BG Financial Analysis

Analysis Date: 2/6/2025

Business Model

Bunge generates revenue through its core segments: Agribusiness (Processing and Merchandising), Refined and Specialty Oils, and Milling. Agribusiness involves oilseed processing and merchandising of grains and oilseeds. Refined and Specialty Oils focuses on producing and selling plant-based oils and fats. Milling includes milling wheat and corn.

Revenue Sources

• Agribusiness: Processing of oilseeds (soybeans, canola, rapeseed, sunflower seed) into protein meals and vegetable oils; merchandising and distribution of oilseeds, oilseed products, grains, and related services.
• Refined and Specialty Oils: Production and sales of specialty plant-based oils and fats to food, industrial, and foodservice customers.
• Milling: Milling of wheat and corn into flour and other milled products for the baking and food industries.

Income Statement Analysis

• Net sales decreased by 9.33% compared to Q4 2023, reflecting a general softening in market conditions.
• Gross profit decreased by 13.79%, indicating pressure on margins, possibly due to increased cost of sales or lower sales prices.
• SG&A expenses decreased by 8.89%, suggesting cost control measures.
• Foreign exchange losses were significantly higher in Q4 2024 compared to gains in Q4 2023, negatively impacting profitability.
• Other income (expense) – net increased significantly, positively impacting EBIT, likely due to one-time gains such as the sale of Sugar & Bioenergy JV.
• Income from affiliates decreased significantly, potentially indicating lower performance from joint ventures or associated companies.
• Total EBIT decreased by 19.35%, reflecting the combined impact of revenue decline, margin pressure, and FX losses, partially offset by other income.

Balance Sheet Analysis

• Cash and cash equivalents increased by 27.25%, indicating a stronger liquidity position, possibly from proceeds of asset sales and debt issuance.
• Trade accounts receivable decreased by 17.13%, which could be due to efficient collection or lower sales in Q4 2024.
• Inventories decreased by 8.64%, potentially reflecting better inventory management or lower demand.
• Property, plant and equipment increased by 15.70%, suggesting continued investment in operations and growth projects.
• Goodwill and other intangible assets decreased by 12.74%, which might be due to amortization or impairment.
• Investments in affiliates decreased significantly by 39.14%, possibly due to the sale of the Sugar & Bioenergy JV, which was accounted for as an equity method investment.
• Short-term debt increased by 9.78% and Current portion of long-term debt saw a large increase, while long-term debt increased by 14.97%, indicating increased leverage and financing activities, possibly related to the Viterra acquisition.
• Trade accounts payable decreased by 24.20%, possibly due to changes in payment terms or lower procurement.
• Total equity decreased by 7.36%, possibly due to share repurchases and net losses, despite the increase in asset base.

Capital Allocation

Bunge's capital allocation strategy prioritizes reinvestment in the business, returning capital to shareholders through dividends, and share repurchases. In 2024, Bunge allocated $925 million to growth and productivity-related CapEx and repurchased $1.1 billion of shares. Dividends were also consistently paid. The company is focused on strategic growth projects and acquisitions like Viterra and CJ Selecta, while also actively managing its share count through buybacks. Proceeds from the Sugar JV sale were partially used for share repurchases.

Management Commentary

We made great progress on integration planning for our announced combination with Viterra and, having received the vast majority of regulatory approvals, we expect to close the transaction soon.

We continued to make productivity improvements from our investments in the business while returning significant capital to shareholders.

We took meaningful steps in sustainability by achieving our 100% traceability and monitoring targets in Brazil.

While we didn't end the year as we expected and our forward visibility is limited by the increased geopolitical uncertainty, we are confident that the work we've done to further strengthen our business will allow us to continue to create value for all stakeholders.

Fourth quarter came in below our expectations. This was particularly true in South America, where market environment has been challenging all year, impacting industry margins.

We also felt the impact of a declining margin environment in North America from biofuel rate uncertainty.

Overall Sentiment: Cautiously optimistic. Management is positive about strategic initiatives like Viterra and sustainability progress, and productivity improvements. However, they acknowledge near-term challenges with market conditions, especially in South America and North America, and geopolitical uncertainty, leading to a more conservative outlook for 2025 compared to recent strong years.

Recommendation

Rating: Hold

Reason for Rating: Given the mixed financial performance in Q4 2024 and a cautious outlook for 2025, a Hold recommendation is appropriate. While strategic initiatives like the Viterra acquisition and capital returns are positive, near-term headwinds and market uncertainties warrant caution.

Disclaimer: This report is for informational purposes only and not investment advice. The analysis is based on limited information and subject to change. Investing in securities involves risks, including potential loss of principal. Past performance doesn't guarantee future results. Always conduct your own research, understand the risks, and consult a financial professional before making investment decisions.

Generated on: 2/6/2025, 6:32:44 AM