Bunge Limited (BG) 2024 Q2 Earnings Call Summary

Optimistic Highlights

• Solid Adjusted EBIT: Bunge delivered solid adjusted EBIT, reflecting an improved margin environment in some regions during the second half of the quarter.
• Strategic Combination with Viterra: The future combination with Viterra is expected to make Bunge a more complete company, enhancing its capabilities and optionality.
• Strong Fundamental Drivers: Long-term demand for Bunge's products continues to increase, positioning the company well to meet global food, feed, and fuel needs.
• Strategic Initiatives: Bunge is progressing on strategic initiatives, including the sale of its interest in the sugar and bioenergy joint venture in Brazil, focusing resources on core businesses.
• Innovative Solutions: Bunge completed a commercial pilot season for lower-carbon solutions and successfully tested a traceability platform for sustainable soy, enhancing transparency and sustainability.

Pessimistic Highlights

• Challenging Merchandising Environment: Merchandising results were lower, primarily driven by global grains, with volumes offset by lower margins.
• Inverted Margin Curves: Q4 margin curves are inverted, providing very little visibility and highlighting the unpredictable nature of future earnings.
• Slow Farmer Selling: Farmer selling has been slow in Argentina and North America, impacting margins and merchandising results.
• Non-core Business Performance: The non-core sugar and bioenergy joint venture's results were negatively impacted by lower Brazil ethanol prices and foreign exchange translation losses.

Company Outlook

• 2024 Adjusted EPS Forecast: Bunge now expects full-year 2024 adjusted EPS of approximately $9.25, reflecting the current margin environment and forward curves.
• Agribusiness and Refined Oils: Full-year results in agribusiness are forecasted to be in line with previous outlooks, while refined and specialty oils full-year results are expected to be up from the previous outlook but down compared to last year's performance.
• Capital Expenditures: Capital expenditures are expected to be in the range of $1.2 billion to $1.4 billion, with potential adjustments based on greenfield project progress.

Q & A Highlights

• Q: Can you explain the drivers behind the guidance and the market conditions affecting crush margins? (Ben Theurer, Barclays)

  A: Crush margin improved late in Q2, providing visibility into Q3 and allowing some hedging. However, Q4 visibility is low due to inverted margin curves and spot market dynamics. (Greg Heckman)

• Q: What are the current negotiations and potential divestitures for regulatory approvals with Viterra? (Ben Theurer, Barclays)

  A: The majority of jurisdictions have issued clearances, with ongoing engagements in the EU, Canada, China, and others. Confidential discussions are progressing, with no material issues anticipated. (Greg Heckman)

• Q: How is the merchandising environment impacting earnings, and what's the outlook for this segment? (Adam Samuelson, Goldman Sachs)

  A: Merchandising results were lower due to global grains and slow farmer selling in Argentina and North America. The outlook depends on weather and farmer selling patterns. (Greg Heckman)

• Q: What contributed to the strong performance in refined and specialty oils, and what's the outlook? (Adam Samuelson, Goldman Sachs)

  A: Strong demand in Asia, tight cocoa butter supply, and additional energy demand contributed to performance. The outlook remains cautious due to market visibility. (Greg Heckman)

• Q: Can you discuss the coverage for Q3 and Q4 in light of current crush margins? (Heather Jones, Heather Jones Research)

  A: Largely covered for Q3, especially on the canola side. Q4 visibility is low, with minimal liquidity and hedging opportunities. (Greg Heckman and John Neppl)

• Q: What's the normalized earnings outlook for merchandising, and when might it return to the $75 million to $100 million range? (Salvator Tiano, Bank of America)

  A: The current environment is below the baseline due to market transitions and slow farmer selling. The outlook will depend on market rebalancing. (Greg Heckman)

• Q: How does the recent performance of Viterra align with expectations, and are you satisfied with the transaction price for the non-core business divestment? (Manav Gupta, UBS)

  A: Viterra's performance aligns with expectations, and the transaction price for the non-core business divestment was satisfactory. (Greg Heckman and John Neppl)

• Q: What internal levers can Bunge pull in an environment of challenged U.S. crush margins? (Andrew Strelzik, BMO)

  A: Bunge's global platform provides flexibility and optionality, allowing adaptation to market conditions and focusing on areas with better margins. (Greg Heckman)