Bunge Ltd Q3 2015 Earnings Call Transcript

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

Question: Adam Samuelson - Goldman Sachs - Analyst : Thanks. Good morning, everyone. So I guess my first question is on the Agribusiness guidance and the outlook. The profit of in excess of $1 billion implies you're going to be above $214 million of profit in the fourth quarter, which seasonally is a bigger quarter, given northern hemisphere harvests. Last year, you were $319 million, but that included an $80 million mark-to-market hedge and a $30 million loss on your Chinese soy crush inventory. I'm wondering if you could think about some of the pieces in the outlook that you talked about, Soren. Why would the guidance be just better than down 50% on the base business for 4Q? And maybe think about what's really better and worse year over year.

Question: Adam Samuelson - Goldman Sachs - Analyst : Okay. That's helpful. And then, you also said that you think Agribusiness EBIT would grow in 2016, despite a weaker margin structure. And I'm hoping you could elaborate on that thought a little bit, both in terms of the areas where the margin structure you think is it going to be worse, as well as what gives you confidence on the growth side.

Question: Adam Samuelson - Goldman Sachs - Analyst : All right. Great. That's very helpful. I'll pass it along. Thanks.

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

Question: Ann Duignan - JPMorgan - Analyst : Normally you reiterate your target for 2017, $8.50. I don't think I heard it, but I might have missed it. Are you backing away from that, or is that still a target?

Question: Ann Duignan - JPMorgan - Analyst : Okay. I appreciate that. That's good color. And then just secondly, if we look globally, the world has adequate burdensome supplies of most commodities. This should be the ideal environment for a Bunge to be operating in. What's been the biggest surprise to date in this environment?

Question: Ann Duignan - JPMorgan - Analyst : Great. I'll leave it there. Thanks. I'll get back in line.

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

Question: Farha Aslam - Stephens Inc. - Analyst : Could we talk about your crush margins and profitability in China? How does that look, going out into the fourth quarter and into next year?

Question: Farha Aslam - Stephens Inc. - Analyst : My one follow-up on that one is: There's a lot of M&A that's happening in the food space, particularly in potentially Agribusiness. Are you still thinking sub-$500 million?

Question: Farha Aslam - Stephens Inc. - Analyst : Sure. I was just trying to understand -- historically you've just said that for now you're just going to stick to tack-on acquisitions? Is that going to be continuing to be your focus?

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

Question: David Driscoll - Citi Research - Analyst : Great. Thanks a lot. Good morning, everybody.

Question: David Driscoll - Citi Research - Analyst : Wanted to talk a little bit more about food products. You gave a lot of good information, but I want to try to pull a couple things together. So, the $200 million to $225 million, correct me if I'm wrong, that's a reiteration of what you told us last quarter.

Question: David Driscoll - Citi Research - Analyst : So, if I'm right about that, if my memory is right, how come maybe you don't tighten that one up a little bit, given the third-quarter performance? It feels okay, it feels good, it feels like you should be saying $225 million. But I always get a little nervous when the ranges don't change, and you have a quarter in the bag. What's on the bubble here, as we go into fourth quarter food products?

Question: David Driscoll - Citi Research - Analyst : Okay, so, I think that math would still put us closer to the upper end of this range than the lower end of the range. And what I really care about here is 2016, but the fourth quarter run rate matters. Food products has never been a business that was crazy seasonal. So, if the fourth quarter number is at that $60 million-ish or plus, or $70 million type level, I feel like I want to take that one, extend it into 2016, and then add on to it the cost savings that you're going to continue to produce in that business. Again, if my thinking is right, then having a number in $300 million to $330 million for 2016 would be somewhere in the ballpark of what this thing is likely to do. Is my logic at least reasonable?

Question: David Driscoll - Citi Research - Analyst : All right. That's really, really helpful. And then on the tax rate, guys, I've been covering this name here since you came public, and I'd tell you what, the tax rate is like the roller coaster from hell. Can you give us any comments here, Drew, on this tax rate? I mean, a 400-basis-point movement here in your full-year tax rate in the new guidance this morning -- what happened in the third quarter? It's not too much criticism. I understand the geographies move all around, and this is really brutal. But as hard as it is for you guys, it's like impossible on the outside. I really need to go to 2016 and beyond that for some kind of semblance. Should we be in the 30% zip code, the 25% area? I know it's got -- Food products recovery is probably very germane to the answer here, but why don't you fill in the details?

Question: David Driscoll - Citi Research - Analyst : Really appreciate the guidance and understand the complexity there. I'll pass it along. Thank you.

Question: Evan Morris - BofA Merrill Lynch - Analyst : Good morning, everyone.

Question: Evan Morris - BofA Merrill Lynch - Analyst : Your comments that you made on the US market, the weak origination export, can you just talk a little bit more about that? Is it just a timing issue, and things will reverse themselves? Is there something more structural, if it is a timing issue? When do you expect that environment to look a little bit better? If you can just give a little bit more color around that?

Question: Evan Morris - BofA Merrill Lynch - Analyst : Okay. That was really helpful. And then just shifting back down to Brazil to your Sugar and Bioenergy business, the environment there is certainly improved a bit. And certainly better than it was a year ago. So, sounds like you're getting a little bit incrementally positive, at least on the profit outlook. So I guess, one, could you give us a sense as to how much better things are getting incrementally? And as we look into 2016, based on what you know now versus what it was like six months ago, what that could mean for profits? And then secondly, if the environment is improving, how does it change the outlook or the possibility of a sale of those assets as you continue that process?

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

Question: Robert Moskow - Credit Suisse - Analyst : Thanks. I guess you just answered my question I was going to ask on sugar and how to position it potentially for a sale. But my understanding is that the conditions in the ethanol market are getting much stronger, and you've said yourself that sugar -- Brazil is the low-cost producer in a global export market. Is there any -- would it be possible for Bunge to consider running the business for more than just breakeven? You said you wanted to work on reducing your exposure even further, I think is what you said. But if conditions in the market are good, why reduce it further? Why not try to capture a little bit of the upside?

Question: Robert Moskow - Credit Suisse - Analyst : Okay. Thank you very much.

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

Question: Ken Zaslow - Bank of Montreal - Analyst : Obviously, a lot of questions asked -- just to make sure I get a couple understanding. One is: I know you increased your tax rate. What is the impact on cash?

Question: Ken Zaslow - Bank of Montreal - Analyst : So, the increase in tax rate really is somewhat meaningless, in the scheme of your operations? Is that fair?

Question: Ken Zaslow - Bank of Montreal - Analyst : Okay. The second question is: You talked a lot about farmer retention around the world. I guess what I'm trying to figure out is -- okay, so, Brazil -- they're releasing. Argentina, after the election, will they release, you expect? And how long will it take for them to release?

Question: Ken Zaslow - Bank of Montreal - Analyst : Okay. So, they can't hold it through the whole year? We will see soybeans out of South America come to market?

Question: Ken Zaslow - Bank of Montreal - Analyst : Right.

Question: Ken Zaslow - Bank of Montreal - Analyst : Again, I don't think it matters. I mean, 2016 is -- I think that's fine. In the US, can the farmer hold soybeans for a year, or two years? How long can they hold it for?

Question: Ken Zaslow - Bank of Montreal - Analyst : I guess my point I'm trying to get at is, although right now you see farmer retention, the reality is, in 2016 we're going to see Brazil, Argentina and the US all release soybeans somewhere through the year next year?

Question: Ken Zaslow - Bank of Montreal - Analyst : Okay. So, your caution on next quarter is irrelevant for 2016? Is that a fair assumption? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. OCTOBER 29, 2015 / 2:00PM, BG.N - Q3 2015 Bunge Ltd Earnings Call

Question: Ken Zaslow - Bank of Montreal - Analyst : My final question is: On your $8.50 guidance, I get that -- I think most people understand that the food products was at risk the whole way. I guess what I'm trying to figure out is when -- if there's a way that you can bracket the impact you think, if we stay at these current levels, how much then would that knock off the $8.50? Is it $0.50, or is it $1? Or some sort of parameters to put it in? Because our calculation is about $0.50. I didn't know if it was larger or smaller than that?

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

Question: Neel Komar - Morgan Stanley - Analyst : This is Neel Komar calling in for Vincent. I was just wondering if you could elaborate a little bit more on the timing of your CapEx spend changes? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. OCTOBER 29, 2015 / 2:00PM, BG.N - Q3 2015 Bunge Ltd Earnings Call

Question: Neel Komar - Morgan Stanley - Analyst : Got it. And my second question was -- if you could just talk a little bit more about the impact of the Brazilian farmers needing less credit? Does that mean you will have to barter more, and is that what we're seeing in the changes in working capital?

Question: Neel Komar - Morgan Stanley - Analyst : Got it. Thanks.