Bunge says Covid-19 impact 'too early to tell' as Q4 earnings double

It is too early to predict what effect the Covid-19 outbreak will have on global commodities markets, the CEO of US agriculture giant Bunge Greg Heckman said, after the company posted better-than-expected results in its final quarter of 2019.

Heckman said the group’s 2020 strategy is to be “nimble” as markets remain uncertain following the aftermath of the African swine fever (ASF) outbreak, US-China trade tension and the recent outbreak of the coronavirus.

“It’s too early to tell what, if any, impact the coronavirus situation will have on our markets,” Heckman said in Bunge’s Q4 earnings call.

The virus, renamed Covid-19 by the World Health Organisation on Wednesday, has infected over 45,000 people and killed 1,100 with over 70 million people quarantined in regions surrounding the epicentre of the outbreak in China.

In addition, transportation in and around the area has been restricted, containers and vessels full of grain and corn are facing delays and the country is facing the lowest economic growth in decades.

Analysts expect soymeal demand for animal feed to suffer, but despite this the USDA increased its forecast for Chinese crush demand this year by 2 million mt over previous estimates while the Chinese government itself says it may delay purchases of US soybeans.

The coronavirus outbreak comes on top of an African swine fever epidemic that has over the past 18 months wiped out 40% of China's pig herd, moving import demand from animal feed to meat.

However, Heckman said that was less of a concern for the company going forward.

“Some of the demand has improved, some of the small [consumers] have been able to switch over to poultry quickly. And we have seen sales rebound 2%. We hope that the worst is over,” Heckman added.

Bunge expects 2020 results to be “broadly in line” with 2019 “taking into account the current margin environment and lack of visibility into the back half of the year,” the company said in a statement.

Q4 buoyant on South American origination

Q4 earnings at the US agriculture giant were better than expected in response to solid origination of oilseeds and grains in South America, offsetting lower crushing operations in the US, Europe and Asia.

Total adjusted EBIT for the group’s fourth-quarter came in at $283 million compared with $107 million during the same quarter in 2018, prompting Bunge shares to rally 3% by the time of press.

“Higher results were primarily driven by origination in South America. Brazilian farmer selling increased as local prices improved. In Argentina, farmers accelerated sales in anticipation of a change in export taxes,” the company said.

That more than doubled adjusted EBIT in its Grains segment to $136 million compared to a loss of $57 million during the same three-month period the year before.

“Lower soy processing results in the US, Europe and Asia were partially offset by higher results in South America,” the company said.

Lower crush caused the adjusted EBIT of the Oilseeds segment to fall by nearly a third on the year to $41 million.