27 Jul 2012 --- Bunge results in the second quarter were primarily driven by strong performances in oilseed processing and grain merchandising in our South American operations. Results in our European merchandising business, which benefited from the addition of our new Ukrainian port terminal, also improved and contributed to the higher volume in the quarter. The addition of grain facilities in the U.S. related to our new grain export terminal in the Pacific Northwest and oilseed processing capacity expansions in Asia that came on-stream last year also contributed to the increase in volume. Results in the quarter included an $85 million gain on sale of the company’s minority stake in Solae. Results in the second quarter of 2011 included a $37 million gain related to the sale of our interest in a European oilseed processing facility joint venture.
Alberto Weisser, Bunge’s Chairman and Chief Executive Officer, stated, “Bunge’s Agribusiness operations performed well in a volatile environment, but Sugar & Bioenergy, which was impacted by adverse weather conditions, and Food & Ingredients delivered lower than expected earnings. Looking ahead, we expect a strong second half of 2012.
“Weather is always an important variable in the agribusiness and food industries, but this year it is particularly significant. Global stocks of corn and soybeans are already tight, and a severe drought in the U.S. has lowered expectations for a replenished supply this fall and driven commodity futures prices to record levels. As the world adjusts to these developments we are likely to see a tempering of near-term demand among commercial customers, the emergence of non-traditional trade flows both within regions and globally, as well as massive planting by farmers in the Southern Hemisphere. Large crops next spring from farmers in South America will help provide relief to a stressed market.
“We expect Bunge will have a strong second half of the year, not only because we are confident in our businesses and our approach, but also because we are confident that the role we play as a company is both meaningful and valued. In times of tight commodity stocks and price volatility, farmers depend on a trusted outlet for their crops, commercial customers rely on a responsive supplier, and the world requires flexible trade that can move products smoothly and safely from where they are to where they need to be. Bunge’s strong balance sheet, efficient operations, diverse product portfolio and global asset network enable us to provide these services in the most challenging of times.
“Of course, record commodity prices spark concern for the food security of vulnerable communities. However, while corn and soybean stocks are low, global stocks of other key staples, including wheat and rice, are at more comfortable levels. The availability of these crops, combined with rational approaches by governments to domestic food, agriculture and trade policies, fast response from aid agencies and cooperation from industry, should help the world respond quickly and effectively to potential issues.”
Rainy weather in the center south of Brazil interrupted milling operations and reduced the sugar content of harvested sugarcane. This led to lower than expected industrial volumes and higher unit costs, which contributed to the loss in the quarter. These impacts exacerbated what is normally a seasonally weak period. Results in 2011 benefited from unusually high ethanol prices resulting from the tight supply situation in Brazil. Lower volumes in the quarter were primarily related to our merchandising business.
Performance in Edible Oil Products was weaker in most regions, primarily due to lower margins in packaged oil resulting from volatile raw material prices. The quarter included an impairment charge of approximately $5 million related to the closing of a European margarine plant as part of a facilities consolidation program to improve efficiency.
Lower Milling Products results in the quarter were primarily due to the combination of lower margins in wheat milling and continuing challenges related to the completed implementation of a new SAP system in Brazil that impacted volumes and margins. Results in the quarter included a gain of $36 million arising from the acquisition of the remaining interest in a Mexican wheat milling business in which we previously held a minority investment.