CHICAGO (Reuters) - Bunge Ltd (BG.N), one of the world’s largest agricultural trading houses, reported fourth-quarter profit on Thursday that was well below analysts’ expectations due to deteriorating oilseed-crushing margins in China and further hedging losses.
Declines in earnings and revenue were disappointing after Bunge’s projection last year that fourth-quarter results would be strong due to record U.S. harvests, analysts said.
It was the second consecutive quarter in which Bunge had $80 million of hedging losses at least partly tied to its North American oilseed processing business that contributed to lower-than-expected earnings.
In the company’s key agribusiness segment, net sales fell 20 percent to $10 billion and adjusted profit dropped about 8 percent to $319 million.
Weak soybean crushing margins in China and slower farmer selling in Europe overshadowed strength in Bunge’s North American businesses, JP Morgan analyst Ann Duignan said.
“We would expect the stock to react negatively to the print,” she said, referring to Bunge’s financial results.
Net profit for the quarter was $82 million, or 56 cents a share, compared with $115 million, or 78 cents, a year earlier. Excluding special items, earnings per share were $1.20, down from $1.35 a year earlier. Analysts had expected $2.51, according to Thomson Reuters I/B/E/S.
Revenue dropped to $13.898 billion from $16.375 billion. Analysts had expected $16.72 billion.
In the fourth quarter, the company suffered new hedging losses in its North American oilseed business and fuel oil. At the same time, it recovered $80 million that had been lost through hedges in the third quarter, Bunge said in its financial statement.
Gains on the fourth-quarter’s hedging losses will be realized in the first half of 2015, it said.
Bunge’s stock price has appreciated 8.6 percent since the start of the fourth quarter, while shares of rival Archer Daniels Midland Co (ADM.N) have dropped 8 percent. ADM last week reported higher quarterly earnings.
“In grains, our operations should continue to benefit from large global crops and increasing trade, though farmer selling could be sporadic as they adjust to lower global prices,” Bunge Chief Financial Officer Drew Burke said.
The price of corn has slipped 12.5 percent from a year ago on the Chicago Board of Trade due to bin-busting harvests.
In China, the world’s top soybean importer, the value of Bunge’s soybean inventories fell $30 million due to a significant drop in basis on beans delivered to the country, according to the company.
Editing by Bernadette Baum