Bunge Global SA (BG) 2012 Q3 法說會逐字稿

Welcome to the Q3 2012 Bunge earnings conference call. My name is Kim 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, Kim, and thank you, everyone, for joining us this morning. Welcome to Bunge Limited's third 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, 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 investors section. I'd 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 risk 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'll now turn the call over to Alberto.

Good morning, everyone. We had a good third quarter. Agribusiness results were solid, and I'm especially pleased because it was a very balanced performance with contributions from all geographies and all product lines.

We now have six years of strong, growing, consistent performance in Agribusiness as a consequence of our approach to growth, which has focused on expanding in three areas -- geographies, portfolios, and value chains. This approach is what has made the business balanced and resilient through changing conditions and difficult market environments. I'm also pleased that Food & Ingredients and Fertilizer showed improved performance from the challenging first half of the year. And results in Sugar & Bioenergy on a comparable basis were higher than last year, but below the potential of this business.

Our continued sugar cane planting and other cost reduction efforts, which will result in increased sales volume and lower unit cost, will help us realize this potential. We are making steady progress and remain optimistic for a strong performance in the 2013 crop year.

Regarding the continuing effects of the US drought, the current market environment has been and will continue to be volatile and complex for everyone who participates in our industry, including farmers, processors, and the livestock industry. Stocks of corn and soybeans are tight, and as a result, the world is adjusting to typical trade flows. Bunge's role is to help farmers and customers manage through this environment by providing market access for crops and delivering the right products when and where they are needed.

We have the core strength, geographic balance, a diverse product portfolio, an experienced team, and a strong balance sheet that will enable us to fulfill this role effectively and profitably. The world needs record crops to rebuild stocks, and today's high prices are sending a strong signal to farmers, especially in South America, to plant. Early indications are that soybean production will be at record levels. And as new crops are harvested, we should see a more balanced supply/demand situation, which will be good for consumers and for the market overall.

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

Thank you, Alberto. Let's turn to page 3 in our earnings highlights. Our total segment EBIT for the quarter was $441 million versus $191 million in the prior year. This result was driven by a strong performance in Agribusiness, with a third-quarter EBIT of $406 million versus a prior year of $149 million.

Earnings were strong across all geographies and in both our oil seed processing and merchandising businesses. Oil seed processing results were good in all regions, with significant year on year improvement in North America, Europe, and Asia. Grain origination results were particularly strong in South America and our distribution business in Europe, the Middle East, and Africa performed well.

Our Agribusiness volumes continue to show growth, with a 15% increase over the prior-year quarter to 35.8 million tons. On a year to date basis, volumes have grown 19% to 101 million tons. This growth has been primarily driven by our investments in North American grain handling and port assets, and our European origination and distribution businesses.

Our Sugar & Bioenergy business recorded a loss of $47 million in the quarter. This amount includes an impairment charge of $39 million related to a US corn ethanol joint venture. Without this charge, the business recorded a loss of $8 million, as a profit in our industrial business was offset by a loss in our merchandising business, where we didn't generate sufficient gross margin to cover our operating costs. Both of these businesses performed better than the prior year.

Our continued focus on increasing capacity and utilization and reducing costs is producing results. According to UNICA, the Brazilian sugar association, mills in the center south have seen a reduction in cane [million] volume of 8% through September 30. By contrast, the Bunge mills have increased their production by 13%. We remain on target to crush between 17 million and 18 million tons this year.

Our results in the third quarter were negatively impacted by lower sales volumes caused by port congestion and by the continued impact of this year's crop low level of ATR. ATR is the total recoverable sugar in the cane. The reduced ATR results in reduced production output and increased unit costs.

Our Food & Ingredients business had a quarterly profit of $59 million. This is higher than the prior-year result of $52 million. Last year included a $6 million gain on the sale of a facility. Both our edible oil and milling businesses performed at a higher level than the prior year.

Our Fertilizer business earned $23 million in the quarter versus a prior year of $33 million. The reduction was due to lower margins in our Brazilian business.

Our net income in the quarter was $297 million. Excluding the impairment charge on the ethanol joint venture, it was $322 million versus a comparable prior-year number of $134 million. Earnings per share, excluding certain charges, was $2.08 in 2012 versus $0.86 in 2011.

On a year to date basis, our earnings per share, excluding certain charges, was $3.99 versus a prior-year amount of $4.15. Let's turn to page 4 and the cash flow statement.

Funds from operations generated $950 million of cash flow. Our working capital usage has increased substantially. 2012 has been a year of high and increasing commodity prices. In such an environment, our operating working capital naturally increases as the higher prices are reflected in our inventory and accounts receivable balances, particularly in Agribusiness. This is reflected in the cash outflow of $3.8 billion to fund operating assets and liabilities.

In such an environment, we focus on ensuring that we receive an adequate return on the higher level of working capital investment. Our Agribusiness performance in the quarter demonstrates our ability to generate the necessary returns.

We also take steps to ensure that we maintain sufficient liquidity to conduct business at the level we deem appropriate. We have been able to do this throughout the year and have $3.1 billion of committed and available credit at September 30.

Let's turn to page 5 and our balance sheet. Our September 30 operating working capital was $9.5 billion, of which inventories represented $8.1 billion. And as noted earlier, this represents a significant increase from December 31. Our debt levels have increased to fund these higher levels of working capital.

Let's turn to page 6 and the outlook. The business environment for Agribusiness remains positive for the remainder of 2012 and into 2013. With tight global supplies, our ability to source product from diverse geographies and supply the necessary logistics and risk management expertise will be essential.

Soybean inventories in South America are diminishing. The US is becoming the main supplier of beans, meal, and oil to domestic and export markets. While the drought has reduced the size of the North American crop, there will be adequate supplies to fulfill this role into early next year. Processing margins are expected to be good.

Once the US crop is reduced, South America will have to become the primary supplier. Farmer economics have been good and they have responded by planting large crops which are expected to be record in size. With our network and scale in the region, we are well-positioned to handle and process this crop.

In Europe, oil seed processing margins are strong, and they are improving in Asia. Considering the tight supply environment, global grain demand will continue to be met by a variety of products from different geographies. With our global network of ports and elevators, our grain merchandising operation should continue to perform well. Our capability to quickly react and move crop from where it is produced to where it is needed will be critical.

Turning to page 7, we expect our Sugar & Bioenergy business to continue to improve in the fourth quarter, but it will be faced with a continuation of lower recoverable sugar in the cane, and margin pressure if ethanol prices do not increase from third-quarter ending levels.

As we look forward to the next crop year, we are optimistic. We are on pace to have planted 73,000 hectares of cane, which should allow us to produce at or near our full production capacity of 21 million metric tons versus the 17 million to 18 million tons we expect to crush this year.

Additionally, the total recoverable sugar in the cane should recover to closer to historical norms. If this happens, we will be able to produce approximately 20% more sugar and ethanol combined. As this is a high fixed cost business, the additional production adds significantly to profits.

Our Food business had a strong third quarter, and we expect that to continue into the fourth quarter of 2012 and into 2013.

Fertilizer is in the seasonally strong period in South America. Large crops are being planted and farm economics are strong. This favorable environment is tempered by tough competitive pressures in certain markets.

Overall, we expect a solid finish to the year and a strong 2013. We will now open for questions. Kim?

(Operator Instructions) Christine McCracken, Cleveland Research.

Good morning. Just on this port -- continued port congestion issue, it's been a problem getting fertilizer in, now sugar out. I'm just wondering, with all of the disruption and congestion already, and then some of the damage that's been done to some of the ports, how are you going to move this record crop out of South America if it's already a problem when we are dealing with the smaller issues?

I would say that this year was unusual because we had this two-month strike of many federal agencies that only made it worse. So we had planned for certain behavior, but the strike made it really worse.

So, as we look into the new crop, I'm sure there will be some issues. But at the same time, there are more and more new avenues of exports. So, especially there is more of the products flowing north through the rivers of the Amazon out and through Victoria, through San Francisco to Seoul. I think there will be an issue, but assuming that there's no strike from any agencies, we should see a logistic flow that is okay.

Isn't there a strike every year, though? It seems like at least over the past several years it seems like we've had -- is this just longer?

This one was especially unfortunate because it was in the high season of fertilizer and the high season of the sugar movement. So I hope there's none when we export soybeans and corn next year.

Yes, I think, Christine, it's going to be difficult on the industry and the country to move all the product. Brazil, as you said, is subject to congestion. I think you hear our confidence because we have a pretty good interior network as well as a network at the ports.

So we have not only the logistic channels that we can rely on to move the product, we also have pretty good storage if we have to hold product for a little while. So I think when we look at our overall system, we think we've prepared well to handle it. But as a country and an industry, there's no doubt there will be some difficulties.

And then just one follow-up on ethanol. They've been exporting quite a bit of ethanol out of Brazil into the US. I'm curious if now that the government looks like they're going to move that blend back up to 25% in the spring, if that changes in your view.

Overall, the prices for hydrous ethanol are worse than the anhydrous. So the changing of the blend will be positive. Now, the exports are also anhydrous, so what will happen is whatever -- wherever the price is more attractive, I think everybody will start shifting more from hydrous to anhydrous. So if the export market is more attractive, you will see more export and if -- with the blend. If the domestic one is more interesting, we will see more local sales. So the good news is both of them are positive.

Great. Thanks.

Vincent Andrews, Morgan Stanley.

Thank you. Good morning, everyone. I know you don't want to give guidance, but can you just sort of talk about the level of performance, particularly in Agribusiness this quarter, and as you look out over the next few quarters? Is this about what we should expect within sort of a normal range of sensitivity for your business?

Vincent, as you said, we don't give guidance. I think what we would say is, as we look out the next six, nine months, which is where we have the most visibility, we do see a very good macro environment for Agribusiness, as we said. And it will shift from market to market, and probably will move earlier in the next year from North America down to South America than is typical, because North America is going to add a short crop and is really going to have to step up here in the fourth quarter and the first quarter to handle the shipments. So, when we look at the overall environment for Agribusiness, it feels very good and we expect Agribusiness to continue to perform well.

Okay. And you're not seeing anything on the demand side because of the high prices in any of the markets that's at all concerning?

No. I think we factored it all into our plans. You know as well as we do that there has been a little bit of a decline in meat production in the US over the last months, but that seems to have flattened out a bit. And the demand out of Asia remains pretty strong.

So overall, we don't see a big shift in demand unless something happens in the macro environment that would change the situation dramatically. But right now, demand seems to be reasonable and to be continuing.

Okay. And then just last question, on the volume increase, particularly maybe the port and some of the new infrastructure stuff, is there anything different about the unit economics or the margin opportunity with a port asset relative to a grain elevator, sort of what we consider to be your core business? In other words, is it a higher-margin sale? Is it -- are those margins less variable? Is there anything we should know about this volume growth that you're bringing on line?

I think the two -- the biggest one coming on line now is the PMW terminal in the West Coast of the United States, and that comes with both grain origination business in the interior and it comes with port elevation. So you have two sources of income. You get the origination margin and you get the elevation margin.

But I wouldn't say there's anything special about that, and you've had the same kind of development in Eastern Europe where we now have the Port of Nikolayev and are doing more origination in the country. So I wouldn't say they are anything special, but it gives us a chance to provide a full chain worth of services and make money across the chain.

So you get to double dip on the same bushel, basically.

Yes, but, if I understood your question correctly, obviously, on merchandising, the whole origination/elevation merchandising, the margin per ton is slightly lower than processing because you also have less investment in assets.

Okay. That's helpful. Thanks very much, guys.

Ken Zaslow, Bank of Montreal.

Good morning, everyone. In terms of the quarter on the Agribusiness side, can you talk about what the key drivers and kind of -- I know you won't quantify exactly, but kind of a least rank or give us a little idea of what were the key drivers. Was it the crush margin in the US, that you had good ownership of soybeans in South America, that you had exports out of South America? Can you just give us at least a qualitative? If you could give us quantitative, that would be fantastic. But what can you tell us a little bit more about this quarter?

It really was an excellent quarter in the sense that every region and every product line performed well. So we had good performance in South America with processing and origination. We had good improvement in margins in the Northern Hemisphere, so North America. Europe performed well.

So it was everywhere. It is not one silver bullet, it was everything was doing -- was performing well -- the merchandising business, distribution, origination. So I'm sorry to tell you there is not one answer. There is many. So I think that's also the power of what we have built over the last many years, that it is very well-balanced.

Did you have -- did you participate in the corn exports out of Brazil? Was that a big part of it?

It was a very important component, yes. We are a large player in that.

And how long has that continued through?

It's ongoing.

Okay. So that should continue into this quarter that we are in right now?

Yes, and, yes, that's correct.

And then the ownership of your soybeans in South America, are they kind of dwindling down, that now it's really going to be a US crush margin environment in terms of going -- for the next quarter?

Absolutely. And now the next two quarters is mainly the Northern Hemisphere. It starts in Northern Brazil, the harvest in early January. But the volume of the business now is the northern hemisphere. We are processing what was harvested both in North America and Europe.

How long will the North -- can you give us a relative idea of like, historically, how long do you get the good crushing margins out of North America? And how much do you expect it to be this year?

It's all about -- the issue is going to be the demand. We are surprised how strong the demand from the mid-sector is, but obviously you know the supply is tight. So the question mark is going to be how -- at the end of the first quarter, where is the demand going to be.

Okay. And then are you going to sell the Fertilizer business?

We don't comment on these kind of things.

Okay. And my last question is, gross profit, can you talk about gross profit dollars on the merchandising business, how it's actually trended for the last couple years? And do you think that you've actually reached more of a steady state at this higher level?

I think the overall answer to your question is yes, Ken. We've continued to expand the volumes we've done and we've got a network that can produce good margins.

I would also, though, just add that it's never a straight line in Agribusiness, as you know. So you always get a little bit volatility quarter to quarter and where the margin is in the train. But I think we've continued to expand our capacities and our capabilities, so I think if you look at the underlying trend in our merchandising business, it's very positive. And the growth is there and we expect it to continue.

Great. Just Ukraine -- is there any worry that the exports -- do you guys have any problems with having too much wheat that can't get exported, or is there any issues in Ukraine for you guys?

No. It was pretty much expected. The market expected it. It was overall very well-coordinated so we -- the volumes were as expected and good, and the transition to the reduction in exports. There is no real surprise here.

Great. Thank you very much.

David Driscoll, Citi Research.

Good morning everyone. This is Cornell Burnette, calling in with a question for David. Well, first of all, congratulations on the quarter.

And then if I'd start off here, I'd like to ask about Agribusiness. You obviously did very good in the quarter in crush margins and grain merchandising. I think a lot of that is driven by the opportunities that you had from just tight global supplies of grains.

Alberto, can you talk about what happens, I think, early in 2013 when the US crop starts to dwindle a bit, and globally supplies really tighten from where they are today? Does that give Bunge the opportunity to get maybe even more special opportunities relative to what you had in this quarter?

The situation will allow Bunge to play its strength because of our large presence in South America. And we have been very active in filling our pipeline so that we can start earlier than usual the production and exports from South America.

So if necessary, if the North American supply dwindles earlier because of strong demand, I think we can kick in with the South American supply. So we are preparing for this situation. So it should be a good transition and we should play an important role here.

Okay, very good. And on Fertilizer, you guys were profitable, but maybe considering that we've got tight global grain supplies and high grain prices, it would seem that maybe you could have done even better than what occurred in the quarter. Can you give any color on maybe why results weren't better?

And then moving forward, with the fact that you're expecting a record crop and we really need a record crop coming out of Brazil, is there the opportunity to get material increases in profitability in Fertilizer on a sequential basis as we move into the fourth quarter and into the first quarter of next year?

I would say that the main reason is that the quarter was very complicated with the port issues. And there were significant longer delays to unload the ships. That created really a havoc because this is the most important time of deliveries to the farmers.

In addition, some of the competitors got nervous and unloaded inventory faster. And so it was a very complicated quarter. So, volumes were lower and also margins were lower. And we do not expect this to be repeated, so we expect this to stabilize.

So do we think that maybe you could see some profit potentially shift between the third quarter and into the fourth quarter in Fertilizer?

The fourth quarter is an important quarter, but it's also the end of the season. So we expect it to be well.

Okay. Very good. Thank you.

Christine Healey, Scotia Bank.

Thanks. Hi, guys. First question I have is for you, Drew; just a comment that you made at the investor day last month. In Agribusiness, you were indicating that volume growth in the second half of the year would slow significantly from the first half. I think you gave an 8% as an approximation, and that was from 22% growth in the first half.

So you had a great quarter this quarter. Volumes, I think, were higher than what people expected. Should we expect volumes to fall off in the fourth quarter, or has your view changed since your investor day?

I think our business has stayed pretty strong. I think we will have volume growth in the fourth quarter because we'll have PMW for the full harvest this year. So that will help somewhat.

The reason we -- what I was trying to say at the investor day -- I don't remember exactly what I said, to be honest, the exact words -- is in the first quarter and earlier in the year we had that 19%-type of growth. We were somewhat, because of our activities and our new investments was a major part of it, but it was also partly because you had a drought in the Black Sea region in the year before. And there was additional quantities were there this year. So part of the 19% came from there, and I think we were trying to set the expectation we couldn't continue at those 20% rates.

Okay.

But, as you could see, our volumes have been stronger than I said on that, the number you are quoting. And I think we'll have strong volumes in the fourth quarter. I don't want to get into predicting any (multiple speakers).

Oh, that's fine. That's just what I wanted to know. And then on those same lines, in Fertilizer, you said that you expect the segment to recover first-half losses in the second half. Is that still the expectation? Because I think with Q3, that would require Q4 to be quite a bit higher.

That would be a stretch to get there at the moment. I mean, the business is moving the right way, but we are a little bit lower in the third quarter than we thought. So with that, I don't know that we're going to recover all of that this year.

Okay. And just the last question. Can you guys talk about what regions would you focus on growing in grain origination? What are some of your focus areas that you'd be looking at right now?

We continue expanding in the regions we are present, as you have seen. In North America, in US, with the PGT, the Pacific Northwest terminal, which also meant that we expanded our grain origination in North America, the same we are doing in South America, in Eastern Europe. So we are growing organically.

What is new is we are expanding both in Africa and in -- we are making investments in Australia, and also expanding now our grain origination in Canada. So the business continues growing in geography and in products.

Alberto, you knew someone had to ask you the question about Australia. So that is a market that you are interested in growing in.

Yes. We have been present without assets, but now we are moving.

Okay. Great. Thanks so much.

Tim Tiberio, Miller Tabak.

Good morning. Congratulations on a good quarter. I guess my question is on oilseed demand. We are hearing reports that China may be stepping in and ramping up imports of palm oil, with the recent decline in prices.

How should we look at that? Is that a risk for substitution between soy oil and palm oil on the demand side? Or is it just the fact that across the overall oil seed complex, supplies are so tight that this is really not going to become potentially a substitution issue over the next few quarters?

I would say generally from an impact on Bunge, it's not that relevant because we operate in all the oils. And on soybean, we have to remember that one of -- the soybean meal part is even more important than the oil side. So these kind of movements happen from time to time. We also have a shorter rapeseed crop and canola crop. So you have movements in which oil is more abundant than others.

So at the moment, we have one, which is the palm oil. So you see different flows and it's reflected on prices. But, remember, we work on margins, in general. So we can mix and change some of the oils we work with. It should not have a significant impact on us.

Okay. Great. Thanks for your time.

Ryan Oksenhendler, Merrill Lynch.

Good morning, guys. Alberto, just in regards to a previous question, you answered about growth in origination, you talked a lot about -- it sounds like greenfield projects. But there's been a lot of consolidation in the industry and it seems like there is more to come. So I guess, one, do you feel like there will be more consolidation in the industry? And then, second, where does Bunge stand in terms of M&A opportunities?

I do believe that we have more consolidation, because we have shown that -- the market has shown that it is necessary to have large companies with a significant geography spread and strong balance sheets to operate and serve the markets in these volatile times. And so we expect them to continue. And we are part of it, but at the same time we have shown we are disciplined operators.

So when we do acquisitions, they have to meet our hurdle rate. If they are too expensive, we will not move, and then we prefer to do either greenfield over a longer period of time. So just remember that, over the last 15 years, we have increased 10 times in size and that was a lot in terms of acquisitions as well. But if it's too expensive, we will pass.

Okay. Thanks for that. And then just in terms of -- for ethanol. How much shifting can be done from the industry from hydrous to anhydrous? Are there any limitations on that?

There are limitations because you have to do investments. And so there have not been a lot of investments. So we have done some. But, anyway, it's also a signal of pricing. So I don't expect a significant move there.

So you don't expect a significant shift.

Yes. We will because we have made investments in the past, but the whole industry will have very little shift.

Got it. And then for next year in terms of pricing for ethanol and sugar in general, I know you guys are replanting a significant amount, but are your competitors? And if not, then do you see a possible increase -- or decrease in supply, or an increase in pricing for next year?

Overall, we all are expecting an increase in supply next year, and obviously some more, some less. We probably are the ones that have -- on a relative basis, have the biggest increase in planting. And we really -- our focus is to become profitable and getting close to a cost of capital, even with this kind of environments, these kind of prices.

Hydrous ethanol prices are a little bit too low at the moment. So, all we can do is reduce our unit costs, and we are doing this as fast and focused as we can. So that is our focus.

Okay. Thanks. And then just one last one to follow up on Ken Zaslow's question. How long will the Brazil corn exports last? I guess how much supply is there?

To be honest, I don't know the details. There is something left, but very soon you will have the summer crop starting, so.

Yes, the winter crop will probably be -- the exports will probably be completed in the fourth quarter, is my thought. But again, I don't know the precise date.

And now it's the time for the Northern Hemisphere. We have -- interestingly, we are also exporting corn from Ukraine, which is a new one, something new.

Got it. Thanks a lot, guys.

Ian Horowitz, Topeka Capital Markets.

Good morning, everyone. First of all, can you give us a little bit of an update on the situation in Argentina with the cereals registry?

There is no relevant change. You know, this grain registry is not a significant impact for us because it's more about domestic trading, so which we are not an important player. So there is no significant change.

Alberto, there seems to be kind of a discrepancy between what you guys are accounting for in terms of exposure to this issue, financially, and what the Argentine government is saying that you are on the hook for. I'm sure there's going to be some sort of sit-down and come to an agreement. But just maybe some indication of how this process may work in terms of getting to some sort of agreement -- will this be something that happens over time in step functions or will there be --?

First of all, I think our accounting for this is absolutely correct and we've made all the disclosures around this issue in our SEC filings. So we've disclosed what has happened. We believe that the tax positions we've taken are absolutely correct, and we plan to defend those positions vigorously.

Okay. And then, you talked about in the press release a little bit of weakness in the edible oil market in North America. I think that's how the sentence read. Can you just give us just a little bit more color on where that weakness was, either in the processing chain or in geography?

It is nothing unusual, but I would say it is a couple of things, mainly around food service. And -- but it is not something that we are worried about too much.

There is also our ramping up of our margarine production. We shut down one plant from the acquisition we did in the past, C.F. Sauer's plant. And we moved it to another one. So these are -- however, should I say, nothing structural this should change.

Okay. And then one last question. You talk about -- and still in oil seeds -- the benefits from acquisitions. If you strip out acquisitions, can you comment a little bit more on the performance of the legacy business?

Are you referring to the edible oils business that we mentioned in the comments on?

Yes. Absolutely.

Yes. It's the food acquisitions.

Obviously, we had the benefit last year of a sale of a plant in Canada, and this year all the acquisitions are contributing, the ones in India and Brazil and even in US. So all of the acquisitions are contributing and are delivering as expected in year one.

They are not yet at full run rate. As you ramp up acquisitions, it takes time, integration, so one times item. But they are in line with our expectations.

All right. I guess I understand that. What I'm trying to figure out is the business, if you kind of look at edible oils without the acquisitions, where you are seeing significant market penetration.

They were -- excluding the gains on sale of assets, they were improved versus last year.

Our underlying edible oil business is performing well sequentially. Both Brazil and in Europe had a good third quarter and then showing improvement, and they were not -- those results were not driven by acquisitions. The major contribution from the acquisition was in India, and then somewhat from the tomato business in Brazil. But the core base Bunge business has performed -- or traditional Bunge businesses performed well in the quarter.

Okay. Great. Thank you.

Christine McCracken, Cleveland Research.

Just wanted to follow up on these heavy rains in Southern Brazil and Argentina. Curious how you think it will impact timing of the harvest and whether or not there will be some -- is that good for you to have it delayed in some way, or if it's immaterial? And then, generally what you think about wheat and wheat quality out of Argentina as a result of the rains.

I would say it's immaterial and as expected, so, these kind of things happen. So let's say for a lot of rain is perhaps not so good for wheat, but it's ideal for soybeans. So the weather market, it's too early to talk about it. Weather in South America really becomes more relevant January, February. So at the moment, there is no concern from our side.

And not on wheat quality, either?

Yes, on wheat, yes. But if you have a change in wheat, that will have an improvement for soybeans. So these kind of things happen. South America, remember, is a little bit different than North America. You have much wider geographies from north to south and from east to west, so we have -- every year we have some issue somewhere. So at the moment we are not concerned.

Okay. Thanks.

Robert Moskow, Credit Suisse.

You'll have to forgive me if someone touched on this already, but I've noticed that chicken-egg set data in the US is tracking down again. I would imagine there is going to be reductions in the pig herd as well. I wanted to know if you are seeing anything -- any signs of that in your forward sales to livestock producers.

And then also, perhaps a little color on -- your crush margins look pretty good right now. And is that just a reflection of an easy comp to a year ago? Or is it more rational behavior in the industry?

So the first question is we are surprised how strong the demand to the livestock area business is. We expected somewhat a stronger drop, and we are planning for next year a drop in demand in US, not worldwide. Worldwide, it will be expanding.

So we could see a reduction in demand as we end the first quarter, but at the moment we don't see too much of it.

In terms of crush margins, I would say it's a mixture of both. Crush margins are good. And it's irrational behavior, but it's also solid demand. So the structure of the business is good.

Thank you.

(Operator Instructions) David Driscoll, Citi.

Great. Good morning. Thanks for taking the follow-up from our team. Alberto, the question is going to go back to the logistical operations down in Brazil.

One of the strengths that I've always thought was true for Bunge was the significant port investments that you guys have made over the year. And then specifically, I thought that advantage would translate into really significant advantages in logistics out of the Brazil when the infrastructure gets tight.

So I know you mentioned about a strike, and that would be above and beyond these comments. But can you develop this line of logic little bit and maybe, for everybody listening, explain how this plays through into next year as we would be anticipating an incredible surge of product that needs to get out of Brazil?

We think that we probably have one of the best logistics in the industry, with a very wide and large network of silos, which is very important if there is congestion and high freight rates, that we can hold back and wait for better rates, which has a positive impact on margins.

I think we have also developed very good contracts and relationships, and traditionally being very good customers of the railways. So we probably use more rail than others. And combined with our ports that we operate in different parts of Brazil and continue to expand, we think we are very well-positioned.

So if there is one port where there is an issue, Paranagua, we could ship it through San Francisco, Victoria, Santos and more and more through the north as we continue expanding through the river system in the north. So we look at it, as you said, if there is no other disruption like a strike, we feel that we are very well-positioned.

So, maybe just to go back over that one more time, just to be super clear, so next year, I anticipate that your logistical advantages will really come through in the results. Am I overstating the case?

I hope you are right.

All right. Well, that's not perfectly clear. So, Drew, one final thing. You've made some comments about 2013 numbers. Is there any suggestion that you can give right now for us in context of today's results?

And this is the best quarterly result we've seen in, I think, seven or eight quarters. Again, I know you don't give any mathematical guidance, but is there any context here you can really lay out for us?

Yes, no, Dave, I still feel very good about 2013, as I said at a conference earlier this year and I've said at our investor day. I think the people inside Bunge are more much optimistic about 2013 that the people who are on the outside. I think we see continued strength in Agribusiness and Foods.

2013 is the year we are finally going to have put everything in place for Sugar, should perform at the level -- at its potential and what we expected. So, yes, I still feel real good about 2013. I think it's setting up to be a very good year for Bunge and we are excited about it.

Thank you for the comments.

Thank you. At this time, this concludes the time that we have for the question and answer session. I will now turn the call back to Mr. Haden for closing remarks.

Thank you, Kim, and thank you for everyone joining us this morning.

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