Chinese Trading Distorts Soybean Trade, Bunge Suffers

13 Feb 2015 --- Bunge, a leading food and agriculture trading company, has posted disappointing Q4 results, blamed largely on the Chinese commodity markets, which are ‘distorting’ trade.

Net sales were down $2.5bn compared with the same period last year and full year results were also down at $57.8bn in 2014, compared with $61.3bn in 2013. Both the Agribusiness and the Food & Ingredients business were hit by lower sales. Fourth quarter profit was down to $90m compared with $138m in the same period last year.

The company reported that while North American and European operations remained strong, China was a disappointing market, and Brazil continues to grow for the company.

Bunge operates four soybean crushing plants in China but blames traders who buy use soybeans to buy and sell stock at inflated prices on overcapacity in the market.

Losses were also attributed to charges related to the company’s North American soybean business, equivalent to around $80m. Despite large oilseed crops in North America last year, which lead to significant gains for rivals such as ADM and Cargill, Bunge suffered due to its heavy reliance on the Chinese market.

Soren Schroder, Bunge’s Chief Executive Officer stated: ““Fourth quarter earnings were close to our expectations, adjusting for impairment charges, mark-to-market impacts and using our normalized tax rate of 28%. Our North American and European operations performed exceptionally well, capitalizing on strong soybean processing margins and executing large export programs. Food & Ingredients continued to make advances with its commercial and operational excellence programs, and generated higher full-year results than in 2013. Sugarcane milling finished the year adjusted free cash flow neutral, which was our most important goal for that business.

“We are building on a solid foundation, and 2015 holds considerable promise as Bunge’s biggest regions – Brazil, North America and Europe – are in good positions to repeat record annual performances. Market fundamentals are solid, with strong world trade, an expected record soybean crop in South America, good structural crushing margins and high capacity utilization at port facilities. We have the right assets in the right places, and the improvements we have made to the business are on track to produce demonstrable results. Overall, we are optimistic that we will achieve our ROIC target of at least 9% for our core Agribusiness and Food & Ingredients operations while also growing earnings on a trajectory to reach our 2017 target of $8.50 per share.”