Bunge Global SA (BG) 2010 Q2 法說會逐字稿

Good day, everyone, and welcome to Bunge Limited's second quarter 2010 conference call. Today's call is being recorded. At this time, for opening remarks and introductions, I'd like to turn the call over to Mr. Mark Haden. Please go ahead, sir.

Thank you, Miranda. Good morning, and welcome to Bunge Limited second quarter 2010 earnings 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 myself, and I'll go through this.

Welcome to -- before we get started, I want to inform you we have prepared a slide presentation to accompany our discussion. It can be found in the investor information section of our website, www.bunge.com, under investor presentation. Reconciliations of non-GAAP measures disclosed orally on this conference call, to the most directly comparable GAAP financial measure, are posted on our website in the investor information section. I'd 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'll now turn the call over to Alberto.

Thank you, Mark, and good morning, everyone. The second quarter was disappointing. Slow pharma selling was a particular challenge for our agri-business operations during the period. It created tight supply conditions around the world that contributed to lower volumes, and pressured margins by increasing the cost of our supply. Much higher-than-expected demand for soybeans from China also contributed to the tight supply situation.

Frankly, our commercial and risk management strategies, especially in oilseeds, had anticipated more balanced supply and demand in the quarter, considering the record soybean crops in South America. Fortunately, supply and demand conditions in our markets are always changing. Farmer selling has normalized, and the upcoming harvest in the northern hemisphere will bring a new market environment in the second half of the year.

On slide four, we outline the use of proceeds from the sale of our Brazilian Fertilizer Nutrients assets, which we closed in the second quarter. The sale generated pre-tax proceeds of $3.9 billion, and we have used approximately $1.5 billion to pay down outstanding debt and strengthen our balance sheet. Today's balance sheet is particularly strong. The financial strength and flexibility created by the nutrient sales positions us well to make additional attractive investments, both in our core and adjacent businesses. We have also returned over $200 million to shareholders, via our stock purchase plan which we announced in June.

Turning to slide five; the sale of our Fertilizer Nutrients assets, as well as the acquisition of Moema, have significantly changed the profile of our appropriations in Brazil. We believe that today our business in the country is even better positioned for growth. We also see more natural synergies among the various operations. In order to capture these synergies, and reduce costs, we have embarked on a major restructuring effort that will consolidate Moema and our other businesses -- agri-business, fertilizer, and food and ingredients -- into one organization. We anticipate annual cost savings of approximately $120 million beginning in 2011. As part of this process we are also remaking our Brazilian fertilizer business into one that is more focused and lean, the stronger connections to agri-business, and a lower risk profile. 2010 will be a transition year for fertilizer, but we expect it to make meaningful contribution to Bunge's results moving forward.

Finally on page -- slide six, a few words about sugar. Second quarter results in this segment were in line with our expectations. This period is seasonally the slowest of the year; it's the beginning of the harvest; sugar contained yields are low, and as a result volumes and asset utilization are not at their peak. Our operations will ramp up significantly in the second half of the year. I'm also pleased to report that the integration of Moema is going well. We are pleased with the assets and with the team, and continue to see a lot of good opportunities in this market. Now, I will turn over the call to Jackie, who will provide you with additional details on our results, and our outlook for the rest of the year.

Good morning, everyone. Thank you for being on the call this morning. Starting with some highlights from the income statement; agri-business and fertilizer volumes decreased in the quarter, and drove total volumes down. In agri-business, the biggest impact was lower grain origination volume in Brazil, the US, and eastern Europe. US and European oilseed processing volumes were also down, but to a lesser extent.

For fertilizer, volume declines versus last year came from a combination of disruptions to production arising during the nutrients divestiture, along with a deliberate decision to reduce market share on low margin business. Total segment EBIT in the period benefited by $2.4 billion, from the gain on the sale of the nutrients business. Excluding this gain, total segment EBIT was negative, as it was adversely impacted by the lower volumes in agri-business and fertilizer, as well as lower margins in both of those segments.

Results in agri-business were weaker in all regions. Slow farmer selling, combined with stronger-than-expected soybean export demand from China, and excess capacity in some regions, created a tight supply situation that pressured margins in South America and the US. Slow farmer selling also impacted European softseed processing results, and our grain origination and distribution businesses in most regions. Fertilizer margins were pressured by high cost, and lost sales due to disruptions from the divestiture of the nutrients business, as well as aggressive competitor pricing in Brazil. Sugar and bioenergy performed as expected.

With a good performance from margarine, edible oil results improved versus last year on a comparable basis, excluding provisions and adjusting for the sale of [sycol]. Corn milling results also improved, but were offset by weaker wheat milling results, due to strong competition in Brazil from the larger local wheat harvest. A few key information points on sugar and bioenergy, as we see that business start to ramp up; integration of the Moema acquisition is going well and we are quite pleased with the evolution of the business.

We continued to build our merchandising and trading platform, and saw significant growth in that part of our business, solidifying our position as the number two global sugar trading player. Production began to ramp up in the second quarter, as did our sales of sugar, ethanol, and electricity. Total recoverable sugar, a measure of the yields on cane crushing, improved versus last year, driven by Moema, and is expected to further improve in the second half of the year, as the strongest part of the season is still ahead of us. We expect this segment to contribute strongly to our second half results.

Turning to the balance sheet; today our balance sheet is the strongest it has ever been. Of our $1.5 billion debt repayment plan, approximately $700 million was completed as of June 30, and the remaining $800 million was repaid in July. In addition, to date we have also used just over $200 million to repurchase shares. We have achieved solid results on asset efficiency by maintaining our focus on working capital, and in total, have reduced cash cycle days by five from one year ago, and four versus the end of 2009. The combination of cash we have available, and our strong balance sheet, give us the flexibility we need to execute on our strategic investment plans.

Cash flow for the year-to-date is solid. Excluding the $417 million of withholding tax, and transaction costs on the nutrients divestiture, cash flow from operations for the six months ended June 30 would be about $260 million positive. With respect to the outlook, we are optimistic about the remainder of the year and the environment moving into 2011. The outlook for the US crop looks good, which should bode well for both our grains and oilseed businesses.

In addition we see a solid global demand picture for both meal and oil, a well-supported environment for fertilizer moving into the South American planting season, and the peak performance period coming up for sugar and bioenergy. There are some challenges in the current global crushing environment, but we see these as relatively short-term, and we see margins rising from today's levels as we enter the northern hemisphere harvest period. The wheat milling business in Brazil remains highly competitive, but all other categories in our food and ingredients business are generally doing well, and should benefit from the good demand. Considering all these factors, our revised full-year net income guidance shows a strong second half to the year. The revised guidance for net income, excluding notable items, is $510 million to $550 million, or $3.25 to $3.50 per share. This compares to our previous guidance of $850 million to $930 million for net income, or $5.30 to $5.80 per share.

The reduction in full-year net income is driven partly by lower-than-expected earnings in the second quarter, which we will not be able to recover. In addition, we have somewhat lowered our forecast for the second half of the year, given the magnitude of the restructuring we are pursuing in Brazil, and the risks associated with such an effort, and the slightly weaker current environment for oilseed processing. We believe the factors that negatively impacted the second quarter -- slow farmer selling combined with stronger-than-expected Chinese demand -- are behind us, and the second half of the year should be much improved versus the first half. This expected strong finish for 2010 makes us confident in our ability to perform well in 2011. And with that, I'll open up the call to questions and answers. Thank you very much.

Miranda?

Thank you. (Operator Instructions) We'll go first to Christine McCracken with Cleveland Research.

Good morning.

Good morning, Christine.

Alberto, it seems like there is a lot of disruption in the quarter tied to these imbalances-- China buying a large South American crop. Sound like you expect some of the Chinese situation to resolve itself, or moderate here as we head into the second half, and yet we continue to hear about pretty large crop disruption, especially in the south of the country.

Is it your expectation, then, that we get a smaller impact from that? Or is there any expectation that they actually have sufficient stocks at this point?

The issue has been more probably a timing mismatch, because there is enough beans for the demand, but it came earlier, and the farmers delayed their sellings, so there was tension in the system. But as the crop is over, and farmers are starting to think about planting already again in the second half, the older farmer selling has normalized, so it is flowing normally now.

So, the stress was much more, earlier in the quarter. I think it is-- I think it has completely normalized now.

Okay, so it's not that you don't expect continued shipments, it's just the availability in South America wasn't there. But--

Yes, it was--

--Isn't that an annual event? It seems like every year the farmer holds out for higher prices. What made this year different? What made you think that it would be different this year?

Well, we saw-- when you look at it, when we look back, we put ourselves at the moment when you start thinking about the new crop. It's in September. We saw this huge crop coming and capitalized farmers, so obviously with the network we have, these 46 million tons capacity of processing facilities, (inaudible), you start working on selling forward to customers around the world and we prepared ourselves for this situation.

Now, the farmer-- the bean buying came earlier than normal, and in a much, much higher volume than we expected. So, there is where we were a little bit behind, and-- but this caught up at the end of the quarter, and so I know it is every time the same. So, we anticipated correctly the size of the crop; we anticipated the farmers were capitalized; but we did not anticipate the stronger bean buying, so you don't always get it 100% correct, but this is part of the commodities business, and from time to time it is like this. So, as long as we get it right, as I think we have eight, nine times out of ten, that is fine.

So, we obviously had to deliver to our customers around the world, so we had to buy-- to pay up to, to buy the beans. As you can see have our volumes, it was lower than last year.

That's really helpful. Thank you.

And one other question; in terms of the wheat crop in Russia-- obviously there's been a lot of news for the last few weeks about possible disappointments there. Could that create further displacement? Is that something you're anticipating affecting the supply and demand balance globally, of crops, and could that benefit maybe your merchandising business? Is that something you're anticipating affecting kind of the supply/demand globally of crops and could that benefit maybe merchandising business?

We think we are very well positioned for this situation. We have seen this in the past. We will be able to serve our customers from North America, from South America, and this tends to be-- have a positive impact in our grain business.

I'll leave it there. Thank you.

Okay, thank you.

We'll take our next question from Ken Zaslow with BMO Capital Markets.

Good morning, everyone.

Good morning, Ken.

Hi, Ken.

My first question is, if I look at your employees over the last three or so years, maybe five years, has there been a material change that would have affected your risk management, your ability to forecast anything? Because it seems like-- I know, Alberto, I think you said eight out of ten times, my calculation doesn't come up with that-- I'm just trying to figure out what-- if there's been any personnel change, or something that's changed that maybe the forward-looking or forecasting ability of Bunge has changed?

I would say that we are continuously improving-- we are improving; all the changes we have been doing over the-- when I look at it, ten years-- I don't look at only the last three or four years-- I'm very pleased. I think all the time we are getting better information, and so I feel very good about it. And I don't see it related to this. I think we are improving on that.

Okay. Another question-- have you thought about your earnings base? Obviously, this year isn't that great.

Have you thought about where you think that your numbers could eventually get to? And how do you think about that in terms of your returns? And can you give us the lay of the land, or do you think this is the new base going forward?

Look. The way we look at it is, at our asset base and returning, our target is to return 2 percentage points above cost of capital. It's just a question when we get there. We want to get there as soon as possible.

When I look at 2011, and I think Jackie had it in her remarks, there are a couple of positive signs out there. The shorter wheat crop in eastern Europe will have an impact on higher demand for corn and higher demand of soybean meal. As the ethanol mandate in the United States is reaching its goal, there will be less DDGs available, which had an impact on demand on soybean meal. So, we see this year's a strong demand for soybean meal; we are seeing a stronger demand also next year, which will help to reduce the-- improve the capacity utilization in the market that will also have a positive impact on margins.

In addition, we have a strong demand for vegetable oil, both in Europe and in South America-- additional biodiesel demand. So, the picture-- very good environment for the meat industry, so I think 2011 is-- there are a couple of very positive signs. We will be running fertilizer. We will have our Company in Brazil in good shape. Obviously Argentina is in good shape already.

And sugar and bioenergy-- we will have the three new facilities from Bunge-- Santa Juliana; Pedro Afonso; and Monte Verde-- up and running at full capacity, and we will have a full year. So, we will have the impact of the restructuring charge. I think we are moving fast in the direction to our target.

And then-- the biodiesel policy in the US, could you give you an update on that? And will that-- would that have an impact on vegetable oil prices, and how much?

We don't see yet any significant impact in the US.

You don't think that if we get the renewed dollar biodiesel credit, that would have any impact on vegetable oil prices?

We don't think too much. We don't think it will have a significant impact.

Right. I appreciate it. Thank you.

We'll take our next question from Christina McGlone with Deutsche Bank.

Good morning.

Good morning, Christina.

Alberto, I wanted to understand the profits in agri-business more.

So, in your answer to Christine, it sounds like you had sold forward, you expected to have the availability of the beans; farmers weren't willing to sell and so you were short bought, and you had to go out and buy the satisfied Chinese demand; but it also looks like, was there a hedging loss in there? Because it was so much lower than expected.

No, it was not a hedging loss. But normally, the combination of all of our risk management plus the commercial aspect-- not many things worked well. So, there were no trading losses, but obviously the contribution from the risk management didn't add-- didn't enhance our profitability.

Okay.

It was really-- most of it was volume. As you saw, it was around the world, mostly, obviously, in South America. But crush margins in the US were also negative, vis-a-vis good performance last year.

So, mostly it's commercial.

Okay. That's helpful.

And then in terms of separating-- in fertilizer, separating retail from nutrient-- have you-- where are you in your retail share right now of fertilizer, and what is your target? So, how much smaller does that business need to get?

Look, it's-- early in the process.

We started already last year focusing in on the different approach, but it really took off significantly after the divestiture, and we are not going to have two of the blending facilities in the state of Sao Paulo. So, that naturally will be a little bit lower volume, and we are considering that.

Now, we will have to increase our sales; we will have to add our sales with nitrogen and potash to adjust the mix to the new approach. So, when we targeted perhaps 30% market share in the past, it will be lower, but it's too early to say. It is much too early to say. We will-- after this-- now we are in the middle of the very important planting season and we are-- this month of July, but especially September, October, November are the key ones. We will be able to give you a better picture of what the market share will be next year; something below 30%, I expect to be above 20%.

Okay.

We are focusing on the right balance in the right-- it's all about returns. We don't need to focus so much on selling all the phosphate products; it's all about to get the highest return.

Okay.

And we feel that the sweet point is below 30% market share, but we don't know exactly where.

Okay.

And then if I think about the $120 million in savings for next year, is that ramping throughout the year? Are you working on that now so you hit the ground running on January 1? How does that build?

As you know, we have these-- restructuring has become a way of life. You have to do it all the time.

So, we have already-- but this program we're working at the moment, especially because of bringing all the organization to get better and having back offices won, it's happening now. We already started in the beginning of the year, so we will not see so much of the benefits because obviously there are all these expenses related to it. But we expect already some slight contribution before the end of the year, net of the expenses. But $120 million is the net amount for next year.

Okay.

And then Jackie, what was the average price that you bought your shares at in the quarter?

In the quarter, it was-- because we bought some cents at slightly higher prices-- in the quarter it was around $0.50 or so.

Okay.

And then last question-- just a follow-up to Ken's question-- if the biodiesel tax credit does not get renewed, do you think soy bean oil prices go down?

No, we don't think so, because we see the inventories worldwide going down. So, there is globally more demand than supply in the whole softseed area and soybean oil area. There's probably a slight reduction in canola and in rapeseed in Europe, so the demand is stronger than all the vegetable oils, and especially for soybean oil, rapeseed oil, and sunflower oil.

And when I say the biodiesel impact to Ken's question, it's more like this year and next year, so it will not have a big impact this; in the years after, perhaps. We expect stronger-- there is-- there is more-- let's say it like that. We don't know where the prices will be, but there's more demand than supply.

Okay, perfect. Thank you.

Our next question comes from Vincent Andrews with Morgan Stanley.

Vincent?

He must have dropped off the call.

Miranda, can you go to the next one? Vincent can come back later.

Yes. We'll move onto Robert Moskow with Credit Suisse.

All right, thanks.

Couple of questions; one is-- I found it interesting what you said, Alberto, that the buying of the beans started earlier than you thought. And with more volume than you expected. Does that mean that your competitors were out there buying beans ahead of you in Brazil?

No, I think probably everybody had to go out earlier. And the farmers were not--

Okay, so--

Because our view-- normally we have an advances to farmer program of $500 million or $600 million. Because we saw the very large crop, plus capitalized farmers. So we were a little bit low on our advanced farmer program.

And so probably, one of the others might have been-- had bigger-- a program bigger than ours earlier. But I think the reason why margins were lower is exactly because everybody was more or less in the same situation.

Because that's why I'm wondering-- I think investors are applauding the effort you're making towards reducing your risk profile in Brazil, but what I'm also wondering is, does this-- does a more conservative attitude in Brazil, does it mean that you might lose some market share? Or others with more robust balance sheets, maybe even, can get ahead of you when buying beans? Have you seen any disadvantage there at all?

I think at the moment we have the most robust balance sheet, or one of the most robust. This was a very clear conscious commercial decision.

We are very comfortable with our-- the last three years-- experience in our farmer's credit in the way we are operating with the farmers, or the credit situation of funding. You have to remember; the biggest issue that we had was related to `05 and partially `06. So, I think we have a very robust program there. This was a commercial decision that we didn't get right.

Okay. Thanks for that.

And another question on your interest expense line-- it was $101 million. I haven't done the math yet, but does that include some one-time charges for buying back the debt?

No, Rob, that is due to a couple of things.

One is the assumption of Moema debt at higher interest rates that we subsequently refinanced. And in the second thing, versus last year, is the spreads on our credit facilities; and you'll remember the 8.5% bond issues that we did are a bit greater than they were in the same period. And that will start to normalize from an apples-to apples standpoint as we go into the second half of the year.

So you'll see the run rate for interest expense host the refinancing of the Moema debt and normalization, basically, of where our debt portfolio is come down a little bit.

I would have thought it might come down quite a bit. I mean, your balance sheet right now shows--

It will anyway, as debt balances come down. The average interest rate should also be coming down as well.

Can you give us a forecast for what a new run rate would be?

Well, I think we had already said that the net interest expense should be around $200 million or so for the full year, and that's where we see it, and so a run rate would be around $50 million on a net basis.

Got it. Got it.

Okay, great. Thank you very much.

Thank you.

We'll take our next question from Diane Geissler with CLSA.

Good morning.

Good morning, Diane.

Hey, maybe I'm a little obtuse here, but can you walk me through the strategy behind the decision on the purchase of beans this year, that was different versus last year? You come into the year and you're like, I know what I'm going to be selling. I think we've got a big crop, so I can maybe get it cheaper later, so I don't-- buy in front of the demand I know that I have, and therefore when the Chinese come in and buy, all of a sudden I'm caught short in the market? Is that--?

No, not really.

--strategy? Or could you just walk me through why you would have been-- your advances to farmers program would have been lower this year?

The reason why was that we saw the very large crop, which was in the very capitalized farmer. So, the farmers were not asking so much for the funding that they normally do.

Our buying program was the same as ever. As you see, the volume is lower, by, I think, two million tons, because they just were not available. So, the farmers were not selling it. So, it is-- the advance to farmer might have added perhaps 500,000 tons.

Even with a robust program of advance to farmers, we still would have had some issues here.

Okay.

This is a general market condition, that when you have a-- suddenly you have a stronger demand, the farmers were delaying it, so the prices were going up, so that's the way I see it.

Right. And what was your utilization rate in your assets? Your Brazilian-based assets?

They're good. They're good.

On a year-over-year basis?

Yes. On the crushing or the processing plans, they are good. They are fine, yes.

Were they better this year than last year?

A little bit better.

A little bit better. So, you had better utilization rates, yet profitability was-- --all directly related to the price you had to pay for beans.

You saw we had a little bit less volume, but also we had reduced some of the silos to reduce costs. So, we have adjusted in one facility. We also mothballed. So, the utilization rate was good.

But the issue here is significantly more on margins.

Okay. And then, on the restructuring program that you're implementing now within the Brazilian operations, can you tell us what the-- what are your expected costs to implement that?

Most of them are included in the restructuring provisions diem that you see us outline in the press release. And you'll see maybe a little bit more detail in the queue when we file it. But the lion's share of them are in there, based on what we're able to book under US GAAP, and there will be potentially some smaller amounts flow through in any given quarter related to that, but they will be quite modest.

Okay, so are you saying that the restructuring program is primarily complete at this point? To me it sounded like you were just embarking on it so I'm a little surprised that the costs associated with restructuring operations is--

And not all the measures we are doing, obviously, reflect mean--not all of them mean that there's a termination cost. It's-- some of them are related to head count, but there are a lot of other ones; in logistics, in freight buying, and a significant amount of areas; and we don't need some rents anymore, so it's a large laundry list. And some of these restructuring charges that will occur in the next couple of months will be offset immediately by the savings. So, it doesn't make any sense to highlight them here.

Okay.

All right, that's it for me. Thank you.

Thank you.

We'll go next to David Driscoll with Citi.

Yes, hello. This is Cornell Burnette calling in with some questions for David Driscoll.

Good afternoon.

Great.

Just wanted to get a handle on the pacing of the potential improvement and agri-business segment during the second half. Am I correct to assume the lion's share will be felt in the fourth quarter when the North American harvest comes in? Or are you expecting significant improvements, as well, in the third quarter just because things are flowing more freely in Brazil now?

There is-- we should see some improvement in Brazil and in Europe, and then in agri-business. And then the lion's share is in the northern hemisphere, is in North America in the fourth quarter. At the same time, we should see pickup in sugar and bioenergy in the third quarter, and also in fertilizer. So, we will see, with this new structural Bunge, it could be that-- it could very well be that the third and fourth quarter are more or less similar overall, in terms of spread of the earnings.

Okay.

For different reasons. Agri-business more in the fourth quarter, sugar and fertilizer a little bit more in the third, so we expect it to be similar.

Okay, and then can you just talk about what the spot markets look like right now, for soybean processing, and some of your different geographies; North America, South America, and Europe?

The margins-- I imagine, you're talking about margins or prices?

Processing margins.

Processing margins-- they are--in some areas they are the lower end and some areas they are picking up. Some, because of these different situations on not having the supply of feed weed, some additional demand on soybean and oil, less pressure on beans, and farmers now selling. So, South American margins have-- are better than they were before, and little bit better in Europe. Perhaps in North America-- is sluggish.

Okay. Thanks a lot.

Thank you.

Our next question comes from Bryan Spillane with Bank of America.

Hi, good morning.

Good morning, Bryan.

I want to follow up, or come back to the question about farmers selling or releasing beans. Alberto, in the-- I guess it was on the last earnings call, you sort of addressed this issue, and if I remember it correctly, you talked a little bit about how farmers in Brazil had been reluctant to sell beans in the first quarter, and-- but then that had changed during the second quarter, especially as the currency got weaker and the prices of fertilizer came down.

So, I guess-- and if that was your view on June 4, something obviously changed dramatically between then and the end of the quarter. Is that true? Was it June where the problem was, or is the information flow that's coming up through the organization a little lacking in-- specific detail? I'm just trying to figure out what the disconnect is between that statement and what happened at the end of the quarter.

I think our call was in early May, right? Or end of April. I think it was end of April.

I'm sorry, this would have been at the Bernstein conference on June 4.

Well, you know, the question was about farmer selling. So, the farmer selling was erratic in the first half of the year, and it had picked up, but its margins were not good. So, we have been struggling with the margins. So, we have mentioned-- I think in-- I don't remember which-- what you mentioned, what was it, June 4?

At the Bernstein conference on June 4.

We indicated that there are some issues on margins, so the issues on margins were through the quarter. At the beginning of-- around at the time of the first quarter earnings call, the currency got weaker and fertilizer came down so there was more selling. But it dried up again. So, it was really-- there are obviously moments when you have opportunities to buy more. Anyway,

I would say that the most difficult part were probably February, March, and April and beginning of May, so this was until the middle, end of May. So, it normalized in June.

Okay.

I think we have-- I'm very proud about the level of information we're getting about the visibility we have. I think that's a huge advantage by having all these assets locally. I think we have-- even with our assets now in China, we have more visibility, but you don't get it always there.

Okay, great, thank you.

Our next question will come from Vincent Andrews with Morgan Stanley.

I obviously missed a large portion of the call, so I hope I don't ask anything repetitive.

There are two things I want to delve into; the first is, on the share repurchase-- on the one hand I was delighted to see that you guys went so deep into it so quickly; on the other hand, I'm kind of curious why you were so aggressive in the face of these results.

Well, Vincent, we announced the program; and I think we said over the course of the first few months of its existence that we would use it, and not use the whole thing, but use a part of it; and we started to do that in a disciplined fashion, using a pricing matrix; so we buy a little more if the share goes down and a little less if it goes back up.

We feel very good about the long-term prospects and where we think the business is going to go, and we think that at the values we bought the share at, it was the right decision to make.

I guess my question goes more towards-- are you not-- how long does its take within a quarter before you what the results look like? At the beginning of June, did you not realize that the quarter was going to come in like this? Or it is not until you closed the books? Is there something we can understand from that?

Look, we are not in trading. This is a long term program. We have a clear view, positive view about where we will be, and so we see this-- this is a quarter-- as I said, you don't get it always right.

There's absolutely nothing different in what we are seeing out there. We see our position constantly improving; all the time we are improving ourselves, and I'm very-- to be honest, I'm very happy with this change from the mining business to the sugar business. We would not have seen growth in the mining business in the next five years because we were at full capacity. There is growth in sugar. So, we are comfortable when we take a look.

When you do this averaging-- you have to really look at this as an averaging. This is a program you put in, and it's automatic.

Yes, it's a (inaudible) program, Vincent, so we don't want to be watching it every day and then calling up the trader and saying "buy today and don't buy tomorrow," or whatever. We've got a pricing matrix out there that allows us to buy more when the stock goes down, and we buy a bit less when the stock goes up, because we're trying to make the right financial decision here, but we're not trying not to be too cute about it.

Okay.

Did you just-- maybe the last thing on that-- within the guidance, is there shares outstanding for the full year?

Yes, it's 157 million average for the full year.

My second line of questioning will just go towards-- I just want to understand, with the record crop or harvest that Brazil had, were there any issues logistically in terms of ports or anything like that, that also impacted results? I'd also just be curious to understand-- we were aware the farmer was holding beans back, but at the same time we also thought, perhaps a limit to how many beans the farmer can hold back because of on-farm storage, or so forth. So, how did all that play out?

I would say there was some marginal additional cost in freight, inland freight, marginal; but these kinds of things we program in all the time, so it was a little bit more than usual. But that is not the main thing.

You have to remember that with over 60 processing plants around the world, 26 boards, we have to have a program to deal with our customers. So, there's only so much we can not buy, so there are moments where we really have to buy to serve our customers. So, this was clearly a situation of lower margins.

Okay, thank you very much. I'll pass it along.

We have no further phone questions at this time. I'll turn the conference back over to Mr. Haden for any additional or closing remarks.

Thank you, Miranda. And thank you, everyone, for joining us today.

I'd also like to point out that early next week, we plan to put out a sugar and bioenergy segment overview describing our business a little bit more, and we'll put it out on our website. Look for that in the first half of the week next week. Thank you.

Ladies and gentlemen, that does conclude today's conference call. We'd like to thank you all for your participation.