Bunge Reports Fourth Quarter and Full-Year 2018 Results

WHITE PLAINS, N.Y., Feb. 21, 2019 /PRNewswire/ -- Bunge Limited (NYSE: BG) today reported Q4 2018 and full-year 2018 results.

• Full-year 2018 GAAP EPS of $1.57 vs. $0.89 in the prior year; $2.72 vs. $1.94 on an adjusted basis;
• Q4 GAAP EPS of $(0.51) vs.$(0.48) in the prior year; $0.08 vs. $0.67 on an adjusted basis
• Agribusiness impacted by decline in value of Brazilian soybean ownership; full year results up 114% on strong soy crush margins
• In Food & Ingredients, Loders Croklaan integration proceeding as planned
• Sugar & Bioenergy impacted by heavy rains as poor crop year came to an end
• Global Competitiveness Program delivered $200 million of savings in 2018, expect $50 million of additional savings in 2019, reaching original target a year ahead of schedule
• Strategic Review and CEO search progressing

• Overview

Kathleen Hyle, Bunge's Non-Executive Board Chair, stated, "Although 2018 was a substantially better year than 2017, we are not satisfied with these results, and we know that Bunge has the global assets and people to perform better in the future. In the past several months, the Company has taken a number of significant and positive steps to reposition itself for sustainable growth, including announcing a leadership transition and enhancing its leadership team, refreshing our Board and establishing a Strategic Review Committee of the Board."

Ms. Hyle continued, "The Committee initiated and is continuing a thorough, outside-in review of all of Bunge's businesses. At the same time, we are committed to addressing underperforming assets as part of our effort to enhance shareholder value, and we are strengthening our risk management capabilities, as they are foundational to everything we do. The Board and the leadership team are moving with speed and accountability to drive results."

Acting CEO Greg Heckman commented, "Even in my short time leading the company, I see many strengths. We have a world-class global network of assets and a talented team of people, all of whom are committed to driving the business forward. While the Strategic Review Committee continues its work, we are refocusing the organization and placing greater emphasis on improved execution. Our key priorities are to drive operational performance, optimize the portfolio, strengthen our capital allocation framework and sharpen our financial discipline. I am confident that with the actions we are taking, we will be able to better leverage Bunge's asset base and increase shareholder returns."

• Financial Highlights

• Fourth Quarter Results

Agribusiness

Lower segment results in the quarter were largely due to the reduction in value of the Company's Brazilian soybean ownership as factors related to China trade and demand caused Brazilian soybean prices to converge with U.S. and Brazilian new crop prices. The approximate $125 million loss associated with this reduction in prices impacted results in both oilseeds trading and distribution and grains origination.

In Oilseeds, structural soy crush margins were higher in the U.S., Europe, Brazil and Asia due to more favorable market conditions. Margins, however, were lower in Argentina due to tight bean supplies resulting from the drought and farmer retention. Total soy crush volumes were similar to last year, as higher volumes in the Northern Hemisphere were offset by lower volumes in South America. Results in softseed processing were higher, as improved structural margins in Europe more than offset lower margins in Canada.

In Grains, Origination results declined due to lower structural margins and volumes, which were impacted by the decrease in soybean demand from China. Results in grain trading and distribution were comparable to last year.

Edible Oil Products

Higher results in the quarter were driven by the contribution from Loders Croklaan, and improved performance in Europe, which benefitted from higher volumes and lower unit costs, and an increase in volumes and margins in Argentina. Results in North America and Brazil were lower than last year.  The integration of Loders Croklaan with our existing B2B oils business is progressing as planned.

Milling Products

Higher margins and volumes in Brazil were more than offset by lower margins and volumes in Mexico. Results in the U.S. were similar to last year.

Sugar & Bioenergy

Results in the quarter were significantly below the Company's expectations, primarily due to the combination of sustained rain during the quarter, which negatively impacted sales and unit costs, and lower than expected ethanol prices.  Compared with last year, lower results were primarily driven by lower sugar prices, reduced sugarcane crush volume and lower yields.

Fertilizer

Higher results in the quarter were primarily driven by higher prices and lower costs related to prior restructuring actions, which more than offset slightly lower volumes. Additionally, fourth quarter results included the remaining $6 million recovery of foreign exchange losses from the second quarter.

Global Competitiveness Program

The Global Competitiveness Program (GCP) announced in July 2017 is rationalizing Bunge's cost structure and reengineering the way the Company operates, reducing 2017 addressable baseline SG&A of $1.35 billion to $1.1 billion by 2020.

The Company has reduced addressable SG&A by approximately $200 million as compared with its 2017 baseline. This reflects $100 million of additional savings compared with the Company's initial outlook for 2018. The Company expects 2019 savings against the baseline of approximately $250 million, achieving its addressable SG&A target of $1.1 billion a full year ahead of schedule. With the changes implemented and ongoing continuous improvement, the program is expected to achieve additional savings beyond 2019.

Cash Flow

Cash used by operations in the year ended December 31, 2018 was approximately $1,264 million compared with cash used of approximately $1,975 million in the same period last year. Adjusting for beneficial interest in securitized trade receivables, cash provided by operating activities was $645 million compared with cash provided by operating activities of $1,026 million in the prior year. The year-over-year decrease was primarily driven by higher inventory, which was partially offset by higher earnings. Adjusted funds from operations was approximately $1.1 billion as of the year ended December 31, 2018.  Total capex of $493 million was $169 million below prior year, reflecting disciplined capital investment.

Income Taxes

The effective tax rate for the year ended December 31, 2018 was approximately 39%.  Adjusting for all notable items, the effective tax rate for the year ended December 31, 2018 was approximately 26%. The higher than expected tax rate was primarily due to earnings mix and the significantly larger than anticipated loss in Sugar & Bioenergy that raised our tax rate by 4 percentage points.

• Outlook

Beginning in 2019, the Company is changing its guidance approach. Bunge will provide directional guidance for the company instead of individual segment EBIT ranges as it has previously.

In Agribusiness, based on the current soy crush margin environment, 2019 full-year results would be expected to be lower than 2018.  Actual soy crush margins over the course of the year are likely to evolve based on U.S.-China trade discussions, crop sizes and farmer commercialization. Based on the current softseed crush margin environment, results would be slightly higher than last year, driven by strong oil demand. Improvements in risk management and in how we operate should support higher results in Grains compared with last year.

In Food & Ingredients, full-year results in Edible Oils should benefit from 12 months of ownership of Loders Croklaan, as well as increased synergies from the integration of our B2B businesses. Favorable Milling operating environments in Brazil and the U.S. are likely to be partially offset by more challenging conditions in Mexico.

In Sugar & Bioenergy, based on normal weather and forward price curves for sugar and ethanol, full-year 2019 results would be expected to be about break-even. Approximately 60% of sugar production has been hedged and, weather permitting, the Company plans to crush approximately 19 mmt of cane.  As in past years, results will be seasonally weighted to the second half of the year.

In Fertilizer, based on the current market environment, full-year results would be lower than last year.

The Global Competitiveness Program is expected to generate approximately $50 million of incremental year-over-year savings. The Company expects additional savings from industrial and supply chain initiatives, which are expected to offset inflation.

Additionally, the Company expects the following for 2019: A tax rate in the range of 22% to 26%; net interest expense in the range of $290 to $310 million; capital expenditures of approximately $550 million, of which approximately $115 million is related to sugarcane milling; and depreciation, depletion and amortization of approximately $650 million.

• Conference Call and Webcast Details

Bunge Limited's management will host a conference call at 8:00 a.m. EST on Thursday, February 21, 2019 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 (877) 883-0383. If you are located outside the United States or Canada, dial (412) 902-6506. Please dial in five to 10 minutes before the scheduled start time and enter confirmation code 1185117. The call will also be webcast live at www.bunge.com.

To access the webcast, go to "Webcasts and presentations" in the "Investors" section of the Company's website. Select "Q4 2018 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 21, 2019, continuing through March 21, 2019. To listen to it, please dial (877) 344-7529 in the United States, (855) 669-9658 in Canada, or (412) 317-0088 in other locations. When prompted, enter confirmation code 10127862. A replay will also be available in "Past events" at "Webcasts and presentations" 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.

• Website Information

We routinely post important information for investors on our website, www.bunge.com, in the "Investors" section. We may use this website as a means of disclosing material, non-public information and for complying with our disclosure obligations under Regulation FD. Accordingly, investors should monitor the Investors section of our website, in addition to following our press releases, SEC filings, public conference calls, presentations and webcasts. The information contained on, or that may be accessed through, our website is not incorporated by reference into, and is not a part of, this document.

• 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 statements include our expectations regarding industry trends and our future financial performance, the completion and timing of acquisitions and dispositions, our assumptions and expectations for the Global Competitiveness Program and other efficiency initiatives and similar statements that are not historical facts. These forward-looking statements 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; the outcome and effects of the Board's strategic review; the effectiveness of our risk management strategies; our ability to attract and retain executive management and key personnel; 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.

• Additional Financial Information

The following table provides a summary of certain gains and charges that may be of interest to investors, including a description of these items and their effect on net income (loss) attributable to Bunge, earnings per share diluted and total segment EBIT for the quarters ended December 31, 2018 and 2017.

The following table provides a summary of certain gains and charges that may be of interest to investors, including a description of these items and their effect on net income (loss) attributable to Bunge, earnings per share diluted and total segment EBIT for the years ended December 31, 2018 and 2017.

• 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") and Total Segment EBIT, adjusted, to evaluate Bunge's operating performance. Total Segment EBIT excludes EBIT attributable to noncontrolling interests and 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 industry. 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 attributable to Bunge to Net income (loss) - adjusted (excluding certain gains & charges and discontinued operations).

Below is a reconciliation of Net income (loss) per common share from continuing operations - diluted, adjusted (excluding certain gains & charges and discontinued operations) to Net income (loss) per common share–diluted:

• Severance, Employee Benefit and Other Costs

The following table summarizes the costs incurred as part of the Global Competitiveness Program and other associated cost reduction and strategic initiatives.

2017 baseline total SG&A was $1.45 billion.  There was $100 million of SG&A determined not to be addressable through the GCP, leaving 2017 addressable baseline SG&A of $1.35 billion ("Addressable Baseline").  The items that are not addressable by the GCP relate to costs other than direct spending and personnel costs, such as amortization, bad debt charges and recoveries and financing fees and taxes.

GCP savings are determined by comparing Adjusted Actual Addressable SG&A to the Addressable Baseline.  Adjusted Actual Addressable SG&A is equal to the total reported SG&A minus the items not addressable by the GCP, plus or minus items such as:

• GCP program costs which include severance and related employee costs, consulting and professional costs and other costs specifically designated to the program,
• Changes in inflation and foreign exchange rates as compared to Addressable Baseline assumptions,
• Perimeter changes relating to acquisitions and divestitures and corporate transactions,
• Changes in variable compensation relating to business performance as compared to the Addressable Baseline assumptions, and
• Identified investments in new or enhanced capabilities.

We expect to reduce Actual Addressable SG&A from the Addressable Baseline level of $1.35 billion to $1.1 billion by 2020, achieving $250 million in run-rate savings by the end of 2019.

As previously announced, the Company has developed a high-level estimate of $200 - $300 million for the total pre-tax costs expected to be incurred in connection with the Global Competitiveness Program.

• Notes

SOURCE Bunge Limited

Related Links

http://www.bunge.com