Bunge Ltd Q1 2015 Earnings Call Transcript

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

Question: Ann Duignan - JPMorgan - Analyst : Hi, good morning, guys.

Question: Ann Duignan - JPMorgan - Analyst : Can we talk about on-farm storage, both in the US and in Brazil? In the US, do you agree that that's more of a secular trend? We've had a lot of on-farm storage built over the last five or six years. Brazil might be more a little bit cyclical, or just based on currency. Could you talk about what impact this has on your Business, both on the cadence of the seasonality of your Business, and also on what it could do to working capital demands as we go forward?

Question: Ann Duignan - JPMorgan - Analyst : And in Brazil, how should we think about those crops coming to market? Does it just put more pressure on the logistics business?

Question: Ann Duignan - JPMorgan - Analyst : Great thank you. I appreciate the color. Then just a quick follow-up on the China environment: Can you talk about what's going on there from a fundamental standpoint, rather than just the trading?

Question: Ann Duignan - JPMorgan - Analyst : Thank you.

Question: Ann Duignan - JPMorgan - Analyst : Okay. Great. Thank you, I appreciate the color. I'll get back in line.

Question: Evan Morris - BofA Merrill Lynch - Analyst : Good morning. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. APRIL 30, 2015 / 2:00PM, BG.N - Q1 2015 Bunge Ltd Earnings Call

Question: Evan Morris - BofA Merrill Lynch - Analyst : Just a question, first, on the oilseeds-processing margins: You mentioned that they improved in Brazil and Argentina, and should remain good through September. If you could put a little context around that? Where are the margins now? How do they compare with last year? And I guess, when you say good through September, does that mean in line with current trends? Are you expecting an improvement? Can you just put some context around that?

Question: Evan Morris - BofA Merrill Lynch - Analyst : Okay. You had a big second quarter last year in the agribusiness. You talked about slower farmer selling, possibly deferring income, sugar and bioenergy was more weighted to the second half, and it sounds a little bit like you're tempering maybe the food and ingredients growth for a few reasons. I know it's tough to forecast quarters -- I'm just trying to understand the cadence of the year? Should I be thinking that second-quarter total operating profit will be below year-ago levels, before rebounding in the second half? Is that the right way to think about how the rest of the year shapes up?

Question: Evan Morris - BofA Merrill Lynch - Analyst : Perfect, thank you.

Question: David Driscoll - Citi Research - Analyst : Thank you, and good morning.

Question: David Driscoll - Citi Research - Analyst : Just wanted to follow up on Evan's question on second quarter. So, sequentially slower farmer -- sorry, just slower farmer sales, and then sequentially lower crush margins, appear to be pretty factual almost at this point, just given the shift from really strong North American crush margins to the southern hemisphere. Furthermore -- now, granted, this is hard because there's different periods that might contradict this -- but generally, guys, I think that the second quarter is the seasonally lowest EBIT quarter of the year. Just to dial into this (technical difficulty) accurate is this thing? Would you think that second quarter would be the seasonally lowest EBIT quarter?

Question: David Driscoll - Citi Research - Analyst : Could I follow one other point here is that -- so, the northern hemisphere crush margins, Q4 and Q1, just as we calculate those board margins, were exceptional relative to almost any period in history that I look at. North America -- good consolidated market. So, again, what I feel so unsure about is -- this Q1, and even Q4, we're benefiting from that, but that is not true in the second quarter. It really shifts to South America. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. APRIL 30, 2015 / 2:00PM, BG.N - Q1 2015 Bunge Ltd Earnings Call So, when you guys describe South American margins as good, I think a lot of investors will compare them to the first quarter, and I just don't even think they do compare. I think South American margins are -- while good, they are much lower than northern hemisphere margins from Q4/Q1. Is that fair?

Question: David Driscoll - Citi Research - Analyst : That's helpful. Final question for me is: We have this outbreak of avian influenza in the turkeys and in the chickens here. These would be your end customers. What is your assessment of the situation in the United States right now? What type of impact would it, could it have as the year progresses? And I'm looking for just scale here. Is this a significant issue that we should be worried about, regarding the sales of soy meal and other products that you will sell to those customers?

Question: David Driscoll - Citi Research - Analyst : That's what I wanted to hear. Thank you. I'll pass it along.

Question: Farha Aslam - Stephens, Inc. - Analyst : Hi, good morning.

Question: Farha Aslam - Stephens, Inc. - Analyst : One of the things we noticed is -- you did reiterate your $8.50 target for 2017. One of your ways of getting that was your SAP system and standardizing your operations. Could you just share with us, on the bigger picture, where you stand with your SAP implementation and some of that strategic improvement that's being generated from it?

Question: Farha Aslam - Stephens, Inc. - Analyst : Okay. Just a follow-up on that North American farmer selling: What gives you the confidence that the farmers will go ahead and sell in the second half of the year, while they're holding back right now? This is now the third harvest that's going to come in. Is there enough capacity for them to continue to hold crops? Because I think they haven't fully sold the last two.

Question: Farha Aslam - Stephens, Inc. - Analyst : With this increased on-farm storage capacity, do you think that grain storage in the US, which is underowned over the last year or two, is a permanent shift, in terms of downtick in earnings opportunities because of this better capitalized farmer and more on-farm storage? Or do you think it's a temporary issue that was a result of the 2012 [step]? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. APRIL 30, 2015 / 2:00PM, BG.N - Q1 2015 Bunge Ltd Earnings Call

Question: Farha Aslam - Stephens, Inc. - Analyst : Do you think that grain storage income is going to be lower in the US or North America (multiple speakers)?

Question: Farha Aslam - Stephens, Inc. - Analyst : That's helpful. Thank you very much.

Question: Tim Tiberio - Miller Tabak - Analyst : Good morning, guys. And a nice speech -- good to see. I have a question on capital allocation. I was a bit surprised that it didn't get a little bit more commentary on the forward buy-back outlook. How should we be thinking about your prioritization of cash return versus maybe increased M&A opportunity as we enter 2015?

Question: Tim Tiberio - Miller Tabak - Analyst : Okay. That's fair enough. I guess, on the M&A side, it sounds like bolt-on acquisitions versus transformational acquisitions are still your thought process at this point. Is that fair?

Question: Tim Tiberio - Miller Tabak - Analyst : Okay. Just one last question: I know you expanded into Canada with this partnership with the Canadian Wheat Board organization. My understanding that there is still some limited port capacity in Vancouver, but I know you've invested quite considerably in the Pacific Northwest over the couple last years. Can you frame up for us what the -- how you're thinking about the long-term EBIT potential from this partnership? Will this require more in-country CapEx, potentially on the west coast of Canada?

Question: Tim Tiberio - Miller Tabak - Analyst : Great. Thanks for your time.

Question: Adam Samuelson - Goldman Sachs - Analyst : Yes, thanks; good morning, everyone. I guess the first question is thinking -- or maybe going back to the capital allocation question and the Wheat Board and buybacks, and thinking both -- on the Wheat Board, can you just quantify how much cash, if any, you're actually putting in to the JV? What you think the actual capital inflow you're going to need to be on the hook for there? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. APRIL 30, 2015 / 2:00PM, BG.N - Q1 2015 Bunge Ltd Earnings Call

Question: Adam Samuelson - Goldman Sachs - Analyst : The takeaway there is that we shouldn't be thinking about the CWB and the increased Canadian presence as materially changing the CapEx outlook you laid out at the analyst day and the opportunity for incremental cash that can go back to shareholders via repurchase over time. Is that a fair assessment?

Question: Adam Samuelson - Goldman Sachs - Analyst : Okay, great. Maybe switching gears to -- taking Farha's question in a little bit different light. You've talked about $325 million of EBIT improvement from cost efficiency actions in agribusiness, and food and ingredients, through 2017. I'm sure -- and I hope this is something you're tracking rigorously internally. Can you help us think through how much has actually been achieved to date? How much of that $325 million would be expected to contribute to 2015 earnings? And how that layers through the next couple of years, as you execute on those actions?

Question: Adam Samuelson - Goldman Sachs - Analyst : So, just to be clear, that was $30 million in the quarter, or $30 million annualized run rate? I just want to be clear on that.

Question: Adam Samuelson - Goldman Sachs - Analyst : Got it. Okay. That's very helpful; appreciate the time. Thank you.

Question: Ken Zaslow - Bank of Montreal - Analyst : Hey, good morning, everyone.

Question: Ken Zaslow - Bank of Montreal - Analyst : I know there's a lot of talk about the second quarter, but can we broaden it out a little bit? In terms of this quarter itself, it sounds like it exceeded your expectations or it came in line with your expectations? Your first answer to that?

Question: Ken Zaslow - Bank of Montreal - Analyst : Okay. And then, how does that translate for the full year, rather than just the second quarter? There seems to be some moving around of mark to market. It seems like that happens between first and second. But for the full year, what is the expectation relative to where we started out? Because it sounds, again, like things are playing out more positively in the ag industry? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. APRIL 30, 2015 / 2:00PM, BG.N - Q1 2015 Bunge Ltd Earnings Call

Question: Ken Zaslow - Bank of Montreal - Analyst : Okay. When you think about that path to $8.50 -- I know I asked the question at CAGNY. I just want to -- one quarter under your belt is maybe not the best time to ask, but it will get a little bit further there. Do you think that the progression through to 2017 -- to your $8.50 number -- is evenly weighted through the years, a little bit weighted earlier, given the operating environment? How do you see the progression between now and getting to your $8.50 number? Has it changed since CAGNY?

Question: Ken Zaslow - Bank of Montreal - Analyst : Great. I appreciate it. Thank you.

Question: Rob Moskow - Credit Suisse - Analyst : Hi, thanks. This will just be, I think, modeling types of questions. Your oilseeds and grains breakout that you're providing -- and thank you for providing it -- in terms of proportion to each other, is that pretty typical with oilseeds 3 times the size of the profit contribution between the two? Tough question.

Question: Rob Moskow - Credit Suisse - Analyst : Right. And the reason that the return on assets is higher in oilseeds is because it's crushing operations that tend to get good margins? Is that the primary reason?

Question: Rob Moskow - Credit Suisse - Analyst : Okay. I'll follow up on that one. Then, for food ingredients, did you quantify what the currency hit for the year is going to be, in terms of profit?

Question: Rob Moskow - Credit Suisse - Analyst : Okay, and then last question: Grains had a big quarter, I guess, because of the Middle Eastern trade that you did, and it was a high-margin trade. Is there any reason to believe that you couldn't do that again in second quarter because of the size of the North American crop? Is that the driver that provides that ability?

Question: Rob Moskow - Credit Suisse - Analyst : More in oilseeds, okay, so that's where it lies. Okay. Is there any reason to believe that that couldn't continue into second quarter?

Question: Rob Moskow - Credit Suisse - Analyst : Okay, Thank you.

Question: David Driscoll - Citi Research - Analyst : Thanks for taking the follow-up; just two quick ones. Drew, what did you say for share repurchase for all of 2015? I think you said $200 million in the first quarter. What happens from here?

Question: David Driscoll - Citi Research - Analyst : Can you remind me what remains on your repurchase authorization? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. APRIL 30, 2015 / 2:00PM, BG.N - Q1 2015 Bunge Ltd Earnings Call

Question: David Driscoll - Citi Research - Analyst : Okay. So, maybe there's something more to say later on. On food ingredients, I think the target is -- hopefully my memory is right -- $425 million in segment earnings by 2016. The question -- hopefully I got that right -- the question is that, given your comments, Soren, about the foreign exchange environment, in your opinion, is that target still safe by 2016? Or would you haircut it because of the ForEx issues going on now?

Question: David Driscoll - Citi Research - Analyst : Okay. Great. Thank you.

Question: Adam Samuelson - Goldman Sachs - Analyst : Hi, just a quick follow-up on FX: $30 million to $50 million in food and ingredients. What is the benefit from FX in agribusiness and sugar? Or put another way: What is the net FX impact to the Company in 2015, given current rates?

Question: Adam Samuelson - Goldman Sachs - 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. APRIL 30, 2015 / 2:00PM, BG.N - Q1 2015 Bunge Ltd Earnings Call