Bunge lifted its earnings forecast after a stronger-than-expected start to the year, as Russia’s invasion of Ukraine “further intensified” the tightness in world grain and oilseed markets.
US-based Bunge, which is with ADM, Cargill and Louis Dreyfus one of the “ABCD group” of big agricultural traders, lifted from $9.50 per share to “at least” $11.50 per share its forecast for its earnings for 2022.
The upgrade reflected in part a “strong” performance in the January-to-March quarter, in which the group reported underlying earnings of $4.26 per share – up from $3.13 per share a year before, and far exceeding an expectation from analysts of a fall in the result to $2.94 per share.
Bunge also cited the “current market environment”, marked by soaring grain and oilseed prices, in the face of supply tightness fuelled by factors such as weather-hit crops in the likes of South America and Canada, and the hit to Black Sea supplies from Russia’s invasion of Ukraine.
Greg Heckman, the Bunge chief executive, termed it an “unprecedented global market, further intensified by the war in Ukraine”.
Bunge forecast that all its divisions would now report better full-year results than it had initially expected.
The milling unit was not expected to achieve “significantly higher” results year on year, after a first quarter in which “improved margins and volumes” drove a four-fold surge in adjusted operating profit, to $51m.
The improved outlook for the refined and specialty oils division was “driven by strong demand from food and fuel in our North American and European businesses”, which had already helped lift its underlying operating profit by 45% to $180m in the first quarter.
Expectations for the core agribusiness division were also lifted – although Bunge underlined that the unit was still expecting a decline in the unit’s result from last year, with the group “not forecasting the same magnitude of margin-enhancing opportunities that we captured during 2021”.
Even at $11.50 per share, the group’s full-year earnings would remain below the $12.93-per-share result achieved last year.
Soy vs softseeds
Bunge’s agribusiness division achieved a 4.3% increase to $627m in first-quarter earnings, with the benefit of “improved” soybean crush margins in Brazil, Europe and the US, thanks to strong demand, offset in part by weaker performances in softseeds, such as rapeseed and sunflower seed.
The group reported “lower softseed crush results in Europe and China, which were negatively impacted by tight seed supplies and higher costs”.
Rival ADM on Tuesday reported a shrinkage to $5-10 per tonne in Chinese soybean crush margins, from $20-25 per tonne three months ago.
However, for rapeseed, it estimated European crush margins at about $100 per tonne, well above the $20-30 per tonne in late January.
Bunge reported unadjusted group earnings for the first quarter down 16.4% at $688m, on revenues up 23% at $15.88bn.
Shares in the group gained 3.3% to $118.60 in early trading in New York.