Bunge Global SA (BG) 2012 Q2 法說會逐字稿

Welcome to the Q2 2012 Bunge Limited earnings conference call. My name is Larissa, 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 is being recorded.

I will now turn the call over to Mark Haden. Mr. Haden, you may begin.

Thank you, Larissa; and, thank you, everyone, for joining us this morning. Welcome to Bunge Limited second quarter 2012 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 Investors section of our website at bunge.com under Investor Presentations. Reconciliations of non-GAAP measures disclosed verbally on this conference call to the most directly comparable GAAP measure are posted on our website in the Investors section.

I would like to direct you to Slide 2, 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 Chief Executive Officer, and Drew Burke, Bunge's Chief Financial Officer.

I will now turn the call over to Alberto.

Good morning, everyone.

Before Drew offers details about Bunge's performance in the second quarter and our outlook for the rest of the year, I would like to start by discussing conditions in the agribusiness market. Weather is always important variable in the agribusiness and food industries, but this year it is particularly significant. Global stocks of corn and soybeans are already tight and severe drought in the US has lowered expectations for replenished supply this fall and driven commodity futures prices to record levels.

As the world adjusts to these developments, we are likely to see a tempering of near term demand among commercial customers, the emergence of nontraditional trade flows both within regions and globally, as well as a massive planting by farmers in the Southern Hemisphere. Large crops next spring from farmers in South America will help provide relief to a stressed market.

We expect Bunge will have a strong second half of the year, not only because we are confident in our business and our approach, our global presence in agribusiness, our investments in sugar, and our downstream in fertilizer businesses, but also because we are confident that the role we play as a company is both meaningful and valued.

In times of tight commodity stocks and price volatility, farmers depend on a trusted outlet for their crops, commercial customers rely on a responsive supplier, and the world requires flexible trade that can move products smoothly and safely from where they are to where they need to be.

Bunge's strong balance sheet, efficient operations, diverse product portfolio, and global asset network enable us to provide these services in the most challenging of times. Of course, record commodity prices spark concern for the food security of vulnerable communities. However, while corn and soybeans stocks are low, global stocks of other key staples, including wheat and rice, are at more comfortable levels.

The availability of these crops, combined with rational approaches by governments to domestic food, agriculture and trade policies, fast response from aid agencies, and cooperation from industry, should help the world respond quickly and effectively to potential issues.

I will now turn the call over to Drew, who will take you through the quarter and our outlook.

Thank you, Alberto.

Let's go to our earnings highlights on Page 3. We again achieved strong volume growth. Total volumes were 40.6 million tons, a 14% increase over the prior year. The volume increase was driven by agribusiness, as volumes went from 29 million to 35 million tons.

This increase resulted from increased grain merchandising business in Europe, due to increased supplies and our new port in the Black Sea. And in North America, as our Pacific Northwest port and related grain origination facilities were in operation. Oilseed volumes also increased.

The second quarter of 2011 volumes were negatively impacted by the 2010 drought in the Black Sea. Our total EBIT for the quarter was $403 million. Included in the amount are gains of $85 million related to the sale of our minority interest a Solae joint venture. And $36 million related to our purchase of a controlling interest in a wheat milling joint venture, in which we previously held the minority share. Excluding these gains, our total seed segment EBIT was $282 million, the comparable prior-year number was $336 million.

Our agribusiness EBIT, excluding the gain on the sale of the minority interest in Solae was $301 million. This was higher than the comparable prior-year amount of $271 million, which excludes a gain on a sale of our share of a European oilseeds joint venture.

Agribusiness results were driven by strong performances in oilseed processing and grain merchandising in South America. Our European business, which includes our new Ukrainian port operation, also performed well.

Sugar and Bioenergy reported a loss of $28 million. While the second quarter is the weakest business seasonally, we had expected a result around break even. The shortfall versus expectation was caused by an unusual level of rain in June, which resulted in lower crushing volumes and higher unit costs.

The prior-year result of $18 million benefited from unusually high ethanol prices related to a tight supply situation in Brazil. The lower sugar volumes in the quarter were attributed to our merchandising business.

Food and Ingredients reported a quarter result of $46 million. This amount includes a gain of $36 million related to our purchase of a controlling share of a Mexican wheat milling business in which we previously had a minority interest. The adjusted 2012 result of $10 million compares to a prior-year result of $52 million.

Our Edible Oil results were lower, as volatile raw material prices in the quarter resulted into reduced margins, and we recorded an impairment charge of approximately $5 million related to the closing of a European margarine plant as part of a facilities consolidation program to improve efficiency.

Our wheat milling results were lower than expected due to the combination of lower margins and continuing challenges related to the implementation of an SAP system that impacted volumes and margins. Corn milling continued to perform well, but results were slightly below a strong quarter last year.

Our Fertilizer business reported a loss of $1 million in the quarter, versus a profit of $12 million in the prior year. The prior-year amount is adjusted for $17 million of one-time charges. Volumes increased over the prior year, but margins continued to be affected by high cost inventories from earlier in the year when international prices decreased.

Our tax rate in the quarter is 19%, compared to 11% in the prior year. The higher rate was due to our earnings mix on the gain on the sale of the minority interest in Solae. The net income attributable to Bunge was $274 million; and our earnings per share, excluding the gains on transactions, was $1.20.

Let's move to page 4. We have indicated that we have been consistently investing in our sugar plantations to have the ability to produce at full capacity. This chart compares the performance of our cane fields and mills to the Center-South industry as a whole. The comparison period is crop year to date at June 30.

Cane milling volume for the industry has declined by 28% from last year's crop to this year's. At the same time, our cane milling volume has increased by 10%. A similar result is seen in sugar production; and in ethanol, the variance is even larger.

The only area where we show a decline is in total recoverable sugar. This reduction was due to the rains in June, which reduced the concentration of sugar in the cane. As with the other measures, our performance is better than the industry's, as we showed a decline of 2% versus 4% for the industry.

In 2012, we are continuing to invest significantly in sugarcane plantations and will plant approximately 70,000 hectares. As a result of these investments, we expect to have enough cane available to produce at full capacity next year.

Let's turn to page 5 and the balance sheet. Our balance sheet remains strong. During the quarter, our inventories increased $1.6 billion reflecting higher crop prices and increased inventories in South America, following the normal pattern during the harvest season. Our debt level increased by a similar amount. At June 30 we had $2.1 billion of available and unused capacity under our committed credit lines.

Turning to page 6 and our cash flow statement. Our funds from operations for the six months ended June 30 were $401 million, primarily reflecting our net income of $355 million plus the gain on the Solae and wheat milling transactions plus depreciation depletion and amortization of $264 million.

Changes in operating asset and liabilities of $3.1 billion primarily reflects the increase in inventory levels. Our capital expenditures to date are $473 million, and we are on track with our full-year spend of $1.2 billion.

Let's turn to our full-year outlook on Page 7. We continue to expect a strong finish to the year. Agribusiness should perform well. In oilseed processing, we expect good margins. North American soy crushing will benefit from export demand due to tight supplies in South America.

Our Canadian canola and Eastern European sunseed margins should be strong, as crops are large and demand will benefit from the tight global soybean supply. European soy margins are also good, while rapeseed margins remain under pressure. China crushing margins are expected to improve as high soybean inventory levels are drawn down later in the year. However, the higher crop prices we are seeing will cause demand to slow down.

The corn balance sheet is particularly tight as a result of North American drought. The world's grain needs will have to be served by nontraditional trade flows, and our asset base and logistic network are well positioned to meet that need. Our strong balance sheet and risk management capabilities are essential in the current high-price, volatile environment.

Let's turn to page 8. In Sugar, we are entering the seasonally stronger half of the year. As the harvest progresses, we have greater visibility as to the crop size and we continue to expect to mill 17 to 18 million tons of cane. However, for the year, we expect results to be below our prior estimates. While we should be able to recover the million volume loss during the second quarter, we are not expecting to be able to make up the entire earnings shortfall from the second quarter.

As mentioned earlier, we are on track to plant about 70,000 hectares of cane this year. The development of this cane was helped by the June rains, so our confidence is increasing that we will be able to operate at full capacity next year. We expect our Food and Ingredients business to return to its previous level of profitability in the second half, as prices align with raw material costs.

Please turn to the next page. Fertilizer is entering its peak season. Farmers are profitable and the market needs a large South American crop. This would translate into strong volumes for our business. We are now forecasting a tax rate for the year of 17% to 20%, driven by our earnings mix and the Solae transaction.

As we approach the end of 2012 and the beginning of 2013, we are confident our businesses will perform well. Our global footprint, strong merchandising and logistics capabilities, and risk management skills position us well in the current agribusiness environment.

The expected large crops in South America next year should support our continued growth. Our Foods business should benefit from having an integrated supply chain with our Agribusiness operation. Our investments in sugarcane planting are starting to pay off and should be reflected in our profits starting in the third quarter and thereafter.

We will now be happy to answer your questions. Larissa will lead us through that process.

Thank you. We will now begin the question-and-answer session.

(Operator Instructions)

Ken Zaslow, BMO Capital Markets.

I want to talk about the Brazilian crush outlook. Can you just talk about -- so, the stock crush margins for Brazil are obviously not that great. Can you talk about your ability to actually own the soybeans versus how you can sell it? And, can you help us out what the outlook for your Brazilian crush margins would look like for the next, call it, three to six months?

Ken, the crush phase of South America is full in swing. Obviously, we have already bought most of the beans that we need to crush. Crush margins are okay, so they have been quite good. We feel comfortable where we are.

Okay. Would you think that they would be better year over year or in line with year over year? How do you think about it going forward like that?

Obviously, the structural margins have been better in South America, vis-a-vis last year; and, we expect it to continue being strong until the end of the season.

Okay. In terms of the inventory levels, year over year it is about $1 billion bigger than it was last year. Is that comprised mostly of volume or pricing?

I would say it is mostly price, but we have expanded, somewhat, our market share.

Okay. With the sefrina crop coming out, does that change the logistic opportunity that you would have, given the tightness of the supply in the US? And, how does that work out? Obviously, it is supposed to be much bigger than last year. Does that create somewhat of a bridge to offset some of the US crush margin outlook?

The sefrina is related to corn --

Yes.

So, the margins here also have been very strong for domestic and export businesses. So, this has been -- in fact, it is not suffering any more it is very large [sefra]. We have good inventory, good forward businesses here, and margins are structurally strong.

Okay. Yes, relative to your outlook in the first quarter, would you say that the composition of your earnings in the Agribusiness is going to be stronger or weaker than you expected? And, what is the composition based on crush margins versus logistics?

Look, we feel as strong as we felt in the last quarter for the rest of the year. I think we are very well-positioned. And, South America is performing extremely well.

So, if there is some weakness, perhaps in crush margins in Europe like rapeseed and in North America is offset by the stronger performance of South America, so outlook is as robust as we thought about in the last quarter. Obviously, it is a little bit different because the harvest is looking different. But, we feel very comfortable about the second half.

My last question is on capital projects. Can you give us an update on how you think the return characteristics of certain of your capital projects will go from the Northwest port to some of the smaller projects? How does that all play out relative to your expectations going forward?

The good news is that many of the investments that we launched are now in full swing, like Nikolaev in Ukraine and the Pacific Northwest, some of the Vietnam plant, and so on. They are performing as expected.

Also, the acquisitions in the food sector in India and in Brazil -- so we are comfortable with how they are performing in terms of returns, as expected. Obviously, some a little bit better, some a little bit less good but, we are very comfortable the way they are moving.

I guess I lied when I said one last question. Are you more optimistic, less optimistic, or the similar? I can't figure out which way you are feeling relative to last quarter. It sounds like you are kind of more optimistic but not really sure. So, I'm just trying to take your temperature on that. Are you feeling better about the next 18 months or not as strong?

I feel at least as strong as in the last quarter. You know, let's -- we obviously are quite worried with a shorter crop in North America. But, the way Bunge is positioned with a very strong global asset network logistics, I think we will be able to participate and help the customers to feed wherever it is needed. So, we feel very good, even with the change in the picture of the harvest.

We have, probably, one of the strongest balance sheets in the industry. We are being able to fund the expansion of the business with higher prices. So, as you saw our inventory going up, we are ready. So we feel very, very well-positioned.

Great. Thank you very much.

Ken, let me just add to that because you took it out to how do we feel over longer period time into next year. I think we are feeling pretty good about next year. They are going to have very large crops in South America, and we are very well-positioned to both process and handle the crop in that market. I think you'll see a big harvest in South America and big volumes used domestically but, particularly, for exports because the world's going to need that product.

Even that -- it should offset the US crush outlook, which is probably less good than you thought it was, but the South America should more than make up for it, my guess is --?

Yes, I would think so, Ken. One, it is hard to predict the US because we are in a difficult weather position. The soybean crop isn't made yet, and it is under some stress.

But, I think the feeling is that the fourth quarter will be -- third and fourth quarter will be okay in the US. But, they'll run out of product earlier early in the first quarter next year that there won't be a whole lot that can be exported out of the States. At which time, the Brazilian crop will come in.

So, I think on a net-net balance, yes, we do see the opportunities for us in the future of Brazil outweighing what we might give up because of the smaller US crop.

We feel very good about the next 18 months. Also, sugar and bioenergy will start showing the results. We are seeing it already, the way it is performing in July. So, we are comfortable with the next 18 months, the outlook.

Great. Thank you very much.

Ryan Oksenhendler, Bank of America.

Can you just talk about the shortfall or the magnitude of the shortfall in terms of EBIT margin for sugar? I think last quarter you had pointed to slightly below the normalized range of 8 to 10. Can you point to what it would be this year?

We can. I think it will be a little bit lower again, Ryan, because what's happened is in the second quarter, we lost crushing volume. And, we still have the same crop; we have 17 to 18 million tons. So, as long as there is nothing very unusual in the Brazilian weather pattern, we will be able to meet our crushing targets for the year.

But, the other significant thing in the Sugar business is how much sugar you recover in the cane. During the cane we produced in the second quarter, the total recoverable sugars were lower than historical levels because the cane was wet in effect from the rain. So, that piece of the profit we are not going to be able to earn back over the rest of the year because that crushing is done and that sugar is gone, or was never there. So, I think it will be slightly below than we thought last time.

Okay. Can you talk about where is the improvement from 2Q to the back half of the year? So when I look at your milling volumes, you already milled, I guess, 5 [million]. I would think that most of that would be in the second quarter because you probably didn't start harvesting until April, and you've got 12 million or so to go. So, let's just say you do 6 [million] in each quarter, you are only going to pick up an extra 1 million tons per quarter. And then the TRS, from what I have been reading, is that given that the rains have increased in the second quarter, that it continues to drain the sugar content and TRS may not actually pick up that much in the second half of the year. How do you bridge that gap in getting better volume -- or better margins in the back half?

Let's take it one at a time. Then, if you want more details after that, I suggest you give Mark a call. He would be happy to take you through it.

In Brazil, you start to harvest in the second quarter. At that time, the cane is not that mature in the total recoverable sugars are lower, lowest of the season. As you move through the harvest, the sugar continues to mature. The concentration of sugar in the cane grows higher as you move out, and then it declines again.

So, as you enter the third quarter and the beginning of the fourth quarter, you have the highest recoverable sugar rates. So a ton of crush is not a ton of crush. Material crushed from September forward -- or excuse me from July forward, starts to have the higher total recovered sugar than sugar recovered earlier. So, that is the one factor, so you actually get better yield in that period. That is why we have always said sugar is a second-half business, and we earn our highest profits in the second half in sugar.

If you look at total recoverable sugar, they do recover during as the crop moves along. I think the UNICA data is showing that the total recoverable sugars are getting higher.

How high they'll get, versus historical, has to do a lot with the weather and other factors, and that is very difficult to predict. Our projections are based on a normalized ATR development through the crop cycle.

Okay, thanks for that. I guess just a follow-up on Ken's question. It justify seems strange that -- or, I'm just curious how you can have such a huge shift in Agribusiness, the supply and demand balances, where you go from one of the biggest crops in US history to one of the worst droughts in 25 years, and your outlook hasn't changed at all, and especially with demand dropping off here.

Is there a scenario where it is actually not good for you guys? What -- how are both scenarios that good for both that your outlook is so strong for Agribusiness?

You have to understand that we are very strong in South America, and the South American harvest was a very good one. It was lower than originally expected, but I think it was the third or fourth largest ever. Therefore, the world needed their products, and they needed the infrastructure, and the kind of assets and capabilities we have. So the margins are good. When we look at the next year, South America will again be a major contributor.

It is a shorter crop in the US, but it is going to be a good crop. So, we will have enough beans and grains to process until the end of the year. You have to remember also that we have expanded in the Black Sea area, where we have generated significant amount of volumes. And, it was not there last year.

I think what you are hearing from us is Bunge is, because of its geographic breadth and also the product portfolio, we are very well-positioned. That is exactly where our strength comes to play. When there are problems in some areas, we are able to compensate it with products and geographies from other areas. That's exactly our business model.

Okay, thanks. I'll leave it there, guys.

Vincent Andrews, Morgan Stanley.

As you look at the US soy crop, where do you think the yield comes in? Are you guys closer to where USDA is or are you much below it?

I would say we are where the USDA is and there is still time. There's quite a way to go with the soybean crops. There are a couple of rains out there, so we are where the USDA is as well.

Okay. Let's take a scenario where the USDA just happens to be wrong. And, they are really wrong, and yield comes in three, four, five bushels below where they are. So, we are somewhere in the high 30s and soybeans go into the high-teens, maybe to $20. What type of situation would that be for you?

We are in the middle of it, so we earn our spread. What we would do is -- you might have -- the fourth quarter should be reasonable because we all have the availability. You might have, earlier in the beginning of the first quarter of next year, not enough beans to supply for exports. So you have to remember that Brazil starts harvesting at the very end of December already, so Brazil would have to kick in even earlier.

I would say that the scenario is tight, but it is reasonable. We think we will be able to serve our customers.

And, $20 beans from a balance sheet perspective or maybe, Drew, it would be helpful if you just could give us a little bit more detail about how the balance sheet is functioning.

I see that you still have $2.1 billion left of credit facilities, even though inventory went up in the quarter. So what is the comfort level if beans go to $20? Is that fine, or how should we think about that type of scenario with the balance sheet?

I think, Vincent, I don't want to give too precise of an answer because it is a very dynamic situation and it -- in what it would mean to us varies on how much inventory we decide to carry and how much of a position we have on the exchanges.

What I would say is we are very comfortable with our balance sheet, and our debt capacity, at the moment and think we'll be okay in all the scenarios that we are envisioning for the market going forward. We don't see that as an issue at the moment. It could be at a point in time, but right now, we don't see it as something that's going to impact us in a great way.

Okay, that's helpful. One last question from me. The tax rate you guided to for the full year went up, and I know your tax rate can move around for a variety of reasons. Can you help us understand what the reasons are in this case?

Yes. I think the two in the press release, the one is very straightforward, which is we had a gain on the sale of Solae, which is taxed in a high tax rate jurisdiction. So that is having straight some pressure in moving it higher.

The second one, and the one that causes volatility in our rates, is the earnings mix. That is always difficult for us to project. You know we do business in, I think, over 40 countries. They all have a unique tax rate, and their tax rates range from very low up to about 35%.

As we have said in the past, earnings moves throughout the chain in our business quite frequently. So, we may be expecting to make it in origination and end up making it in distribution and that transactions are likely to be in different countries. So, that is what causes the volatility in getting it to move up.

There are many drivers to why it increased, but I would say the biggest driver in this year is the fact that we see both increased operating earnings in Brazil, and we see lower financing costs in Brazil. So, our pre-tax increase in Brazil is increasing, and that is a fairly high tax rate jurisdiction for us.

The other thing I would point out is while we don't like high tax rates, if it is caused mainly by higher earnings --

Right, it's fine.

It is not such a bad thing. We would prefer a lower rate, but when it comes the other way, it's not. I would actually say it is strength in Brazil pre-tax profits that is causing the biggest increase in our estimate for this year.

Okay, it makes perfect sense. I will get back in the queue.

Christine McCracken, Cleveland Research.

Alberto, you talked about the global supplies of wheat and rice being ample. It seems like we have seen some estimates coming down here recently on those crops.

And I'm curious -- you know, rumors about hoarding, again politically motivated kind of changes in policy. I'm wondering how that affects your outlook for availability, if it does all? And, whether or not you have any protection this time around? Or, how it might be different if there were to be any kind of export bans?

One situation is -- one message is very clear. I think it is the one thing we don't need and would be very detrimental is government interventions about limiting exports. As we have seen in the past, this is very, very negative for the whole world.

We don't have any indications. We think it is -- we have enough inventories, and we have enough ending stocks. So we feel it is comfortable. But, obviously, government interventions are always tricky and problematic.

Is there anything different this time, like who controls the supply? I think that shifted a bit since we had these issues before, at least that is what we hear from the trade.

I'm not so sure. I think we are having this time -- okay, we have the issue that we don't have enough feed input, which is corn and soybeans are smaller. But, this goes into the livestock industry, so I think that is a little bit different.

But, rice and wheat is available. The Chinese crop is good. I think we have enough, although a little bit lower in Europe, but we have enough production of wheat. We have enough stocks in US, and the crops should be okay.

I would hope everybody stays reasonable, and just remembers that the issue is with corn and with soybeans.

Then with the increase in prices of seeds specifically. We are hearing about quite a bit of liquidation, globally, on the high cost feed supplies. I'm wondering how that changes your demand projections, if it does at all? And, how you are working with customers maybe to secure physical supplies?

We would say, at the moment, the change in demand is more that six weeks or to a month ago, we expected a higher, in fact an increase, and we are not seeing the increase; so, that is the delta. I think the meat industry and some end customers are being more careful and on not expanding.

We think there is enough supply until, at least, beginning of next year. Physically, I think we have supply and there might be substitutions. There might be some rationalization, and there might be [off] trade flows. And, we are working with our customers with these different scenarios. So far, I think, obviously, the biggest impact is high price, which is obviously negative for the end consumer.

Right. Just one last question then on the Brazilian policy, on the blend rate, curious if you have any update on how that might go?

We know that the government would like to increase. But as you have seen, also from our chart, the production of sugar and ethanol from cane sugar has not increased. There is only so much that can be done to increase the blending rate. First, the prices have to go up before you would see significantly more expansion of cane production, and then you could see an increase in the blending rate.

So, nothing expected this year?

We don't know. But, obviously, because the country is importing a lot of gasoline, which is very expensive; and obviously, they would prefer to have local production of ethanol. So, the government is thinking and working on what to do to help to expand the ethanol production. So, I think that would be, probably, the first step. Then, the second step would be increase the blend.

All right, thanks.

Tim Tiberio, Miller Tabak.

We have seen a report out this morning that China might be pressuring edible oil producers to keep wholesale prices stable. Just wanted to get your sense of how that could potentially impact some of your commentary that the Food Ingredient business should improve on the edible oil side in the second half, and Chinese crush margins have the potential to improve?

We have very, very small de minimis business to the end customer in China. So, these kind of things happen from time to time. We have seen it before, so we plan for this when there are difficulties increasing prices.

Even if it's not the government, not always we are able to pass on all the increases in price to the end customers. So that is why you saw also, because of the volatility of prices, you saw the drop in margins in our quarter.

This does not mean, as a company as a whole, that this is automatically negative because, sometimes, the margin is picked up in Agribusiness. But, over time we are able to pass on the prices into the market.

Now, when I talk about improvement in crush margins in China, it is more that we see. There is ample inventories, a lot was bought. And, as these inventories are crushed, we see an improvement the in the margins.

Okay, thanks.

Just one last question to drill down into your commentary on South America. Is this -- the confidence itself in South America, is that primarily driven by the fact that you were able to buy more beans at December and January levels, and now you are essentially selling a lot of that product that you are crushing at July, August mill and oil prices? Is that really where the spread has opened up for you this year?

I would say when we -- it is, obviously, also how you position yourself commercially when you buy. We start buying the crop for the, sometimes already in July, August, for next year. So it depends, obviously, when you buy it and what kind of margins you can accomplish.

The global structure in the world allowed for the farmers to make a significant amount of money and the margin expanded for processors and the merchandisers like us. This is normal when you have a large crop and you do not have too much competition from other regions. The picture is very constructive for South America this year and also for next year.

Okay, thanks for your time.

David Driscoll, Citi Research.

Alberto, I joined the call a little bit late so apologies, a slew of earnings reports out. Can you pull together the full year for us a little bit? Does a disappointing second quarter mean that the full year outlook is reduced? Then, I've got a number of follow-ups, but can we start there?

Overall, I would say the quarter was good because Agribusiness performed better than we thought. Now, we had some issues in Sugar and Bioenergy and in Food and Ingredients.

Now, I would say our outlook for the second half in Agribusiness continues to be very strong. In Sugar and Bioenergy, probably stronger for the second half than we thought in April, but we will not be able to recuperate everything -- the amount we lost in the second quarter because there was more rain in June than we expected that increased our costs.

In Food Ingredients, we think we will be able to do at least what we did last year. It should be better because we have a couple of acquisitions that came in. So, we feel very good about the second half and also next year.

Okay. Then, versus your comments three months ago and looking at the full year, this is definitively a more back-half weighted year; and it got even more so, given what happened in Sugar in the quarter and the expectation that Agribusiness will continue to improve in the back half. Is that a fair summary?

Yes, that's fair.

I want to also ask a little bit about crushing margins. So, and this is -- I get a lot of questions on this from clients. They see Chicago Board of Trade crush margins decline on the front month contract in a non-seasonal period, i.e. old crop beans, and we know we are running out of those. What I would really like to focus on here is how much visibility do you guys have on your crushing margins in the second half of the year?

Then, to expand on this a little bit, it seems to me that there was a very good opportunity during the quarter to lock in the board crush margins at attractive levels. So did you do this? And, can we feel comfortable that the business will perform well in the back half, i.e. do you actually have business locked up, rather than just an expectation that it will be good?

Look, let me tell you the way I see, generally, the crush margins. They have been, and are, good in South America. They are not good in US. They are good in Canada. Soybean, in Europe, and sunseeds are very good; rapeseed are not so good, and China is improving.

So, the general picture of crushing margins so far this year, and the outlook for the rest of the year, are better this year than they are last year. Obviously, Dave, we can't tell you exactly what we did and our strategies for the second half of the year in the US, but we feel -- we are very confident that the crush margins will be quite good in the fourth quarter in the US as well.

Okay. Then, one final question here on sugar. I understand your comments a moment ago, but maybe I need a little clarification on something. If the rains in the second quarter are good for sugar yields in the third and fourth quarter, and if those are the quarters where you produce most of the product, why is it that you can't still meet your profit goals in the Sugar business? Isn't it logical to think that you would produce at least as much sugar on a recover basis as you had originally projected, if not more?

Dave, I think what you are going to see is the third and fourth quarters would have been stronger than we were thinking about originally. I know we didn't publish those numbers, but that is correct because what we weren't able to crush in the second quarter, we will crush in the third and fourth quarters.

However, what we did crush in the second quarter was crush with less total recoverable sugars. The amount of sugar in the cane was less because when the cane gets wet you have volume, but you have less sugar there. That delta that we lost of total recoverable sugars in the second quarter, we are not going to be able to make up later in the year.

Okay. I appreciate the commentary. Thanks, everybody.

We have no further questions at this time.

Larissa, thank you very much; and thanks, everyone, for tuning in today. Thank you for your appreciation, and we will look forward to seeing you on the next call.

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