ADM Archer Daniels Midland Company

By Jacob Bunge 

Bunge Ltd. aims to cut costs in its grain and food businesses and look at joint ventures in some businesses as the agribusiness giant navigates turbulent economic conditions.

Slowing U.S. grain exports and food-ingredient sales in Brazil are likely to continue pressuring the White Plains, N.Y., company in 2016, its chief executive said, prompting the company to dial back long-term profit expectations.

"In the current challenging environment, modest growth is the right indication," Bunge CEO Soren Schroder said in an interview.

A broad collapse in commodity prices has pressured Bunge and other top traders of crops and agricultural products, such as Cargill Inc. and Archer Daniels Midland Co. While three-straight years of bumper crops in North America and elsewhere have replenished global grain supplies and reduced costs for grain companies that make vegetable oil, animal feed and ethanol, farmers have built more bins to store crops rather than sell at cut-rate prices, and U.S. grain has become less competitive on global markets as the U.S. dollar rises and currencies of other crop-producing nations have fallen.

Bunge on Thursday reported $203 million, or $1.30 a share, in profit for the quarter ended Dec. 31, compared with a loss of $54 million, or 43 cents a share for the year-earlier period. The results undershot analysts' expectations of $1.56 a share, and the company's mixed outlook for 2016 sent its shares plunging 16% to $49.02 after hitting their lowest level since late 2009.

A prior target to deliver $8.50 in earnings per share by 2018 now is uncertain given pressures on multiple fronts, Mr. Schroder said. "We can see how we get there, but we are not going to put a date on it," he said. "It's too difficult in the current environment to predict that accurately."

Double-digit earnings growth in 2016 is "not impossible," he told analysts on a post-earnings conference call.

Mr. Schroder said Bunge plans to cut $125 million in annual expenses this year by managing transport more efficiently across its grain-trading and ingredients operations, while running its soybean-crushing plants and packaging facilities more efficiently. Tough business conditions are prompting other companies to reassess their own portfolios, which could create openings for more joint ventures and partnerships that would let grain firms share the cost of maintaining assets like ports and transport networks, he said.

"There's an understanding that it pays off to be smart about how you deploy capital," Mr. Schroder said. Bunge's deal last year, in which it joined with a Sauri Arabian investment firm to buy a majority stake in the Canadian Wheat Board, is an example and part of Bunge's ongoing strategy, he said.

Last week, ADM said it had started a strategic review of its corn dry mills that make ethanol and animal feed.

Despite the challenges, Mr. Schroder said a wholesale restructuring of Bunge's business wasn't needed or feasible. "I don't believe there's one big silver bullet thing you could do to restructure and make a massive difference," he said. "The pieces fit together and I don't believe they can operate on their own."

For the fourth quarter, earnings in Bunge's core agribusiness division, which trades and processes grains and oilseeds, dropped 15%. Profit from edible oil and milling products plunged 28% and 42%, respectively. Meanwhile, earnings from fertilizer rose 4.8%, while sugar and bioenergy swung to a profit.

Executives said that conditions in the sugar business, where Bunge has been considering the sale of its Brazilian mills for more than two years, are improving as Brazil's ethanol market improves and sugar prices rebound globally.

Revenue, linked to the prices of the commodities that Bunge deals, declined 16% to $11.13 billion.

Anne Steele contributed to this article.

Write to Jacob Bunge at jacob.bunge@wsj.com

(END) Dow Jones Newswires

February 11, 2016 14:04 ET (19:04 GMT)

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