Bunge Reports Third Quarter 2018 Results

WHITE PLAINS, N.Y., Oct. 31, 2018 /PRNewswire/ -- Bunge Limited (NYSE:BG)

• Q3 GAAP EPS of $2.39 vs. $0.59 in the prior year; $2.52 vs. $0.75 on an adjusted basis
• Agribusiness results driven by strong soybean crushing margins; includes ~$155 million of new mark-to-market gains on forward soy crushing contracts
• In Food & Ingredients, Milling produced a solid quarter; Edible Oils impacted by oil surplus from strong soy crushing environment
• Global Competitiveness Program expected to deliver full savings a year ahead of schedule; increasing 2018 savings target to $175 million from $150 million
• Expect 2018 full-year EBIT outlook of ~$1.2 billion, ~$600 million higher than prior year, and combined core Agribusiness-Foods ROIC to exceed WACC

• Financial Highlights

• Overview

Soren Schroder, Bunge's Chief Executive Officer, commented, "Bunge produced a strong third quarter, supported by the prudent actions we took in the second quarter to secure crush margins at multi-year highs, positioning the company for a strong second half performance. Milling also had a good quarter; however, margins in Edible Oils remained under pressure due to a surplus of soy oil resulting from the strong global crushing environment. The integration of our recent acquisition of Loders Croklaan is on track, and the combined Bunge Loders Croklaan platform will be an important driver of earnings going forward."

Schroder continued, "Looking ahead, we expect to deliver a good fourth quarter led by our Northern Hemisphere oilseed processing operations. We also expect improvement in Edible Oils, where oil supplies are tightening, and we are entering the period of seasonally stronger demand.

We continue to drive greater efficiency and lower costs throughout the company. The Global Competitiveness Program is now expected to generate $175 million in SG&A savings this year relative to our 2017 baseline. This represents a $25 million increase from our previous target and $75 million higher than our initial estimate this year. We have also achieved $65 million of industrial cost savings toward our full year target of $80 million, positioning us well to enter 2019 with a lower cost profile."

• Third Quarter Results

Agribusiness

Structural soy crush margins were higher in all regions driven by favorable market dynamics and actions taken in the second quarter to deliberately build our inventory of Brazilian beans, allowing us to secure crush margins in Brazil and China at attractive margins. A decrease in industry margins in certain regions resulted in new mark-to-market gains in the quarter of approximately $155 million related to forward soy crushing contracts, which will reverse as we execute on these contracts in the coming quarters.

In Grains, higher results in the quarter were primarily driven by Brazil origination, which benefitted from increased farmer selling as local soy prices rose from the combination of currency devaluation and strong export demand. Results in North America origination benefitted from lower logistics costs, which last year were negatively impacted by weather. Results in ocean freight were also higher than last year.

Edible Oil Products

Performance improved sequentially; however, due to the favorable soy crushing environment, margins in Brazilian packaged oil and North American refining remained under pressure. Underlying performance of Bunge Loders Croklaan was solid and the integration is on track, but reported earnings were impacted by an approximate $10 million negative impact from the revaluation of raw material supply contracts that will largely reverse in future quarters as sales contracts are executed. Excluding this impact, Loders results were as expected. Compared to last year, higher results in the U.S. and Argentina were more than offset by lower results in other regions.

Milling Products

Improved performance was driven by higher results in Brazil as margins expanded with the smaller domestic wheat crop. Results in the U.S. and Mexico were similar to last year.

Sugar & Bioenergy

Sugarcane milling results were negatively impacted by early season drought and excessive rain during the quarter, reducing production and increasing unit costs. Sugar trading & distribution incurred a $5 million loss related to exiting the international business, which was completed during the quarter.

Fertilizer

Higher results in the quarter were driven by our Argentine operation, benefitting from higher prices and volumes, as well as lower costs related to prior restructuring actions. Additionally, third quarter results included a $7 million recovery of foreign exchange losses from the second quarter. An additional $6 million recovery is expected in the fourth quarter.

Global Competitiveness Program

The Global Competitiveness Program announced in July 2017 is rationalizing Bunge's cost structure and reengineering the way we operate, reducing our 2017 addressable baseline SG&A of $1.35 billion to $1.1 billion by 2020.

We are now targeting SG&A savings of $175 million by the end of this year relative to our 2017 baseline. This reflects $75 million of additional savings compared to our initial outlook for 2018. We expect 2019 savings against the baseline of approximately $250 million, achieving our addressable SG&A target of $1.1 billion a full year ahead of schedule. With the changes implemented and our culture of continuous improvement, we expect to achieve additional savings beyond 2019.

Cash Flow

Cash used by operations in the nine months ended September 30, 2018 was approximately $3.3 billion compared to cash used of approximately $2.0 billion in the same period last year. The year-over-year variance is primarily due to an increase in inventory, reflecting our decision to build soybean supplies in Brazil during the second quarter to support our crushing operations. We expect to work down the balance to a lower level during the fourth quarter. Trailing four-quarter adjusted funds from operations was approximately $1.1 billion as of the quarter ended September 30, 2018.

Income Taxes

Income taxes for the nine months ended September 30, 2018 were $106 million, which included a notable tax benefit of $15 million. The prior year included $49 million of notable tax benefits.

• Outlook

Business conditions are expected to remain favorable for the balance of 2018 and into 2019 driven by strong oilseeds processing margins and improving conditions in Edible Oils.

In Agribusiness, we expect our full-year 2018 EBIT results to be in the upper half of the range of $800 million to $1.0 billion, with fourth quarter results to be driven primarily by our Northern Hemisphere oilseeds operations.

In Food & Ingredients, we are reducing our full-year EBIT outlook range to $250 to $270 million, reflecting a softer than expected third quarter in Edible Oils. While margins are currently recovering in Edible Oils, they are doing so at a pace slower than we had anticipated.

In Sugar & Bioenergy, we are reducing our full-year EBIT outlook from breakeven to a loss of between $20 and $40 million. This is based on the weaker than expected third quarter results and continued lower cane crush from the challenging weather conditions, and includes a year-to-date loss of $25 million in our trading & distribution business.

In Fertilizer, we are increasing our full-year EBIT outlook to approximately $35 million, an increase of $10 million from our previous outlook.

Expected savings from the Global Competitiveness Program and industrial and supply chain initiatives are reflected in our segment EBIT ranges.

Additionally, we expect the following for 2018: a tax rate at the upper end of the range of 18% to 22%; net interest expense in the range of $310 to $315 million, an increase of approximately $35 million due to higher inventories and interest rates; capital expenditures of approximately $600 million, a reduction of $50 million from our previous estimate.

• Conference Call and Webcast Details

Bunge Limited's management will host a conference call at 8:00 a.m. EDT on Wednesday, October 31, 2018 to discuss the company's results.

Additionally, a slide presentation to accompany the discussion of results will be posted on www.bunge.com.

To listen to the call, please dial (877) 883-0383. If you are located outside the United States or Canada, dial (412) 902-6506. Please dial in five to 10 minutes before the scheduled start time and enter confirmation code 6561288. The call will also be webcast live at www.bunge.com.

To access the webcast, go to "Webcasts and presentations" in the "Investors" section of the company's website. Select "Q3 2018 Bunge Limited Conference Call" and follow the prompts. Please go to the website at least 15 minutes prior to the call to register and download any necessary audio software.

A replay of the call will be available later in the day on October 31, 2018, continuing through November 30, 2018. To listen to it, please dial (877) 344-7529 in the United States, (855) 669-9658 in Canada, or (412) 317-0088 in other locations. When prompted, enter confirmation code 10124597. A replay will also be available in "Past events" at "Webcasts and presentations" in the "Investors" section of the company's website.

• Website Information

We routinely post important information for investors on our website, www.bunge.com, in the "Investors" section. We may use this website as a means of disclosing material, non-public information and for complying with our disclosure obligations under Regulation FD. Accordingly, investors should monitor the Investors section of our website, in addition to following our press releases, SEC filings, public conference calls, presentations and webcasts. The information contained on, or that may be accessed through, our website is not incorporated by reference into, and is not a part of, this document.

• About Bunge Limited

Bunge Limited (www.bunge.com, NYSE: BG) is a leading global agribusiness and food company operating in over 40 countries with approximately 32,000 employees. Bunge buys, sells, stores and transports oilseeds and grains to serve customers worldwide; processes oilseeds to make protein meal for animal feed; produces edible oil products for consumers and commercial customers in the food processing, industrial and artisanal bakery, confectionery, human nutrition and food service categories; produces sugar and ethanol from sugarcane; mills wheat, corn and rice to make ingredients used by food companies; and sells fertilizer in South America. Founded in 1818, the company is headquartered in White Plains, New York.

• Cautionary Statement Concerning Forward-Looking Statements

This press release contains both historical and forward-looking statements. All statements, other than statements of historical fact are, or may be deemed to be, forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These statements include our expectations regarding industry trends and our future financial performance, the completion and timing of acquisitions and dispositions, our assumptions and expectations for the Global Competitiveness Program and other efficiency initiatives and similar statements that are not historical facts. These forward-looking statements reflect our current expectations and projections about our future results, performance, prospects and opportunities. We have tried to identify these forward-looking statements by using words including "may," "will," "should," "could," "expect," "anticipate," "believe," "plan," "intend," "estimate," "continue" and similar expressions. These forward-looking statements are subject to a number of risks, uncertainties and other factors that could cause our actual results, performance, prospects or opportunities to differ materially from those expressed in, or implied by, these forward-looking statements. The following important factors, among others, could affect our business and financial performance: industry conditions, including fluctuations in supply, demand and prices for agricultural commodities and other raw materials and products used in our business; fluctuation