Why Did Bunge Limited Issue Senior Notes?

Bunge Limited (BG) has a market cap of $9.3 billion. It fell 1.6% to close at $67.36 per share on November 10, 2016. The stock’s weekly, monthly, and year-to-date (or YTD) price movements were -2.8%, 12.0%, and 0.72%, respectively, on the same day.

BG is trading 6.5% above its 20-day moving average, 8.8% above its 50-day moving average, and 12.6% above its 200-day moving average.

The iShares Russell Mid-Cap Value ETF (IWS) invests 0.26% of its holdings in Bunge Limited. The ETF tracks an index of US mid-cap value stocks. The index selects from the bottom 80% of the Russell 1000, screening on value factors. The YTD price movement of IWS was 12.9% on November 10.

The market cap of Bunge’s competitors are as follows:

• BRF SA-ADR (BRFS) — $12.2 billion
• Archer Daniels Midland (ADM) — $26.2 billion

In a press release on November 10, 2016, Bunge Limited reported, “Bunge Limited (BG) today announced that Bunge Finance Europe B.V., its wholly owned finance subsidiary, has priced a public offering of €200,000,000 aggregate principal amount of 1.850% senior notes due 2023 (the “notes”). The notes will be guaranteed by Bunge Limited.”

The company added, “Bunge Limited intends to use the net proceeds from this offering for general corporate purposes, including, but not limited to, the repayment of outstanding indebtedness, which may include indebtedness under its revolving credit facilities.”

Bunge Limited (BG) reported 3Q16 net sales of $11.4 billion, a rise of 5.6% compared to net sales of $10.8 billion in 3Q15. Sales from its Agribusiness, Edible Oil Products, Milling Products, Sugar and Bioenergy, and Fertilizer segments rose 4.5%, 4.1%, 14.7%, 20.5%, and 8.4%, respectively, in 3Q16 compared to 3Q15.

The company’s gross profit margin and total segment EBIT[1. earnings before interest and tax] margin fell 200 basis points and 190 basis points, respectively, in 3Q16 compared to 3Q15.

Its net income and EPS (earnings per share) fell to $116.0 million and $0.83, respectively, in 3Q16 compared to $229.0 million and $1.56, respectively, in 3Q15.

Bunge’s cash and cash equivalents fell 27.7%, and its inventories rose 15.8% in 3Q16 compared to 4Q15. Its current ratio fell to 1.4x, and its debt-to-equity ratio rose to 1.8x in 3Q16 compared to a current ratio and a debt-to-equity ratio of 1.5x and 1.7x, respectively, in 4Q15.

Bunge Limited has made the following projections for fiscal 2016:

• EBIT for Food and Ingredients of $230 million–$240 million
• EBIT for Fertilizer of ~$30 million
• EBIT for Sugar and Bioenergy of $60 million–$70 million

Bunge Limited (BG) has declared a regular quarterly cash dividend of $0.42 per share on its common stock. The dividend will be paid on December 2, 2016, to shareholders of record on November 18, 2016.

The company has also declared a quarterly cash dividend of $1.22 per share on its 4.9% cumulative convertible perpetual preference shares. The dividend will be paid on December 1, 2016, to shareholders of record on November 15, 2016.

Next, we’ll look at Cal-Maine Foods (CALM).