U.S. agricultural trader Bunge Ltd (BG.N) on Wednesday reported a better-than-expected quarterly profit and forecast strong earnings growth in 2017 on expected massive corn and soybean harvests in South America, sending shares nearly 8 percent higher.
Earnings were propelled by higher sugar and ethanol prices and improved edible oil margins in Brazil, and rose despite weaker results from its core agribusiness segment.
Bunge reiterated its optimistic outlook for 2017. The company expects its agribusiness unit, the largest in terms of revenue and volumes, to start the year slow and progressively improve as volumes and margins pick up in South America.
"We enter 2017 with confidence and expect strong growth in earnings. After disappointing crops in South America last year, the region is on track to produce record harvests this season, which aligns well with our footprint," Chief Executive Officer Soren Schroder said.
South American farmers are expected to harvest bumper corn and soybean crops this year, including record-large crops in Brazil, the continent's largest producer and exporter.
Last year's weather-reduced Brazilian harvests prompted farmers to hold back supplies. That weighed on processing margins and limited trading opportunities. Bunge's agribusiness earnings slumped nearly 12 percent in the fourth quarter.
A record U.S. harvest and brisk U.S. exports in the quarter only partly offset the reduced crop volumes in South America, home to a large share of Bunge's operations.
Bunge's other business segments all posted higher year-on-year results.
Net income available to shareholders rose to $262 million, or $1.82 per share, in the fourth quarter, from $188 million, or $1.30 per share, a year earlier.
Excluding one-time items, the White Plains, New York-based company earned $1.70 per share, beating the average analyst estimate of $1.57 per share, according to Thomson Reuters I/B/E/S.
Net sales rose 8.6 percent and beat estimates.
The strong results helped send Bunge shares up $5.45 to $73.74. Bunge stock had been underperforming the broader market heading into the report.
"This is a solid Q4 report and expectations were low heading into the print," J.P. Morgan analyst Ann Duignan said in a note.
Bunge and rival agribusinesses ADM (ADM.N), Cargill [CARG.UL] and Louis Dreyfus [LOUDR.UL], known as the ABCD companies, make money buying, selling, storing, transporting and processing grains and oilseeds around the world.
ADM last week reported lower quarterly results as trading losses offset gains from strong U.S. exports. Cargill's North American grain operations boosted its most recent quarterly results.
(Reporting by Karl Plume in Chicago and Arathy S Nair in Bengaluru; Editing by Shounak Dasgupta and Jeffrey Benkoe)