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Bunge Will Deliver Cargo of French Wheat to Spain

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Price movement of Bunge

Bunge (BG) has a market cap of $7.3 billion. BG rose by 3.0% to close at $51.50 per share on March 2, 2016. The stock’s weekly, monthly, and YTD (year-to-date) price movements were 3.9%, -15.2%, and -24.0%, respectively, as of the same day.

Currently, BG is trading 2.8% below its 20-day moving average, 13.4% below its 50-day moving average, and 29.0% below its 200-day moving average.

The Vanguard Mid-Cap ETF (VO) invests 0.33% of its holdings in Bunge. VO tracks the CRSP US Mid-Cap Index, a diversified index of mid-cap US companies. The YTD price movement of VO was -4.1% as of March 1, 2016.

By comparison, the iShares Russell 3000 ETF (IWV) invests 0.06% of its holdings in Bunge. IWV tracks a cap-weighted index that measures the investable US equities market, covering the entire market-cap spectrum, including micro-caps.

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

  • BRF SA-ADR (BRFS)—$11.8 billion
  • The Kroger Company (KR)—$39.6 billion
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Bunge delivers cargo of French wheat

Bunge plans to deliver French wheat that Egypt rejected in December 2015 to Spain, after the agricultural trading house was unable to resolve a dispute with Egypt over the quality of grains.

The company already filed legal proceedings against Egypt’s state grain buyer after inspectors rejected the cargo for containing too much of a common fungus known as ergot.

Bunge’s performance in 4Q15 and 2015

Bunge reported 4Q15 net sales of $11.1 billion, a fall of 15.9% compared to net sales of about $13.2 billion in 4Q14. Sales of its agribusiness products, edible oil products, milling products, sugar and bioenergy products, and fertilizer products fell by 15.2%, 10.6%, 17.6%, 27.0%, and 16.5%, respectively, in 4Q15 over 4Q14.

Its net income and EPS (earnings per share) rose to ~$188 million and $1.30, respectively, in 4Q15, compared to about -$62 million and -$0.43, respectively, in 4Q14.

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2015 results

In 2015, BG reported net sales of $43.5 billion, a fall of 23.9% YoY (year-over-year). Its net income and EPS rose to $738 million and $5.07, respectively, in 2015, compared to $467 million and $3.17, respectively, in 2014.

Meanwhile, the company’s cash and cash equivalents rose by 13.5%, and its inventories fell by 20.1% in 2015. Its current ratio fell to 1.48x, and its debt-to-equity ratio rose to 1.7x in 2015, compared to its current and debt-to-equity ratios of 1.5x and 1.5x, respectively, in 2014.

Bunge’s price-to-earnings and price-to-book value ratios were 11.1x and 1.2x, respectively, as of March 2, 2016.

Projections

Bunge has made the following projections for 2016:

  • In agribusiness, it expects results in oilseeds and grains to be largely driven by its South American operations.
  • In fertilizer, farmer economic conditions have improved in Argentina, and Bunge expects that the removal of export taxes on grains will result in a rise in sales.
  • In sugar and bioenergy, Bunge expects earnings and cash flow growth from hedge sugar and Brazilian ethanol.
  • It expects depreciation, depletion, and amortization of ~$550 million.
  • It expects capital expenditures of ~$850 million, which include $150 million worth of investments carried over from 2015.
  • It expects the tax rate to be in the range of 25%–29%.

In the next part and final part of this series, we’ll look at Pinnacle Foods.

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