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Bunge CEO forecasts higher earnings

profits up
Trading margins have returned for Bunge and its rivals as China loads up on U.S. crops.

By Isis Almeida

Bunge Ltd., one of the world’s top agricultural commodities trader, surged to a two-year high after its chief executive officer forecast even higher earnings.

The ‘B’ in the storied quartet of crop traders that dominate the industry now sees earnings of $6.75 a share as the lower end of the range for this year, CEO Greg Heckman said at a BMO event. That was the the top of the forecast provided to investors in October, when Bunge reported third-quarter results.

The fat profit marks a stark turnaround for Bunge, which has been cutting costs, shedding under-performing assets and buying back shares in a bid to boost results. The company has now completed its revamp, having recently agreed to sell a refinery in Rotterdam and a rice mill in California.

“Quite frankly, I’m going to be really disappointed if we can’t deliver adjusted EPS with a seven in front of it,” Heckman said at the virtual event.

The new outlook comes after the company raised its earnings forecast twice this year despite the pandemic that locked down cities from Paris to Los Angeles, slashing demand for crop-based fuels and reducing consumption of vegetable oil as people eat less fried food at home. Bunge rose as much as 3.7% to $63.61, the highest since November 2018. The stock closed at $63.50.

Trading margins have returned for Bunge and its rivals, which include Archer-Daniels-Midland Co., Cargill Inc. and Louis Dreyfus Co., as top commodities buyer China loads up on U.S. crops. The Asian nation has already bought record amounts of American corn, while soybean purchases are running at the fastest pace in data going back to 1991.

At the same time, U.S. crops turned out smaller than expected, while dry weather delayed planting in Brazil, the world’s largest soybean producer.

“After coming off several years of low price, low volume, oversupply, low volatility, we’ve got really something that’s quite different globally right now,” Heckman said. “We’ve got a demand-led situation here.”

“We are going to need a crop cycle, probably more than two crop cycles to get the surplus built back up, so we are seeing higher prices, that’s a positive,” he said. “Higher volumes are a positive for our global network, higher price volatility -- so we can help our customers manage their risk -- and the fact that there has been more dislocation, and these are all things that our global system is built for.”

Bunge lifted its outlook for a second time in the third quarter, forecasting earnings of $6.25 to $6.75 a share, excluding notable items and mark-to-market timing differences. The new lower-end forecast of $6.75 is higher than the most optimistic of analysts surveyed by Bloomberg, whose estimates range from $6.41 to $6.73.

© 2020 Bloomberg L.P.
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