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Bunge SA(BG) - 2024 Q3 - Earnings Call Transcript
BGBunge SA(BG)2024-10-30 14:53
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Financial Data and Key Metrics Changes - Reported third quarter earnings per share (EPS) was 1.56comparedto1.56 compared to 2.47 in the third quarter of 2023, with adjusted EPS at 2.29versus2.29 versus 2.99 in the prior year [13] - Adjusted core segment earnings before interest and taxes (EBIT) was 561millioninthequarter,downfrom561 million in the quarter, down from 735 million last year [14] - The first nine months of the year reported income tax expense was 236millioncomparedto236 million compared to 495 million in the prior year, primarily due to lower pre-tax income [18] Business Line Data and Key Metrics Changes - In agribusiness, processing results were 291million,downfromlastyear,ashigherresultsinSouthAmericanandEuropeansoycrushwereoffsetbylowerresultsinNorthAmerica,Europeansoftseeds,andAsia[14]−Inmerchandising,improvedperformanceinfinancialservices,oceanfreight,andglobaloilsbusinessesoffsetlowerresultsinglobalgrades[15]−Inmilling,slightlyhigherresultsinNorthAmericawereoffsetbylowerresultsinSouthAmericaduetohigherrawmaterialscosts[16]MarketDataandKeyMetricsChanges−Thecompanynotedgooddemandforsoybeanmealglobally,particularlyintheU.S.andEurope,whileArgentinafacedmarginchallenges[33]−TheU.S.marketisseeingstrongsoybeanmealdemand,supportedbylowershipmentsfromSouthAmerica[33]−Thecompanyexpectsfullyear2024adjustedEPStobeatleast291 million, down from last year, as higher results in South American and European soy crush were offset by lower results in North America, European soft seeds, and Asia [14] - In merchandising, improved performance in financial services, ocean freight, and global oils businesses offset lower results in global grades [15] - In milling, slightly higher results in North America were offset by lower results in South America due to higher raw materials costs [16] Market Data and Key Metrics Changes - The company noted good demand for soybean meal globally, particularly in the U.S. and Europe, while Argentina faced margin challenges [33] - The U.S. market is seeing strong soybean meal demand, supported by lower shipments from South America [33] - The company expects full year 2024 adjusted EPS to be at least 9.25, reflecting a better than expected third quarter but down compared to last year [24] Company Strategy and Development Direction - The company is making progress on the integration planning for the combination with Viterra, expecting to close the transaction later this year or early 2025 [9][10] - The company is focused on continuous improvement and strengthening operations to provide quality products and services [28] - The combination with Viterra is expected to accelerate diversification across assets, geographies, and crops, enhancing the company's ability to address food security needs [29] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the demand for meal and oil, with good livestock economics supporting meal demand [33] - The company anticipates that the current margin environment will continue for the rest of the year, with expectations for adjusted EPS to be at least 9.25[12][24]−ManagementremainspositiveabouttheresolutionofU.S.policyuncertaintiesaffectingfueldemand,expectingimprovementsintherenewablefeedstockmarket[46]OtherImportantInformation−Thecompanyrepurchased9.25 [12][24] - Management remains positive about the resolution of U.S. policy uncertainties affecting fuel demand, expecting improvements in the renewable feedstock market [46] Other Important Information - The company repurchased 200 million of its shares since the last call, making progress against its repurchase plan [11] - The company generated approximately 1.3billionofadjustedfundsfromoperationsyeartodate,with1.3 billion of adjusted funds from operations year to date, with 988 million of discretionary cash flow available [20] - The trailing 12 months adjusted return on invested capital (ROIC) was 13.8%, well above the weighted average cost of capital of 7.7% [23] Q&A Session Summary Question: Thoughts on crush margins and durability - Management noted good demand for meal and oil, with livestock economics being supportive, particularly in the U.S. and Europe, while Argentina faced challenges [33] Question: Changes to Q4 assumptions - Management indicated that they may have pulled some earnings from Q4 into Q3 due to strong performance and the sale of sugar impacting forecasts [35] Question: Customer demand on the fuel side - Management clarified that soybean purchases remain strong, contrary to reports, and expressed optimism about global demand despite U.S. policy uncertainties [44] Question: Viterra's impact on long-term earnings power - Management remains confident in the combination with Viterra, emphasizing the long-term growth opportunities it presents [51] Question: Farmer selling pace in South America - Management expects farmer selling to pick up in the first half of 2025 as producers gain confidence from policy clarity and good crop conditions [57] Question: Growth capex and project timelines - Management indicated that key growth projects are expected to be commissioned in late 2025 to early 2026, with material contributions to EBITDA anticipated thereafter [59] Question: Impact of refined oil market - Management noted that refined and specialty oils have been resilient, with expectations for better performance than baseline in 2025 [71]