Bunge Global SA (BG) 2006 Q2 法說會逐字稿

Good day, everyone and welcome to Bunge Limited Second Quarter Conference Call. Today’s call is being recorded. At this time, for opening remarks and introductions, I would like to turn the call over to Mr. Mark Hayden, Director of Investor Relations. Please, go ahead, sir.

Thank you, Tony and thank you everyone for joining us this morning. Welcome to Bunge Limited Second Quarter 2006 Earnings Conference Call. With me today to discuss our results are Alberto Weisser, Bunge’s Chairman and CEO and Bill Wells, Bunge’s Chief Financial Officer.

Reconciliations of non-GAAP measures disclosed orderly on this conference call to the most directly comparable GAAP financial measure are posted on our website: www.Bunge.com in the investor information section.

Before we proceed, I would like to read the Safe Harbor Statement. This call may contain forward-looking statements within the meaning of the Safe Harbor provision of the Private Securities Litigation Reform Act of 1995, including statements about future financial and operating results. These statements are based on management’s current expectation and beliefs and are subject to a number of risks, uncertainties and assumptions that could cause actual results to differ materially from those described in the forward-looking statements. The pertinent risk factors can be found in SEC filed reports. And now let me turn the call over to Alberto.

Good morning everyone. The second quarter was not good and we are disappointed with our performance for the first half of the year. Additional losses in freight, farmer protests in Brazil, excess capacity in Argentina and low volumes and margins in international marketing all contributed to a weak first half.

On the positive side, we have seen continued strong performance in North America and in our edible oil and milling businesses. We expect improved performance in the second half of the year. Losses from previously contracted freight are almost entirely behind us and we should see better performance in international marketing.

Our North American operations produced the majority of their results in the second half. Our more stable Brazilian Real and farmer aid programs have helped simulate crop commercialization in Brazil. Recent auctions with government price supports have led to the commercialization of over 3 million tons of soy. We expect better results in our fertilizer and Brazilian agribusiness operations in part because of improvements we have made to our businesses.

We have lowered costs, [unintelligible] reduced crushing capacity and fertilizer inventories and enhanced our risk management. Lower overall fertilizer inventory should help margins industry wide.

Brazilian agribusiness and fertilizer markets will rebound. As the steady demand for mill and oil and increasing demand for bio-fuels draws down stocks of soybeans, the global commodity market world price crops at levels that improve profitability for Brazilian farmers and encourage additional production and import purchases. USDA forecasts that substantially all of the medium-to-long-term growth in global soybean production will occur in South American, especially Brazil. We will continue to improve Bunge’s operations so we are well prepared to capitalize on this improvement.

At the same time, we continue to improve our competitive position. Our new plant in Balboa, Spain and the switch line in our plant in Manheim, Germany are starting operations. We are close to finalizing the purchase of our second soy-crushing plant in China and we are working on a number of buy-on energy joint venture project in North America and Europe that fit strategically with our business.

At our annual shareholder in late May, we outlined Bunge’s vision for sugar and sugar-based ethanol. The sugar business has similarities to our core operations. Integration, risk management [and logistics] are essential. In many ways, sugar is a natural expansion of our agribusiness product line. They attract the business because it benefits from steady growth and demand and from a move in production to lower cost markets in the southern hemisphere. The ability to shift production between sugar and ethanol offers a natural diversification and flexibility.

We created a sugar origination and marketing business to learn more about the industry and over the last 12 months, we have developed a solid position exporting sugar from Brazil. We intend to leverage this position in a meaningful way to become a global fully-integrated player. Bill will now provide an overview of our results and outlook.

Good morning. Before I begin my regular remarks, I would like to discuss certain topics that may be of interest to investors - Bunge’s cash flows, our program of secured advances to farmers in Brazil and taxes. We have posted additional information on these topics in the investor information section of our website this morning. We encourage you to visit the site and read the presentations. We hope they are helpful.

First, let me discuss cash flow. For the period from 2001 to 2005, Bunge produced cumulative operating cash flow of $1.5 billion. For the period from 2003 to 2005, Bunge produced a cumulative $1.1 billion in operating cash flow. During the same periods, Bunge produced $46 million and $185 million respectively in positive free cash flow. Our definition of free cash flow is operating cash flow plus proceeds from divestitures and sale of assets, less capital expenditures and less dividends paid to our shareholders and minority interests.

Since 2001, Bunge has tripled in size. We operate in a growing industry with many attractive investment opportunities. We intend to invest all of our operating cash flow and proceeds from divestitures and sale of assets after paying dividends to take advantage of these attractive opportunities. Our target is zero or neutral free cash flow, based on our definition.

Second, let me address our program of secured advances to farmers in Brazil. These advances are an extension of credit to farmers in return for future delivery of crops. They are an essential tool for securing crops and a normal part of the Brazilian agribusiness market. To give you a sense of the interest rates that we charge on these advances, in 2005, the average effective interest rate on our secured advances portfolio was approximately 12%. These advances are well collateralized by the physical crop by mortgages and other security. Credit losses averaged approximately 1% of average outstanding balances between 2001 and 2005. You will note, in the charts on our website that our net exposure is, in fact, below the amount at the same time last year.

We will continue to review the information we provide the market related to secured advances. If we can enhance it in the future without compromising competitive information, then we will do so.

Lastly, our results have often been affected by movements in tax accounts as we are a global business that operates in numerous emerging markets. In February, we provided explanatory materials related to 2005 taxes on our website. We have now updated these materials to reflect the first half of 2006.

Now, let me give you some perspective on the second quarter. The second quarter typically represents a higher level of activity for our South American agribusiness operations and the slowing down of crushing operations in North America and Europe. Fertilizer sales are normally slow as we build stocks for the strong demand of the South American planting season. As a result, the second quarter is typically seasonally weaker than the third and fourth quarters.

Let me now turn to our results. In agribusiness, volume was down due in part to low oil seed processing activity in Brazil and a weak demand in Southern Europe. Freight management losses of $44 million were greater than expected and represented the largest variance in results over the same period last year. In South America, oil seed processing results decreased due to depressed crushing margins in Argentina and lower volumes in Brazil. Farmer protests in brazil and overall slow farming selling contributed to the low crushing volumes in that country.

The average Real U.S. dollar exchange rate strengthened 12% when compared to the second quarter of 2005, resulting in higher local costs in Brazil when translated into U.S. dollars. International marketing performance was lower due to reduced volumes and margins. North American results, while good, were below last year’s high levels.

Fertilizer results were lower in the quarter due to lower sales volumes and margins as soy farmers held back purchases in anticipation of the Brazilian government’s aid package. Selling, general and administrative expenses, the second quarter of 2006 declined due to lower expenses resulting from lay-offs made earlier in the year and a $12 million provision reversal due to a favorable court ruling relating to Brazilian social taxes. Fertilizer results for the second quarter of 2005 included a $35 million value-added tax credit related to taxes paid in prior periods.

Edible oil results were stronger due to higher volumes and improved margins in Europe. Margins benefited from lower seed costs, the consolidation of an acquisition of Poland, better distribution and brand positioning. European results more than offset weaker results in the Americas. In North America, oil shipments to buy diesel processors are having a positive impact on margins.

Milling results were strong but down due to lower margins and higher expenses. Interest income increased primarily due to higher levels of interest-bearing accounts. Interest expense increased primarily due to higher short-term interest rates. Volatility in the value of the Brazilian Real, relative to the U.S. dollar during the second quarter of 2006 resulted in exchange rate losses on the net U.S. dollar denominated monetary liability position of Bunge’s Brazilian subsidiaries.

In the second quarter of 2005, the appreciation of the Brazilian Real resulted in exchange gains on the net U.S. dollar denominated monetary liability position of Bunge’s Brazilian subsidiaries.

The effective tax rate for six months ended June 30, 2006 was 9%, compared to 29% in the same period in 2005. The decline in the tax rate from 2005 was primarily due a reduction in income from operations before income tax for the six months ended June 30, 2006 of $238 million, compared to the same period in 2005. Most of the decline in income from operations before income tax occurred in subsidiaries that are in tax jurisdictions with higher income tax rates. In addition, higher earnings and lower tax jurisdictions and the effects of a legal restructuring also contributed to the lower effective tax rate.

Minority interest expense decreased when compared to 2005, due to lower earnings [unintelligible]. Net financial debt and readily market inventories at June 30, 2006 increased $598 million and $596 million respectively from December 31, 2005 primarily due to seasonally higher levels of grain and fertilizer inventory in South America.

Cash flow used by operations was $400 million for the six months ended June 30, 2006, compared to $349 million used by operations in the six months ended June 30, 2005. Bunge’s cash flow in the first half of the year is typically negative as cash is used to purchase oil seeds and grains from the South American harvest and fertilizer raw materials, in anticipation of the new planting season.

Now, let me discuss Bunge’s outlook and guidance for 2006. Our performance in the second half of the year should be much better. Freight results are expected to improve since capacity previously contracted at higher rates has been substantially utilized. Farmer protests in Brazil have ceased and the Brazilian government assistance program is starting to have a positive effect on farmers’ credit exposure and their commercialization of crops.

Although AMDA, the Brazilian Fertilizer Industry Association, now forecasts lower year-over-year retail fertilizer sales, we expect our fertilizer business will perform better than last year due to cost reductions, enhanced risk management and reduced inventory levels of the market. Our North American and European operations are expected to have a good year. Strong domestic markets for milling and European edible oils will contribute to improved performance in our food products business.

Our enhanced foreign currency hedging programs and working well. Net income effects of the strong Brazilian Real should be mitigated by our initiatives to improve margins, lower costs, decrease our effective tax rate and reduce exposure to the Real throughout our business. Although difficult to quantify, marked-to-market effects on freight, foreign exchange and commodity exposures will probably shift some results from the first half to the second half of the year. Results will be realized when physical volumes are sold.

Our guidance assumes the following: stable currencies in South America and Europe, normal crops, stable international fertilizer prices and a decrease in Brazilian retail fertilizer market sales when compared to 2005. Based on these assumptions, our 2006 net income guidance is $425 million to $445 million representing $3.50 to $3.67 per share. This fully diluted per share guidance is based on an estimated weighted average of 121.3 million shares outstanding and includes $0.06 per share for stock option expense, as well the effect of impairment and restructuring charges taken during the first quarter.

We will now be happy to take your questions.

Thank you. [OPERATOR INSTRUCTIONS] And we’ll go first to John McNolan with Prudential Equity Group.

Hi, good morning, everybody.

Good morning, John.

Good morning, John.

Just a comment, Bill. I appreciate the slides that you put out there but you know, a lot of us look at free cash flow from operations and don’t include, you know, proceeds from the divestitures, you know, we’re just kind of looking at the operating business, so I mean, you can comment to my comment but I just, you know, I just make that point.

What we’re doing, John, is we’re taking assets which were not well aligned with our strategy or assets which were less productive assets and we’re re-deploying them into areas of our business that are clearly aligned with our strategy, that have higher growth and higher profitability.

As you can see, we’ve done an extensive amount of that over the last few years. We’re trying to manage the balance sheet so that we maintain a strong balance sheet. We’d like to see steadily improving credit ratings for the company and we feel that matching our capital expenditures to the amount of operating cash flow, plus the proceeds that we get from divestitures of assets is a prudent way to do that.

Okay. I appreciate your answering that. And just in terms of the freight losses, are these losses versus what you would have gotten if you had just used the cash market or just bought the freight independently.

Well just to look at these straight programs, you have to look at it over a longer period, so we had when we contract some of these freight contracts into the future, you have to also add previous years. So, when you think about - you have to look at some of these losses that we had this year versus the profits we had last year and the year before. You cannot always time it perfectly in terms of what - how much do you need. So, in times when there’s very scarce [unintelligible] on transportation, you have to make some longer-term contracts and this is exactly what’s happening here is the tail end of some of these contracts that we hired in the past. So, we are comfortable with where we are with these - some of these longer-term contracts we have because at the other end, last year and the year before, we had very positive results there.

But your lines were probably a little bit lower than expectation, so you had less need for freight. Am I thinking correctly?

That is correct and that actually was a factor in exaggerating the situation, I think because we had less ability to pass through some of these costs to our customers. If we had been in a strong volume environment, then I think we would have been more able to pass it through and in fact, in our original guidance at the start of the year, that was our assumption. We thought that we would be in a stronger business environment and would be able to pass through some of these incremental costs.

Unfortunately, because of the situation in Brazil and because of some of the reduction in demand caused by the bird flu outbreak in the Mediterranean, that did not occur.

Okay and to the extent there’s freight gains down the road, you’ll quantify them?

Certainly, if we have material freight gains, we will let people know that we have had a, you know, a positive result in that business. I don’t know that we will quantify exact amounts every single quarter. We’re quantifying the losses here because we think that it is a material event that investors needs to know about.

And to the extent, Alberto, you make investments in sugar now, it would seem to me that everyone involved in sugar right now from growing to refining, you know, is just kind of coining money. It’s not usually your style to kind of buy when things are this good - could you kind of comment to this?

Yes, you are right. We were criticized in the past that we took a little bit more time in China until we got it right and we have passed already on a couple of opportunities where we don’t think it is the right moment but there might - even in an environment like today, there might be one or the other opportunity that could work out well and sometimes, you also have to start with something but we are very clearly, we have our stringent rules about, in terms of returns, and if it doesn’t work now, it will not work.

But that’s why we are starting with the trading. We are starting with the logistics. We are starting with the origination. So, we are doing the part where you, at the moment, don’t need assets and we are investigating a lot of different opportunities not only in Brazil but in also other parts of the world. So, we will be very disciplined like we have been in the past.

And just my last question on the fertilizer business, clearly, you know, the market trends in your core Brazilian market, you know, volume estimates are coming down and then I guess, if I read correctly, you’re assuming market share losses. Is that right, Bill?

No, we’re not assuming market share losses for the year. We are being disciplined, in terms of pricing in brazil and also, in terms of extension of credit so that, you know, that may have an impact on our market share but we’re not assuming that we will lose market share for the year.

Okay but you assuming that the market is down in line with what these estimates are?

Yes, we are.

Three, four percent? And just in the quarter, you know, the swing in SG&A and fertilizer, some of that was due to the gain, the other just by cost cutting? I mean, it just seems like a pretty big drop in SG&A?

Yeah, there was a $12 million gain in - which is in the fertilizer SG&A number related to this tax case that we won and so that’s part of the difference. The rest of it is cost cutting and we’ve been quite aggressive going about reducing our expense base.

Okay, thanks, a lot.

You’re welcome.

And we’ll go next to David Driscoll with Citigroup.

Good morning, everyone.

Good morning.

Good morning.

Bill, Alberto, the press release seems to indicate that agribusiness volumes were down, I think, 4% in the second quarter and fertilizer volumes down 3%. Can you guys just help me connect the points? Those volume declines don’t seem that enormous to such an extent that the second quarter results would be impacted from, I mean, my estimate was, you know, something close to $0.70 a share for the second quarter and then your guidance back on June 26th was, I think, roughly, break even earnings. So, certainly, you know, and in that press release, you described the impact, because of the farmer protests, but simply, when I look at the volume declines, it doesn’t seem to be as large of a volume decline as I would expect, given the reduction in earnings. Can you help me out and connect some of the points?

The key one is more when you see the [unintelligible]. This has a ripple effect through the whole system because you have to re-route some of the supply to Argentina, to the U.S. and so on at more expensive costs and import. So, what it has, some of the volume came down but the biggest effect is on the margins. So, at the same time, we also the disruption in - where the bird flu in the Mediterranean, so it does have a strong effect when you look at gross profit on the margin.

You took the full-year numbers down by $0.58 when you came out with that release and you’ve maintained that guidance today. Bill, Alberto, can you talk to us a little bit about a lot of people, I think, have been struggling with what the right base of earnings is in which 2007 will grow. Consensus estimates came down in 2007 and to me, that implies that people are looking for a weak result in the second quarter next year but, you know, obviously, your results are very volatile quarter to quarter and I think people are struggling with how to interpret, you know, where this business really can grow. If you want to say that second quarter this year was an unusual event, that would stand to reason that next year, you know, when we lap this quarter, it will be an entirely different result, back to the numbers that we’d seen in previous second quarter. Bill, Alberto, can you talk a little bit about what will happen next year and how you view this farmer protest and the disruption to the business?

Why don’t I start make a comment and then I’ll ask Bill. Look, first, it’s very important, you have to look at this on a yearly basis. We have to remind everybody very, very important. These quarters, there are movements around the quarters. When one crop starts, the other one ends and so on. You have to take a yearly look and now, when I look at next year, it’s a little bit early to say where we will be. We will update you by the end of the year when we are through the season but I’m optimistic because what we are seeing is obviously, some of these issues like the freight will not be there anymore. We have some of our newer plans up. Bill Bowers now up in this half year. We will have it full next year. Catarina in Spain will be up. The Voronezh plant in Russia will be up. So, a couple of our plants will be up and will be positive. We will have the full benefit of the cost reductions that we have done at the beginning of the year. So, next year, we will have it. So, we also believe that some of these over capacity from Argentina will be digested sometime during next year. So, I’m quite optimistic when I look at next year. I don’t want to quantify it yet but also, very important is that the Real has become more stable, which is very important.

So, at this level, at 220, everybody’s adjusting themselves to make money at this level. So, it should be okay for the farmers because we have to remember the biggest problem we had in the last and this year was the appreciation of the Real, not the fact that it was strong but they were buying, the farmers were buying the imports at one level and when they were selling the crop, it was even stronger. Now, if the level of the Real is stable, they can make money and the imports, also, many of them are priced in dollars, so they have the benefit of lower import costs. So, we are kind of optimistic for next year but it’s much too earlier to talk about in detail.

The other big factor, I think, is the increase in buy diesel production. That’s just starting to come on stream here in North America but it will be going full board next year, so we think that that is going to be a significant factor as well. Just to go back to Alberto’s point about the Brazilian farmers, we did, in fact, do a complete review of the farm economics for the farmers in brazil during the quarter just to confirm that our belief that the farmer can make money at this level of exchange rate and just about everywhere in Brazil, except the very furthest areas in Mato Grosso, from the port, the farmer will cover all of their costs, including land rent and make a decent return. Even in these far western areas of Mato Grosso, they will cover their variable costs and exceed their variable costs, although they may not get full compensation for the value of their land. That gives us a lot of confidence.

Can you guys talk a little bit about the projects out there? You mentioned a number of different projects that are coming on stream in 2007. I guess the takeaway that I’ve had on this is that it seems that a number of the capital projects that you’ve had under way for, you know, in some cases, two years, in some cases less but you have more new projects that are actually going to come on stream in 2007 - the Santos Port, I don’t actually think you mentioned that a moment ago in your litany of projects that are coming on but again, can you just give us - there’s something that I don’t think we focused on enough on the substantial $500 million investment program that you’ve had for capital spending way above the depreciation levels and maintenance levels. So, I think points here are extremely helpful.

Yes, the - very important is when we talk about, in Spain, we have struggled and with these new plans - Bill Bower, Catarina, and with the shutdown or shift of three or four of the other ones, we will have a significant improvement in efficiency and these are larger plans directly in the port and we could switch it either from importing mill or running it. This has a major impact in it. The additional one are the two projects - one in Russia, Voronezh. The other is Lichens in Ukraine. These will all be up and running. These are relevant.

Also, in Brazil, we have basically finalized the expansion of - or finalizing the expansion of our mining projects. This is a 10% increase in mining and [phosphate] production. This is also relevant because today, we have to important the phosphate and now, we [will] be able to supply from our own need, so this has a positive impact. We have also finalized the project in the United States, the new plant in Fort Worth. The switch lines in Germany, the consolidation of our businesses in Poland. S

So, there are a couple of them that are maturing now and you’re right. With a census, project, we should be able, by the end of the year, to use that port for beginning to import the fertilizer that should give us also a break, reduce our import costs.

So, when we look at - many of these projects are getting ready for next year. Am I missing one, Bill?

Well, just a comment on Fort Worth is an edible oils plant. It’s not a crushing plant. Nanjing in China, which we should be closing shortly, that’ll be a new plant which will be on it and operating, would be some of the port projects around the world will come into operation. Ramallo in Argentina will be fully in operation with increased capacity. I think we have a port project in Vietnam that should be up and should be running. So, there’s a variety of different projects which are just about ready to come on stream. We have been accelerating our CapEx spend and naturally, there’s a lag associated with that before you start seeing a result.

One final question, if I may. The third and fourth quarter would seemingly have very high EPS expectations embedded in them when we look back over the history, Bill, you know, certainly, you’re going to be at or near your highest you’ve ever achieved on earnings per share for those two quarters. A lot of folks have pushed back on this and just a question here is, is this conservative? Are you really able to achieve this? What’s the confidence level in the back half of calendar ’06?

Well, we went through a process in mid June of re-forecasting the entire business, bottoms up, from all of the business units and we were quite stern with them that we wanted very realistic numbers out of them and the guidance that you have is that product. A number of factors I think are going to make the second half a good second half, first is that most of the results from North America come in the second half and North America is having a good year. Second, we don’t expect a drag from freight anywhere near like the drag we’ve experienced in the first half to eh year. Third, we do think that things are improving a little bit in Brazil.

Certainly, these new auctions from the government have helped our commercialization of soy. There’s over 3 million tons of soybeans that have been commercialized through these auctions so things appear to be loosening up in Brazil somewhat. The fact that the exchange rate is stable and the farmer profitability is in line to where soy farmers can make money at the existing exchange rate we think bodes well for the fertilizer market as we go forward. Fertilizer sales this year are going to be very heavily backend loaded because the farmers were waiting to see what the government aid package was going to be before they committed themselves to buying fertilizer and we also think that there might have been some shifting of results out of the first half into the second half because of mark-to-market effects on some hedges related to our risk exposures within the business. We would then pick up the benefit of that when the actual physical product is sold in the second half.

Thanks a lot everyone. That was helpful.

And we’ll go next to Christina McGlone with Deutsche Bank.

Good morning.

Good morning, Christina.

Good morning, Christina.

First question, when you talked about North American ag. being down year over year, looking at board crush margins, they’ve been up substantially all quarter. I’m curious, how does this impact the third and fourth quarter because like you said, it’s more North America waiting and North American trends are very strong. Could we see - should we see results be up year over year in the next two quarters in North America?

We’re expecting very good results in the next two quarters. I think part of the effect in the second quarter was a mark-to-market effect on some risk exposures that we had in North America which [reduced to results] in second quarter and we would expect to pick that up in third quarter and fourth quarter.

Okay and Bill, in terms of freight, you talk about less of a negative impact in the second half. So, on a year-over-year basis - versus sequentially, but on a year-over-year basis, is it neutral? Is it positive? How can we look at it that way?

Freight on a year-over-year basis, in the second half will probably still be a drag. It will not be a positive factor but it will be much less of a drag than it has been in the first half. There’ll be much, much less material.

And then as we go into ’07, it should be a year-over-year benefit?

Going into ’07? Yes, we expect that - the way that we currently have our freight book aligned, that we should see a benefit in ’07.

Okay and then going - there’s been a lot written recently about Amazon protection. I don’t know if that has an impact on you and then there’s news about droughts in Europe and a lower sun seed crop in the Ukraine and Russia. How do those events impact Bunge?

The European one is a little bit early but we are watching it very carefully. We are coming into, clearly into the weather markets, same as in North America. The first three weeks in August are - the weather - it was very important to see the weather. We all remember 2003, where at this time, everything looked good and then it turned different and last year, it was the other way around. So, it’s a little bit early to say. We do not see anything unusual. You have to remember that there’s always some place in one of the continents where there are issues. There’s never a perfect year and at the moment, all the indications are there are some pockets of issues but nothing major.

And in the case of the Amazon, it is really these issues about what you see in the news. This is extremely minor, the amount of soybeans that are grown in the biomes, the Amazon biome.

Okay.

It should not have any effect.

Okay and just my final question. I wanted to know what gives you confidence that international marketing will improve because from what I understand there’s still a lack of forward contracting in the soybean market and maybe we’ll see more volatility in August with the weather but I just wanted to see why you think that would improve.

One of the main reason is we had this disruption in the second quarter and a little bit before also. We had this bird flu issue in the Mediterranean and what we are seeing is that, you know, the success capacity from Argentina where there is a lot of competition out there. I think this is all being slowly digested by more demand. The demands picture is reasonable and we have a very strong picture from the oil side. The bio-fuel is demanding more and more of the oil, so why in the past, a lot of the crushing was geared much more towards the mill, we have a little change here, a slight inclination more towards the oil side. So, this is having a benefit on the crushing margins.

And also, basically, these are the [more ones] and also we had some issues with the disruption from Brazil and the supply, so we are a little bit more confident looking forward that from the international marketing side, we should see a positive contribution and very important is the freight reduction, reduction of the freight loss.

Okay, thank you.

You’re welcome.

And we’ll go next to Ken Zaslow with BMO Capital Markets.

Good morning, everyone.

Good morning.

Good morning.

I’m kind of glad I went a little later because I have a lot of questions, so I apologize ahead of time. Can you quantify the hedges impact from the back half - from the first half to the back half?

I’m sorry. I’m can’t, Ken.

How material - are we talking about $10 million or are we talking about $50 million to $100 million?

Well, we think it will be a material impact but I really just want to quantify it at this point because it’s very difficult to come up with an exact number.

Okay. In terms of, you know, looking at your back half numbers relative to the second half of ’04 which was your best result, I believe, how does this year bode better than that? Like, what are the - from an outsider’s point of view and understand we don’t have the nuances that you do but how do I look at that and say, you know, 2h ’06 should be materially higher than the second half of ’04?

Well, we went through the factors earlier that we think are going to make the second half better.

Relative to ’04, in terms of, you know, to me, ’04 was a very strong environment. What sequentially has improved that you can, you know, match those results to exceed them?

Well, there are a couple of issues. First of all, between ’04 and today, we have grown, we have invested, we have new businesses. Europe is contributing - Europe was really a drag in 2004. Europe has contributing much more. We have a lower tax rate. We have probably - you have seen, in the case of fertilizer, there is much more concentration in the second half of the year, so there are a couple of items. I don’t get all the details now in my head but would you add something, Bill?

I think those are probably the biggest ones is more concentration with the fertilizer sales in the second half to the year compared to ’04, just a bigger business generally because we’ve grown.

Low income tax.

Lower tax rate and significant cost reductions in the South American operation. Also, the north American operation is going to be contributing a lot of our results in the second half and while the North American operation I think was good in ’04, I don’t think it was as good as we are expecting it to be this year. So, I think we are - we should see some sequential improvement in north America.

And just to be clear, when you say the tax rate lower, you can say that is part of ongoing operations through, right? So, that wouldn’t be, you know, it’s created because of the currency, not so much because of one-time events. This is part of your operations, no?

That’s right. We expect, because of the first - because our capital structure has improved from 2004. You remember we did these two major restructurings after we acquired Sur Real and then after we acquired the Brazilian minority and so our capital structure, in terms of tax efficiency is just materially better than it was in 2004. So, that’s going to be a big effect and second, we, I think, have gotten much more sophisticated in the way that we are hedging some of our risk exposures particularly related to taxes and we expect those benefits to count to this year. Obviously, they already have started coming in the first half to the year but we expect them to carry through into the second half of the year and we did not have those programs operating in 2004.

And just to follow up on another point that was raised earlier, ’07 we should see abnormal growth because this is a period of kind of a kink in the armor, not really - it shouldn’t’ take you off your long-term growth pattern?

It’s too early to say it, Ken. We feel good about 2007. Obviously, ’05, ’06 were tough but we feel better and better but before we become much more concrete, we have to see how this crop, the northern hemisphere crop to come through.

In what areas of the low-tax regions of the world did you see higher growth?

In terms of income, we are earning more income in low-tax areas because of this improvement in our capital structure that I just talked about and so that--.

--Where were the areas?

The areas are in various different locations that have low tax rates. Places like, you know, Singapore and in our holding company in Bermuda through our central treasury operation. We’re earning more earnings there and in Switzerland as well through our trading operations in Switzerland. We’ve also seen a significant reduction in effective tax rate in Argentina. The government had brought in some new rulings in - I think it was in 2004 which it took us some time to adjust our business to and so that is also generating some additional tax efficiencies.

So, it’s not just one location. It’s a variety of different locations around the world and all of this is due to a lot of work restructuring the business.

The key one is the capital structure. I think that’s the key one you mentioned before.

Yeah.

And your presentation on advances, that does or does not include fertilizer?

That does not include fertilizer. We’re just focusing on the advances portfolio there. As you can see in the chart that we put out on the website, our net exposure has declined versus same time last year because there are more soybeans sitting in the silos available for payment of those advances.

And how does that play out on the fertilizer side? If you made the same, you know, slides, how would that all look?

In the case of fertilizer, it is a different dynamic. We have much more risk in the fertilizer receivables than we have in the advances to farmers. The advances to farmers, we are very confident about the credit worthiness of that portfolio.

In fertilizers, we are less confident and that’s why we have been steadily increasing our reserve levels in fertilizers. Today, we are at about 21% reserve for [unintelligible] accounts in our fertilizer areas. That’s up from about 18% in June of 2005 and up from around 11% in December of 2004. So, we have substantially increased it over this time period.

Now, when we go back into history and we look at what our actual collection experience has been on those fertilizer receivables, our collection experience has been pretty good. Actually, our real loss history is in the low single-digits. However, what happens is when farmers are under stress, they delay payment on these receivables and that has been occurring, so we obviously create a reserve against those accounts which are delayed but we would expect to recover some of this in future periods.

Assuming that things improve the way that we think they should in 2007, this may actually be another factor in 2007.

Okay and my last question and I’ll pass it on and I apologize to all the other people - in terms of fertilizer demand re-accelerating in ’07, what would be the dynamics that would create that to happen?

Well, the most important one is that when you look at it, the stocks are diminishing. You can around it. The stocks in corn in the U.S. is coming down so somebody will have to produce the corn. Let’s assume it will not come from the U.S. it probably will come more from Argentina and then somebody will have to provide for the soybeans. So, we expect pick-up on the soybean production next year because this year, we expect a reduction. So, that is the one very important factor.

The second one is it won’t give the confidence to the farmers to use again more fertilizer next year because assuming the Real will be stable, the farmer income next year should be positive and with a - that gives the confidence to the farmer to use again more technology because one of the reasons is they’re cutting a little bit here and there on [unintelligible] technology, crop chemicals and fertilizer and so on.

Also, the additional liquidity which the Brazilian government is providing to the farm sector, additional credit, is going to help. Obviously, that additional liquidity is going to go into buying input so that they can plant and fertilizer is a key input.

I think this is the key point. If there would be more financing available to date for the farmer, they would plant. So, everybody’s very careful. So, that is one of the reasons the governments had to expand because nobody wanted to - the credit because nobody wanted to do it. The farmers want to plant but the amount of funding is not available to them.

Great, thank you very much.

You’re welcome.

You’re welcome.

And we’ll go next to Christine McCracken with Cleveland Research Company.

Good morning.

Good morning.

Morning, Christine.

Just to follow up on a few comments that you made, specifically on the outlook or the confidence of the South American farmer. I’m wondering do you think this aid package is actually going to be large enough to make a difference? You mentioned that you’re kind of seeing some of the benefit of that already but as I understood it, it was actually relatively small, I guess, relative to the magnitude of the issues.

Well, more would always be better but it’s already making a difference, as you said and so we are seeing a tangible benefit in the business. I think one of the most important things is that now the aid packages is a known element. In the past, there was negotiations going on between the farm groups and the government and so the farmers were all just waiting to see what was going to happen with the government aid package and so they didn’t want to do anything. They didn’t want to see their crop. They didn’t want to buy fertilizer. They just wanted to wait and see what was going to happen with this package. Now, the package is a known factor. The auctions are actually starting. More liquidity is coming into the farm sector. It’s removed a significant element of uncertainty for the farmer and so I think everybody can go forward at this point.

All right and then just in terms of the southern European weakness that you saw in terms of demand, if you could just briefly comment on is that still lingering effects from bird flu or is it some other factor?

It was the second quarter. I think that reduction in demand has disappeared, so the demand is starting to pick up again.

Okay, what was the driver?

It was the bird flu.

Oh, it was? Okay good and then just in Argentina, you’ve mentioned, obviously, the over capacity situation but your expectation is that it’s actually being absorbed to some extent. Is that, you know, where are we in this process? Are we kind of, you know, three innings in and we have, you know, several months to go or are we - do you expect kind of more of a shake-out here in the short term that could accelerate the process? Maybe you could comment on just where we are relative--.

Yeah. The increase in capacity in Argentina, which was the correct place to do it - it’s the most efficient one - as a consequence, you saw a couple of reductions in - first of all, in Brazil, including us, with five plants but you also saw, in Europe, a switch from many, including us as well, but also some of our competitors switched from crushing soybeans to rapeseeds. So, you had a mixture. The demand picking up some of it but also reduction of crushing. At the moment, we still are in an over-capacity situation in Argentina but we believe it should be probably a situation of 12 months. But there’s also we see - we have seen that some of the [unintelligible] is irrational so they are not just producing at a loss. So, we also some reduction in capacity insight on Argentina.

Any idea of how much?

No, that is - this is all, you know, some of the capacity is a new [unintelligible] and that is why I’m saying that I believe this is something like probably a 12-month situation.

All right and you feel like brazil is right sized now with these--?

--Yes, I think we feel very comfortable. We have to see what will happen with a bio diesel. If all the bio diesel plants are off, this would make the [presume] Brazil would not export any oil anymore. So, we don’t believe that so many bio diesel plants would be produced in brazil but that would have a positive effect in other parts of the world as well.

So, we think that brazil is right sized. There are obviously some idle plants out there that you might see coming up but we believe that’s right sized now.

And just following your comments relative to your, I guess your plan to expand into sugar-based stuff and on brazil, you’ve been measured in earlier calls. Wondering is there something that has changed? Do you feel more comfortable now that you’ve been involved in some minor way in the industry and maybe you could give us a timeline in terms of investment and when you might expect that to take?

The reason we are very clear about it is we want everybody to know what we are doing. We want to be very transparent. We are very comfortable with this business. The adjacency to our business model is very strong. It’s very close and we are comfortable but we want to let people know that there is no surprise. We want to talk about it where we are in the cycle of the prices and so on.

The ethanol component is a very - an immediate one. It’s a very low risk because it is basically, at the moment, most of it is sold domestically. Look at the case of Brazil and there is an international demand and - but you know, you might see something soon but you also might not see anything soon. So, we want to be very clear that we are comfortable with the feasibility with all of the projects.

You know, I think the important element is that we are making it clear to everybody that we’ve made the decision that we want to be a globally integrated player in sugar and ethanol with a strong base in Brazil and that we are looking for opportunities that will help us to achieve that goal. Our actual origination then in marketing business that we’ve developed out of brazil in sugar is not so small. It’s actually developed quite well and provides us a great base from which to grow.

In terms of - we’ve heard lately that several farmers are actually converting more of their acreage to sugar and I’m sure that’s a gradual process but how do you expect it to affect kind of overall acreage, their competition for acreage for other crops and I think we’ve touched on this briefly before but with your, you know, enhanced exposure, I guess I’d like to know about that. There is obviously new acreage available. Also, that could help it.

I think this is always very normal that they are - that the farmers repeat the [unintelligible] like, in every part of the world. You have to remember that most of the sugar production is in a state of San Paulo and if I’m not mistake, only 1 million tons from the 50 million tons of soybean are growing there. So, there are different regions. The agronomics are different and so you have a little bit of expansion of the sugar cane going into Mato Grosso del Sur but this is not significant. Normally, more of the competition for soybeans is cut than corn so the - you might see a little bit of reduction of this 1 million tons but there’s more - you might see sugar cane taking more away also from the orange juice, from the citrus. So, it does not have a significant impact on soybean growing.

Most of the land which is being converted is actually pasture land.

Okay, and relative to your fertilizer demand, then you’d expect it to be favorable as well.

Absolutely. Sugar cane uses a lot of fertilizer. I think it uses about twice the amount that soybeans do but it tends to be much more heavily concentrated on nitrogen.

And all margins are lower in that part of the business. You should be careful there.

All right. Thanks, I’ll leave it there.

Thank you.

And we’ll go next to Diane Geissler with Merrill Lynch.

Good morning.

Good morning.

Good morning.

Most of my questions have been asked but I just - one clarification here on the freight, how has your expectation about the impact of the - your freight program changed as the year has gone through? You know, I know that with an adjustment to earnings in April and then again in June, I’m just trying to quantify how much of that adjustment was due to the, you know, your change in expectations about the freight impact.

looking at where we are today, much of the change, I think, is related to freight. We had anticipated most of these freight losses, although some of the - it’s a little bit worse than we had anticipated but we had also anticipated being able to pass it through in pricing to customers and so we thought that we were going to be able to offset it in our international marketing of product and that did not occur due to market conditions.

I think you said that the negative impact from freight, in the first half of the year, was about 65 million. So, when you entered the year, you thought, okay, we have these hedges but [Inaudible] no, we’re going to be able to pass it on? You had to assume no negative impact from the freight at that point?

We expect it. We already--.

--We expected some but we thought we were going to be able to pass through much of it.

We probably anticipated two-thirds of it. What happened was that the freight was a little bit worse but South America was a little bit better than we expected.

Okay and then I guess, just getting back to Dave’s question earlier about [debate]. You haven’t backed off your long-term growth rate of 10% to 12% net income growth. Is that correct?

No, we continue to believe that that’s a good a target for us, on average, over five years.

Okay, well, we had sort of entered the year thinking, you know, 2006 would be kind of “more normal” whatever that is, in this business. So, I guess I’m just struggling a little bit with, you know, your coming back to trend and what the true base of the business would be, just as we think about sort of what your opportunities are to add to that base, i.e., the sugar, ethanol, etc. but just given your current mix of business and your projected 10% to 12% growth rate. What should we be using as the base there?

Look, the way we tend to look at it is based on operating profit and probably 2003 was normal. If we exclude the sale of ingredients. If you take 2004, it was probably a little bit of both trend line or when you take - go off 2003, 2004, we should see a tendency of that base and 2004 probably was above trend line.

Okay, so even though your business has changed since 2003, which you--.

And from that, you probably see an increase in percentage. But we hate to say it now. We have not done it in detail now for next year. We will do this by the end of the year, so we cannot say yes if 2007 will be normal back to trend or but we’re optimistic about 2007 - 2006 is clearly below. There is one, obviously, positive nuance which is we’re looking forward to a lower tax rate that we had in 2003, 2004 and we have made some investments. That’s why we are confident that the 10% to 12% growth rate is there.

Okay, well, that was all I had. Thank you.

Thank you.

You’re welcome.

We’ll go next to Robert Moscow with Credit Suisse.

Good morning. I wanted to know on the balance of soybeans available for payment on advances. It looks like you’ve almost doubled there on the value of those soybeans. Is that a reflection of farmers not selling as much as they were last year and then, if so, you know, you also mentioned that the government subsidies had increased selling. Do you expect a material reduction in that number over time?

Well, if the - if I understand you correctly, if the soybeans available, if they are reduced, the growth balance reduces as well. So, if you have - you’re probably talking about the $440 million, is that right?

Yeah. Yeah. You say there’s more in the silos sitting there now. Is that a function of farmers not selling yet?

It’s a function of farmers being a little slower to sell this year. Also, the harvest was bigger this year than it was last year. We had a very big harvest in Brazil. But there’s a normal cyclical pattern here. You’ll notice that we gave you two year-end numbers as well as so that number goes down quite significantly towards year end and so we would expect to see that same cyclical pattern happening this year.

This business is one in - is really a flow business. You have advances being repaid with soybeans that have come in and then new advances will be made for the next planting season. So, the, you know, you see the balance coming down with soybeans that have been received and then it goes back up again towards the end of the year as we provide new advances for the new planting season.

Okay and then a final question. You mentioned you’d done some studies on farmer economics and how the stabilization of the Real would be better for their profitability but I guess I’m still concerned about the absolute level of the Real and how that has affected their profitability. Can you give me a sense of - is it fair to say that maybe half of their problems are solved by the stabilization but then perhaps the continued strengthen in the Real is still hurting them, the other half?

There’s no question we’d all be a lot happier with the Real at [$2.50] but we have to, you know, we have to face the reality of today which is a Real at [$2.20] and when we do the numbers based on a Real of [$2.20], and assuming it stays at this level, almost all of the farmers planting soy are profitable and covering their land rent, as well as variable costs and all farmers planting soil would be profitable covering their variable costs.

The main element of that caused difficulty for the farmers over the last two years was the delta, was the change in the exchange rate and the fact that they were buying their inputs when the real was weaker and then selling their product when the Real was stronger. That differential represents an exchange loss to them. If the Real is stable, it stays at this level, they buy their inputs at this level and sell their crop at this level, then there should not be an issue. If they buy their inputs at this level and we get a little bit of weakening of the Real, which, in my personal view is not unlikely, then that’s a net benefit to them.

Very good. Thank you, Bill.

Thank you.

And we’ll go next to Todd Duvick with Banc of America Securities.

Yes, good morning.

Good morning.

Hi, Todd.

A couple of quick questions for you. Bill, you commented earlier that you’d like to see steadily-improving credit ratings for the company and I just wanted to know if you could kind of speak to that, generally, where you kind of see the credit rating going over the next couple years.

Well, we’re at triple B level right now. That’s improved. When we took the company public in 2001, we were Triple B- and have gradually moved up to Triple B level. We would like to be at a Triple B+ level and so we’d like to migrate there steadily over the next few years. Obviously, I don’t know exactly when that would happen. It’s up to the [unintelligible] agencies but if we continue to improve our balance sheet and continue to grow the business in a disciplined way, the way that we have been, I think that we will get there.

We’ve put out on the website the charts related to cash flows and we also attached to that a chart of our net financial debt which we view as the asset test of how we’re really doing, in terms of managing the balance sheet and managing cash flow and if you look at that chart, you’ll see that, at the end of 2000, we had net financial debt of roughly $2 billion and shareholders’ equity of $1 billion. At the end of 2005, we had net financial debt of roughly $2.7 billion and shareholders’ equity of roughly $4.2 billion. So, a really dramatic improvement in the strength in the balance sheet over that period of time. Now, what would happen was that we were trying to match our capital expenditures to the operating cash flow generated by the business and the proceeds from the sale of assets. We did do a number of acquisitions during this time period but they were mostly financed with equity. We raised about $1 billion in equity in this period. A little bit of it was financed with that but we mostly used equity to finance those acquisitions.

And so naturally, a result of all of that was a much stronger balance sheet. WE think that this is the right way to manage the business and we intend to continue managing the business that way going forward and so we’re hopeful that it will eventually result in an upgrade.

Okay, that’s helpful. I guess, kind of near term though, obviously, you’ve had a rough start to the year and you know, I’ve been listening and it sounds like you’re e really expecting that turn around and I think you’ve got good reason for that. I’m just curious though, with respect to, you know, two of the rating agencies is putting you on negative outlook last month certainly your long-term trends are positive but kind of near term, you’ve had a rough patch here. Is there anything - well, then I guess tying that into - it sounds like you’re going to be accelerating some of the CapEx spend in the near term, related to bio diesel, are there some things that you can do to kind of sure up confidence, I guess, for the fixed-income investors in the near term with respect to either free cash flow or just things that you can do to increase our confidence that things are turning in the right direction.

Well, we’re focusing a lot on cash flow at the moment. The first half to the year is always negative cash flow for us and we’re a little bit worse than we were last year. But we have a big emphasis on it with - throughout the company. I’m confident that we will end the year with positive operating cash flow and we’re going to do our best to make that’s as high as we can get it. The--.

--Yeah, I don’t think we’re accelerating CapEx. CapEx is $30 million below last year. I think when Bill meant acceleration was that in the past, we have accelerated and some of the projects are now coming up now and starting to contribute in earnings.

That’s right.

Okay.

We’re not changing our CapEx guidance going forward. We’re keeping it at the same level to the extent that we’re looking at opportunities in the sugar business. Most of those opportunities in the near term are acquisition-related opportunities, not CapEx and of course, when you do an acquisition, if you’re pricing it right, it brings cash flow with it and should, in fact, strengthen the balance sheet.

Okay. All right. Very good. That’s helpful. Thank you.

You’re welcome.

You’re welcome.

We’ll go next to Victor Galliano with HSBC.

Hello, good morning. Just a couple of questions here. In terms of the edible oil business which obviously had a much better performance in Q2, do you see this as a sustainable trend going forward and related to this, I know you’ve been involved historically in a build-out there in eastern Europe, in terms of your edible oils business, is this improved performance because this build-out is finally beginning to pay dividends?

And secondly, on the sugar side, I’d just like you to give me a better feel for what you mean by a sort of integrated approach that Bunge’s going to have for this business. Are you going to be doing the refining and the processing? The refining of sugar and processing into ethanol as well?

To your first question, that is correct. We have underperformed in the past in edible oils. We are starting to perform at the level of cost of capital and many of our actions and improvements and expansion in eastern Europe are starting to work out and we do expect it to continue to improve as we bring in, like, the new plant in Voronezh in Russia and as we also improve our operations in Ukraine. So, we do expect it to continue improving. We see they are positive trends.

In terms of the sugar business, what we mean integrated is similar to the way we operate in oil seeds processing. It includes origination. It includes logistics, terminals, mills and normally, when we talk mills, one of the mills to process the sugar cane would include sugar - raw sugar production and ethanol and in terms of refinery, we have not decided yet. Probably, it would not include refineries at destination but it might include some joint ventures of refineries but we have not made up our mind there yet but it’s basically an export business of raw sugar.

Okay, great. Thank you.

You’re welcome.

And we’ll go to David Driscoll with Citigroup.

My questions have all been answered. Thank you.

Thanks, Dave.

And next to Christina McGlone with Deutsche Bank.

Thank you for taking the follow-up. Just a quick question. ADM’s out on a tape saying they’re building a bio diesel plant in Rondonopolis which, as you pointed out, Alberto, very good for industry crush margins down there. What’s Bunge’s plan for bio diesel, in terms of maybe participating directly, wholly-owned or [unintelligible] like in Europe?

In the case of Brazil, we are still analyzing. There are some pros and cons and the rules are not very clear yet. That’s why I was very careful at the beginning in saying there might be 2 million tons but we have seen very little concrete projects at the moment. So, we’re evaluating it very carefully.

Okay, thank you.

You’re welcome.

And we’ll take our next question from Alec Patterson with RCM.

Yes, just extending it on bio diesel discussion, the notion that a lot of bio diesel capacity use trying to be put in tandem with crushing capacity and with the Argentinean crushing capacity, you said it’s starting to get soaked up. What is your outlook as bio diesel comes into the fold for crushing capacity globally? Do you see it getting soaked up or is there a risk that we’ve seen incremental capacity come on for the, you know, for having, you know, proximity to bio diesel markets?

When you talk about soybean plants, we see less of a risk because 80% of the crushing or the processing of the soybeans is mill and 20% or 18% is oil. So the risk of having a new crushing plant just for soybean oil, the risk is lower but we have seen one or the other plant going up in Europe and for rapeseed because the oil content in rapeseed is above 40%, 42%. So, but we are watching it very carefully at what - is one of the reason we are working with some joint ventures that we make sure that if a buy deal goes up, it is built close to one of our crushing plants.

In the case of brazil, there’s also still the question open about the PetroBrass project of including the vegetable oils, in general, in their cracking process. So, we have to see how that technology evolves because that might mean that the oil would be soon directly for PetroBrass and you don’t need a bio diesel plant.

This is actually very interesting and I don’t know if we’ve discussed it much in the past but PetroBrass has developed this new technology called HBio where they can treat vegetable oil and then combine it directly with mineral oil and crack it in their refineries without ever having to go through a bio diesel refinery and so that, you know, that has the potential for substantially increasing a demand for soybean oil. I think PetroBrass has said they wanted to do about 300,000 tons of soybean oil in Brazil over, you know, the next 12 months or so, so it’s a pretty significant amount.

Does that imply a lower processing count for the soybean oil into the bio diesel?

It implies a better yield because the byproduct of glycerin that you would normally get out of bio diesel refining would be through this process converted into useable fatty acid chains and so you get better yield of bio diesel out of this process.

The Nestea company in Finland also has a similar process so we are watching this very carefully.

Okay and just, I mean and sort of following up on John McNolan’s comments about looking at free cash flow and incorporating asset gains, asset disposals, etc. into the equation, I guess, as an investor, I tend to separate out returns of capital from returns on capital and free cash flow as a proxy for returns on capital. So, are you really looking at it as these asset sales as an ongoing source of cash?

We’re just trying to measure how much cash we’re investing in the business and to have a methodology of making sure that we’re not over-investing, that we’re matching the amount of cash available to the amount of investment that we want to do and so obviously, the first source of cash is operating cash flow but we do have some assets that, from time to time, are underutilized or don’t fit our strategy well anymore and so we would like to redeploy the proceeds of the sale of those assets into productive assets with a good strategy fit in our business. So, it’s really just a methodology for us to manage how we’re using cash and investing cash in the business and we’ve tried to communicate to the market that this is our methodology. I think we probably haven’t been clear enough in the past, so we’re trying to make it absolutely clear today.

So, does that include acquisitions in your capital expenditure assumptions?

No, it does not. Acquisitions we view as being different from CapEx. If you are pricing an acquisition correctly, you have the cash flow of the acquisition that you receive immediately and if you have an acquisition which is accretive in a short period of time and has substantial cash flow that comes with it, you can actually improve the balance sheet. And when you look at the acquisitions that we’ve done over the last five years, that’s been the case.

If we see large acquisitions that will require substantial amounts of cash, then we’d be willing to go to the equity markets. Of course, we have to make sure that we price those acquisitions correctly so that we have accretion quickly to [unintelligible]and in fact, so far, I believe all of our acquisitions have been immediately accretive. So, this is just the methodology that we’re using.

Okay, that’s fine. Thanks, very much.

You’re welcome.

You’re welcome.

That does conclude our question-and-answer session. I would like to turn the conference back for any closing or additional comments you’d like to make.

Thank you for joining us this morning and we look forward to our call next quarter.

This does conclude today’s’ conference. We do thank you for your participation. You may disconnect at this time.