Bunge Limited Q1 2003 Earnings Conference Call Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: John McMillin - Prudential Securities - Analyst : Can you go over again on April seventh you game out with a press release predicting 30 to 35 cents. It's nice to see positive surprises but it's unusual that it happens after the quarter. Can you just go over again, Bill, how numbers came even higher than that range you gave on the seventh?

Question: Ken Zazo - Morgan Stanley - Analyst : To what extent have you seen competitors increase their penetration in South America and how do you assess the various entry in this market?

Question: Ken Zazo - Morgan Stanley - Analyst : Have you seen increased capacity being brought on by [inaudible]and DM and does that at all hurt your utilization rates at all?

Question: Ken Zazo - Morgan Stanley - Analyst : The second question I have is can you give a little color on Bunge's markets and performance in the quarter in terms of volumes an profitability?

Question: Ken Zazo - Morgan Stanley - Analyst : Excluding Cereol, what type of internal volume growth was there at Bunge Global Markets?

Question: Ken Zazo - Morgan Stanley - Analyst : Okay. Thank you. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies.

Question: David Nelson - CSFB - Analyst : Congratulations. Good morning. You're holding off on revising, potentially revising your full year guidance until the closure of [Solae], but that would be nonoperating. I guess should we assume that you're not going to revise your operating guidance for the full year at that time?

Question: David Nelson - CSFB - Analyst : (Inaudible) both against the real and the Argentine peso, right, in reading the nonoperating expense discussion in your release?

Question: David Nelson - CSFB - Analyst : Okay. On the fertilizer, the double crop, what are they double crop with, is that wheat?

Question: David Nelson - CSFB - Analyst : Thank you.

Question: David Driscoll - Smith Barney - Analyst : Thank you. Good morning. I just wanted to follow up on the earnings guidance questions. It seems to me that we have got in a 10 to 15 cent improvement over your early expectations back in January but you are being very cautious on your guidance by not raising it. I know you talked about this a second ago but it seems to me that there is no information whatsoever as to really what the fourth quarter is going to bring, and if my understanding is correct, that's where we're all trying to guesstimate what crush margins in the US are going to do following the next crop. So you know, number one, is that really what we are trying to estimate here why you're being conservative on the full year begins and then a follow-up if I may.

Question: David Driscoll - Smith Barney - Analyst : Okay. And then if we could move over to your SG&A line. This line has been extremely difficult to get a handle on in the model. In the fourth quarter, if I do my calculations right SG&A was about 221 million and that did include I believe approximately 2 months of Cereol, then moving into the first quarter, again if I've done calculations right, we're at an SG&A expense of about 150 million dollars, 70 million dollar change. First off, can you just walk us through where SG&A should come out for the full year and then give us a little color on the difference between AGRI business and food products because I do believe food products after your la sewer sale takes place, then a number of assets will transfer over to those folks and the accounting for that will be different, so SG&A will not be accounted for from LASUR food products. Again, this is a very complicated line, it seems, any help would be appreciated.

Question: David Driscoll - Smith Barney - Analyst : Can you give us a number on the synergies with Cereol? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies.

Question: David Driscoll - Smith Barney - Analyst : And again most of that is SG&A synergies?

Question: David Driscoll - Smith Barney - Analyst : Perhaps the last question on SOY margins. Some of your competitors have made comments that the industry is not in balance in the United States, your action yesterday of taking down a plant seems in line with what everybody else is talking about. But what I don't have a perspective on is what percentage of US capacity that plant represented. Can you give us some numbers there?

Question: David Driscoll - Smith Barney - Analyst : : Excellent. Thank you very much.

Question: Eric Katzman - Deutsche Bank - Analyst : Good morning. A few questions. I think I want to try the easy one first. CAPEX, can you guys say where that was when you announced the Cereol deal and where you expect it to come in for the year and if there's any difference, why there is a difference?

Question: David Driscoll - Smith Barney - Analyst : Is change in SOLAE isn't obviously going to be more than a hundred million dollars swing?

Question: David Driscoll - Smith Barney - Analyst : Okay. And so if we walk through the components of cash flow, Bill, can you kind of using the guidance that you have previously given just kind of walk me through where net income if you use your target that you talked about in the past, depreciation, amortization, minus CAPEX, minus dividends. Just kind of walk me through where you expect to be. And also include what kind of money you expect roughly to get from this gain and the SOLAE and how that effects the cash flow.

Question: David Driscoll - Smith Barney - Analyst : All right. And then one of the questions I get a lot is just kind of -- it's obviously difficult for you, it's difficult for us on the sell side and on the buy side is trying to figure out the swings in the currency and you have told us today the tax rates should be different where you see the real and I guess the peso. Could you give us a sense of if the real goes where it is currently at three, up 10 percent or down 10 percent, what that could mean REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. to like the impact on let's say I suppose the best measure would be on your pretax line, because we already -- I don't know, you tell me what's the best way to measure it in terms of the swing.

Question: David Driscoll - Smith Barney - Analyst : Assuming that we all adjust our models to higher tax rate and try to take this first quarter, then from now on with obviously a little bit of flux, assuming something crazy doesn't happen down there, any change should really be due on an operating basis? Is that kind of what you're leaving me with?

Question: David Driscoll - Smith Barney - Analyst : Okay. Thank you.

Question: Leonard Teitelbaum - Merrill Lynch - Analyst : Good morning. Just a couple things. On the type 2 tax adjustment. You said you were going to create a receivable for it and you got paid in advance. So I guess I just -- it's been a long time since I had to fool around with that, Bill, but I just -- wouldn't that be a plus, not a minus for you?

Question: Leonard Teitelbaum - Merrill Lynch - Analyst : Right. And you got cash instead --

Question: Leonard Teitelbaum - Merrill Lynch - Analyst : So that would have given you a higher tax and you wound up with a lower one, is that your point?

Question: Leonard Teitelbaum - Merrill Lynch - Analyst : Didn't you have an escrow of 75 million set up for the Cereol payment to somebody, whom ever the courts told to you pay it to, and you actually wound up paying 55? Am I wrong in that?

Question: Leonard Teitelbaum - Merrill Lynch - Analyst : We got a flash on it while this call was going on. I thought it said 55.

Question: Leonard Teitelbaum - Merrill Lynch - Analyst : So what happens with the difference?

Question: Leonard Teitelbaum - Merrill Lynch - Analyst : So 77 is --

Question: Leonard Teitelbaum - Merrill Lynch - Analyst : But it will consume the 77, so there's no excess cash; is that correct?

Question: Leonard Teitelbaum - Merrill Lynch - Analyst : Thank you. Could you tell us on your capital expenditures, to what countries that's going to be allocated, please.

Question: Leonard Teitelbaum - Merrill Lynch - Analyst : And one final question, and you touched on it earlier, and that was a currency hedge. Were you -- did you close out any significant dollar hedges in the quarter that would have impacted the SG&A line or in the other income line?

Question: Leonard Teitelbaum - Merrill Lynch - Analyst : And your expanded hedging that you might use going forward to stabilize the impact would be reflected primarily in the tax rate, I appreciate the caveat that you're not going to eliminate 100 percent of it, but I don't want to run too far in one direction but if it's going to be less foreign currency in terms of earnings and much more in a operating income, that's got to be a positive and I want to make sure I'm not going to overemphasize that - that I think it's going to be much more operating income than tax related in the quarters going forward if you hedge it correctly? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies.

Question: Leonard Teitelbaum - Merrill Lynch - Analyst : Okay. Thank you very much.

Question: David Driscoll - Smith Barney - Analyst : Thank you. Guys, I just wanted to ask you just to clarify the effect of Cereol. I think if I heard things right basically you said on an operating profit basis Cereol did not contribute anything in the AG business line, overall Cereol contributed 20 million in the operating income line, which meant it was all in edible oil. Is that correct?

Question: David Driscoll - Smith Barney - Analyst : And that was --

Question: David Driscoll - Smith Barney - Analyst : And that was fully offset by the higher interest expense if the acquisition which results in the net of zero?

Question: David Driscoll - Smith Barney - Analyst : Okay. Great. Thank you. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies.

Question: Andrew Cash - UBS Warburg - Analyst : With the soy meal down, I guess it's a few percent, based on your operating rate, I'm assuming that it's because production of broilers and hogs were down. If those assumptions are correct, why do you think that broilers an hogs are down and why do you think they are going to come back later in the year?

Question: Andrew Cash - UBS Warburg - Analyst : Right.

Question: Andrew Cash - UBS Warburg - Analyst : Okay. So mostly inventory. Is there a shift in the diet in the United States, that demand for meat will be down this year or flat?

Question: Andrew Cash - UBS Warburg - Analyst : Okay. I have another question if I could. You indicated -- I was wondering about the begin on the SOLAE but you gave us you're expecting about 256 million in cash. I'm wondering if you could tell us roughly what the sales an operating income contribution from Bunge to SOLAE was, perhaps on a whatever is convenient for you, 2002 calendar figures or whatever basis you have.

Question: Andrew Cash - UBS Warburg - Analyst : Okay. Could you say if it was adding operating profit or not adding operating profit? Can you give any guidance about the range?

Question: Andrew Cash - UBS Warburg - Analyst : Okay.

Question: Andrew Cash - UBS Warburg - Analyst : Okay. Very good. Thank you.

Question: Eric Phil - Kappa Capital - Analyst : Was there any pull forward demands for seed in South America or was it just a better planning second season altogether?

Question: Eric Phil - Kappa Capital - Analyst : Thank you. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies.