Bunge released second quarter 2018 results on Aug. 1. 

At a glance:

Second quarter results for Agribusiness

Global soy crush margins were higher in all regions driven by the combination of strong underlying soymeal demand, crushing capacity constraints caused by reduced soybean production in Argentina, and increased availability of U.S. soybeans as the U.S.-China trade discussions evolved.

The increase in forward margins resulted in new negative mark-to-market in the quarter of approximately $125 million related to forward soy crushing contracts. Including impacts from the first quarter, Bunge is carrying forward about $185 million of mark-to-market, which will reverse as it executes on these contracts in the second half of the year.

In Grains, results in the quarter were impacted by a temporary $24 million foreign exchange loss on hedges in Brazil that are expected to reverse in the second half of the year as contracts are executed. Excluding this impact, results in Brazil were higher than last year driven by higher volumes and margins. 

Origination results in Argentina were negative due to smaller crops resulting from the drought. While origination results in North America were higher than last year, they were not a material contributor to the quarter.

Grain trading & distribution generated a loss in the quarter from positions taken to offset potential unfavorable movements on our bean basis exposure in Brazil, and to protect second half soy crush margins in Europe and the U.S.

CEO’s outlook

Soren Schroder, Bunge's Chief Executive Officer, said "The soy crushing environment continued to evolve positively, and second quarter results in Oilseeds were within the range of our expectations when excluding the new mark-to-market impact. In Grains, results were lower than expected in South American origination and trading & distribution, where we chose a prudent risk management approach that protected against the downside and set us up for a strong second half. In Food & Ingredients, Milling had a strong quarter, led by the anticipated improvement in Brazil market conditions. Edible Oils performance was soft due to margin pressure from a temporary surplus of soy oil resulting from the strong global crushing environment. The integration of Loders Croklaan is on track, and a strong second half is expected with momentum building into 2019."

Schroder continued, "While total company performance in the second quarter came in below our estimates, we expect a strong second half driven by another step up in performance in soy crushing as we have committed most of the open capacity for the balance of the year at very attractive margins. We are confident in our ability to deliver on our targets for the full year. Through our Global Competitiveness Program, we continue to make progress improving the way we work together around the world. We’re already seeing the benefits of our streamlined organization. The Program is tracking ahead of target and is now expected to generate $150 million in SG&A savings this year – $50 million more than our previous target. We also expect $80 million in savings over the course of the year from industrial and supply chain initiatives."

Source: Bunge