US – Bunge has reported a loss of US$60 million in the fourth quarter in for its agribusiness, sugar and bioenergy and edible oils business in the year 2017.
The world-leading agricultural merchant has posted weaker earnings as compared to last year when it recorded a net profit of US$271million.
Bunge says that this came as the company tried to adjust to the US tax reforms and a corporate restructuring the company.
“While industry headwinds persisted through the end of the year, we made good progress in 2017 towards our strategic objectives by taking proactive steps to improve our cost structure and create a more balanced business,’ said Soren Schroder, Bunge’s Chief Executive Officer.
Agribusiness grains and oilseeds realised lower results compared to last year as margins overall remained weak.
In the quarter, the agribusiness handled 34.3 million tonnes, an increase of 4.6% year after year and according to Bunge, the last years have witnessed immense growth in the international grain trade.
There was an improvement in sales in the North American region but lower than the target, and the improvement was primarily due to effective positioning, which helped overcome weaker structural margins and lower volumes due to increased exports out of South America.
Oversupply of soymeal resulted to depression of structural processing margins during the quarter impacting on low results from Oilseeds.
However, soymeal crush margins in Western Europe and Vietnam have received positive impacts from improved conditions toward the end of the quarter that saw Argentine crushers reduce production, bringing global soymeal supply into better balance with demand.
Higher results from Canada’s softseed processing were offset by low production in Europe leading to a lower record in soft seed processing as compared to last year.
The agribusiness sector was marked with excess supplies and high stock of grains damping price swings and inability to make profit.
Bunge said that although they were not expecting a quick turnaround of the agribusiness sector, they were optimistic for the oilseeds segment particularly soybeans given an improvement in the soy processing conditions.
Performance of Edible Oil Products improved in North America driven by high margins and lower costs.
Europe and Asia recorded good performance as a result of improved volumes, sales and margins while in Brazil, higher volume and lower costs were partially offset by lower margins.
Milling products segment recorded low results especially in Brazil while Mexico good performance benefitted from higher volumes reflecting new customer wins.
Sugar & Bioenergy Fourth quarter results in sugarcane milling were below expectations due to late rainfall that reduced crush by approximately 700,000 metric tons.
In its renewable oils joint venture, the company made a US$5 million loss.
Bunge revealed that following discussions over the last quarter, they were planning to exit their global sugar trading operation and were in discussions to sell their interest in the renewable oils joint venture to their partner- Corbion.
In 2018, the company says it will continue to focus on execution of their strategic priorities, making US$100 million and additional US$80 million savings in industrial and supply chain initiatives.
Bunge also plans to reduce forward logistics and sales commitments in Brazil and Argentina, providing more optionality to adapt to farmer marketing and customer buying patterns.
“Our Global Competitiveness Program is off to a strong start, putting us on a good trajectory to achieve our US$250 million target by the end of 2019.
We also delivered $110 million of industrial cost savings in 2017, exceeding our target by US$10 million,” said Soren Schroder.