Poor real boosts Bunge profits

Bunge, set to become the world's top soybean processor with the acquisition of French rival Cereol, said on Monday that it expected third-quarter earnings to rise at least 40 per cent over a year ago, fuelled by the currency slump in its key base of operations, Brazil.

Bunge, set to become the world's top soybean processor with the acquisition of French rival Cereol, said on Monday that it expected third-quarter earnings to rise at least 40 per cent over a year ago, fuelled by the currency slump in its key base of operations, Brazil.

Bunge, whose shares soared more than seven per cent on a day the Dow Jones Industrial average fell 113.87 points, or 1.43 per cent, and the tech-laced Nasdaq fell to six-year lows, said it anticipated a strong performance by its core agribusiness, fertiliser and food product divisions in the third quarter.

The company has gained from strong demand and the highest prices for soyoil and soymeal in three years. Argentina and Brazil, where Bunge is the dominant producer, are expected to surpass the United States in soybean production next year.

"We believe Bunge is gaining investor confidence the right way by delivering solid performance," Merrill Lynch analyst Leonard Teitelbaum said in a research note.

"Higher fertiliser volumes and profits, better than expected demand for soybean derivative products (soymeal and soyoil) and management which knows how to execute and hedge contracts by selling forward makes for better profitability."

Bunge said it now expects third-quarter earnings of $80 million (€82m) to $85 million, or 81 cents to 86 cents a share, up from previous guidance of $65 million to $70 million, or 65 cents to 71 cents a share. The company's net income in the third quarter of last year totalled $57 million.

Bunge benefits from a fall in the Brazilian real because its costs in Brazil are in the real, while exports are priced in US dollars. The real currency has lost more than 34 per cent of its value against the US dollar so far this year.