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Categorized | Financial

Bunge rules out transformational deals

Posted on April 30, 2015

Combine harvesters crop soybeans during a demonstration for the press, in Campo Novo do Parecis, about 400km northwest from the capital city of Cuiaba, in Mato Grosso, Brazil, on March 27, 2012. AFP PHOTO/Yasuyoshi CHIBA©AFP

Bunge, the international agricultural trader, said it was looking for smaller acquisitions rather than a transformational deal as it reported strong first-quarter results driven by soyabean processing and improved grain trading.

Soren Schroder, Bunge chief executive, said it was looking at businesses up to the range of about $600m, all but ruling out an independent move for Tate & Lyle, the UK sweeteners company that the commodity trader was recently linked with. Mr Schroder declined to comment directly on Tate & Lyle, which has a market capitalisation of $4.2bn.

    Discussing the possible type of acquisition target, he pointed to Bunge’s deal this month for 50.1 per cent in CWB, formerly the Canadian Wheat Board, for C$250m ($202m) alongside the Saudi Agricultural and Livestock Investment Company.

    His comments came as the New-York based company reported adjusted net profits of $1.58 a share for the first three months of 2015 compared with a loss a year ago. Analysts’ consensus forecasts were around $1.14 a share.

    “Overall, it was a strong quarter and solid start to the year,” said Mr Schroder.

    Earnings before interest and tax jumped at the agribusiness division, which moves soyabeans, corn and other crops between continents and processes them into food products.

    The unit’s first quarter ebit more than quadrupled to $330m from $79m in the same period last year. Volumes for the agribusiness were largely unchanged at 31.2m tonnes.

    Mr Schroder said that the situation in China “felt a lot better than last year” and added that the market distortion in the soyabean market from financial players had declined.

    Bunge was positive on the outlook for the rest of the year, noting that big supplies of grains and oilseeds thanks to strong North and South American crops were expected to be met with solid underlying demand.

    The company said lower prices had increased underlying consumption and trade flows, but warned that price falls could lead to slower farmer selling that may defer income to later quarters.

    Meanwhile losses at the sugar and bioenergy business fell from $64m to $23m. The company said that sugar cane in Brazil was developing well and the business was expected to be profitable and cash flow positive for the full year.

    On the CWB deal, Bunge said the investment provided access to high quality Canadian grain, improving the balance of its global grain trading network.

    Mr Schroder said that the transaction filled “a missing piece of Bunge’s global agribusiness footprint”.

    Additional reporting by Gregory Meyer in New York