Bunge Global SA (BG) 2010 Q1 法說會逐字稿

Good day, everyone, and welcome to the Bunge Limited first-quarter 2010 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 Haden. Please go ahead, sir.

Thank you, Danielle. And thank you, everyone, for joining us this morning. Welcome to Bunge Limited's first-quarter 2010 earnings conference call.

Before we get started, I want to inform you we have prepared a slide presentation to accompany our discussion that can be found in the Investor Information section of our website, www.Bunge.com under Investor Presentations.

Reconciliations of non-GAAP measures disclosed orally on this conference call to the most directly comparable GAAP financial measures can be found in this slide presentation.

I would like to direct you to slide two and remind you that today's presentation includes forward-looking statements that reflect Bunge's current views with respect to future events, financial performance and industry conditions. These forward-looking statements are subject to various risks and uncertainties. Bunge has provided additional information in its reports on file with the SEC concerning factors that could cause actual results to differ materially from those contained in this presentation, and encourages you to review these factors.

Participating on the call this morning are Alberto Weisser, Bunge's Chairman and CEO, and Jackie Fouse, Bunge's Chief Financial Officer. I will now turn the call over to Alberto.

Thank you, Mark, and good morning, everyone. Bunge's first quarter improved significantly from where we were this time last year. Agribusiness performed well, considering that our origination activity in Brazil was limited by the tight supply -- soybean supply situation.

Fertilizer results in the quarter were weaker than expected due to lower volumes and margins. However, we expect a significant improvement in the second half of the year when farmers purchase the bulk of their fertilizer, which the industry is expecting to be one-third in the first half of the year and two-thirds in the second half of the year.

Also, it is important to note that the high-cost inventory that impacted this business throughout 2009 has been sold, and our average inventory costs are now below market prices.

Edible Oils' results were lower than in the first quarter of 2009 because they no longer include results from our joint venture interest in Saipol, which we sold in the fourth quarter of that year. On a comparable basis, performance this quarter improved due to stronger results in North America and in our Brazilian margarine business.

Looking ahead to the remainder of the year, Agribusiness and Food & Ingredients should perform as expected. However, 2010 will be a transition year for Sugar & Bioenergy and Retail Fertilizer as we work through the integration of Moema and the separation of nutrients from retail.

We are excited that with the addition of Moema to our portfolio, Sugar & Bioenergy has become an important segment for Bunge with attractive growth potential. It has increased our sugarcane milling capacity to 20 million metric tonnes and turned a complementary value chain into a core business that fits well with our strategy and capabilities.

We also continue to expect the second-quarter closing of the sale of our Brazilian fertilizer nutrients assets to Vale. This transaction will result in approximately $3.5 billion in after-tax proceeds.

With respect to the use of proceeds from the transaction, the best way to think about our plans is to outline our general priorities. First, we will use a portion to improve our balance sheet. Second, we will invest to expand and strengthen the businesses we are in today. There are a lot of opportunities in our core businesses and new geographies to enter. And third, we will look at opportunities in other areas that complement our businesses and that have strong returns. We are going to be as disciplined with investments as we have always been.

I feel good where we are today. We have a strong global network of assets. We have a talented team. We are in a strong financial position. And the growth fundamentals of our markets are attractive.

Now I will turn the call over to Jackie, who will provide you with additional details on our results.

Good morning, everyone. Thank you for joining us on the call this morning. Starting with some highlights from the Bunge Limited income statement. Total segment EBIT improved significantly versus a very weak first quarter of 2009. Other than Agribusiness, all segments showed solid volume growth.

Agribusiness volumes were impacted by lower grain origination in Brazil and Eastern Europe due to the combination of the tight soybean supply in South America and slow farmer selling. Nevertheless, the EBIT result for the quarter was very solid, driven mainly by good margins in oilseed processing and strong distribution results due to soybean demand from China.

Sugar & Bioenergy is reported as a separate segment for the first time starting this quarter. Here, volumes grew as a result of the ramp-up of our existing business prior to the Moema acquisition and as a result of the acquisition which closed during February. Sugar & Bioenergy EBIT was modest for the quarter due to the mid-quarter closing of Moema, $11 million of acquisition-related expenses and the net negative impact of the inventory and forward sales step-up in the purchase accounting.

Our Trading & Merchandising business performed well in a volatile period. We expect this segment to begin contributing meaningfully to EBIT as from the second quarter of this year.

Fertilizer displayed a strong recovery when compared to the significant losses it had in the first quarter of 2009, and overall volume growth was good, so this was concentrated in nutrients.

Retail saw lower volumes and market share during the quarter, as we maintained pricing and farmers slowed their purchases in the second half of the quarter. Nutrients' margins begin to improve with the increase in international phosphate prices. Nutrients' EBIT also benefited from lower depreciation expense due to its status as assets held for sale.

Edible Oils posted a solid performance, driven by improvements in our North American and Brazilian margarine businesses and the continued contribution from the Walter Rau and Raisio businesses in Europe. The EBIT results in the quarter were lower than last year because last year's results included our share of profits from our joint venture interest in Saipol, an investment that we sold late in 2009.

Milling results were negatively impacted by strong local competition in Brazil wheat milling as a result of the large local harvest.

Overall EBIT was impacted by a total of $22 million of impairment and restructuring charges, as well as the $11 million Moema acquisition expense.

SG&A expenses are being well-controlled, and for the quarter, would basically have been even with the level of last year, excluding the negative impact of foreign currencies and the Moema acquisition expenses.

The effective tax rate for the quarter was expense of 10% of pretax profit versus a benefit in the same period last year, as we returned to profitability. The rate for the quarter is low due to a one-time net $10 million benefit taken in the quarter as a result of settling prior-period tax issues.

Turning to the balance sheet, our balance sheet is stronger than ever. With commodity prices down across the board as of the 31st of March of this year versus the end of last year, and with good management of working capital our operating working capital levels are below year-end 2009, and our cash cycle is down slightly as well.

Gross debt increased slightly due to the Moema debt assumed with the acquisition.

Cash flow was strong during the quarter. The combination of lower working capital and a return to profitability drove solid cash flow from operations generation, and CapEx is in line with where we expected it to be. CapEx in the quarter was slightly higher than normal for that first quarter of the year due to our three sugar mills accelerating investments in order to get ready for the cane harvest, which began in April.

With respect to our outlook for the remainder of the year, we feel confident in our expectations for good performance in the coming three quarters. Large South American crops should be good for that region and for Agribusiness. Soybean meal and vegetable oil demand is back to average historical consumption levels. Retail Fertilizer should have a solid second half of the year as purchases accelerate near planting season and as margins stabilize. Sugar & Bioenergy should become a meaningful contributor to profits, and the Brazilian cane harvest has begun, and our mills are operating.

Some headwinds include higher-than-expected Moema acquisition and integration costs. That, coupled with lower sugar prices, will somewhat weigh on 2010's Sugar & Bioenergy performance and the expected impact of higher oilseed processing capacity in North America. Compared to 2009, foreign currency continues to also be a headwind, but the risk of an adverse impact of it on our guidance is limited, given our hedging strategy.

In light of this outlook, we are revising our 2010 full-year earnings guidance to $5.30 to $5.80 per share. This guidance takes into consideration $33 million of EBIT impact of the notable items, $19 million EBIT net impact related to the purchase accounting step-up of inventories and forward sales associated with the Moema acquisition and anticipated integration costs.

It also assumes an effective tax rate of 14% to 18% and it's based on an estimated weighted average of 160 million shares outstanding on a fully-diluted basis, which includes assumed dilution relating to our convertible preference shares. The guidance also assumes a second-quarter closing of the divestiture of the nutrients business to Vale.

And with that, I will open it up to questions and answers. Thank you very much.

(Operator Instructions) Vincent Andrews, Morgan Stanley.

I apologize if you already answered some of these questions. But I think in the press release and maybe even in the prepared remarks, in oilseeds processing you talked about margins potentially coming under pressure because of increased capacity in North America.

And I just want to make sure that -- it sounds like what you're talking about is that there are more crush facilities year-over-year. Is that correct?

Yes, we have one new plant, canola plant in Canada. There is a second one coming up. And there are some expansions. So in -- let's call it here and there, additional, not new plants, but expansions in existing plants, but there is obviously also the one in Claypool, Indiana.

At the same time, we are obviously confident that the industry is going to be rational, that it has been. And at the same time, when you think about some other movements, like we have shut down one facility, so it is not sure, but there is a little cloud out there.

And then can I just follow up and ask a little bit about the demand environment, I guess as it relates to oilseeds? I think in previous conversations, myself and others have wondered whether margins in North America or just in general would come down, just because of the change in sort of geographic availability of supply, now that South America has got a big harvest.

Is that not something that you are concerned about? The commentary seemed to be primarily just about capacity.

We feel quite good about where we are in terms of demand. We have now three tougher years behind us. There was substitution, especially in the US, where DDGs were used more. And so the demand increase in the US was not very strong for soybean meal.

But the whole picture for the meat industry has significantly improved. There is also even restaurant consumption is up. Margins are better. We have a very strong demand from China. So the picture in general is quite positive.

As you saw in our press release, the USDA expects an increase of 4% globally in soybean meal demand, and also in vegetable oils. So this is a positive change vis-a-vis the last couple of quarters. And so from a demand point of view, I think the picture is positive.

If I could just -- last question and then I will pass it along. China, yesterday, it came out, is buying corn from the US. I think they did that maybe four years ago, but they do it, I think, as little as possible. And it was a relatively large order, and there are rumors that there are larger orders to come.

Were you guys at all involved in moving that corn over there? Or can you just comment at all about their level of demand, both for that and I guess also in terms of soy oil, which I guess they are not buying from Argentina, and how that is affecting the environment?

In terms of corn, we have the similar view as USDA that in the mid- to long-term, China will become a small -- relatively small importer of corn as the demand continues increasing, especially for the meat industry and as feed. And so we see we are a part of this process of shipping corn, but it is not very clear yet how much it will be this year. But I think it is a positive trend for the industry.

In terms of oils, there is a -- we consider this situation a little bit more temporary, and there are some issues in terms of quality with Argentina. There is a temporary -- or a little bit reduction for the second quarter in demand, and we are providing our customers with oil from Brazil. So we expect this oil situation to be something more temporary. Eventually, Argentina will come back and be responsible for the bulk of the flow to China's oil demand.

Thank you very much. I will pass --.

Ken Zaslow, BMO Capital Markets.

You guys seem to have a lot of cash coming to you, and can you talk about what you expect to do with the cash, just starting with priorities?

Our priority is, first of all, to strengthen our balance sheet. And we will let later Jackie talk a little bit about that. The second one priority is to strengthen our business and expand it. So our core businesses, oilseed, grain, sugar, Food & Ingredients, and the core business, new geographies. The third one, we will look at opportunities in complementary value chains to add where we can use our capabilities of logistics, processing, risk and so on.

Now, this will be a mixture of accelerated CapEx, accelerated investment. It might include here and there some acquisition. But we are going to be very disciplined, as we have been in the past. You want to talk about the -- Jackie?

Sure. Good morning, Ken. With respect to what we expect to happen immediately after the closing of the divestiture of the nutrients business, in the relatively short term, we will pay down debt, probably on the order of close to $1.5 billion. I think we gave you guys a range back in February of $1 billion to $1.5 billion. We think the debt repayment will be closer to the upper end of the range.

And so what we've built into the guidance for the remainder of the year is the assumption of the closing on that transaction during the second quarter, and then the repayment of about $1.5 billion of debt. And then a couple of billion dollars, we've just assumed for guidance purposes, staying in the balance sheet, earning a very low return for the remainder of the year.

Will you guys consider share repurchases?

We believe that we have enough opportunities, enough projects that we would not consider this at this time. So we probably have a different problem is there are more projects than we have funding, so we are not worried about that at the moment.

Okay. The other question I have, your guidance is a little confusing. Can you help us understand -- so you basically took it down by $0.45 and there's a lot of extraordinary taxes and stuff like that.

Can you help us kind of figure out how much is the unanticipated integration, how much is extraordinary, and how much is -- I can figure out the tax -- it seems like it is about $0.25 to $0.30. But what are you actually taking down in terms of the operations I guess is what I'm trying to figure out?

If you take the notable items, those are worth in total about $0.15. And then if you look at the net impact of the step-up issue for sugar, that is worth about $0.10. So between those two things, you get about $0.25.

So with respect to the combination of everything else, that would include the anticipated continued impacts of smoothly integrating the Moema business, a little bit for lower sugar prices and all of that, then that is going to be worth something on the order of -- let's call it roughly $0.20.

And I would like to mention on this integration -- obviously, we are being a little bit more cautious. This is a new business to us. We want to make sure -- these are large farming operations. There is a lot of traveling. There is a lot of discussions going on. There is disruption.

So there is nothing very specific we are seeing here. It is just in general when we do large acquisitions, they are -- there is always some stuff that goes on. So it is more as a precautionary view. There is nothing very specific that we are seeing.

Let me try and say it a little differently. How much "stuff" is not going to be in 2011?

You know, let me say it differently. The way the industry likes to look at it is that when you have -- like we probably will crush or mill next year 20 million tonnes; we could be in the neighborhood of plus or minus $10 per tonne in terms of EBIT. So this year, it will be less. We don't know exactly.

We don't want to say it so specifically. It's too early. But it will be a little bit less than that.

I think I'll that one off-line. I will --. The other question I have is can you just discuss the outlook on the Brazilian and Argentine crush outlook, as well as are soybeans leaving Brazil and Argentina? Is that business up and running, fully utilizing? Just give us a little bit of an outlook on that business as we see it right now.

In Agribusiness, oilseed grains and in Food & Ingredients we continue being confident, as we were in the beginning of the year. The large crops are positive. We will have large volumes, so we will have a good optimization of our assets. There is this, we think, temporary little hiccup of oils not being -- from Argentina not being able to be sold to China. But this, I think, is more a temporary situation. So we feel quite comfortable there.

Obviously also, some of -- there is a little bit of a shift of the business because farmers have been slow in selling their grains in Brazil. So this is shifting into the second quarter of the year. So we will pick up that business in the second half.

So when we look at the general picture, we feel comfortable where we are.

Thank you.

Bryan Spillane, Bank of America.

It is actually Ryan Oksenhendler for Bryan. I guess could you provide a little bit more color around the sugar business? What went well in the quarter? Was sugar good, was ethanol bad? What would earnings have been, I guess, if you had Moema for the entire quarter, as opposed to closing in February? Could you just give a little more color on that and why you expect it to be a meaningful contributor going forward?

The business did well, and obviously, we are all learning and getting -- we need a little bit more time to be very specific, and as we evolve, you will hear more about it. I think with the exclusion of these step-up costs plus the one-time acquisition costs, everything worked quite well.

Ethanol prices are fine, in line with what we thought. Sugar price as well. Overall, we were around two-thirds hedged for the sugar part. So I would say with the exception of this, it would have been a relatively normal quarter.

Ryan, you might also keep in mind that our pre-Moema existing businesses are still in ramp-up mode, so they have not hit their run rate profitability yet. So that would have been -- the quarter for them would have reflected that. And then so then we have Moema coming in kind of in the middle of the quarter, which makes that quarter not anything like what it will be on a go-forward basis, when everything is fully up and running.

I guess given that prices are coming down, how far hedged are you, like I guess for the next couple quarters on sugar, given that prices have come down?

We are more or less two-thirds, 70% hedged for the year on sugar.

Okay. And then just a last question, if I can just follow up to Ken's question on the guidance. I will try and take a crack at it.

But you lowered your guidance by $0.45 and you gave, I guess, that $0.20, $0.25 -- you know, the notable items and the step up-accounting. But you also lowered your tax rate. And you gave, I guess, another $0.20 for the transition or the integration costs. So there still another $0.25 -- $0.20 to $0.25 on the operating line that is lower. Can you quantify that or give a -- reconcile that?

Well, I mean, I think it is just -- it's an overall reflection of how we see the remainder of the year playing out. Partly in sugar, just as we integrate the business and then have a look at what the run rate profitability for that should end up being as we move into next year. And otherwise, it is just a general reflection of maybe a little bit of caution for the rest of the year.

Plus the tax (inaudible).

And that's it.

Okay. Thanks, guys.

Christine McCracken, Cleveland Research.

Alberto, you mentioned that demand for meal and oil looked quite a bit better than maybe we would have expected for the year, at least it is accelerating at a faster pace. And I'm wondering -- you mentioned better feed demand out of the livestock industry. Is this coming in a particular geography, or is this an interplay with distillers in some of those markets? And I guess from my perspective, with lower distillers' prices going forward, I'm curious what your outlook is for that demand.

The last one portion, I didn't hear very well, but let me say most of the increase in demand -- this is a global picture -- is coming from Asia and also some of South America. So US and Europe is still soft, but it is not negative anymore for the year. So that is the way we are seeing it.

Also, we are seeing more and more exports of DDGs, which shows that DDGs has found a balance inside the US, as we see it at the moment.

I guess to follow on that last point, just on the distillers' market. As they continue to increase production, wouldn't you expect more distillers in the market and, therefore, that trend to kind of continue?

What we are seeing is there will be more distillers, but we are seeing more and more of that being exported. Because it probably -- it seems that it has reached its saturation point how much it can be used. We all know it is not an ideal protein and it's not an ideal energy source for feed. And it probably has reached its right level in the US. So we are ourselves exporting more of it.

And then just on your comment relative to the stronger food-service demand for oils, is that in the US or is that something you are seeing outside the US?

No, I was mentioning more general consumption of restaurants in general, which has a positive -- should have a positive impact for meat, and therefore should also have a positive impact for us.

Got you. And then just on the outlook, I guess, for the US crop, we got off to an early start on corn planting. I'm wondering then what is your outlook relative to the soy crop here in the US, and are you hoping for a larger crop -- soybean crop or average-size US soybean harvest?

It is too early to say, Christine. It is really early. We are all focused now on the South American crop. Next quarter, we talk about that.

Just your outlook for sugar. You know, there was a report out I guess this week on the Indian crop looking quite a bit better for next year. Is it your expectation that sugar prices will continue to fall?

Look, we -- obviously, talking about prices is always very difficult. The next day you are always wrong. So let me see it a little bit different. What we see is we will need a lot of sugar cane demand. We'll need a lot of sugar cane supply.

There is this pent-up demand in Brazil. At least for the next five years, the supply has to grow at least 10% for ethanol and 4% for sugar, which means 30 million tonnes of sugar cane year after year at least. So this -- in order to have the farmers plant and do it, sugar prices have to be above $0.15, $0.16 per pound at this exchange rate. So this is the way we are looking at it.

So we are taking it as a view of during the year. So you might have a little bit higher prices, you might have lower prices. So but India will probably never become --in our view, will never become a major exporter of sugar, but one year, it might import a little bit less or a little bit more. So you might see a shift -- if sugar prices are perhaps not as attractive, you might see a bigger shift to ethanol sales.

I'll leave it there. Thank you.

Diane Geisler, CLSA.

Just a question on the Sugar & Bioenergy net sales and volume. To what extent was that -- could you quantify the base business in terms of how much it was up because of pricing and how much it was up because of the inclusion of the Moema business? Is there any way to disaggregate that?

Oh, that is a detailed -- that I don't have at the moment. But I can give it to you qualitatively, which is we have more volume from Santa Juliana and we have more volume from Monteverde, and we have obviously half of the quarter more or less of Moema. So -- but this is a little bit complicated now, to give you the exact details. Is that fair, Mark?

Yes, I would say that, yes, part of it is the trading -- merchandising business is up a little bit year-over-year as well. And recognize we didn't have a lot of inventories carried over from our three mills because they were in development for a large portion of last year.

And even Moema didn't come with all the inventory. So it is a mixture of all three components.

Okay. Well, it is just I'm looking at the volume up 23 and the sales up 162%. I'm just trying to get a little bit better handle on what the --

The prices are also higher.

(Multiple speakers) run rate would have been in the base business prior to the inclusion of Moema.

It is a very difficult quarter, because also ethanol prices were very low last year in the first quarter. So we need a little bit of more time here.

Okay, and then to what -- I think on your last call, you indicated that you thought that the Moema business would add $0.30 to your bottom line. But today's commentary suggests it is not going to be as much as you had originally anticipated. Could you tell me what you expect Moema to add to the bottom line?

I think the $0.30 number that we gave was the accretion that we expected from Moema, [right]?

And does that hold today or is the accretion less than that?

I think it probably will be a little bit less than that. It will be accretive, but it will be less than that.

Okay. Do you have a number somewhere between zero and $0.30 that it will be accretive?

Yes.

I think most of the reason why it would be a little bit less accretive is because of the step-up on the inventory, because obviously we thought about some of the other things. So you can say maybe up to $0.10 maximum.

Okay, so up to $0.10 less because of the step-up in (inaudible) shifted from the inventory?

Well, we didn't do the calculation.

I'm just trying to parse like what part is from Fertilizer and what part is from Sugar, not being as much as you thought it would be.

You mean for the quarter or for the year? For the year, it is basically mostly these step-up, one-times; there is a mix in tax and there is -- we are a little bit more cautious in terms of how our view on sugar is going to be. So from -- in terms of the guidance, I would say most of it is that we are taking a little bit more careful view on the Sugar & Bioenergy business.

I think Retail and Fertilizers should be more or less where we thought it would be.

Okay. Is that just -- has something changed since you made the acquisition to Moema? (Multiple speakers) see the step-up?

No. It is absolutely nothing, but as we obviously look at it, we say, let's be a little bit careful. It might take a little bit of more time. Absolutely nothing has changed.

In fact, let me tell you we probably are positively surprised what we have seen. We are seeing other areas where we are going to have good synergies, where we can learn -- from these eight mills, some things can be learned here, some things there. But obviously, all this takes a little bit of time.

So the -- we are being a little bit more careful that our -- the learning curve and integrating everything, it will take a little bit of more time. But our view is, I would say, slightly more positive than it was over the midterm.

We are quite excited about what we are seeing also from the -- using the co-generation potential in terms of bagasse. We are expecting that we will be expanding over the next three to five years another 50%. We think we will be able -- with not a significant amount of investments, we will be able to increase the capacity to 30 million tonnes, and perhaps in 10 years, to double it to 40 million tonnes in a very attractive way.

So we are -- let's not get it wrong. We are excited about the new segment we have, and we are just being a little bit more careful about -- give us a little bit of time to integrate it well. That is the message here.

Okay. Thank you very much.

Christina McGlone, Deutsche Bank.

Alberto, I just wanted to understand the crush margin environment geographically a little bit. If we can start in North America, your comment about the outlook, was that more related to Canada than the US? Because to Vincent's question, it seemed like you were naming the Canadian capacity.

What we are seeing is, let's not get too excited about where we are now. There are some risks. It might not happen, but it might happen. So there is -- the biggest increase obviously is in Canada, but there is also in US. So it might not happen.

But if everybody is rational, so we might have a normal environment. But we have to be a little bit concerned. So now it is the end of the season in the northern hemisphere, so obviously, there is a slower second quarter and third quarter is always a slower environment in the northern hemisphere, especially in the US. And we are -- when it comes to soybeans. And we are coming now into more in Europe into the rapeseed and sunseed environment.

We are confident that the crush margin should be good here, and in South America, we might have a little bit smaller margins, but we have more volumes. So from a unit point of view, you might see a little bit less margins, but on an absolute amount, should be okay.

And then the question mark is over the fourth quarter in the northern hemisphere.

Okay. And it looks like -- just staying on US, the US crush margins have come up a bit, like off of bottom. And I was curious if that was because you closed Danville or if it is because we are seeing more demand from the US because Argentina and Brazil have been somewhat delayed. What do you attribute that to?

It is probably -- that is correct. It is also -- the picture is decent in terms of demand. And also, it is a very good demand we expect this year for oil. We don't see it yet for biodiesel in US, but in other parts of the world, in Argentina, in Brazil in Europe, biodiesel demand is also up. Global inventories of vegetable oils are coming down. So this has some reflections on the margins.

Okay. And then going back -- I think it was Ken asked about Brazil. So are farmers -- it sounded like you said farmers were still holding on to their beans, and so we would see maybe some shifting from the second quarter into the second half. Did I hear that right?

No, from the first quarter to the second quarter.

Okay, so farmers are letting go now?

They are starting. Also, some of the fertilizer prices went up a little bit too much, so the farmers often try to sell it and already lock in margins for next year. So the relationship between commodity prices and fertilizer were not perfect. So farmers are a little bit more reluctant. And now we are seeing more farmers selling now.

Okay. And then when you talked about Europe, the rape and sunseed crops being good, I think Jackie mentioned Eastern Europe was -- the volumes weren't so good. So I was wondering what that was attributable to.

And then I think there was a fire at your Mannheim facility. How should we think about that? Is that out for the count for a while, or is that going to be right back up?

In the case of sunseed, it is more origination; the origination was also a little bit slower. The crop is okay. The crop is in good shape.

Now in terms of Mannheim, you are right. We had two days ago a fire in our preparation room. And fortunately, nobody was hurt. But the preparation room, and therefore the crushing facility, will be out for a while. It is too early to say, but it could be six months or so.

And it shouldn't -- it will affect somewhat our operations. And obviously, we have to rearrange the way we serve our customers and the way we -- especially oil, the biodiesel plants and so on. It will have a marginal effect on it. Obviously, it is all insured, so we don't think it will move the needle. But it will require of us to do some adjustments.

Okay, thank you. And just last question. On retail fertilizer, what did your share go to? And with the competitive climate being better now are other people still discounting relative to you or is it more in line with what you're doing?

We were -- we probably lost some market share, we are adjusting the way we operate. We are starting to think in terms about how we will operate our retail business after we don't have the new trends anymore. Much of our focus was in selling the phosphate products and that means we will be adjusting our business model. So it takes a little bit of time.

Obviously there are disruptions at the moment. And we are very careful in terms of pricing and we are also very careful in terms of credit and so on. So it is a transition year. So retail will not to be operating at its full potential this year so as we are adjusting it.

Now the market in the first quarter, there were some more discountings, it has come back to normal. I think everybody is also adjusting themselves to the new environment that will be out there because Vale will be the new seller and we will be a different operator. So remember, everybody lost a lot of money last year in the distribution business. So some of our competitors in the retail business are also moving very fast.

If they get a little bit nervous on prices they might discount, but the discounting is not staying so long. So prices at the moment are normal again. But the key one, Christina, is this is a transition year. So, we will need to have a little bit of time, we will have to also slim down in some areas, expand here. So we don't expect too much from retail this year because we want to really adjust ourselves very, very -- be very well prepared for the second half of the year. The first quarter is not so important.

Okay, thank you so much.

Thank you.

Ian Horowitz, Rafferty Capital Markets.

Hi, good morning.

Good morning, Ian.

Good morning.

Just a couple of quick questions I guess to kind of go off Christina's question on the Eastern Europe. I'm just not sure I'm quite following exactly where the weakness was in that region in that area. I mean, you talked about the soy tightness in South America. But can you just put a little bit more color on that Eastern Europe (multiple speakers)?

It was not a weak -- let's say it was a -- you know, this is the problem of us reporting quarterly. You always have to look at this business on an annual basis. And what is happening in both much stronger in Brazil but a little bit in sunseed in Eastern Europe is that there's, sometimes farmers wait a little bit longer in selling, so then it shifts into the second quarter.

So there is nothing to worry about, but it's just for us to give you color of why -- if there would have been a normal, let's say a normal pattern of selling we should have seen a little bit higher earnings and volumes in the first quarter. But what we are seeing in both, especially in Brazil but also a little bit in Eastern Europe, is a shift from first quarter to second quarter.

So similar to Brazil they've started to let go as well?

Yes.

Okay. And then, Jackie, just on the near-term we're at a 20 million ton capacity for the sugar assets. Should we expect roughly a 10 million ton kind of run rate for the second half of 2010?

Probably a little bit less. Because we have more capacity in terms of assets, but we have to ramp up the agricultural part. So we probably will not be at 20 million tons run rate in the second half. I don't remember exactly the number, but around more probably like 19 million tons for the whole year. So the second half should be half of that.

So, --

But we have to give you -- we will have to adjust a little bit our information because we also are learning. I don't know if it's exactly half and half. So -- but on the yearly basis it should be 19, around 19 million tons.

This is Mark. Starting from April through November we should crush that level.

On an annual run rate?

Yes.

That's right. But recognizing inventories get built and some of those will be sold at the beginning of 2011.

Yes.

Right, exactly. So the June quarter should see a significant ramp in the sugar volumes as well, correct?

That's correct. And that's why we say we think that it will -- it will start to become a meaningful contributor as of the second quarter.

And you talked about the new areas in your -- you used the proceeds as your third point, Alberto, about new areas and new geographies. Not holding you to anything, but can you just kind of discuss some of the geographies, some of the different businesses that are kind of hitting your interest points at this time?

Yes. The first priority, let me repeat it, is strengthen our balance sheet. The second one is expanding and building and strengthening our core businesses. And this sometimes means also newer geographies. One of the new geographies we are expanding is Vietnam where we are building a crushing plant and have 50% of a port. And so when you -- this is a very, very clear example of what we have done.

Last year we invested buying (inaudible), we had added a facility also in Finland, so that is one example. But we are also exploring over the long term you will see that we will have some small, very small at the beginning, but you will also see expanding businesses in some parts of Africa because that will become over the next 20 years an important, not only market, but very important also origin. You will see perhaps more of us and you might see of us more in Central America, there are some interesting opportunities also in terms of sugar but also perhaps some palm. So these would be typically examples.

I noticed that you didn't mention US or corn dry milling, is that intentional or is that still part of the thought process?

Very important is also one of our biggest projects at the moment is the building of the terminal in the Pacific Northwest. The export business from the US in terms of grain is very important. As we have discussed before, China will continue to be an important and growing importer of soybeans, but it might over time also import more of other grains and the rest of Southeast Asia is a very important market for grains.

It's very difficult to expand agriculture in Asia and Southeast Asia. So the US will see growth of flows through the Pacific Northwest through our terminal in Longview and the Columbia River in Washington State. So we will see there and we will expand there as well in this kind of -- in this area. We will expand in US, we should also expand in Mexico; I didn't mention it because we are present there already. You will see us expanding in Canada over time.

So, I perhaps misunderstood you talking about complete new geographies. We -- very important was this [Pasa] acquisition, this fertilizer acquisition we did in Argentina. So very important is that we will continue strengthening our businesses wherever we are.

Okay. And just remind me again, when do you expect to see that Washington port come online?

Beginning of 2011, beginning of 2011. It's going very well the construction.

Great, thanks a lot.

Thank you.

David Driscoll, Citi Investment Research.

Thank you, everyone. Could you say, Jackie, what CapEx for the year is? I'm sorry if I missed it.

Yes, we -- it's still the $750 million to $850 million range.

Okay, so then in your commentary about uses of cash it's $1.5 billion of debt pay down. And then you said that you have, Alberto, I think "just a lot of projects out there". I'm not really clear on what that means in terms of dollars. So if we've got $750 million and that's really unchanged, then can get you clear up for me what you mean by the number of projects that you have out there?

Well, we are in the middle of the process to, first, you can imagine inside Bunge is a lot going on with the integration of Moema, it's one of our largest acquisitions ever. The separation of nutrients is a massive work that we are doing. We tend to forget what it means. But it is a lot going on. So, at the same time we are slowly preparing ourselves to look at it, what we could do and what we would accelerate. But let's first do first things first.

We did Moema, done. Now we want to close the deal and we will tell you more about it. But we are looking at different options. So once we close we will -- and which should be sometime in the second quarter, it could be all the way until the end. So, next time around we will tell you more.

But it is -- don't expect nothing revolutionary. It is going to be exactly what we are, it's in our existing businesses strengthening it, expanding it. So there will be some accelerations. We are doing -- with this acquisition of Moema we are obviously -- as part of the integration team we are looking at very, very interesting projects or perhaps anticipating some of the cogeneration investments, perhaps rearranging some of our investments and accelerating this plant or that plant expansion.

So we need a little bit of time to fine-tune this. So that is why we are sticking to the -- initially to our guidance that precedes -- all what we will do is with the proceeds invest them in paying down debt and in money market or whatever, until we have a clearer picture.

And just keep in mind, David, when we think about the $2 billion that's left it would hopefully be deployed via a combination of M&A type of projects and potential acceleration of some CapEx projects. So given that we're already in the month of May from a cash flow standpoint you have to think about how much can you actually spend CapEx wise. We may be earmarking the funds for some major projects.

But the $750 million to $850 million, even with what we've spent in the first quarter, you still have to spend a couple hundred million dollars a quarter for the rest of the year to eat that up just from a movement of the cash standpoint in the year 2010. So you might want to keep that in mind. In the first quarter it was a little heavy, as we said, because of the spending on the mills that were pre-existing Moema.

Okay, so let me see if I understand what you said. So we've got the $2 billion in cash left over, you've got the $750 million earmarked for the year. Now I'm not necessarily so worried about the pace of spending on this I'm just trying to get the big picture kind of multiyear view on the CapEx.

If you are seeing a lot of internal projects, what I was really hoping to get an understanding of is this going to be something that would ramp up capital spending? Because you look at it, Alberto, and I know you've said for a long time that you have a lot of really good projects that were in the pipeline that needed funding. With the cash on hand that is so substantial, is that really what you're trying to tell us? Am I inferring correctly that then over a multiyear period we see a significant step up of CapEx as organic projects really start to ramp up?

Not really. When I talk projects we also mean a couple of them are acquisitions. So, it is not only CapEx. I think we will see some anticipation of some of our projects in CapEx but you can't simply increase it that fast. We need to see resources, you need to look at it, you cannot do it so fast. And obviously CapEx are always -- it takes time, the paybacks are long, there are some risks and so it will not be -- it will be a clear mixture. And we will be careful. There are going to be opportunities out there.

One more question here on the share repurchase activity. So you mentioned that you weren't interested in doing this. I'd kind of just like to just maybe pick at this a little bit. What does it -- what does make you get interested in it, the stock really has not acted well and I would say that if you're really confident in some of our prior-year conversations about invested capital and returns on invested capital, a lot of people really struggle with understanding how your decision tree works.

At this moment we really have no plans to buy back shares, Dave. I think we have interesting projects. Obviously you have to think in terms of -- we have to separate when we look at Bunge what went well, what not. I think agribusiness has performed extremely well over the last three years, and has been above our target in terms of return on invested capital.

We have struggled somewhat with fertilizer, excellent 2008, mediocre 2009, but obviously the whole industry suffered with that. This is changing. When I look at the way we are changing our portfolio in terms of adding the sugar and bioenergy, which I think it is very interesting, has very interesting growth potential. Interesting -- interesting very interesting returns this combination of sugar, ethanol and electricity is a very nice combination.

It is an industry which is fragmented, has inefficient players, we are coming in, all of our eight mills are going to be state of the art, right sized, well located. So I think we will have a very clear competitive advantage. And obviously it will take out some of the volatility once we don't have the mines anymore. I feel very good about it. And give us one or two quarters I think it will become clearer. So, buying back shares at this moment is not on our agenda.

Can we then at least rule out share issuance given the stock price? Is that a reasonable thought process?

Well, at the moment we have a situation that we are clearly having more funds, so we don't need to issue shares at the moment.

Final question, Jackie. Interest expense, can you give us guidance for the year?

Yes, I think that net number for the year should be around $200 million, the net.

Great, thank you very much.

Thank you.

Bryan Spillane, Bank of America.

Hi, it's Bryan this time. Hey, just a couple of follow-up questions. First, in terms of the fertilizer business, did you separate or could you separate out just what the nutrients portion of that contributed in the quarter?

Over time you will see it. But it's a very difficult moment because we are separating it. And as we are separating it it's complicated. How do you -- which costs go with the new assets, how do you allocate it? We have an agreement with Vale that we will continue doing service for a period of time and charge them. You have to give us a time, Bryan to do this. During the year you will see it, but let me give you qualitatively retail underperformed and nutrients overperformed.

So, but to give you the precise number, you will eventually see it and we will give it to you, but we need some time. Because also retail has to adjust. It's one thing when you operate retail by mainly selling phosphate products as when you work in nice synchrony with agribusiness, optimizing other components of it like logistics, credit in perfect synchrony. It is different. And we need a little bit of time for that.

Okay, actually that's helpful. And then in the retail business, and in the short time that I've spent covering this stock one observation I guess I've made is it just seems like Bunge has had a very difficult time with the predictability of the retail business. So one, is that true? Do you agree with that statement?

But then beyond that, what changes going forward? Now that you're separating nutrients will it make it more or less difficult to predict the retail business? And also with you're not lending as much to farmers now as you did before, does that also change your ability to predict with more accuracy what's happening at retail? I'm just trying to figure out if you're doing something different to try to get a handle on how to forecast that and what the drivers are?

Yes. That is exactly our intention. I think it will be more predictable and it will be much less risky or less volatile. So, when you're working in tandem, selling -- having the mines and also selling the products. So sometimes too much of a burden was put on the retail chain to replace all these products because it was an integrated model. But once it is separate the focus is different.

It is how do you massively reduce the risk not only on price but also on credit, also on the foreign exchange. There is a different type of approach and that is what we are slowly implementing either. So it is different. So we think it will be more predictable, it should be more stable. That is the condition also the way we want to operate. So that is the premise how the retail business should operate.

And, Bryan, specifically we're shortening the gap or the time between the buying and selling of the product in retail and we're working through some of the supply contract negotiations to share a bit more of the price risk with the producer -- the price of the product (multiple speakers) differently.

And I guess just at a more fundamental level, it just seems like one of the things that's difficult is just being able to predict what farmers are going to do. When they're going to buy, what they're going to buy, how much they're going to buy, how price-sensitive they are. Do you feel like you've got a good grasp or a good handle on what the inflection points are and when farmers will do things? Have you learned more about that over time and is that an important part that we should think about in terms of the predictability of that business?

I think so. And -- I think so. And obviously when you have also now and the future a different relationship with a supply which is not so much focused on phosphate you might see also different segmentation in our business. We probably will do more of -- and now also that we are more involved with sugar cane we will be more involved in also selling nitrogen products.

We get obviously over six months ahead information as we sell the fertilizer. This is good information we're getting for the grain and for the sugar business as well. So, we are looking at it with a quite positive way the way we are to see the retail business. It will be different, it might be a little bit smaller, it will be less risky, it will be a little bit different. Closer to the agribusiness and grains and sugar business. But it's early; we will give you more -- a better picture as the year progresses.

Okay, great. That's very helpful. Thank you.

Thank you, Bryan.

Ladies and gentlemen, that is all the time we have for questions. I'd like to turn the call back to a Mr. Mark Haden for any additional or closing remarks.

Great. Everyone, thank you for joining us this morning and we'll see you next quarter.

And that does conclude today's teleconference. Thank you all once again for your participation.