April 24, 2008 / 5:24 PM / 10 years ago

UPDATE 4-Bunge earnings nearly double Wall Street view

(Adds analysts’ comments, updates share prices, background)

By Lisa Shumaker

CHICAGO, April 24 (Reuters) - Fertilizer producer and oilseed processor Bunge Ltd (BG.N) said it earned nearly twice as much in the first quarter as Wall Street had expected due to global demand for food and fertilizer, but its shares fell in a general decline in fertilizer stocks.

Bunge said on Thursday it was optimistic that strong market conditions would continue, and it raised its full-year earnings forecast to $7.10 to $7.40 per share, up from $6.01 to $6.30.

Corn, soybeans, rice and wheat prices have hit record highs as demand increased and supply in some crops decreased, prompting some farmers in the United States and South America to plant more acres. This helped Bunge post a record profit in its fertilizer business.

Bunge is the largest fertilizer producer and supplier in South America.

Fertilizer profit could climb even higher because price increases in March and April were not fully reflected in the first-quarter earnings, J.P. Morgan analyst Pablo Zuanic said in a research note on Thursday.

“We believe there may be much greater upside to guidance if fertilizer price conditions remain where they are and grain markets remain high, favoring economics for the agribusiness unit,” Zuanic said.

Bunge, based in White Plains, New York, said earnings rose to $289 million, or $2.10 per share, compared with $14 million, or 5 cents per share, a year earlier when the company had trading losses. Analysts had expected Bunge to earn $1.06 per share, according to Reuters Estimates.

Revenue rose 70 percent to $12.47 billion. The average forecast from analysts polled by Reuters was $12.82 billion. Volume, a measure that excludes currency and price fluctuations, rose 7 percent to 31.8 million tonnes.

Bunge shares were down 1.7 percent at $117.66 in afternoon trading on the New York Stock Exchange.

Record prices for crops are also requiring Bunge to use more cash for operations -- $353 million this quarter, up from $182 million a year ago.

“The headlines are great, but the quality of those earnings are actually quite poor,” said MorningStar analyst Ann Gilpin.

“They are increasing their working capital requirements, particularly for accounts receivable. They are increasing their short-term debt. When commodity prices fall, Bunge’s earnings could fall fast and furious.”

Bunge’s short term debt was $1.15 billion, compared with $398 million a year ago.

Bunge did sound a note of caution due to the volatility of grain prices and the fact that U.S. farmers have yet to even plant their crops.

“We do include in our guidance some worries,” said Chairman and Chief Executive Alberto Weisser on a conference call with analysts.

“We don’t know yet how the northern hemisphere harvest will be,” he said. “It’s very early in the year but overall, we are optimistic about the year.”

Shares of other fertilizer companies were down in afternoon trading.

Potash Corp (POT.TO), the world’s largest fertilizer company, said on Thursday it nearly tripled its first-quarter profit. It ratcheted up its outlook for the rest of the year, but its stock was down 4.32 percent at $202.18 on the Toronto Stock Exchange.

Crop nutrient producer Mosaic Co (MOS.N) said earlier in April that its quarterly income increased 12-fold. Its shares were down 5.7 percent at $125.66 on the New York Stock Exchange. (Editing by Toni Reinhold)

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