WHITE PLAINS, NEW YORK, U.S. — A difficult fourth quarter sent Bunge shares tumbling more than 7% in early trading on the New York Stock Exchange on Feb. 21. After closing at $52.70 on Feb. 20, Bunge’s shares dipped to a 52-week low of $48.89 in early morning trading on Feb. 21 before gaining back ground later in the day.
In remarks following the release of full-year and fourth-quarter financials, Kathleen W. Hyle, non-executive chairman of the board at Bunge, and Gregory A. Heckman, acting chief executive officer, said the company was not satisfied with the results in the most recent quarter.
“We have the global footprint, assets and the team to perform better,” Hyle said during a Feb. 21 conference call with analysts. Heckman added that “everything is on the table” to improve returns at Bunge.
To address issues at the company, Hyle outlined three areas where Bunge is taking action.
First, the company has moved quickly to address what she described as “the critical issue of leadership.” Heckman was brought on board as acting CEO in late January to fill the void left by the departure of Soren W. Schroder. Hyle said Heckman has brought a “fresh perspective” to Bunge in his first few weeks.
“He has instilled a new level of accountability, speed and execution, which is driving our progress,” she said. “And his strong leadership skills have already had a significant impact. I am delighted that Greg has stepped up to the position of acting CEO”
In addition to Heckman’s new role, Bunge has refreshed its executive ranks by appointing a new head of Agribusiness and creating and filling the new position of head of Global Risk Management.
A second area of action has involved a comprehensive and detailed review of each of Bunge’s individual businesses as well as the company’s capital allocation priorities.
“We’re taking a holistic approach, and nothing is off-limits as we continue our work,” Heckman said. “While the committee’s analysis is ongoing, that work is already helping our leadership team assess and prioritize portfolio changes and capital allocation decisions. Given the confidential nature of this work, I can’t offer more details at this time. We are working to crystallize our plans, and we will provide additional information as appropriate.
“A more disciplined capital allocation process will incorporate learnings from our past investments and prioritize our use of working capital. This, along with optimizing the portfolio, will help us maintain a strong balance sheet, which is imperative for operating in our industry.”
The third area in which Bunge has taken action has involved its board. Hyle said Bunge has added four new directors and refreshed the chairs of most committees.
“We are a highly engaged board that is fully aligned and dedicated to enhancing shareholder value,” she said.” We are working together with a leadership team with a new sense of urgency. And while there are some challenges facing the company and the industry more generally, we are taking the necessary steps to position the business for future growth and long-term success.”
Reflecting on fiscal 2018, Heckman said there were many things Bunge did well. The company not only capitalized on a significant rebound in global soy crush margins, it also successfully integrated Loders Croklaan into its existing oils business. But he also noted that 2018 was a year in which operational and risk management missteps negatively affected results.
Net income in the year ended Dec. 31, 2018, was $233 million, equal to $1.64 per share on the common stock, up 85% from $126 million, or 89c per share, in fiscal 2018. Sales were $45.743 billion, down narrowly from $45.794 billion.
In the fourth quarter of 2018, Bunge sustained a loss of $74 million, which compared with a loss of $69 million in the fourth quarter of 2017. Sales were $11.543 billion, down from $11.605 billion in the same period the year before.
Major special charges in the fourth quarter included $59 million in interest and income tax charges ($86 million in the fourth quarter of 2017); $10 million in impairment charges ($24 million in 2017); $11 million for severance, benefits and other costs ($52 million in 2017). Overall, special charges totaled $83 million in the fourth quarter of 2018, versus charges of $163 million in the fourth quarter of 2017.
Bunge’s largest division, Agribusiness, had EBIT in 2018 of $645 million, up 152% from $256 million in 2017. In the fourth quarter, EBIT was $33 million, up 27% from $26 million. Agribusiness volumes were 146,309,000 tonnes in 2018, up 2% from 142,855,000 tonnes in 2017. In the fourth quarter, volumes were 35,416,000 tonnes, up 3% from 34,343,000 tonnes. Sales were $32.206 billion for the year, up 1.5% from $31.741 billion; $8,114 million in the fourth quarter, up 2.7%.
EBIT of the Bunge Edible Oils division was $122 million in 2018, down 3% from $126 million in 2017. In the fourth quarter, though, EBIT was $53 million, up 89% from $28 million in the last quarter of 2017. Sales were $9.129 billion for the year, up 14%; $2.357 billion in the fourth quarter, up 10%.
Looking ahead to fiscal 2019, Heckman said Bunge is changing the way it provides guidance. Instead of providing individual segment EBIT ranges, he said the company will provide directional guidance for the company as a whole.
“So looking ahead with this framework in mind, we expect 2019 to be a transitional year for Bunge as we continue to evaluate our businesses with fresh eyes, exit some businesses and implement required changes to create a stronger company positioned for sustainable growth,” he said. “Given current market conditions, we would expect full year 2019 results to be similar to 2018.
“Improvements in Food & Ingredients and Sugar & Bioenergy and incremental savings from our cost programs would be largely offset by lower soy crush margins, which are presently well below last year. Agribusiness market conditions could change and most likely will, but as we mentioned earlier, we’re not going to try to predict the future. But rather, we’ll base our expectations on the current market environment.”