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Bunge lays out plan to turn business around

Company is focused on cutting costs, divesting unprofitable non-core businesses and buying back shares.

Bloomberg, Content provider

June 25, 2020

3 Min Read

By Isis Almeida

Bunge Ltd. is promising investors a boost in profits, with the U.S. crop giant laying out a road map to turn around the struggling business for the first time since its new boss took the top job last year.

The St. Louis-based company is positioned to deliver baseline earnings of $5 a share as it focuses on cutting costs, divesting unprofitable non-core businesses and buying back shares, Chief Executive Officer Greg Heckman said in a call with investors. He didn’t provide a time frame to reach the earnings projection. The last time annual adjusted earnings per share were higher than that was in 2013.

The world’s top oilseeds processor is set to benefit from trends including the expansion of plant-based meat, which is heavily dependent on vegetable oils, Heckman said. The novel coronavirus presented a setback for edible oils demand -- people don’t eat as much fried food at home -- but orders from the food-services sector in North America are increasing again.

“We’re positioned to deliver baseline earnings of $5 per share and normalize crush margins,” he said. “And importantly, we believe we have great opportunities ahead of us that will help us grow earnings power well north of that level.”

Shares gained as much as 2.7% as the investor call progressed, reversing an earlier loss of 3.4%. Bunge was up 1.1% by 3:21 p.m. in New York even amid a broader market sell-off, with rival Archer-Daniels Midland Co. falling. Bunge’s shares have slumped 28% this year.

Related:Bunge hires former ConAgra boss

Cutting costs

Bunge, one of the world’s largest agricultural commodity traders, has been trying to turn its business around by restructuring, reducing costs and offloading assets. Since Heckman became CEO, the company has announced the sale of most of its U.S. grain elevators to a unit of Japanese cooperative Zen-Noh, sold its Brazilian margarine business to JBS SA and formed a joint venture with BP Plc for its struggling sugar and ethanol business.

Chief Financial Officer John Neppl said the earnings projection is based on the assumption of soybean crush margins at $33 to $35 a metric ton, the average of the past six years.

“We’re not yet at those margins and we’re not predicting when we’ll get there,” Heckman said. “Although prior to Covid-19, we thought we were on the path.”

The company also plans to add shareholder value by buying back stock when the opportunity arises. It has already repurchased $100 million worth of stock in the second quarter and it has approval to spend the same amount buying more, CFO Neppl said.

Related:ADM, Bunge fortunes change a year into trade war

Bunge is still working on further divesting assets and while the coronavirus has delayed the process, it hasn’t derailed it, Heckman said. In May, Neppl told a Goldman Sachs Group Inc. conference that the company was targeting another deal of similar size to the sale of its U.S. grain elevators by the end of June. Proceeds of that divestment are expected at about $300 million.

To contact the reporter on this story:

Isis Almeida in Chicago at [email protected]

To contact the editors responsible for this story:

Lynn Doan at [email protected]

Joe Richter, Steven Frank

© 2020 Bloomberg L.P.

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