss from its Brazilian renewable oils joint venture.
Fertilizer
The loss of $3 million in the quarter was due to lower volumes and margins in the company’s Argentina operations, resulting from reduced planting of corn and wheat. Results in the company’s Brazilian port operation were also down due to lower fertilizer imports and currency translation.
Bunge’s peers in the industry like General Mills (GIS) and Flowers Food (FLO) reported an EPS of $0.69 and $0.24, respectively, in the last quarter. The Victory CEMP US Large Cap High Dividend Volatility Weighted Index ETF (CDL) invests 2.8% of its portfolio in GIS, and the PowerShares High Yield Equity Dividend (PEY) invests 1.4% in GIS.
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