Agricultural and food ingredient firm Bunge has reported a slump in net income for its first quarter of almost 80 percent, primarily due to unrealized mark-to-market losses.
In the firm's agribusiness division, forward purchases in South America were also a major driver of the quarter's disappointing results, said Bunge, which reported $14m in net income compared to $58m in the year ago period.
Operating profit was also down by 65 percent, coming in at $19m compared to $54m last year.
Although the results for the quarter ended March 31 2007 were below expectations, Bunge remains positive for the year ahead, claiming that the favorable business conditions of the markets it operates in will allow it to catch up and meet original full-year expectations.
"Overall market fundamentals are solid. Crops are large and world demand for protein meal and vegetable oil is good; these conditions should benefit our operations worldwide," said the firm's chairman and chief executive officer Alberto Weisser.
Net sales for the period totaled $8.2bn, up 46 percent from last year. Volumes were also up 23 percent to reach 30.6 metric tons.
In the firm's Agribusiness division, oilseed processing was solid in North America and slightly down in Europe. Higher selling, general and administrative expenses (SG&A) stemmed primarily from increased personnel costs to support growth in new product lines, such as sugar, and the impact of the stronger real, said the firm. Division net sales increased 47 percent to $6.2bn.
In its Edible Oil Products segment, results for the quarter were primarily driven by higher volumes and margins in Brazil. Increased personnel costs related to the growth of the firm's businesses in Asia and Eastern Europe and the impact of foreign currency translation increased SG&A costs for the segment. Net sales increased 48 percent to $1.1bn.
In the Milling Products segment, volumes dipped 5 percent, but net sales increased 12 percent to $261m. Good margins in wheat milling were offset by volume and margin declines in corn milling, said the firm.
"We continue to follow our strategy of building a larger, more efficient asset network that links the world's leading agricultural commodity production and consumption markets. A larger network enables us to originate, process and transport more products for more customers throughout the year," said Weisser.
Last week, Bunge announced the purchase of a majority stake in a Chinese soybean processing plant. The plant, which the firm plans to expand, is its third in that country.
In addition, Bunge recently agreed to acquire a sunseed processing and refining plant and two popular bottled oil brands in Romania. These facilities represent the latest additions to a global asset network that includes approximately fifty oilseed processing facilities, said Weisser.