Slow development of soyabean crush margins in South America has spurred Swiss financial services company Credit Suisse to downgrade Bunge’s earnings estimates for the third quarter of 2017 and the year as a whole.
The earnings-per-share (EPS) estimate for Bunge for the third quarter was lowered form US$3 to 61¢, while the full year’s estimate fell from US$3.92 to US$1.18, World Grain reported on 9 October.
According to Robert Moskow, research analyst and Credit Suisse, weak crush margins and slow farmer selling in Brazil and Argentina did not improve as projected.
“Access to cheap financing from Argentine government lending programmes and more on-farm storage have given farmers more negotiating power to hold onto their soyabeans for longer,” said Moskow.
“South American crush margins are probably half of what they were a year ago, even though US crush margins remain strong. In addition, local ethanol prices in Brazil have fallen in sympathy with sugar prices, thus squeezing Bunge’s margins in the near term,” he added.
While the situation might improve in the fourth quarter, Moskow said Credit Suisse had taken a more conservative approach and dropped its projected earnings for the coming quarter to US$1.89, well below the industry consensus of US$2.16.
“We note that our fourth quarter is still 20¢ above a year ago, even though business condition are arguably worse. Our agribusiness estimate for US$262M of profit in the fourth quarter is now below management’s implied guidance of US$300M.”
For the 2018 fiscal year, Credit Suisse expected EPS of US$5.3 during the year, as conditions remain weak but nonetheless inch closer to normality.