Bunge posts profit on South America, gain from Beyond Meat investment

Chicago | Reuters – Agricultural commodities trader Bunge Ltd swung to a profit in the second quarter from a year-ago loss, helped by improved results at its South American operations.

Bunge also reported an unrealized gain from the company’s stake in Beyond Meat Inc, meaning it could profit from the plant-based burger venture if it sells its nearly 980,000 shares, a roughly 1.6 percent interest according to the latest government filing.

Though profits were tempered by weak export demand resulting from U.S.-China trade tensions and harsh U.S. spring weather, they topped Wall Street expectations and Bunge’s operations in Brazil and Argentina make it better placed than many rivals.

Shares rose 3.6 percent to $58.42, more than a seven-month high.

Bunge left its previous earnings forecast unchanged, with results for its agribusiness segment, Bunge’s largest in terms of revenue, seen lower in 2019 amid uncertainty about late-planted U.S. crops and the trade war.

Bunge and its agribusiness peers Archer Daniels Midland Co , Cargill Inc and Louis Dreyfus Co have been cutting costs and restructuring operations as years of oversupplied grains markets dragged down prices and sapped trading opportunities for quartet, known as the ABCDs of grain.

Grain merchants faced processing-plant downtime, shipping delays and other supply uncertainty this spring as historic floods ravaged the central United States.

The weather sliced about $13 million from Bunge’s second-quarter profit, Chief Financial Officer John Neppl said.

Massive culling of hogs in China because of African swine fever is also “a major source of uncertainty” for the industry’s animal feed suppliers, Chief Executive Greg Heckman said.

“Combined with the unresolved U.S.-China trade situation, this has altered both typical trade flows and producer marketing patterns,” he said on a conference call with analysts.

Bunge’s large South American operations may shield the company from a more severe trade war impact, according to analysts.

The company’s “solid presence in South America will benefit if the U.S.-China negotiations stretch into next year,” said Arun Sundaram, analyst with CFRA Research, which raised its 12-month Bunge share price target by $5 on Wednesday to $65.

Bunge reported second-quarter net income available to its shareholders of $205 million, or $1.43 per share, compared with a loss of $21 million, or 15 cents per share, a year earlier.

Adjusted earnings of 61 cents per share topped analysts’ average estimate of 34 cents, according to Refinitiv IBES data.

Bunge’s agribusiness unit was also boosted by soybean crush hedging gains of about $70 million that it said will reverse in the third quarter when soy products are sold.

ADM, whose operations are more heavily concentrated in the United States, is due to report second-quarter results on Thursday. Cargill reported a 41 percent profit drop in its most recent quarter because of trade tensions and U.S. floods.