Chicago | Reuters — U.S. agricultural products trader Bunge said Wednesday it expects the record-large U.S. corn and soybean harvest to help its earnings rebound from a weaker-than-expected third quarter.
The company’s shares surged despite reporting disappointing results on Wednesday due to weather-reduced crops in South America, home to many of Bunge’s elevators and processing plants.
Bunge CEO Soren Schroder said the company expects a “solid fourth quarter” and is confident about its growth prospects in 2017, due in part to bumper crops in North America that will benefit its agribusiness segment.
The company also raised its 2016 profit outlook for its food and ingredients unit on higher margins and a stabilizing Brazilian economy, and increased its earnings view for sugar and bioenergy due to higher ethanol prices.
“Going into 2017, all three of those segments are looking positive and it is probably the first time we’ve had that in recent memory. A lot of things can change between now and then, but the setup is pretty good,” Schroder said in an interview.
Third-quarter gross profit in Bunge’s agribusiness — which buys, sells, stores, transports and processes grains and oilseeds around the world — nearly halved in the third quarter as slow farmer selling in South America weighed on earnings.
The agribusiness accounted for nearly 71 per cent of the company’s total net sales of $11.42 billion (all figures US$).
The slow selling is likely to persist through the end of the year, said chief financial officer Drew Burke.
Although Brazilian supplies thinned during the quarter, export sales from the United States surged. Farmers in the U.S. have almost completed what is expected to be the largest corn and soy harvests on record, which should continue to benefit multinational grain traders.
Grain traders such as Bunge and Archer Daniels Midland and Cargill can profit when supplies are ample in some areas and tight in others.
ADM reported a stronger-than-expected third-quarter profit on Tuesday due to robust U.S. exports.
Bunge said it expects to benefit from strong U.S. exports more acutely in the fourth quarter.
Net income available to shareholders fell to $116 million, or 83 cents per share, in the quarter ended Sept. 30, from $229 million, or 1.56 per share, a year earlier.
Adjusted profit per share was 73 cents, missing the average estimate of 81 cents, according to Thomson Reuters I/B/E/S.
— Karl Plume reports on agriculture and agribusiness for Reuters from Chicago. Additional reporting for Reuters by Vishaka George in Bangalore.