By Evie Liu
Bunge stock is sinking after the grain trader reported shrinking profit for the first quarter of 2024, as crop prices continued to fall because of abundant supplies and expanded processing capabilities.
The company posted adjusted earnings of $3.04 a share. Although that exceeded analyst expectations of $2.53, profit is down nearly 7% from a year ago. Gross margin dropped to 6.8% from 7.1% in the year-ago period.
Sales fell 12.5% to $13.4 billion, below Wall Street expectations of $14 billion. The stock is down 3.6% as of midday trading. The S&P 500 was down 0.3%.
Crop traders and processors such as Bunge buy crops -- mainly soybeans but also corn and other grains -- process them, and sell the end products as livestock feed, cooking oil, or biofuels.
The company has made huge profit over the past few years. Major disruptions caused by the Russia-Ukraine war, abnormal weather, and a fertilizer shortage pushed crop prices higher, but the prices in Bunge products even higher.
But as global stockpiles rebound and the processing capacity increases, the company has been slammed by lower prices in the products it sells. The price of soybean meal -- often used in food and animal feeds -- has declined 20% over the past 12 months, while prices of soybean oil declined 14%.
For Bunge's core agribusiness segment, although the volume of processed grains increased 10% from a year ago, the total revenue declined by the same percentage, and gross profit was cut by nearly half.
More headwinds might be on the way. For 2024, the company maintained its outlook for earnings of $9 a share, down from $13.66 last year.
That implies average earnings of just $2 a share for each of the remaining quarters of the year, significantly down from 2023 levels. Management said on a call with analysts that there is "limited visibility" into the back half of the year.
Bunge announced last year that it would acquire grain handler Viterra in a $8 billion bid. The deal would need clearance from many countries where the companies operate.
On Tuesday, Canada's antitrust watchdog warned the acquisition could cause harm to competition in the western part of the country. Bunge said the concerns are "misplaced" and the deal is still on track to close in the middle of this year.
The merger would create an agribusiness powerhouse closer in size to rivals Cargill and Archer Daniels Midland.
Write to Evie Liu at evie.liu@barrons.com
This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.
(END) Dow Jones Newswires
April 24, 2024 12:47 ET (16:47 GMT)
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