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UPDATE 2-Bunge posts quarterly loss, may sell sugar business

Tom Polansek
Thursday, 24 Oct 2013 | 9:30 AM ET

CHICAGO, Oct 24 (Reuters) - Agribusiness company Bunge Ltd reported a quarterly loss on Thursday due to a charge related primarily to its weak sugar business, and said it was exploring a sale of that business.

Bunge's review of the struggling sugar and bioenergy operations comes as its traditional agribusiness lines, which include grain trading and processing, are expected to improve due to large U.S. harvests.

Global grain traders have struggled with tight crop supplies since a severe drought slashed U.S. production in 2012.

Bunge, one of the world's largest agricultural trading houses, forecast a good fourth quarter based on strong performance in the agribusiness and food sectors.

The company's Brazilian sugar milling operations have suffered from poor crop weather and low global sugar prices, Chief Executive Soren Schroder said in a statement.

"Given the challenges facing the Brazilian industry, we have commenced a comprehensive process to explore all alternatives to optimize the value of this business," he said.

JPMorgan analyst Ann Duignan said she was "encouraged" by Bunge's exploration of options for its sugar business.

Bunge is among the four large players known as the "ABCD" companies that dominate the flow of agricultural goods around the world. The others are Archer Daniels Midland Co, Cargill Inc and Louis Dreyfus Corp.

Bunge reported a net loss of $137 million for the third quarter, compared with a profit of $289 million a year earlier. The per-share loss was 94 cents per share, against a profit of $1.92 a year earlier.

The sugar and bioenergy division reported a loss of $19 million. Bunge recorded an after-tax charge of $415 million primarily related to that business.

Revenue was $14.7 billion, below analysts' average forecast of $16.9 billion, according to Thomson Reuters I/B/E/S. A year ago, revenue was $16.5 billion.

U.S. HARVESTS ADVANCE

Agribusiness results during the quarter fell from a year ago, as last year's drought kept U.S. soy supplies tight.

Still, soy processing margins in North America are strong due to lean inventories, large harvests and improving margins for livestock production, said Drew Burke, Bunge's chief financial officer. Livestock producers feed soybean meal to their animals.

"North America and the Black Sea should see strong grain exports as the world restocks inventories after an extended period of tight supplies," Burke said.

Bunge rival Cargill earlier this month reported a 41 percent drop in quarterly profit as the lingering effects of the drought reduced grain-handling opportunities.

The U.S. soy-crushing pace slowed during the summer following last year's harvest shortfall. In addition, strong export demand from China helped drain old-crop U.S. soy inventories to a nine-year low.

The U.S. corn and soy harvests are advancing later than normal this autumn following widespread planting delays in the spring.

The corn harvest was 39 percent complete as of Sunday, behind the five-year average of 53 percent, and the soybean harvest was 63 percent complete, below the average of 69 percent.

CAPITAL EXPENDITURE CUTS

In July, Bunge said it would cut its 2013 capital expenditures to $1 billion from $1.2 billion to boost financial results. The company plans a 2014 capital expenditure budget of $900 million, "with a focus on growth and productivity projects with shorter paybacks," Burke said.

Bunge shares are up nearly 11 percent this year. Shares of ADM, which is due to report quarterly results on Oct. 29, are up 44 percent.

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