Bunge Reports Fourth Quarter 2016 Results

WHITE PLAINS, N.Y., Feb. 15, 2017 /PRNewswire/ -- Bunge Limited (NYSE:BG)

• Q4 GAAP EPS of $1.83 vs. $1.31 last year, $1.70 vs $1.49 on an adjusted basis
• Higher results driven by Food & Ingredients and Sugar & Bioenergy
• Combined Agri-Foods trailing four quarter ROIC of 8.6%; 1.6 points over WACC
• Operating cash flow of $1,904 million; adjusted funds from operations of $1,477 million^(a)
• Continue to expect strong earnings growth in 2017

Financial Highlights

Overview

Soren Schroder, Bunge's Chief Executive Officer, stated, "Bunge had a solid fourth quarter to end a challenging year. Higher Food & Ingredients and Sugar & Bioenergy results in 2016 reflect our team's hard work to drive structural improvements to increase the underlying competitiveness of our businesses. Agribusiness faced a very competitive global market environment, but finished strong.  Our 2016 adjusted ROIC in our core Agribusiness and Food operations was 8.6%, 1.6 points over our cost of capital.

"Our efforts to drive long term, sustainable value are on track. In 2016 we delivered $135 million of cost and efficiency benefits, exceeding our target by $10 million. Adjusted Funds from Operations were approximately $1.5 billion, $61 million higher than last year.  We returned $457 million to shareholders through dividends and share repurchases, and capex of $784 million was below our $850 million guidance and is tracking approximately $275 million below our 2014-2017 target, reflecting disciplined capital allocation.  We expanded our value added Food & Ingredients' capabilities with bolt-on M&A in Europe and strengthened our winning Agribusiness footprint through joint ventures in Brazil, Vietnam and Canada. We expect our previously announced Northern European soy crush and Mexican corn milling acquisitions to close, respectively, in the first and second quarters of 2017.

"We enter 2017 with confidence and expect strong growth in earnings. After disappointing crops in South America last year, the region is on track to produce record harvests this season, which aligns well with our footprint. In addition, global soybean processing margins, which were under pressure during most of 2016, are improving, and soft seed margins are better in both North America and Europe. We expect Food & Ingredients to increase its share of value added products and to grow volumes.  In Sugar & Bioenergy, our sugar is hedged at higher prices and Brazilian ethanol prices should be supported by favorable supply and demand. Importantly, we will also continue to drive our performance improvement programs, expecting $100 million of incremental benefits in 2017."

Fourth Quarter Results

Agribusiness
Results decreased from last year, primarily due to lower results in our soy processing operations, reflecting tight bean supplies in South America and softer global soymeal demand due to competition from lower cost feed products. Results in our European and Canadian softseed processing operations increased, driven by large crops, solid vegetable oil demand and our new Ukrainian plant, which started up earlier this year. Improved performance in Grains was largely driven by higher results in our U.S. operations, which benefitted from record corn and soybean crops that increased origination and export volumes and margins, as well as lower costs resulting from our footprint optimization efforts. Our global teams effectively managed risk during the quarter; however, contributions from risk management were lower than last year.

Edible Oil Products
Increased results in the fourth quarter were primarily driven by improved performance in Brazil, reflecting higher margins in all major product categories, share gains and lower costs. In India, increased sales of higher margin specialty bakery products contributed to its improved performance. Results in North America were down as higher results in Canada were more than offset by lower U.S. results. Performance in Europe was comparable to last year.

Milling Products
Higher results in the quarter were primarily due to increased volumes and margins in Brazil, which benefitted from the contribution of our recently acquired Pacifico mill, market share gains and improved product mix. Partially offsetting these improvements were lower results in North America, driven by the translation impact of the stronger U.S. dollar on our Mexican operations and lower margins in our U.S. corn milling business.     

Sugar & Bioenergy
Increased results in the quarter were primarily driven by our sugarcane milling operation, where higher sugar and ethanol prices more than offset lower crush volumes. Results in our trading & distribution business were down due to lower volumes and margins. Results in our biofuel joint ventures were higher due to improved volumes and margins. We incurred a $7 million loss in the quarter associated with our renewable oils joint venture. 

Fertilizer
Higher results in the quarter were driven by improved volumes in our Argentine fertilizer business that slightly offset lower margins. Results in the quarter also benefitted from the reversal of an $11 million provision related to tariffs on natural gas consumption.

Cash Flow
Cash generated by operations in the year ended December 31, 2016 was $1,904 million compared to cash generated of $610 million in 2015. The year-over-year increase was primarily driven by lower levels of working capital reflecting increased payables and decreased secured advances to farmers.  Adjusted funds from operations of $1,477 million was $61 million higher than the year ago period of $1,416 million.

Income Taxes
The effective tax rate for year ended December 31, 2016 was 22%. Adjusting for net gains and charges, the effective tax rate was approximately 24%.

Outlook
Thomas Boehlert, Chief Financial Officer, stated, "Our full-year 2017 outlook remains largely consistent with the assumptions that we provided at our December investor day. In Agribusiness, we expect EBIT to return to historical range of $895 to $1,050 million, driven by large crops in South America, of which Brazilian farmers have a significant percentage remaining to price; a return to more normal levels of soy meal inclusion in feed rations; and higher softseed crush margins due to the combination of greater seed supply and robust vegetable oil demand. We expect Agribusiness to start the year slow and progressively improve as volumes and margins pick up in South America. 

"In Food & Ingredients, we expect segment results to improve sequentially as we progress through the year, resulting in EBIT of $270 to $290 million.  Our outlook for year-over-year improvement reflects higher margins and volumes resulting from our performance improvement initiatives, more favorable product mix of higher value added products and full year contributions from our new wheat mills in Brazil. 

"In Sugar & Bioenergy, we expect 2017 EBIT of $100 to $120 million. Our outlook for year-over-year improvement reflects our actions to improve cane yields, sugar prices hedged at higher levels, a favorable ethanol supply-demand balance in Brazil, and assumes normal seasonal weather patterns. Similar to past years, results will be seasonally weak in the first half of the year.

"In Fertilizer, we expect EBIT of approximately $30 million.

"Additionally, we expect the following for 2017: a tax rate range of 24 to 27%; net interest expense in the range of $200 to $225 million; depreciation, depletion and amortization of approximately $550 million; and capital expenditures of $750 to $800 million."

Conference Call and Webcast Details

Bunge Limited's management will host a conference call at 8:00 a.m. EST on February 15, 2017 to discuss the company's results.

Additionally, a slide presentation to accompany the discussion of results will be posted on www.bunge.com.

To listen to the call, please dial (888) 771-4371.  If you are located outside the United States or Canada, dial (847) 585-4405.  Please dial in five to 10 minutes before the scheduled start time.  When prompted, enter confirmation code 44122118.  The call will also be webcast live at www.bunge.com.

To access the webcast, go to "Webcasts and Events" in the "Investors" section of the company's website.  Select "Q4 2016 Bunge Limited Conference Call" and follow the prompts.  Please go to the website at least 15 minutes prior to the call to register and download any necessary audio software.

A replay of the call will be available later in the day on February 15, 2017, continuing through March 17, 2017.  To listen to it, please dial (888) 843-7419 or, if located outside the United States or Canada, dial (630) 652-3042.  When prompted, enter confirmation code 44122118.  A replay will also be available at "Past Events" in the "Investors" section of the company's website.

About Bunge Limited

Bunge Limited (www.bunge.com, NYSE: BG) is a leading global agribusiness and food company operating in over 40 countries with approximately 32,000 employees.  Bunge buys, sells, stores and transports oilseeds and grains to serve customers worldwide; processes oilseeds to make protein meal for animal feed and edible oil products for commercial customers and consumers; produces sugar and ethanol from sugarcane; mills wheat, corn and rice to make ingredients used by food companies; and sells fertilizer in South America.  Founded in 1818, the company is headquartered in White Plains, New York.

Cautionary Statement Concerning Forward-Looking Statements

This press release contains both historical and forward-looking statements. All statements, other than statements of historical fact are, or may be deemed to be, forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These forward-looking statements are not based on historical facts, but rather reflect our current expectations and projections about our future results, performance, prospects and opportunities. We have tried to identify these forward-looking statements by using words including "may," "will," "should," "could," "expect," "anticipate," "believe," "plan," "intend," "estimate," "continue" and similar expressions. These forward-looking statements are subject to a number of risks, uncertainties and other factors that could cause our actual results, performance, prospects or opportunities to differ materially from those expressed in, or implied by, these forward-looking statements. The following important factors, among others, could affect our business and financial performance: industry conditions, including fluctuations in supply, demand and prices for agricultural commodities and other raw materials and products used in our business; fluctuations in energy and freight costs and competitive developments in our industries; the effects of weather conditions and the outbreak of crop and animal disease on our business; global and regional agricultural, economic, financial and commodities market, political, social and health conditions; the outcome of pending regulatory and legal proceedings; our ability to complete, integrate and benefit from acquisitions, dispositions, joint ventures and strategic alliances; our ability to achieve the efficiencies, savings and other benefits anticipated from our cost reduction, margin improvement and other business optimization initiatives; changes in government policies, laws and regulations affecting our business, including agricultural and trade policies, tax regulations and biofuels legislation; and other factors affecting our business generally. The forward-looking statements included in this release are made only as of the date of this release, and except as otherwise required by federal securities law, we do not have any obligation to publicly update or revise any forward-looking statements to reflect subsequent events or circumstances.

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Definition and Reconciliation of Non-GAAP Measures

This earnings release contains certain "non-GAAP financial measures" as defined in Regulation G of the Securities Exchange Act of 1934. Bunge has reconciled these non-GAAP financial measures to the most directly comparable U.S. GAAP measures below. These measures may not be comparable to similarly titled measures used by other companies.

Total Segment EBIT and Total Segment EBIT, adjusted

Bunge uses total segment earnings before interest and taxes ("Total Segment EBIT") to evaluate Bunge's operating performance. Total Segment EBIT is the aggregate of each of our five reportable segments' earnings before interest and taxes. Total Segment EBIT, adjusted, is calculated by excluding certain gains and charges as described above in "Additional Financial Information" from Total Segment EBIT.  Total Segment EBIT and Total Segment EBIT, adjusted are non-GAAP financial measures and are not intended to replace net income (loss) attributable to Bunge, the most directly comparable U.S. GAAP financial measure. Bunge's management believes these non-GAAP measures are a useful measure of its reportable segments' operating profitability, since the measures allow for an evaluation of segment performance without regard to their financing methods or capital structure. For this reason, operating performance measures such as these non-GAAP measures are widely used by analysts and investors in Bunge's industries. These non-GAAP measures are not a measure of consolidated operating results under U.S. GAAP and should not be considered as an alternative to net income (loss) or any other measure of consolidated operating results under U.S. GAAP.

Below is a reconciliation of Net income attributable to Bunge to Total Segment EBIT, adjusted:

Net Income (loss) per common share from continuing operations–diluted, adjusted

Net income (loss) per common share from continuing operations-diluted, adjusted, excludes certain gains and charges and discontinued operations and is a non-GAAP financial measure. This measure is not a measure of earnings per common share-diluted, the most directly comparable U.S. GAAP financial measure. It should not be considered as an alternative to earnings per share-diluted or any other measure of consolidated operating results under U.S. GAAP.  Net income (loss) per common share from continuing operations-diluted, adjusted is a useful measure of the Company's profitability.

Below is a reconciliation of Net income (loss) per common share from continuing operations - diluted, adjusted to Net income (loss) per common share–diluted:

„Notes

Agribusiness:

1) 2016 EBIT includes a $90 million pre-tax gain related to disposition of equity interest of operations in Brazil, recorded in the fourth quarter, of which $92 million was recorded in other income (expense)-net and $(2) million in foreign exchange gains and (losses).

2) 2016 EBIT includes a $30 million pre-tax gain related to disposition of equity interest of operations in Asia, recorded in the fourth quarter.

3) 2016 EBIT includes a $(15) million pre-tax impairment charge related to an equity investment in Asia, recorded in the fourth quarter.

4) 2016 EBIT includes a $(12) million pre-tax impairment charge related to remaining unamortized carrying value of certain patents in the United States, recorded in the second quarter.

5) 2015 EBIT includes a $47 million pre-tax gain on the sale of grain assets in Canada, recorded in the third quarter.

6) 2015 EBIT includes a $30 million pre-tax reversal of an export tax contingency in Argentina, recorded in the second quarter.

7) 2015 EBIT includes $(9) million pre-tax charge of taxes and fees related to export activities in our Argentinian subsidiary, recorded in the fourth quarter.

8) 2015 EBIT includes a $(14) million pre-tax impairment charge related to an equity investment in a freight shipping company in Europe, recorded in the fourth quarter.

Edible Oil Products:

9) 2015 EBIT includes a $(15) million pre-tax impairment charge related to the announced closure of a packaged oil plant in the United States, recorded in the second quarter.

10) 2015 EBIT includes a $(13) million pre-tax goodwill impairment charge related to our tomato products business in Brazil, recorded in the fourth quarter.

11) 2015 EBIT includes $(2) million of pre-tax restructuring charges recorded in the fourth quarter.

Milling Products:

12) 2016 EBIT includes a $14 million pre-tax gain related to a wheat import tax contingency settlement in Brazil recorded in the third quarter.

Sugar & Bioenergy:

13) 2016 EBIT includes a $(3) million pre-tax restructuring charge recorded in the fourth quarter. 
2015 EBIT includes a $(5) million pre-tax restructuring charge recorded in the fourth quarter.

14) 2016 EBIT includes a $(8) million pre-tax provision for long-term receivables in Brazil recorded in the fourth quarter.

15) 2016 EBIT includes a $(44) million pre-tax impairment charge of an equity investment in Brazil, recorded in the fourth quarter.   

Fertilizer:

16) 2016 EBIT includes a $(9) million pre-tax impairment charge related to property, plant and equipment in Argentina, recorded in the fourth quarter.

Interest and Income Taxes:

17) 2016 income tax benefits (charges) include benefits of $34 million. Of these amounts $60 million, net of reserves, relates to the change in a tax election in North America, recorded in the first quarter, $11 million tax credits in Europe recorded in the second quarter and $19 million to Sugar & Bioenergy deferred tax allowance release recorded in the fourth quarter, offset by a charges of $(32) million and $(24) million for uncertain tax positions related to Asia, recorded in the first and fourth quarters, respectively.

2015 income tax benefits (charges) include charges of $(16) million. Of these amounts $(4) million relates to the finalization of a tax audit in Asia, recorded in the second quarter, $(14) million and $(12) million, resulting from management's evaluation of the recoverability of net deferred tax assets in Asia, recorded in the third and fourth quarters, respectively. Offset by income tax valuation (allowances) reversals of $14 million benefit resulting from management's evaluation of the recoverability of its net deferred tax assets of a subsidiary in North America, recorded in the fourth quarter.

18) 2016 interest expense and income tax benefits (charges) includes pre-tax interest benefits of $16 million ($10 million after tax) related to the reversal of interest related to ICMS tax credits in Brazil, resulting from a tax amnesty program recorded in the fourth quarter.

Notes to the Financial Tables:

19) See Definition and Reconciliation of Non-GAAP Measures.

20) A reconciliation of Net income attributable to Bunge to Net income is as follows:

21) Weighted-average common shares outstanding-diluted for the fourth quarter and year ended December 31, 2016 excludes the dilutive effect of 4 million, respectively, of outstanding stock options and contingently issuable restricted stock units as the effect of conversion would not have been dilutive.

Weighted-average common shares outstanding-diluted for the fourth quarter and year ended December 31, 2015 excludes the dilutive effect of 4 million and 3 million, respectively, of outstanding stock options and contingently issuable restricted stock units as the effect of conversion would not have been dilutive.

22) Includes readily marketable inventories of $3,855 million and $3,666 million at December 31, 2016 and 2015, respectively. Of these amounts, $2,523 million and $2,513 million, respectively, can be attributable to merchandising activities.

23) The Oilseed business included in our Agribusiness segment consists of our global activities related to the crushing of oilseeds (including soybeans, canola, rapeseed and sunflower seed) into protein meals and vegetable oils; the trading and distribution of oilseeds and oilseed products; and biodiesel production, which is primarily conducted through joint ventures.

The Grains business included in our Agribusiness segment consists primarily of our global grain origination activities, which principally conduct the purchasing, cleaning, drying, storing and handling of corn, wheat, barley, rice and oilseeds at our network of grain elevators; the logistical services for distribution of these commodities to our customer markets through our port terminals and transportation assets (including trucks, railcars, barges and ocean vessels); and financial services and activities for customers from whom we purchase commodities and other third parties.

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SOURCE Bunge Limited