The rolling out of third quarter results today continues with a slip in earnings for US agri-giant Bunge on the back of weaker profits sorely felt in the agribusiness division.
Food processors and ingredients companies are feeling the impact of not only reduced crop harvests in 2002/2003, but also the poor outlook for 2002/2003 soybean crops.
Bunge is no exception. The company reported a fall in profits from $95 million, or $0.95 in earnings for the quarter ended 30 September in 2002, to $89 million and diluted earnings of $0.88 in 2003.
Robust earnings in Bunge's fertiliser division helped offset the plunge in profits in the agribusiness division where margins were severely hit in North America and western Europe due to a cut in the supply of raw materials. Despite sales volumes increasing by 42 per cent, profits from operations in Bunge's agribusiness division dropped by a staggering 75 per cent, or $213 million for the quarter in 2002, to $71 million in 2003.
The company's drive into European oils helped lift the figures with the recently acquired French oil business Cereol boosting results in the food division. Profit for the division rose 43 per cent, or $9 million, to $30 million, reflecting improved results in both the edible oil and milling and baking products segments. Bunge reported that higher margins in its margarines and mayonnaise business in Brazil, as a result of various restructuring moves including cost cutting and portfolio rationalisation - also contributed to the lift in the food products division.
"This quarter shows the value of the Cereol acquisition and our product balance. We were able to partially offset a very volatile operating environment in agribusiness with strong results in our fertiliser and edible oils businesses. Demand remains solid in all three of our divisions despite the short crop which affected North American agribusiness," said Alberto Weisser, chairman and CEO of Bunge.
Cash gained, €211 million, from the the sale of Lesieur to Saipol, Bunge's existing joint venture with Sofiproteol - the financial arm of the French oilseed farmers' association - was used by Bunge to reduce outstanding indebtedness.
Looking towards the next quarter, the US giant is hoping that a decent performance in fertilisers and food products will continue to lift the overall results and offset the anticipated weakness in the North American agribusiness.