(Adds CEO quote, adds detail about capex reduction, updates
By Karl Plume
CHICAGO May 3 U.S. agricultural trader Bunge
Ltd reported a sharply lower first-quarter profit on
Wednesday and cut its full-year earnings forecast as slow crop
sales by farmers in South America squeezed margins in its core
agribusiness unit, sending shares tumbling.
White Plains, New York-based Bunge said net income available
to shareholders plunged 82 percent in the quarter, led by a
steep drop in agribusiness, which buys, sells, stores, processes
and transports crops around the world.
Bunge shares tumbled more than 9.9 percent, the steepest
decline in 15 months, to $68.07.
The earnings miss came a day after rival grain trader Archer
Daniels Midland Co reported its third global trading
loss in five quarters and warned of a weaker year ahead in grain
trading, dealing ADM shares their biggest loss in eight years.
Low grain prices and a global grain glut have eroded margins
for agribusinesses including Bunge, ADM and competitors Cargill
Inc and Louis Dreyfus Corp. The companies,
collectively known as the ABCDs, dominate the global grain
"As it looks right now, if you assume good growing
conditions in the U.S., then we will be in this oversupply
environment for at least another year," Bunge Chief Executive
Soren Schroder told Reuters in an interview.
"We have to prepare ourselves to operate in an environment
with compressed margins and we have to be more efficient and
focus on cost," he said.
By the end of the first quarter, South American farmers had
yet to sell over 70 percent of their corn and soy crops as they
awaited higher prices. That unsold volume was a record high, or
very close to one, Schroder said.
As a result, profit for Bunge's agribusiness segment, its
largest unit in terms of volume and sales, fell more than 61
percent to $109 million.
The company said it expects "solid earnings growth" this
year, but cut its full-year earnings target for agribusiness by
$95 million to $125 million and trimmed its food and ingredients
unit target by $25 million.
Lower first-quarter earnings also prompted Bunge to cut
capex for 2017 by $50 million, likely delaying investments in
"some smaller projects across both agribusiness and food,"
Net income available to Bunge's shareholders fell to $39
million, or 27 cents per share, in the first quarter ended March
31, from $222 million, or $1.54 per share, a year earlier.
(Additional reporting by Swetha Gopinath in Bengaluru; Editing
by Paul Simao and Meredith Mazzilli)