Shares in Bunge, the US-listed agribusiness and grain commodities trader, took a hammering last week – falling by more than 20% in trading – after the group reported lower than expected fourth-quarter earnings and sales for 2015.
Bunge reported fourth-quarter sales of just over $11.1bn, a 16% decline compared with the same period last year. Although net income for the quarter increased by a third to $1.49 per share, it was well short of analyst estimates of $1.56 per share.
For its full financial year, Bunge sales fell by 24% to $43.5bn, while earnings (EBIT) actually improved by almost a third to $1.25bn.
Added to this, Bunge chief executive Soren Schroder painted a bearish picture for the year ahead, saying the group expects 2016 to be “challenging”, which did little to help investor confidence.
Challenging US market
Schroder said the US will be a big challenge for the company in the near term, reflecting the declining demand for US grain due to bountiful global supplies of grain after record harvests, a strong US dollar and intense export competition from South America.
As such, Bunge is forecasting its operations in South America to drive performance for the business in the year ahead. Large corn and soya bean crops are expected this coming year in Brazil, which will support better margins for Bunge’s export and crush businesses.
In neighbouring Argentina, the government has lifted export taxes on agricultural commodities such as corn, wheat and soybean, which should incentivise growers to increase grain production with exporting now a viable option.
Supply and demand
The grain trader was less upbeat on the market situation in the northern hemisphere with grain exports and oilseed processing margins, particularly for European rapeseed, to remain challenged until global supply and demand finds a better balance.
Bunge’s fertiliser business saw a big decline in profits for the year with volumes back significantly as a result of the recessionary economic conditions in Brazil, coupled with the deterioration of the Brazilian currency, affecting the buying power of farmers.
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Currency headwinds taper Bunge third-quarter profits
Shares in Bunge, the US-listed agribusiness and grain commodities trader, took a hammering last week – falling by more than 20% in trading – after the group reported lower than expected fourth-quarter earnings and sales for 2015.
Bunge reported fourth-quarter sales of just over $11.1bn, a 16% decline compared with the same period last year. Although net income for the quarter increased by a third to $1.49 per share, it was well short of analyst estimates of $1.56 per share.
For its full financial year, Bunge sales fell by 24% to $43.5bn, while earnings (EBIT) actually improved by almost a third to $1.25bn.
Added to this, Bunge chief executive Soren Schroder painted a bearish picture for the year ahead, saying the group expects 2016 to be “challenging”, which did little to help investor confidence.
Challenging US market
Schroder said the US will be a big challenge for the company in the near term, reflecting the declining demand for US grain due to bountiful global supplies of grain after record harvests, a strong US dollar and intense export competition from South America.
As such, Bunge is forecasting its operations in South America to drive performance for the business in the year ahead. Large corn and soya bean crops are expected this coming year in Brazil, which will support better margins for Bunge’s export and crush businesses.
In neighbouring Argentina, the government has lifted export taxes on agricultural commodities such as corn, wheat and soybean, which should incentivise growers to increase grain production with exporting now a viable option.
Supply and demand
The grain trader was less upbeat on the market situation in the northern hemisphere with grain exports and oilseed processing margins, particularly for European rapeseed, to remain challenged until global supply and demand finds a better balance.
Bunge’s fertiliser business saw a big decline in profits for the year with volumes back significantly as a result of the recessionary economic conditions in Brazil, coupled with the deterioration of the Brazilian currency, affecting the buying power of farmers.
Read more
Bunge takes legal proceedings against Egyptian grain authority
Currency headwinds taper Bunge third-quarter profits
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