ST. LOUIS, MISSOURI, US — Execution against committed crush capacity and “exceptional” coordination of trade flows contributed to strong second-quarter performance at Bunge Ltd. The improved performance followed a first quarter in which Bunge sustained a loss of $184 million, dragged down by approximately $385 million of temporary mark-to-market losses on forward hedges.
Net income in the second quarter ended June 30 totaled $516 million, equal to $3.47 per share on the common stock, up 141% from $214 million, or $1.43 per share, in the same period a year ago. Net sales fell 6.1% to $9.46 billion from $10.1 billion.
“Bunge delivered a very strong second quarter, with operations reflecting the way we intend to run the business going forward and demonstrating the benefit of our new operating model, leadership team and mindset,” Gregory A. Heckman, chief executive officer, said during a July 29 conference call with analysts. “Performance across all of our core businesses was excellent. Our strong execution in committed crush capacity, exceptional coordination of trade flows and great risk management allowed us to capture above-average margins and deliver solid top- and bottom-line results.
“Across the platform, we hit record capacity utilization in crushing, reduced unplanned downtime about 20% year-over-year and had the lowest operating quarter costs for soy crush in the last three years. We realized the benefit from the risk management decisions we made in the first half of the year, and we earned new business with our focus on innovation and a collaborative approach with customers.
“We generated strong free cash flow while still being disciplined with capital allocation and continue to execute on our key priorities, including refining the portfolio and gaining momentum on reducing costs.”
Elaborating on the new business that Bunge earned in the quarter, Heckman said, “I think what we’ve really seen is there continues to be a little bit of magic in the specialty fats and oils at Loders that we added into the legacy Bunge portfolio of our commodity oils and then our global footprint. So what we’ve been able to do is help people solve their problems, whether it’s the switchover in the product mix we saw as people went from eating away from home to eating at home to where they were making it and using our global platform to help them solve problems that they understand long term that the power of Bunge and our ability to move and be nimble, and our new operating model definitely supported that. That gets us in a less transactional and more partnership relationship with folks and not on single product, but on the portfolio of products and services we’re able to bring. So we definitely like the progress that we’re making, and it’s the right kind of growth with the right customers.”
Bunge posted adjusted EBIT of $843 million within its Agribusiness unit in the second quarter, which compared with EBIT of $211 million in the same period a year ago. Agribusiness volumes were 38.04 million tonnes, up 11% from 34.01 million tonnes in the second quarter a year ago. Sales were $6.81 billion, down 3.7% from $7.07 billion in the second quarter of 2019.
“Higher Agribusiness results in the quarter reflected strong execution throughout the value chains particularly in managing risk, committed crush capacity and global trade flows,” said John W. Neppl, executive vice president and chief financial officer. He added that results also benefited from approximately $380 million of timing differences related to expected first-quarter reversals and new mark-to-market gains.
Within the company’s oilseeds sub-segment, strong soy processing results were driven by higher margins in South America, Europe and Asia, Neppl said. He said the gains partially were offset by lower margins in North America. China soy processing results were higher in all regions, he added.
Meanwhile, results in grains improved driven by most areas of the business, Neppl said.
Adjusted EBIT of the Bunge Edible Oil Products division was $51 million, up 19% from $43 million in the second quarter of 2019. Sales were $2.13 billion, down 3.6% from $2.21 billion.
Neppl said Bunge experienced “a steep drop” in foodservice and biofuel demand due to coronavirus (COVID-19)-related restrictions at the beginning of the second quarter. But, as the quarter developed, refinery margins improved, driven by increased demand for food from food processors and the retail channel, along with partial recovery in biofuel demand, he said.
Adjusted EBIT of the Milling Products division totaled $30 million in the second quarter of 2020, up 11% from $27 million a year ago. Net sales decreased to $381 million from $430 million.
“Higher results in Brazil, primarily driven by increased food processor and consumer demand as well as decreased costs, more than offset lower results in North America, which were negatively impacted by business mix,” Neppl said.