Shares of Bunge Ltd. dropped 12 percent today after the White Plains-based agribusiness giant lowered its 2008 profit estimates in response to weaker demand for farm products in a slowing world economy.
Bunge is heavily exposed to the ups and downs of the agricultural economy through operations that include supplying fertilizer to farmers in South America, processing soybeans and grains worldwide and producing food products for consumers.
Bunge and other agricultural companies are feeling the effects with the United States suffering through one of the worst recessions since the Great Depression, and international economies also hurting.
“In the fourth quarter, demand fell more than we anticipated,” Chief Financial Officer Jacqualyn Fouse said in a written statement.
Bunge shares fell $5.90 to $42.27 in early afternoon trading on the New York Stock Exchange.
One of Bunge’s most challenging markets was Brazil, which accounts for about 20 percent of the company’s sales. Bunge said that tight credit conditions hurt sales to farmers and slowed fertilizer sales in the Brazilian market.
The company added that its fertilizer business was also affected by foreign exchange losses of about $225 million related to the Brazilian real losing about 18 percent of its value compared to the U.S. dollar during the fourth quarter.
Bunge estimated that 2008 earnings will be $1.06 billion, or $7.70 per share. That is less than Bunge’s previous estimates of $11.60 to $11.90 a share. Bunge also said that it expects to record an after tax charge of $160 million related to potential delinquent bill payments from clients.
Fouse said she is hopeful of a turnaround.
“Periods of soft demand are typically short lived in our industry, and we expect to see fundamentals improve during 2009,” Fouse said.
Fouse added that a recent uptick in commodity prices “has improved farm economics. This is encouraging farmers to sell their crops and should stimulate purchases of crop nutrients during the year.”
Bunge is scheduled to release a full earnings report for the fourth quarter on Feb. 5.