Bunge Reports Fourth Quarter and Full-Year 2018 Results

WHITE PLAINS, N.Y., Feb. 21, 2019 /PRNewswire/ -- Bunge Limited (NYSE: BG) today reported Q4 2018 and full-year 2018 results.

• Full-year 2018 GAAP EPS of $1.57 vs. $0.89 in the prior year; $2.72 vs. $1.94 on an adjusted basis;
• Q4 GAAP EPS of $(0.51) vs.$(0.48) in the prior year; $0.08 vs. $0.67 on an adjusted basis
• Agribusiness impacted by decline in value of Brazilian soybean ownership; full year results up 114% on strong soy crush margins
• In Food & Ingredients, Loders Croklaan integration proceeding as planned
• Sugar & Bioenergy impacted by heavy rains as poor crop year came to an end
• Global Competitiveness Program delivered $200 million of savings in 2018, expect $50 millionof additional savings in 2019, reaching original target a year ahead of schedule
• Strategic Review and CEO search progressing

• Overview

Kathleen Hyle, Bunge's Non-Executive Board Chair, stated, "Although 2018 was a substantially better year than 2017, we are not satisfied with these results, and we know that Bunge has the global assets and people to perform better in the future. In the past several months, the Company has taken a number of significant and positive steps to reposition itself for sustainable growth, including announcing a leadership transition and enhancing its leadership team, refreshing our Board and establishing a Strategic Review Committee of the Board."

Ms. Hyle continued, "The Committee initiated and is continuing a thorough, outside-in review of all of Bunge's businesses. At the same time, we are committed to addressing underperforming assets as part of our effort to enhance shareholder value, and we are strengthening our risk management capabilities, as they are foundational to everything we do. The Board and the leadership team are moving with speed and accountability to drive results."

Acting CEO Greg Heckman commented, "Even in my short time leading the company, I see many strengths. We have a world-class global network of assets and a talented team of people, all of whom are committed to driving the business forward. While the Strategic Review Committee continues its work, we are refocusing the organization and placing greater emphasis on improved execution. Our key priorities are to drive operational performance, optimize the portfolio, strengthen our capital allocation framework and sharpen our financial discipline. I am confident that with the actions we are taking, we will be able to better leverage Bunge's asset base and increase shareholder returns."

• Financial Highlights

• Fourth Quarter Results

Agribusiness

Lower segment results in the quarter were largely due to the reduction in value of the Company's Brazilian soybean ownership as factors related to China trade and demand caused Brazilian soybean prices to converge with U.S. and Brazilian new crop prices. The approximate $125 million loss associated with this reduction in prices impacted results in both oilseeds trading and distribution and grains origination.

In Oilseeds, structural soy crush margins were higher in the U.S., Europe, Brazil and Asia due to more favorable market conditions. Margins, however, were lower in Argentina due to tight bean supplies resulting from the drought and farmer retention. Total soy crush volumes were similar to last year, as higher volumes in the Northern Hemisphere were offset by lower volumes in South America. Results in softseed processing were higher, as improved structural margins in Europe more than offset lower margins in Canada.

In Grains, Origination results declined due to lower structural margins and volumes, which were impacted by the decrease in soybean demand from China. Results in grain trading and distribution were comparable to last year.

Edible Oil Products

Higher results in the quarter were driven by the contribution from Loders Croklaan, and improved performance in Europe, which benefitted from higher volumes and lower unit costs, and an increase in volumes and margins in Argentina. Results in North America and Brazil were lower than last year.  The integration of Loders Croklaan with our existing B2B oils business is progressing as planned.

Milling Products

Higher margins and volumes in Brazil were more than offset by lower margins and volumes in Mexico. Results in the U.S. were similar to last year.

Sugar & Bioenergy

Results in the quarter were significantly below the Company's expectations, primarily due to the combination of sustained rain during the quarter, which negatively impacted sales and unit costs, and lower than expected ethanol prices.  Compared with last year, lower results were primarily driven by lower sugar prices, reduced sugarcane crush volume and lower yields.

Fertilizer

Higher results in the quarter were primarily driven by higher prices and lower costs related to prior restructuring actions, which more than offset slightly lower volumes. Additionally, fourth quarter results included the remaining $6 million recovery of foreign exchange losses from the second quarter.

Global Competitiveness Program

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

The Company has reduced addressable SG&A by approximately $200 million as compared with its 2017 baseline. This reflects $100 million of additional savings compared with the Company's initial outlook for 2018. The Company expects 2019 savings against the baseline of approximately $250 million, achieving its addressable SG&A target of $1.1 billion a full year ahead of schedule. With the changes implemented and ongoing continuous improvement, the program is expected to achieve additional savings beyond 2019.

Cash Flow

Cash used by operations in the year ended December 31, 2018 was approximately $1,264 million compared with cash used of approximately $1,975 million in the same period last year. Adjusting for beneficial interest in securitized trade receivables, cash provided by operating activities was $645 million compared with cash provided by operating activities of $1,026 million in the prior year. The year-over-year decrease was primarily driven by higher inventory, which was partially offset by higher earnings. Adjusted funds from operations was approximately $1.1 billion as of the year ended December 31, 2018.  Total capex of $493 million was $169 million below prior year, reflecting disciplined capital investment.

Income Taxes

The effective tax rate for the year ended December 31, 2018 was approximately 39%.  Adjusting for all notable items, the effective tax rate for the year ended December 31, 2018 was approximately 26%. The higher than expected tax rate was primarily due to earnings mix and the significantly larger than anticipated loss in Sugar & Bioenergy that raised our tax rate by 4 percentage points.

• Outlook

Beginning in 2019, the Company is changing its guidance approach. Bunge will provide directional guidance for the company instead of individual segment EBIT ranges as it has previously.

In Agribusiness, based on the current soy crush margin environment, 2019 full-year results would be expected to be lower than 2018.  Actual soy crush margins over the course of the year are likely to evolve based on U.S.-China trade discussions, crop sizes and farmer commercialization. Based on the current softseed crush margin environment, results would be slightly higher than last year, driven by strong oil demand. Improvements in risk management and in how we operate should support higher results in Grains compared with last year.

In Food & Ingredients, full-year results in Edible Oils should benefit from 12 months of ownership of Loders Croklaan, as well as increased synergies from the integration of our B2B businesses. Favorable Milling operating environments in Brazil and the U.S. are likely to be partially offset by more challenging conditions in Mexico.

In Sugar & Bioenergy, based on normal weather and forward price curves for sugar and ethanol, full-year 2019 results would be expected to be about break-even. Approximately 60% of sugar production has been hedged and, weather permitting, the Company plans to crush approximately 19 mmt of cane.  As in past years, results will be seasonally weighted to the second half of the year.

In Fertilizer, based on the current market environment, full-year results would be lower than last year.

The Global Competitiveness Program is expected to generate approximately $50 million of incremental year-over-year savings. The Company expects additional savings from industrial and supply chain initiatives, which are expected to offset inflation.

Additionally, the Company expects the following for 2019: A tax rate in the range of 22% to 26%; net interest expense in the range of $290 to $310 million; capital expenditures of approximately $550 million, of which approximately $115 million is related to sugarcane milling; and depreciation, depletion and amortization of approximately $650 million.

• Conference Call and Webcast Details

Bunge Limited's management will host a conference call at 8:00 a.m. EST on Thursday, February 21, 2019 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 1185117. 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 "Q4 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 February 21, 2019, continuing through March 21, 2019. 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 10127862. A replay will also be available in "Past events" at "Webcasts and presentations" in the "Investors" section of the Company's website.

• 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 and edible oil products for commercia