Bunge Limited Q2 2014 Earnings Conference Call Transcript

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

Question: Ann Duignan - JPMorgan Chase & Co. - Analyst : Two quick questions. One, the risks in North America. Can't help but wonder what could go wrong as we move into a potential record harvest season. And two risks that we see out there -- one is the lack of railcar capacity to move crops out of the Midwest; and two, we're seeing a flood of DDGs in the US and what could that do to soy meal prices and margins. Could you address both of those tell us whether either of them could have a material impact on your second-half earnings?

Question: Ann Duignan - JPMorgan Chase & Co. - Analyst : Okay, thank you and then just one quick follow-up on the improvements, the operating improvements. Just curious when you talk about world best in class as a benchmark, are we talking world best-in-class food processing or are we talking about best in class globally in terms of processing, food processing. I just worry that our benchmark is maybe not world class in the overall scheme of manufacturing or processing.

Question: Ann Duignan - JPMorgan Chase & Co. - Analyst : Okay, thank you. I'll get back in line. Appreciate it.

Question: Adam Samuelson - Goldman Sachs - Analyst : Maybe first, Soren, a question in Agribusiness and the volume performance year to date. I think you were up 2% in the quarter and only 1% in the first six months despite some very large crops in South America and the back end of a very large crop in the US last fall. Just trying to get a sense -- has the volumes this year lived up to your expectations, and if it hasn't, where has that shortfall really been driven?

Question: Adam Samuelson - Goldman Sachs - Analyst : Okay, that's helpful. And then on the initial color on Food & Ingredients and the [medium-term] earnings growth was helpful. A couple of questions there. First, could you talk about the $100 million of organic earnings growth? How much of that is volume growth versus cost out? And then more kind of philosophically you also talk about extracting the value from EBIT growth despite more limited volume growth there. How would that slide 14 look if you were to chart ROIC for Food & Ingredients?

Question: Adam Samuelson - Goldman Sachs - Analyst : That's helpful. Can you give an example of some business lines or product lines where you've actually exited? It's hard to really tell from the outside given the kind of different buckets in there.

Question: Adam Samuelson - Goldman Sachs - Analyst : Okay, that's helpful. I'll pass it along.

Question: Michael Cox - Piper Jaffray & Co. - Analyst : Thanks, guys, and congrats on a nice quarter. My first question is on all the headlines on Argentina. I was just wondering if you could comment on what that if anything means to Bunge either just from a currency standpoint or from business-related issue perspective.

Question: Michael Cox - Piper Jaffray & Co. - Analyst : Okay, and within the Agribusiness segment volumes were relatively flat in the first half compared to last year. I know there's a lot of moving parts here, but if you were to look at it in aggregate, should we see that growth accelerate the back half given the commentary around exports from North America?

Question: Michael Cox - Piper Jaffray & Co. - Analyst : Okay and then one last quick one on the share buyback program. You've bought back 200 million, any thought on stepping up the buyback from here and does the strategic review of sugar prohibit you from doing anything from a buyback standpoint?

Question: Michael Cox - Piper Jaffray & Co. - Analyst : Very good, thanks a lot guys.

Question: Cornell Burnette - Citigroup - Analyst : This is Cornell in with a few questions for David. Congratulations on a nice quarter. Just want to get into a little bit about the pacing of earnings in the back half of the year. So basically I think the message that you are sending is that we should look for the fourth quarter to be stronger than the third quarter on an absolute basis. And then just getting into the drivers of that, is it basically depending on the way farmer selling is heading down in South America so that you see a slow pace of selling in the third quarter but in the fourth quarter things just get a lot more robust in the environment because the big US crop?

Question: Cornell Burnette - Citigroup - Analyst : Okay and then in China know that the environment was still weak but you did say you saw some sequential improvements there. Can you just talk about the conditions on the ground there and what the outlook is for maybe the next couple of quarters?

Question: Cornell Burnette - Citigroup - Analyst : And just one question -- moving onto the sugar ethanol business. I know you guys mentioned that weather is kind of a key variable there and I believe it's been pretty dry down in key parts of Brazil. Going forward, if that continues, what type of impact would that have on your business and maybe the guidance that you have of flat profitability, breakeven profitability this year? And are there any offsets that you would see that are emerging?

Question: Cornell Burnette - Citigroup - Analyst : Okay, thank you.

Question: Christine Healy - Scotiabank - Analyst : Thanks, first I just want to add on to the Argentina question that you were asked. Just with the significant devaluation of the peso in the last year. We're coming up to another planting season, so farmers could be in a bit of a financial bind. Can you talk about what loan and barter programs you have with the farmers there? What kind of credit risks you have and how any of that could change in the upcoming season?

Question: Christine Healy - Scotiabank - Analyst : Okay. So more of a barter situation than loans is kind of what you're saying?

Question: Christine Healy - Scotiabank - Analyst : Okay and then just as you get further into your strategic review on the sugar business, it's been several months now. Just curious -- how real a possibility is it that you could choose status quo? Just run the plants at breakeven until October elections potentially bring policy changes. Is that a serious option or do you guys feel under pressure to do something?

Question: Christine Healy - Scotiabank - Analyst : Okay in just one last question, I just want to clarify something on the Food & Ingredients projects that Gordon was talking about. When you look at those bar charts the before and current and target, I just want to confirm. Is the before 2013 and then the target is it 2017 forecast?

Question: Christine Healy - Scotiabank - Analyst : Yes. I just want to confirm what the timing is for the before and the target. Is that 2013 the before and then the target is 2017? 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: Christine Healy - Scotiabank - Analyst : Okay, great. Thanks, guys.

Question: Ken Zaslow - Bank of Montreal - Analyst : Soren, when you think about the process you underwent with taking the food ingredients to a new level, I know Gordon has taken care of it. But when you kind of implement the process, can you talk about what the process was that made you think that you could get there? And is there a process that you could overlay that onto the Agribusiness? And is there a synergy level that you'd expect to get over time from there as well?

Question: Ken Zaslow - Bank of Montreal - Analyst : Okay, thank you. Is there any progress or update on the sugar sale or what you're doing with that asset? And can you just give us an update on that?

Question: Ken Zaslow - Bank of Montreal - Analyst : So the politics and the environment may actually delay the opportunity that you'd be able to monetize that [asset], is that kind of the update? I just want to make sure.

Question: Ken Zaslow - Bank of Montreal - Analyst : And my last question is do you foresee any dislocation opportunities arising over the next three to 12 months that may come about for you guys?

Question: Ken Zaslow - Bank of Montreal - Analyst : And has there been any change, a big break in basis anywhere for you to capitalize on?

Question: Ken Zaslow - Bank of Montreal - Analyst : Great, thank you very much.

Question: Tim Tiberio - Miller Tabak - Analyst : Thanks for taking my question. Going back to the sugar guidance for the full year. Drew, can you just remind us how much you expect to generate out of cogeneration this year? And when we look at the second-half sensitivity, how much dependency is there on your outlook for the ethanol versus cogeneration, and then raw sugar futures in the second half?

Question: Tim Tiberio - Miller Tabak - Analyst : Well, I'm just trying to get a sense when you are looking at the second half to hit the breakeven forecast, what is the most sensitive part from your perspective at this point? Is it on the ethanol side or the development and raw sugars futures for the second half?

Question: Tim Tiberio - Miller Tabak - Analyst : Okay and just one last question on your port utilization in the Pacific Northwest. Can you give us a sense of what utilization was in the first half? I know you were impacted by weather events this year. But looking towards the second half and a very ample crop development, where would you expect the port facility utilization to likely come in looking at current crop conditions?

Question: Tim Tiberio - Miller Tabak - Analyst : And how does that compare to last season? Were you operating at least 50%, 60% at that port?

Question: Tim Tiberio - Miller Tabak - Analyst : Okay, all right, thanks for your time. 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: Vincent Andrews - Morgan Stanley - Analyst : I apologize if you answered this already but I am hopping between a few calls. Could you just talk about the -- you talked about wanting to do bolt-ons in Food & Ingredients and just from my perspective both inside and outside of agribusiness and food, it seems like this push into higher valued food and ingredients is quite popular and that's increased over the last several years. And the multiples for some of these more recent transactions have gotten pretty elevated. So what's your comfort level that they are actually bolt-ons that you're going to be able to do at multiples and returns that shareholders are going to be happy with?

Question: Vincent Andrews - Morgan Stanley - Analyst : And just as a follow-up or sort of a question. Last year at this time, we were feeling like we had a big crop and the outlook was positive and then it turned out the operating environment became a little bit more challenging than people expected. Now, we're going to have an even bigger crop. Why is this --- what are the risks to this larger crop from an execution perspective both in terms of -- there's clearly going to be a lot of supply globally; North America, South America. So will export margins hold up? And how should we think about the risks associated with this large crop?

Question: Vincent Andrews - Morgan Stanley - Analyst : Okay, thanks very much. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies.