The multinational grain, fertilizer and oil seed company Bunge posted net income of $361M on sales of $41.9B for fiscal 2009. Corresponding values for fiscal 2008 were net income of $1.1B on net sales of $52.6B.
Bunge has four operating segments. Its individual earnings before interest and tax for 2009 were $820M for agribusiness, $181M for edible oil products and $58M for milling products. Fertilizer lost $616M.
Fertilizer represented the major reason for the difference between fiscal 2008 and fiscal 2009 performance. In fiscal 2008, fertilizer earnings before interest and tax amounted to $321M. Edible oil products showed an improvement over the 2008 loss of $11M, and the earnings before interest and tax of milling products declined by 44%. The result of the decline in net income reduced earnings per share by 71% to $2.22.
In a statement accompanying the annual report, Alberto Weisser, Bunge chairman and CEO, said “our earnings in the fourth quarter represented a disappointing end to a mixed, and ultimately challenging, year for Bunge.” He added, “In 2009, fertilizer generated significant losses, which stemmed from a difficult market characterized by high-cost inventory and a weak price environment.”
Concurrent with the annual report, Bunge announced sale of fertilizer assets in Brazil for $3.8B in cash. The purchaser, Vale S.A. , will continue to supply Bunge with fertilizer through 2012 for the Bunge retail operation in Brazil. Bunge will continue to operate fertilizer production in Argentina and the U.S., in addition to a joint venture in Morocco.
The sale will allow Bunge to redeploy cash for other enterprises. An example would be becoming the sole owner of Usina Moema Participacoes S.A., which involves 89% ownership of five sugar mills and a 50.4 million metric ton annual sugar cane production capacity. Weisser indicated that the move allowed Bunge to expand into value chain products, including sugar and ethanol, which offer greater shareholder value over the long term compared with fertilizer.
The agribusiness segment remains the largest component of Bunge, representing 73% of sales, with a gross margin of 4.5%. The company has a total asset value of $21.3B with an acceptable current ratio and long-term debt of $3.6B.