Bunge Global SA (BG) 2010 Q4 法說會逐字稿

Welcome to the Bunge earnings call. My name is John, and I will be your operator for today's call. At this time all participants are in a listen-only mode. Later, we will conduct a question-and-answer session. Please note that this conference is being recorded. I will now turn the call over to Mr. Mark Haden. Mr. Haden, you may begin.

Thank you, John, and thank you everyone for joining us this morning. Welcome to Bunge Limited's fourth quarter 2010 earnings conference call. Before we get started, I want to inform you that we have prepared a slide presentation to accompany our discussion. It can be found in the Investor Information section of our website, bunge.com, under Investor Presentations. Reconciliations of non-GAAP measures disclosed verbally on this conference call to the most directly comparable GAAP financial measure are posted on our website in the Investor Information section.

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 current 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 Drew Burke, Bunge's Chief Financial Officer. I'll now turn the call over to Alberto, and he'll begin with slide three.

Good morning, everyone.

After a slow start, Bunge had a strong finish the year. Our team managed volatile markets well during this quarter. And our global asset network gave us the flexibility to respond quickly to customers during a time of severe drought in the Black Sea region by changing the origin of supply to North and South America. Solid results in agribusiness and food ingredients were offset somewhat by difficulties in sugar and bioenergy. This segment had significantly lower than expected results for a couple of reasons. First, there were lower milling volumes from reduced cane yields due to dry weather in Brazil. Second, we experienced some challenges at two mills that came online during the quarter, Pedro Afonso was in start-up mode, and Santa Juliana's crushing capacity was being expanded. That said, we feel good about our momentum.

We have made some big changes to our portfolio. We sold our mines in Brazil, and changed our fertilizer focus to a blending and distribution business, which has stronger synergies with agribusiness. We also bought Moema, which significantly expanded our sugar and bioenergy business. The quality of these assets and the people that came with them is excellent. The mills are in key agricultural regions in Brazil with advantageous logistics and the ability to significant expand cane production. And our major restructuring effort in Brazil to [consolidate] Moema and our other businesses -- agribusiness, fertilizer, and food ingredients -- into one organization is proceeding as planned. We're also seeking to expand our sugar milling operation outside of Brazil and have made a tender offer to acquire Tully sugar located in the North Queensland sugarcane growing regions of Australia.

Now moving to slide four. During the year, we also invested in our core businesses. We continued work on our new soy processing plant in Vietnam and China, which we will inaugurate at it rate this year. And our new start of the art expert grain terminal in the Pacific Northwest is coming online in time for the US harvest. This will be our first port facility on the West Coast. We also acquired five more grain facilities in the US, and three more are in the works. These will help us better serve domestic and international trade flows, particularly to the Pacific Northwest, which is a gateway to markets in Asia. Additionally, during the year we expanded into an adjacent value chain by purchasing a rice milling business in California. This is a natural extension for us.

2010 was also a year of extremes, particularly in weather and prices. Worries about food inflation continue, but high prices are encouraging farmers to plant larger crops, which are needed to help build the global stocks. While the next 12 months will likely continue to be volatile, good weather, and increased supply could provide balance. It is in periods like this that Bunge's global network can help compensate for disruptions and shortfalls. With assets in multiple geographies, spanning multiple products, Bunge is positioned to serve customers anywhere in the world. Looking ahead, demand for our core products is growing. Bunge has financial strength, the right approach, and a superb team. These are the qualities needed to succeed and grow profitably in this environment.

Speaking of team, I am very pleased that Drew will continue as our CFO going forward. He is uniquely qualified for the position and did an exceptional job on an interim basis. Now I will turn it over to Drew who will discuss our financial results.

Thank you, Alberto.

Let's turn to page five. Bunge had a strong fourth quarter. Our total segment EBIT was $381 million versus $18 million in the prior quarter -- in the prior year's quarter, and our earnings per share excluding notables was $1.99 a share.

This performance was led by agribusiness. Segment EBIT of $377 million for the quarter compares to $65 million in the prior year. On a full-year basis agribusiness EBIT was $840 million. This was the third year in a row agribusiness EBIT has exceeded $800 million. The strong fourth quarter was driven by our grain business, as our strong global network let us react quickly to destructions in the supply chains and move much-needed product from the Western Hemisphere to Europe and Asia. We also effectively managed risk during this volatile period. Our oil seeds crushing business had a solid quarter, with results slightly below 2009's fourth quarter, as margins were weaker in North America.

Taking a look at our sugar and bioenergy segment, it had a disappointing quarter, with a loss of $56 million. This loss was primarily driven by droughts in our main growing areas. The drought dropped our full-year cane crush to 13.5 million tons, with only 2.2 million tons being crushed in the fourth quarter. This drought affected us in several ways. We had less production. That resulted in lower sales in gross margin. The reduced production also resulted in increased cost absorption from our fixed costs. Additionally we added charges related to writing off cane that was damaged and had to be replanted due to the dry conditions. Additionally we incurred costs to wash our out hedge position. We had sold forward cane early in the year based on conservative production projections, but based on the severity of the drought, we fell below those production levels and did not have the sugar available to deliver. As a result we had to settle or wash out these contracts financially. The total impact of the drought from those above factors was in excess of $70 million in the quarter.

As disappointing as the quarter and year were in this business, we feel very good about the future. When we look at the year, we would like to point out we only had the Moema mills for a portion of the year, the business performed well considering the drought and first year acquisition effects, and we expect it to continue to do so. We did not have full use of the Santa Juliana expansion or the Pedro Afonso mill, as they came on line in the fourth quarter and experienced some startup problems. And of course we had the impact of the drought. If we adjust for all of these factors, we still see our sugar business earning $8 to $10 EBIT per ton when we run at our current capacity of 21 million metric tons. This will not be in 2011, but it should occur in the next couple of years.

Turning to food and ingredients, we had a solid quarter, and during the fourth quarter we need to consider two adjustments; the 2009 quarter benefited from the cycle results in the sale of that business for an impact of $72 million, and in 2010 we had a $9 million charge relating to the impairment of a supply contract. When you adjust for those numbers, the 2010 quarter was $68 million, versus $60 million in 2009. This improved performance was mainly the result of improved margins in our European business, and reflects the success of our acquisition strategy and the expansion of our margarine business. A full-year basis, adjusted for the notables, 2009 was $173 million, versus $185 million in 2010. (inaudible -- mic noise) driven by our weak milling business.

Turning to fertilizers. Fertilizer was break-even in the quarter, as we continue to evolve our business from an integrated mining and distribution business to a blending and distribution business. As we have said before, to achieve this transformation, we have three main targets. First, we need to improve our margin and risk manage. Second, we need to redesign our footprint and distribution to allow us to achieve the desired volumes. And third, we need to reduce the [cost] to support that business to resize it to the smaller business. We have achieved very good results in margin and risk management. Our margins have been stable over the last half year, our supply chain has tightened, and we are carrying reduced levels of inventory. We still have work to do, but are progressing with the distribution and footprint redesign, and in reducing our costs, we expect both of those things to be in this place in the second half of 2011.

The cost reductions that we have achieved are apparent yet in this quarter, as the transition is still in progress. We are incurring costs to make the transition, and the prior-year quarter contained a reduction in the tax provision related to our nutrient business. Our Argentina business, including the [Pasa] acquisition, is performing well. Our full-year segment EBIT in this business was $2.3 billion, which reflects the pretax gain on the sale of our fertilizer nutrient business of $2.4 billion. Thenet gain on that sale was $1.9 billion and represents value creation for our shareholders.

To conclude, our net income in the quarter was $301 million and our earnings per share adjusted per notables was $1.99. Our full-year 2010 earnings per share, excluding notables, was $4.13.

Turning to page six and the balance sheet. We continue to have a very strong balance sheet. Our equity has increased by $2.2 billion in the year, primarily driven by the gain on the sale of the fertilizer nutrient business. As one would expect in an environment of rising commodity prices, our inventories and working capital have increased significantly, by about $2.3 billion. Our debt has increased a more modest $1.1 billion due to the cash we received from the divestiture of the nutrients business.

Turning to page seven and the cash flow statement. Our reported funds from operations are $780 million. This includes a deduction for $424 million related to the fertilizer nutrient sale transaction that is recorded there under GAAP. If we add that back, we would have generated funds from operations of $1.2 billion in 2010. As explained earlier, rising crop prices caused a significant out flow in working capital, resulting in negative cash flow from operations. Our capital expenditures were about $1 billion, which was in line with our previous guidance and was primarily focussed on our agribusiness and sugar and bioenergy segments.

Turning to page seven. We would like to point out that even after the run-up in commodity prices, our liquidity position remains strong. At December 31 we had $2.8 billion of committed and available credit lines. This will allow us to continue to participate in ongoing market opportunities. You will note the 2011 revolving credit facilities mature in April. We are in advanced discussions on replacing the revolving credit -- those revolving credit facilities, and anannouncement on that should be coming out soon. We expect to have that transaction closed in late March.

Moving to the 2011 outlook. Before we talk about that outlook, just a reminder that we are no longer going to provide annual earnings per share guidance, but we are going to expand our qualitative commentary on business drivers, strategic initiatives and operating environment.

2011 should be a good environment for our agribusinesses, particularly in the grains business. A tight supply situation, favorable farmer economics, and large [prunings] create an environment where we can use our global assets and logistics system and our risk management capabilities to serve our farmers and customers well. Our grain business will also be helped by our new terminal in the Pacific Northwest, which will be online in time for the US harvest. Crush margins are expected to be mixed in the first half, but may show improvement in the second half, with new harvested and continued demand growth. The US margin environment is soft right now, but Brazilian margins are better, and European margins should improve with the new crop. He will be start up new soy processing plants in Vietnam and China during the year.

Moving on to sugar, unfortunately the poor weather conditions in 2010 will also impact 2011. We expect to crush about 17 million tons of cane next year. This is well above our 2010 volume of13.5 million tons, but below our capacity of 21 million tons. Earlier I said we expect to earn eight to ten million -- $8 to $10 of EBIT per ton at 21 million metric tons of production. This earnings rate does not apply at lower levels of production due to fixed cost absorption and our farming operations. At next year's projected cane volume of 17 million tons we will earn somewhat below the $8 a ton.

This year. 2011.

2011.

Our production output is expected to be about 950,000 tons of sugar and 850,000 cubic meters of ethanol. We expect to generate electricity sales of 350 gigawatt hours. To put that in perspective, thatshould generate growth revenues approaching $30 million. We expect there to be a tight supply environment, which will be supportive of sugar prices. Ethanol demand in Brazil continues to be strong. And we would just like to remind you that the results will be significantly weighted towards the second half due to the seasonality of the cane harvest in Brazil.

Our feed ingredients business should continue to perform well, both in edible oils and wheat milling, and our growing [margarine] business does provide more earnings consistency to the segment due to the more value-added nature of the product.

Moving to fertilizer, the good farm economics and increased planting demand should result to greater demand for our products. In -- beyond the inherent demand growth, we expect our volume in Brazil to improve, because we will complete the adjustment to our facility footprint and logistics during the year. And as noted earlier, our margins have been meeting our expectations in that business.

We would like to highlight a couple of other items. Depreciation, depletion and amortization will be about $500 million next year. Our full year 2011 tax rate is estimated to be approximately 15%, reflecting the global mix of our business. The higher rate in 2010 is largely explained by the taxes paid on the sale of our nutrients business. The reduction from our previous guidance is also mainly attributable to the sale of the nutrients business, as Brazil is a relatively high tax rate jurisdiction. As our Brazilian sugar and bioenergy and our fertilize businesses reach their full earnings potential, we would expect our tax rate to trend towards 20%.

And we expect to spend about $1 billion on CapEx again next year.

And with that, now we'll turn it over to questions and answer. Operator?

Thank you. (Operator Instructions). And our first question comes from Ken Zaslow from BMO Capital Markets please go ahead.

Good morning, everyone.

Good morning.

Good morning, Ken.

A couple of questions. One is, to what extent do you think that you're going to be able to replace the earnings power from fertilizer with your sugar assets?

I think we will be able to do that, Ken. Not only with the sugar assets, but with the fertilizer assets themselves. You have to remember that we only owned 42% of the economic value of Fosfertil. And so when you do it on -- after minority's basis, we think we should not only compensate that with the sugar business and bioenergy, once they run at full capacity and fertilizer is in the range of $50 million to $100 million that we said, butwe will be able to do that with a stronger balance sheet. So clearly, the quality has improved.

And you think you can replace it in 2011? Or will it take time?

One way or another, I think we will be able already to do it in 2011, but obviously much more stronger in 2012.

I think, Ken, as we said, we're not going to be able to operate sugar in full capacity in 2011, so it would certainly be 2012 and beyond when we would get there, and then we've given the indication of $8 to $10 profit per ton on EBIT on the 21 million metric tons. So that gives you a feeling of what we think sugar can do. And I don't think fertilizer will be running at the full earnings rate also until 2012. I think it will ramp up during 2011, but everything will be fully in place for 2012, and you would expect it there. So I think 2011 will be a good year for both of those businesses, but still a transition year and not quite at that full potential.

And my second question is, with the rising commodity prices and just using a little bit more of your cash flow and balance sheet, does that change your appetite for acquisitions? And when you look at the acquisitions -- the larger scale acquisitions; I know you've done a lot of little ones -- would you think that the return on those would be the same that you would have thought a couple of years ago? Can you just give us some parameters to that?

I think not too much changed, because you have to remember that our debt is smaller than our inventory, so the financial -- the balance sheet of Bunge is the strongest it has ever been. And obviously the question is how long the commodity prices will stay at this level and higher. I would say also in the case of acquisitions, you always have -- if you do the right ones, and I think we have shown in the past, we have been very disciplined -- they bring the right amount of EBITDA. So we feel the same way as we felt before. It doesn't change too much our view on the potential acquisitions, but very important is we are disciplined here.

Great. I appreciate it. Thank you.

Thank you.

Our next question comes from Vincent Andrews from Morgan Stanley. Please go ahead.

Thank you, and good morning, everyone.

Good morning.

Good morning, Vincent.

And congratulations, Drew, on your appointment.

Thank you.

Maybe just a follow-up on Ken's question, just -- are you guying trying to say -- if I look at the peak year of fertilizer in 2008 on a gross profit level, that was $1.45 billion, less about $123 million of minority interest. The is sugar business ultimately has that type of earnings power, or are you kind of thinking about a different type of number?

No that's unfair. 2008 is --okay, that's --2008, no.

Okay. Well, it just looks like we're heading in to that type of level of fertilizer earnings power in the 2011/2012 time frame, so I just wanted to make sure that's not what you're saying. I guess maybe just staying on fertilizer for a second. The [anda] data came out the other day, and it looks like from our calculation, that inventory levels are still pretty low in Brazil. And I guess, one, is that true? And two, how does that -- can you give us some insight into your inventory position, and should we be thinking about you booking inventory gains as prices go up during 2011? Or is that just not possible?

We have changed the way we look at our fertilizer business. Obviously with the issues we had in 2009, it was clear that the whole industry had to change, and you cannot have the kind of inventories everybody always had, which was five, six months. So this has dramatically reduced. So this means much less risk on the down side, but there's also less potential on the upside. So when you think -- when you look forward in our business, when we talk about you should be seeing something to $50 million to $100 million type of earnings, it should be a much more stable business. So from our three pillars of what we are working on; risk management, inventory, and margin management; I think we more or less have that under control. We still have to do more homework on cost reduction and also on our volumes increase, which means we have to invest and do work on our footprint. So in the second half of 2011, we should be running on a normal level, so I would say 2011 clearly looks as a solid year in fertilizer.

Okay. And if I could ask maybe, Drew, on the balance sheet, you made the comments that your liquidity is in good shape and that you are going to -- that revolver -- that the short-term payment expires in April. You feel good about renewing shortly. And so is that to say that where commodity prices have gone, you guys feel like you have the working capital flexibility to run the business? You could still participate in some type of M&A? I didn't hear the word share repurchases at all, so should we presume those are off of the table for now, even though I think you still have plenty left on the authorization? I guess just because in last time we went in to this part of the cycle, ultimately there were capital raises, and just any thoughts on that would be helpful.

Vincent I think we're out ahead of the liquidity situation, as you can see from our balance sheet and from the uncommitted lines we have. So we feel comfortable with our position in that we have got the capacity to do what we need. Certainly at the current price levels in handling the prices, in handling somewhat of an increase in prices, if there were to be another severe run up in prices, we would have to get out ahead of that also, obviously. you would have to get out ahead of that, obviously. But for the time beingwe feel comfortable that we can execute our current business plan with what we have in place.

Okay. And just any thoughts on share repurchases?

We -- the program is still open. We reevaluate that option on a periodic basis, but for the time being, we continue to make the decision that we like the flexibility of having additional liquidity available to us, and that's a better use of funds at the moment than further repurchases, but we'll continue to go through that decision-making process on a periodic basis and see what we want to do.

Understood. Thanks very much. I'll pass it along.

Our next question comes from Christine McCracken from Cleveland Research. Please go ahead.

Good morning.

Good morning, Christine.

You talked about the impact of the drought on your sugar business, and I guess roughly $70 million in costs tied to that. How much of that -- or maybe you could give us more color around how much of that was tied to the start up of the mills and kind of the inefficiencies there, relative to the replanning and the additional costs incurred tied to your production side of your business?

The $70 million has nothing to do with the startup, so the $70 million is really only the drought. So it's much more difficult to exactly quantify how much we missed by not having Pedro Afonso running -- basically not running at all, and Santa Juliana not running well. So $70 million is related to the drought.

So the sugar going in to those two new plants wasn't impacted by the drought, is that --

That's correct.

And next year in terms of your outlook for next year in terms of the volumes, is that all drought related relative to the quality of the cane? Because earlier you suggested, I thought, that it would be later in the spring before we kind of really knew what the crop would look like next year?

Christine, that is all drought related. We don't have a final read at the crop, but our estimate today is approximately $17 million. We won't know for sure for another couple of months exactly what it will be. But it'sall crop related, and we expect our facilities to be running fine next year.

We know we are a little bit daring in giving the number, but we thought it was important to give you an idea where we think it to be.

Okay. That really helps. And then in terms of Australia, they obviously got hit with this cyclone. Does that impact anything relative to your operations expected there? And then any benefit maybe to the outlook for Brazil?

It's early to say. We are analyzing it, and obviously this is an open tender situation. We prefer not to talk too much about it.

All right. Thanks so much.

Thank you.

Our next question comes from Christina McGlone from Deutsche Bank please go ahead.

Good morning.

Good morning, Christina.

Congratulations, Drew.

Thank you very much.

I guess first, Alberto, I wanted to better understand Bunge's milling quality wheat capabilities in terms of origination and storage and distribution. We typically think about oil seeds and a little bit about corn, but we don't talk about wheat as much.

The milling part in milling -- in wheat milling is only in South America, which is obviously very solid. Now when we talk about wheat grain origination and merchandising, I think we have ramped up over the years a very solid position in Eastern Europe, and we -- it continues growing. Obviously this year -- last year it was a little bit hampered because of the drought in Russia and quotas in Ukraine, but I think we have a very solid position. And the US it's also growing. It is not as important as our other grain businesses, but it continues growing.

Okay. And then what about the ability to -- Argentina looks like it has a decent wheat crop, and I think it's milling some quality. Is your origination capabilities there pretty robust, and are -- is the government even letting the wheat out of the country?

I think our capability is very strong there, and most of that wheat obviously primarily goes to Brazil, and it -- by us being the largest miller in Brazil, we manage to chain from farm to customer. So we don't have any indication that there should be a disruption in that flow.

Okay. Thank you. And then on the edible oil side, I was surprised to see the margins so strong, so my question is, given the surge that we're seeing in vegetable oil prices, are you able to pass it through? And if you could talk maybe about all of the geographies? Or is there some sort of inventory position so you really -- it's a timing issues and maybe later on we'll see margin compression?

They are -- not everywhere we're able to pass it on completely. There are price limitations in Russia, Ukraine, and also in China, but I think over the years we have significantly improved how we manage this risk, and we have been able to protect ourselves. So I think there is -- I'm happy to hear that you say it's fine, but I still think we can still do better in one of the other areas.

Okay, thank you. And then just on the crushed margin outlook. The commentary talked about improving demand, and definitely vegetable oil demand looks really strong. I'm curious what you think about meal demand? And then if you could -- I always ask, go around the world and just talk about the crush margin outlook in the different locations?

I forgot to mention one more point on edible oils. We are quite proud about also our margarine business that has -- we have become the second largest the world, so obviously brings also stability to the margins.

Now in terms of crush margins, as Drew mentioned, they are weaker in the US, theyare stronger in South America, and we expect them to be stronger in Europe. Do you want to add something, Drew?

No, I think that's accurate, Christina. Europe will be weak the first half, because you're dealing with a short oil seed crop in Europe. But as the new harvest comes in and supplies become tenable, we think there's a chance for the margins to grow in Europe. Brazil margins are fine. In the US, everyone knows well, is weak at the moment, and it depends on demand in the new harvest and whether we see demand destruction or not. We have seen surprisingly little so far at these prices, and the demand on the protein side is holding up, but let's see what happens with more time, and the customers have to absorb these higher prices for a longer time, and how they react.

We obviously all look at USDA's estimate. Was 7% growth rate in meal -- or 11% in soybean meal, and 7% in vegetable oils. The quarter was very strong, so I think the dynamics for the meat industry are positive, but obviously they have come a little bit under pressure at this moment. So it's early to say.

And how about Canada, where you are doubling that one plant? What is the outlook there?

The outlook is, I think, normal. It is lower than it used to be, which was very robust. We expect more normal margins; better than in the US.

Okay. Thank you.

Thank you.

Our next question comes from Diane Geissler from COSA. Please go ahead.

Good morning.

Good morning, Diane.

Congratulations, Drew.

Thank you.

Just a question on the sugar business for 2011. Some of the investor feedback I have had is that they are concerned that you forward sold some of your production, now your production rate is going to be a little bit lower, and therefore your margins will be hit. You did say you flushed those contracts in the fourth quarter. Are you completely out of that forward sales position, or do you still have a little bit of hang over there as you head in to 2011?

Just a reminder, when we talk about the sugar and bioenergy business, we direct about 60% of our cane to ethanol. That is the way our production capacity is set up. And all of that is unhedged, and we never hedge it. On the sugar side we do continue to have some forward hedges on. We just think it's prudent to protect a portion of pricing, but we don't protect 100%, because you have the chance of production shortfalls, and you have -- and you want to keep some flexibility to take advantage of opportunities as they arise. So we're never at 0% hedged, and we're never at 100% hedged, and when we pick the spot that we think fits the price environment and the risk environment as best as we can. And as you know, we have not be disclosing exactly where we are, because we think that is important competitive information that we would rather not share.

Sure, I understand that. So your, quote unquote, guidance on profitability on a per metric ton basis would take in to account whatever hedges you currently have in place for 2011?

Yes, it does.

Okay. And can you refresh me? When you are up and running to the 21 million metric ton limit, where will you be in terms of total market share in Brazil?

So much is exported, it's a little bit difficult to say.

I'm talking on the --

We would be number three or number four.

Okay, but on the processes side is I guess what I'm getting at.

Yes. On the processing side we would be number three, number four. It's out of 600 million tons, so -- which we are something like 3%.

Okay. All right. Terrific. Thank you.

You're welcome.

We have a question from Jeff Farmer from Jefferies & Company. Please go ahead.

Thank you, good morning.

Good morning.

I apologize if I missed this, but if you combine what would be maybe 2% increase in the size of the Brazilian soybean crop with pretty soft processing from last spring and summer, what type of processing growth do you think could you see in 2011 on the soybean side?

We believe -- First of all the crop in 2011 should be a good crop. All of the indications are that the South American crop is a solid one, especially in Brazil. So obviously the question is always how are all of the other origins doing in terms of is there going to be more export of beans, or is there going to be more export of meal and oil, and how is the domestic market doing? Now the domestic market in Brazil is doing very well. It's very strong. The economy is growing, so there be l be good demand from the domestic market, including the biodiesel. So it is a little bit difficult to estimate exactly how much the processing in Brazil will be. We look at it -- remember, you have 60 processing plants around the world, and we look at it more from a global point of view.

Okay. That's helpful. And then just to follow up on sugar, you made the point -- you are roughly 80% capacity utilization. That is your estimate for 2011You pointed to the $8 to $10 at full capacity utilization. Does the 80%, does cut it in half? Is it less than that? How should we think about that?

I think we would -- the world I think I used was somewhat less. So I don't think somewhat implies you should cut it in half. I think you should look at a little bit less than the range we gave you.

Okay. That does work. And then finally in terms to the Washington State terminal, how you should I think about that? How much growth could that represent to your global grain merchandising capacity? Is that a big number?

It is 8 million tons we can ship through the terminal. So I think it will be a good improvement, a good growth for us.

And then I should know this, but 8 million on a denominator of what? So roughly what percent growth would that represent?

Well 8 million is full capacity, so obviously this year we will not be running at full capacity. So I don't think we give you -- I don't think we break out exactly the amount of grains we move from the US.

Okay. Thank you.

Okay.

We have a question from Robert Moskow from Credit Suisse. Please go ahead.

Hi, thank you. Couple of questions, Alberto. In the quarter, agribusiness volume was down 3%. Maybe you covered this in a way, but is that -- why would it be down, given such strong volume in merchandising and filling in these arbitrage opportunities around the world; distributing, originating? Obviously the crop is a little bit smaller. And then second question is on sugar. Can you stick to this -- I think at the last analyst day, it was 26 million metric tons by 2013. Do we have to lower that estimate based on the weather, or do you think we can get there still by 2013 for sugar?

In terms of the grain volumes, by -- clearly the most important one was the fact that we were unable to originate grains in Russia and much less in Ukraine, so obviously the whole domestic business is reduced there, so it basically all there. With the exception of this area, our grain agribusiness continue growing.

In terms of 2013 on 26 million, I think it's a little bit early to see. Let's see how -- we have obviously focused now, with this drought, much more immediately on expanding the agriculture side and replanting, and we are revisiting our program. There will be some expansion in some mills, but to confirm 26 million in 2013 is too early. Probably more in the end of the year we will talk about that more.

And just -- if I could drill in a little on sugar. When you look at other sugar competitors -- I looked at Cosan's results today; they were down. Do you think the issues you are having there are pretty much the same across the industry? Or do you think there's something specific regarding the acreage areas that you are in, or where your mills are located?

We -- what was different for us, one, is we did not have the profits from inventories, because we did the acquisition, and you have to value inventories at fair market value, therefore we don't have the profits in there. Second, we also didn't run the plants from -- the didn't run them the whole year, because we bought them in February. Also Pedro Afonso didn't run much -- very little in the fourth quarter, and Santa Juliana didn't run well, so this is unique to us. Now when it comes to the drought, I think it has been generally in the whole Central South area. I believe that two of our mills were a little bit more affected; the one in Minas Gerais. But overall, I think pretty much everybody was affected.

Okay. Thank you.

Thank you.

We have a question from Bryan Spillane from Bank of America. Please go ahead.

Hey, guys, it's actually Ryan Oksenhendler in for Bryan here. Congratulations, Drew.

Thank you.

I just -- I guess for next year for sugar, you have a capacity of 21 million metric tons, and you are to do 17 million. Is that all because of the drought? I mean if it was X the drought, would it be different?

It's only the drought.

Yes, we are going to process as much cane as we can grow and harvest.

Okay. I mean, this year -- earlier you expected to do 19 million metric tons? I think on the April call that's kind of the target you guys set for the year, and you only came in at 13.5 million. What was -- it sounds like there are some other factors in there besides the drought, so the startup cost -- I know you had some problems at two of the plants. Was that the other driver? And is that over with going in to next year? Are we going to start fresh going in to 2011?

Yes, the -- yes, you are correct that there were two impacts. It was the plants, and it was the drought, so that is correct. As we go in to 2011, we expect to be running those plants fine, but the actual situation is very typical with the industry. We identified what the issues were in the third and fourth quarter, and because those plants were operating, they weren't totally down, we kept them running for the crop season. Those plants are now down in the intercrop period, because there is no cane to harvest. We're making the corrections to those plants at this time, and we expect them to be up and running fine for the new crop.

All right, thanks. And then in terms of the Cogen that you plan to sell next year, it sounds like those are going to double. I know those had a pretty good margin, I think like in the 85%, 90% EBITDA range. I mean, isthat going to flow through next year totally, or there are some investments behind that will cut those margins down?

No, that is exactly. When we say the 350 gigawatt hours, that is exactly based on the investments we did last year.

Your margining might be slightly high, but generally it is correct.

Okay. And then just on the agribusiness side, what are you seeing from your customers? I know like for the last three quarters you've seen a lot of them hand to mouth, but given how tight supplies are, and we have seen crop prices starting to rise here, are you starting to see some buy forward in expectation that prices might go even higher?

This is very difficult to say, but obviously prices are high, so it is a struggle for all the end consumers. But when we think about the meat industry, they had reduced significantly the inventories, and the demand is there, and until recently the margins were good. So in poultry margins are a little bit under stress, but many of our customers hedge themselves. So we expect that we should see a normal demand this year.

And normal demand by do you mean in line with what USDA is forecasting?

Yes, I hope they are right.

Thanks, guys.

Thank you.

We have a question from Christine McCraken from Cleveland Research. Please go ahead.

Thanks for taking my follow-up. Just in terms of farmer sales, in the past we have seen some kind of fits and starts in selling and as soon as the crop comes in. It seems like what we're hearing is that they are anxious to sell, because they are worried about the sustainability of higher commodity prices. Can you talk about in the US if guys are still holding crop? If they are -- if you're seeing that come to market, or if they're waiting for even higher prices? And then as we look at the harvest in Brazil, I guess it's just getting started, as to whether or not you are seeing farmers come to market with those crops?

Farmer selling has been normal, because margins have been good. And obviously farmer's have been worried about increase in fertilizer prices, so many of them did not want to wait to see crop prices going up. So I would consider the farmer selling having been normal in the Southern Hemisphere. And obviously in the Northern Hemisphere there has been some selling forward.

And then just a follow-up on Christina's question relative to crushing outlook. One area you didn't touch on was Asia, and with two new plants coming on line there, I'd be curious to see what you are seeing there in terms of -- I know that things were kind of tough for a while, but it seems like things might be getting better from a crushing environment. Can you talk about the competitive conditions with your plants coming online?

Yes, I could do that, but Drew reminded me that in Argentina, the farmer selling is slower for different local reasons, and -- but it is picking up.

Now in terms of Asia, obviously when we do this investment, we want to have all of our plants state-of-the-art, low-cost, right logistics, so we want to be the most competitive one. So we all know there is excess capacity in China, and -- but I think we will be able to operate well there. So the margin environment at the moment is under pressure in China, but it varies during the year, so we are optimistic for the rest of the year. And in the case of Vietnam, it's a huge country with over 80 million citizens and a very strong demand and the economy growing, so I think our plant is coming at the right time.

Great. Thanks.

Thank you.

Our next question comes from Christina McGlone from Deutsche Bank. Please go ahead.

Thank you for the follow-up. Drew, when I'm listening to your commentary, it sounds like it might be a second-half weighted year, and I can understand that in fertilizer and sugar, because of the seasonality, but there are still small and ramping up. When I think about ag, if we have the volumes coming out of Brazil, based on what the crop looks like, and the crush margins are good, why wouldn't agribusiness be more of a first-half weighted year and then offset sugar and fertilizer?

Yes -- one, Christina, as you know, the quarters we earn money varies by the opportunity that the markets present us. It is never a straight line with this business, and one of our great strength is taking available -- taking advantage of the opportunities when they present themselves. Our results have -- I don't think I said agribusiness would be second-half oriented, but it does tend to be a little bit, because of the first quarter tends to be one of our softer quarters because of the way harvests flow. So maybe a little bit, butI didn't mean to imply that agribusiness would be naturally weighted or definitely weighted to the second half? (Inaudible -- multiple speakers).

No, not agribusiness, but the whole Company? Like consolidated.

Sugar clearly is strong second half. I would say two-thirds, one-third. Fertilizer should -- which used to be like that, it should be still second quarter, second half, but it could be a little bit less because we don't have anymore so much of the phosphate to sell from the mines, and we are shifting more also to sell to coffee and sugarcane. It is probably going to be something like 40, 45, 55, 60. So it's still going to be more second half in general.

Okay. And then -- thank you for that. And the fertilizer, I guess -- I thought at the analyst's day, Alberto, you had talked about earnings potential about $100 million, and then today you said $50 million to $100 million. So did I mishear, or is the profitability outlook a little bit lower than before?

No, it's the same. I think once we run it at full capacity, it should be, when you look at all of the components, it should be around $100 million. But when we say $50 million to $100 million, is we are still ramping it up, adjusting, and so obviously the outlook this year is a solid year. So we also have to think about years --When we talked about $50 million to $100 million, we were not so sure how this year would look like. But with the high commodity prices, with the good demand, I think the outlook for fertilizer is a solid one.

Okay. And then just the last question. In terms of strikes in Argentina, it sounds like between the port workers and the farmers, they have already had one, and they are gearing up. What are the risks around harvest? They seem very high again.

The strike is over. It finished at February 2. The government intervened. And it didn't affect us, because the harvest was not ramping up yet. So it's always a risk we have around the world, so -- but we have to consider that, but we have no -- we have no information that this should be an issue.

Okay. Thank you.

Thank you.

Our next question comes from Diane Geissler from COSA. Please go ahead.

Good morning, again. Thanks for the follow-up.

You are welcome.

I forgot to ask earlier about fertilizer volume for the year. Is there an update on industry expectations for fertilizer volume in 2011? And then I guess you guys missed out on some sales last year because you were shuffling things around after the sale, so would you expect to exceed the industry? Or what should we be thinking about for volume for this year in fertilizer?

We expect the industry should grow at 5% to 7%, and we should be growing more than that. Because we missed one plant in the state of San Paulo and the other one in Rio Grande do Sul, so we are adjusting our foot print, we are adjusting our logistics flows, so we should be growing more in the market. But the market should be growing at 5% to 7%.

Okay. Great. Thank you.

Thank you.

Our next question comes from David Driscoll from Citi Investment Research. Please go ahead.

Great. Thanks a lot. Good morning.

Good morning, Dave.

First question is just a statement about disclosure. Alberto, with the new policy on guidance, I would really just state my position that breaking up the agribusiness segment into something more akin to what ADM does with its oil seed processing and agricultural services would be amazingly helpful to us. Because I think you're really putting the onus on us to try to make the forecast, and I would argue in order to do a somewhat reasonable job on that, we would need that type of breakdown. Is there any chance that you guys would be willing to revise that segment?

We can think about it.

Okay. Second question, then, really goes to the new capacity in oil seeds. So how -- just, I'm sorry, one more time can you say what is the total tonnage of new capacity that you'll bring on in 2011? And do you have an estimate for how much new capacity for all players will come on line globally in oil seeds?

The new capacity we are bringing on stream is 6,000 tons per day, and so -- between China and Vietnam. At the same time, I don't know exactly how much additional is from other areas, but I also would like to highlight that we reduced capacity with shutting down two plants in Italy, Porto Marghera and Ancona. So -- and the -- we feel comfortable about -- if you are questioning [our direction] of supply/demand, the growth in demand is very strong in Asia, so we're not worried about the imbalance there.

Yes, Alberto, that is the -- well, let me follow up here. What was the amount of the two plants in Italy that you closed down? I assume that would be significantly less than what you are adding?

Yes, they were less.

Okay. But you are just saying, though, that it's not a pure 600,000 tons a day that you have added. Okay. So bottom line, then when we look at industry utilization rates, do you expect utilization rates to move higher throughout the year?

Yes.

Because of the balance in growth in supply versus the rate of growth in demand?

I think so. When you look at the increase in demand that USDA is expecting for world-wide, I think the capacity utilization should net-net go up.

Okay. Thank you very much. I'll pass it along.

Thank you.

We have a question from Ken Zaslow from BMO Capital Markets. Please go ahead.

Good morning, again. Let me just ask you, the Argentine crop situation. You did address that. I know it's a little bit small -- it's going to be smaller than next year, but are you guys positioned well enough that there's not going to be any issues with the smaller crop? I know there were little issues, I think, a year ago. Just there is nothing on that front that we should be worried about? Just making sure.

No, we are not worried about that.

And my next question is, you didn't address -- well, your volumes on fertilizer will be up more than the 5% to 7%, the pricing is going to be up, but yet your profitability is taken down a little bit. Is that currency, or what is the reason for that?

No, we are not taking down profitability. I think we are indicating that our profitability will be up.

But down from the $100 million but closer to the $50 million to $100 million.

Oh, we -- let's say --

That's good there. I'm just surprised about that. I would have thought, again, volume is up, pricing is up.

Look, I said $50 million to $100 million, but I feel very good about the range, so I might move up on the range.

Okay. That's what -- it makes more sense there. I appreciate that. And then in terms of sugar there shouldn't be any quarterly losses, right? Everything should be in the black throughout the quarters?I know you don't want to give guidance, and I totally respect that. I just want to make sure there is no funky business in any of the quarters going forward.

No, normally -- we have to be careful with the first quarter. The first quarter is obviously -- we going into the new year with very little production. So obviously we have ethanol production that we are selling, but it's a very weak quarter. So I would not say where it could be, but it could be slightly negative.

Okay. And thenjust on the tax rate, just to understand, you said it is going to be working back to 20%?Is that in 2012, or is it a slow grind back up from the 15%. Like, do we just go 15%, 20%, or do we go 15% and increase it a couple of percentage points every year? Because the 15% adds about $0.50, so in terms of modeling it, it actually makes a difference.

No, understood, and I think a gradual ramp back up would be the way to go.

Great. I appreciate it. Thank you.

Our next question comes from Vincent Andrews from Morgan Stanley. Please go ahead.

Thanks for taking the follow-up, andI apologize if you had gone over this in detail already. I had to hop off for a minute. But, Alberto, couldyou dimensionalize the performance in agribusiness this quarter? It was the second best quarter you've had in the segment, with the best one being 2Q 2008, and then 3Q 2007 was quite strong, as was 3Q 2008. So can you just give us a sense -- and this was a weak oil seeds processing quarter from what we can tell relative to those prior big quarters. So can you give us a sense of the sustainability of some of it? Or how should we be thinking about this type of a number going forward?

We have to look at it from a yearly basis. And we have seen it so many times because -- so many times that things move from quarter to quarter, and you have to look at a crop, because you can buy forward, you can sell forward, so sometimes you have the earnings concentrated in one quarter and less in the other one. So when I look at the $840 million, I think I feel very good about it. It is less in oil seed processing, more in grain. You have years where it is the other way around. And I think we could see more of this, and we hope that we can grow from that.

Okay, that's very helpful, butwhat I was trying to get at was obviously in the last six months we have had many discrete dislocations around the world and plus some disappointing USDA reports, and assuming that stuff settles down, I just wanted to get a sense of whether sequentially the opportunity set is going to settle down with it. And it seems like that is what you are saying. Is that correct?

Yes. You have to remember for us it was pretty horrible in Ukraine and Russia, so there are offsets, and we don't talk too much about it, butwe didn't do anything there, and the inventory we had, we had to sell the loss. So there are offsetting situations there, but as always, there are some things that go better and some less well, but overall, I feel when you look at the last four years, how we have been performing, it has been at this higher level.

Okay. Thanks so much.

Thank you.

Our last question comes from Bryan Spillane from Bank of America. Please go ahead.

Hi, good morning.

Good morning.

Just a question about -- just about how you are positioned in terms of risk for 2011. I think there was quite a bit of volatility in 2010 in your earnings, and some of that was just based on some of the positions that you had, I guess, earlier in the year. So, Drew, I guess if you could talk a little bit first about just in general kind of what you're -- how you would - how you would rate -- or how we should think about where your risk is today versus maybe what it was when you were going in to 2010? And if you could talk a little bit about just what you are doing or what changes you've made in terms of risk management going forward?

We have also felt very good about our risk management process and continue to do so. We have got three main legs of that. We have got a first class economic and market research group that is 100% devoted to research in the various markets. They have people here located with our product line managers, but they also have people in all of our operating companies and markets around the world and do a very good job of gathering data of exactly what's happening on a detailed and a macro level.

We have a group of product line managers who are exceptional risk managers. They understand the business well. They are very experienced. And you go back and look at their track record over the last four years, and I think it has been exceptional. The results on a yearly basis have been fairly steady. I commented that three years were over $800 million, and ifyou go back to 2007, the segment's EBIT was $750 million. So you have got four pretty consistent years of strong performance and strong risk management by that group. And that -- those two groups are located in our agribusiness segment and run the business.

In addition to that we have a risk management group, which is independent from them, reports directly to me, that measures, monitors the risks every day, and does the stress test and questions where we're exposed and where we're not. SoI think it's very robust system. I think it has protected us well and produced results over the year. I think we've had a couple of quarters here or there that weren't terrific, but we've had a lot more that were very, very good. And I think there's some inherent volatility in our business. So I think while you manage risk very well, it is not always going to be a straight line, and what has always impressed me is when you look at it on an annual basis, how much of a straight line it is. Is this more risk, less risk going in to 2010? Very hard to tell. The market is opportunity driven and risk events occur, but I think the key thing is we have got a system that is measure and control it, and that keeps the risk at a level we're comfortable with, and we feel good we can hit our earnings targets.

I think to your question about 2010, I would add that in fertilizer and sugar and bioenergy, we consider our risk is much less. So agribusiness is probably the same. Obviously we always think we will continue to improve it, but in fertilizer and in sugar and bioenergy is less. And obviously in the whole financial area, liquidity interest rates, also the way we adjusted our capital structure in Brazil, we reduced significantly, I'd would say, our risk in the financial area. So we feel better about that level.

Yes, and just to wrap that up, just so I was clear. I talked about agribusiness, but we have that same system in sugar, we have that same system fertilizer. That's the Bunge risk management system that we apply across all of our business units.

So just to make sure I understand, if we kind of the about risk today, you're -- there's -- you have a little bit -- you feel you have got less risk now than you would have had a year ago or two years ago? Is that fair?

Net-net, I would say yes, although the higher prices increase the risk. So in some areas we have a little bit more, but the Company as a whole, I consider it to have slightly less risk.

Okay. That's great. Thank you.

Thank you.

And at this time, we have no questions.

All right. Well, thank you everyone for joining us today. We'll be in touch soon. Thank you.

Thank you, ladies and gentlemen. This concludes today's conference. Thank you for participating. You may now disconnect.