Bunge Global S.A. (BG) Q2 2011 Earnings Report, Transcript and Summary

Welcome to Bunge Second Quarter 2011 Earnings Call. My name is Mitch, and I will be your operator for today's call. [Operator Instructions] Please note that this conference is being recorded. I would now like to turn the call over to Mark Haden. Mr. Haden, you may begin.

Thank you, Mitch, and thank you, everyone, for joining us this morning. Welcome to Bunge Limited's Second Quarter 2011 Earnings Conference Call. Before we get started, I want to inform you that we have prepared a slide presentation to accompany our discussion. It can be found in the Investor Information section of our website, www.bunge.com, under Investor Presentations. Reconciliations of non-GAAP measures disclosed verbally on this conference call to the most directly comparable GAAP financial measure are posted on our website in the Investor Information section. I'd like to direct you to Slide 2 and remind you that today's presentation includes forward-looking statements that reflect Bunge's current views with respect to future events, financial performance and industry conditions. These forward-looking statements are subject to various risks and uncertainties. Bunge has provided additional information in its reports on file with the SEC concerning factors that could cause actual results to differ materially from those contained in this presentation and encourages you to review these factors. Participating on the call this morning are Alberto Weisser, Bunge's Chairman and Chief Executive Officer; and Drew Burke, Bunge's Chief Financial Officer. I'll now turn the call over to Alberto, and he'll begin with Slide 3.

Good morning, everyone. Bunge posted good second quarter results. Agribusiness and food & ingredients did well in the quarter, and we anticipate a solid performance in these segments in the second half of the year. Sugar & bioenergy and fertilizer performed as expected, and we expect increased contribution from both as they enter their high-volume season. Overall demand for agriculture products is good. Global trade is robust, and the steady growth in demand that characterize our industry continues. Moving to Slide 4. Bunge is investing accordingly. Over the next 18 months, we will bring online a number of facilities that will increase our scale and flexibility and contribute to our bottom line results. For example, we will have 11 million tons of new port capacity by the end of 2011, first, through our new deepwater port terminal in Ukraine, which provides an ideal logistics outlet for Black Sea grain production; and second, through our new terminal in the U.S. Pacific Northwest. We'll support these facilities with inland assets as well. In the U.S., we are adding 7 new grain facilities. These elevators will help us better serve domestic and international trade flows. We will also add processing capacity in key locations. Just last week, we broke ground on expansion of our Altona Canada canola processing facility. The project will more than double our capacity in this location and make the plant one of the most efficient in the industry. In total, we are adding more than 2.5 million metric tons of annual crush capacity to our global network. These investments, in addition to the ones in sugarcane and bioenergy and food & ingredients, will help us outpace market growth rates and meet our annual earnings per share growth target of 10% to 12% per year on average over the next 5 years. Before I turn it over to Drew, I want to take a minute to mention a special milestone. Next Tuesday, Bunge will celebrate its 10th anniversary as a public company by ringing the closing bell at the New York Stock Exchange. Bunge has a long and accomplished 200-year history. But surely, the last decade has been one of the most transformative. Our IPO was instrumental to the company's global expansion and our creation of leading positions in oilseeds, grains, sugar, food and other markets. We are proud of what our team has accomplished and proud of our total shareholder returns, 18% per year on average. Today, we are well positioned, well capitalized and have an excellent team. We look forward to another decade of inspiring growth. Now I will turn it over to Drew, who will discuss our second quarter financial results and the outlook.

Thank you, Alberto. Let's turn to Page 5 of the presentation. Bunge had a strong second quarter. Total segment EBIT was $373 million. The prior year EBIT was $2.4 billion, and that included a $2.4 billion gain on the sale of our fertilizer and nutrients business. Net income for the quarter was $316 million. In the prior year, it was $1.8 billion, and that included a gain of $1.9 billion on the sale of our fertilizer and nutrients business. Agribusiness performed well with an EBIT of $319 million. That amount includes $37 million from the sale of our 50% share of a crushing joint venture in Europe. Our results were driven by strong performance in South America, as large harvest and good margins drove good earnings in our grains and oilseeds business. Results in Europe and North America exceeded the prior year. Sugar & bioenergy had a quarterly EBIT of $18 million versus $4 million in the prior year. The industrial business performed well, as prices were strong and all of our mills were operating. Industrial profits are seasonally weak in the second quarter, as it is the start of harvest and sugar content is low. Our merchandising results were lower than the prior year due to reduced margins and volumes. Our food & ingredients business earned EBIT of $52 million in the quarter versus prior year loss of $12 million. The prior year loss included onetime charges of $31 million. Performance was strong across all our food businesses: edible oils, wheat milling and corn milling. Fertilizer recorded a loss of $16 million in the quarter. The loss includes a net charge of $17 million, primarily related to inventory adjustments and a bad debt. Without this charge, fertilizer met our expectations as it continues to transition to a distribution business. Margins are good, costs are in line and our volumes are increasing. However, we still need to increase our market share to hit our long-term targets. Earnings per common share, excluding certain gains and charges, was $1.78 for the quarter and $3.27 for the 6 months, so overall, a strong quarter and a strong first half. Let's turn to Page 6 and the balance sheet highlights. We continue to have a strong balance sheet and liquidity position. At June 30, we had $4 billion of committed credit facilities, of which $3 billion was unused and available. Our equity increased in the 6 months by $1.2 billion, reflecting our earnings and the strengthening of currencies against the U.S. dollar, particularly the Brazilian real. If we move to the cash flow statement. Cash flow provided by operations was $264 million for the 6 months ended June. This compares to a prior year number of negative $159 million, which included about $400 million of charges related to the nutrients sale transaction. Funds from operations was $571 million and was driven by our earnings. Changes in operating assets and liabilities was negative $307 million and includes a $400 million inflow related to our accounts receivables securitization program. Offsetting that was a $500 million outflow related to our fertilizer payables, as we instituted a more effective import financing structure. Capital expenditures were $454 million and in line with our plan. Now let's turn to Page 8 and our forecast. We expect to have a strong second half of the year. It will be weighted towards the fourth quarter, as we realize the full benefit of the Northern Hemisphere harvests in the quarter. Agribusiness is positioned to have a good second half. Grain merchandising will remain strong. Grain balance sheets remain tight, and global trade will be essential to move the crop to consumers. We expect strong North American harvest, and our new grain terminals in the Ukraine and PNW are well positioned to take advantage of those harvests. The oilseed outlook is mixed. Margins in the U.S. should improve with harvest, but will remain relatively weak. Canada expects a good canola crop, and there is good demand for the oil. In Europe, we expect a small rapeseed crop pressuring margins, but a large sunseed crop will support margins. China should show some improvement over the remainder of the year. Overall, our outlook for sugar is unchanged, as better pricing will offset a reduction in volume. We now believe we will crush about 15.5 million tons, which is about 1 million tons below our prior estimate. On the other hand, both sugar and ethanol prices are higher than expected as the supply-demand situation remains tight. In foods, we expect the strong performance to continue. The competitive environment is tough, but there are some signs of easing. In fertilizer, we expect the good margin to continue, and we will look to continue increasing our market share. Taking a look at our tax rate, we now expect the tax rate of 10% for the year. This is down from 15% previously estimated as our tax planning strategies, our capital structure and the mix of our earnings by legal entity have all developed favorably. Also, we may have been somewhat conservative in our initial estimate. In summary, we expect 2011 to be a good year. We're looking forward to an even better in 2012, as our sugar & bioenergy and fertilizer businesses mature and agribusiness and foods continue to grow. Now I will turn it over to the operator and open for questions.

[Operator Instructions] Our first question comes from Vincent Andrews of Morgan Stanley.

Just a couple of questions. One, on the North American oilseeds, some of your competitors had indicated last quarter that, as we got into the summer, we might see some capacity come out of the market. It doesn't sound like from your prepared comments that we've seen that yet. Is that correct?

We did reduce some of this capacity because this is the time of the year where you're prepared for the harvest and you do maintenance. So we also have seen in our case some reduction in capacity.

So there's been some minor reduction beyond just what would be normal from a maintenance perspective but there's nothing...

No, it has been normal -- the normal type of reduction.

Okay. My other questions or my thought to that is that we also heard from some that part of the reason for -- when we look at the sea, a lot of crush margin, it looks well below average. And some in the industry have suggested that that's sort of artificial because some in the industry have better hedge positions on the growth soybean. And then as those hedges rolled off, we would likely see an improvement in the crush margin, and it might sort of coincide with an adjustment to capacity utilization. Do you agree or disagree with that?

Last year, because of the futures exchange, we are able to lock in margins at better times. But you also have to remember that U.S. crushing is only a piece. It's 25% of all global crush. And we had a very good South American crush and so you see a balance here. But you're right, we are able to lock in margins at times when the market gives us the opportunity.

Would that piece just sort of play into your prepared comments of seeing the margins improve in the fall, sort of the behavior of the industrial changes as favorable hedges roll off in North America?

I will say, normally, in the harvest time, there are more opportunities. The margins normally expand at that time. And also, not always the CBOT margins reflect what exactly is going on out there. And so -- but what we expect margin in general in oilseed processing being below normal or below average but improving from where they are.

Okay. And then, lastly, could you just talk a little bit about the basis levels in the U.S. and how that's affecting or not affecting your business?

I don't really know what you mean.

I mean on corn in particular, local market corn prices have gone in excess of the board, which is unusual for this time of year, and basis have moved around and some of the other crops as well. I'm just curious if that's affected your grain origination business.

No, it has not.

Our next question comes from Bryan Spillane of Bank of America.

It's actually Ryan Oksenhendler here for Bryan. I just wanted to ask about -- you talked -- I guess this quarter, you mentioned, and I think we asked about this last quarter, you mentioned that risk management worked well this quarter and you didn't really mention it last quarter. And so I just wanted to know like what made you change the language in terms of how you presented it. And I guess, was it material enough this quarter that it drove some of the results? Could you quantify that? Because I know you look at it kind of as one whole business and risk management is part of it. But you said last quarter, it was more of a structural -- all the earnings were structural in this quarter. I guess, maybe they weren't in agribusiness?

Look, risk management is one of the key component of our business. Remember, our business is completely -- the timing of purchases and selling are different. Spaces are different. So risk management, it's every day's business. But perhaps what you're seeing is that last year was stronger. That might be right. The last quarter was a little bit stronger. Some of the strategies worked better. But let me tell you, this quarter, everything was very normal as expected.

You have to remember the comparison to Q2 last year is a comparison to a weaker quarter. So that is partly playing into our commentary.

It was very certain last year.

So more of a year-over-year basis?

Yes.

Yes.

Okay. And then, I guess, can you -- I know you kind of look at it as a whole chain, but it seems like your outlook for the grain side of the business is much better than the processing side. Like how much better -- can you kind compare those 2 margins? Is the processing margin that much better on a normal basis than the grain margin?

A little bit of both, average, and processing, below average. And so when we think about the second half of the year, should be more or less like the first half of the year.

But on a normalized basis, is the grain margin higher than the processing side of the business?

It's slightly higher, yes. Margins are slightly higher than normal, and oilseed processing is slightly lower.

That's compared to normal grain in oilseed margins. Typically, you're going to find crush margins to be higher than handling margins.

Our next question comes from Robert Moskow, Credit Suisse. Robert Moskow - Crédit Suisse AG: I guess I'm trying to -- maybe you just said it, Alberto, but for agribusiness, I wanted to know if your first half, second half kind of 45-55 split is applicable for agribusiness as well. You had a really strong first half for agribusiness. So I think what people are trying to figure out here is, operationally, can we expect a similar type of result in the second half? Seasonally, the volume is more North America than South America, I imagine. And then kind of like a follow-up on that, your tax rate guidance here, I think, pretty much gives you another $0.35 per share versus what I had going into the quarter. So are you saying that operationally, everything is pretty much where you thought it would be 3 months ago, that nothing has really changed versus 3 months? Or are you saying that operationally, maybe the business is a little weaker than you thought and -- but the tax rate's a little better?

I would say it's the opposite. I think operationally, it's better than we thought. And I'll let Drew afterwards talk about the tax rate. As we -- you heard in his comments, we were perhaps a little bit conservative. But operationally, business is better than we thought. And in terms of the second half versus first half, when we make comments about this 40, 60 and so on, it was most -- that we, most of the time, talk about the whole company. And you have to remember that we used to have -- with the nutrients business, it was the strongest quarter was always the third quarter. So we don't have the nutrients business anymore. So from the company point of view, it's still going to be strong in the second half than the first half, especially because of bioenergy and sugar and because of fertilizer. But when it comes to agribusiness, I think there is a little bit less of the 60-40. It is a little bit more balanced. But we can see a second half more or less the same as the first half. Well, the first half was better than we thought. Robert Moskow - Crédit Suisse AG: That's very helpful, great. Also, is there anything you can comment on the news wires that we saw about the Solae business possibly being for sale? And then roughly, can you tell us, Solae, what was the contribution to your profit from Solae in the quarter and maybe the first half also?

Yes, just let me add a couple of words on your earlier tax question. I think I'd just like to reinforce what Alberto had said is the change in estimate on taxes is not because of a change, many significant change in our view on the operations, we're very comfortable with and have remained comfortable the way the operations are performing and meeting our expectation. We continually optimize our track strategies and capital structure and have continued to do that. And as I said, that have all broken quite favorably. As we've seen that develop through the year, we thought that we should update the estimate for everybody. And earlier on, we didn't think it break that favorably and add a little bit of conservatism in the number. So it's really just an update to let everybody know where it is. But it has to do solely with tax issues, not because of changes on the operating side. As to Solae, we don't comment on any market rumors, so we would not make a comment. As to the earnings impact in the first half of the year, it's not significant.

Our next question comes from Christina McGlone from Deutsche Bank.

I guess on the fertilizer side, you talked about bad debt and an inventory adjustment in the quarter. Is that done now? Or is there more to come there?

Christina, we record everything we know of, so we don't know of anything still to come. So we expect it's all there. We've gotten through. And as you know, we've been changing our footprint in opening and closing distribution centers to get to the right footprint. And as we did that, we took a deep look into the inventories and recounted everything, et cetera. And it was worth a little bit less than we thought, so we took a charge there. We don't expect anything in the future, but we continue to evolve the footprint as we go along.

Okay. And, Drew, on that front, it sounded like you were saying costs are good, margins are good and you just need to increase your share. So are you saying that this is breakeven business at this share level? Or are you still jettisoning stranded overhead and so, we're going to see profitability in the second half? And when does the business earn its cost of capital?

This is clearly a business that is above cost of capital, but we are adjusting it at a pace that we want to do it right. So we are being very, very careful on pruning some of the businesses. We were doing, on purpose, are reducing amount of products, amount of customers that we have been targeting. So we are doing it in a very, very careful way. So remember that we think this is going to be a business that will be $50 million to $100 million. We think this is on track. It will be above cost of capital. But we are doing it in a very, very thorough way, taking it step after step. So obviously, the first priority was all about risk management, and I think this is really working well. The second -- and part of the risk management, it means what do we do, what we don't do. So we have pruned some of the business. Sometimes at first retreat between -- before you expand. So the first half of this year, we already have expanded. But we are not there yet where we want to be with the market share. We still have to do some adjustments on footprint, especially in the state of Sao Paulo, and -- but it is on track, and we are not completely done yet with our cost-cutting because you also want to do it right. Although in the program, the $120 million program we mentioned in Bunge Brazil is on track. We will get there. So it is very easy to get back the market share. This is a commercial business. We could have gotten it back, but we want to do it the right way. So I feel very good where we are in the fertilizer business.

Okay, Christina, just a couple of additions. Remember, it's more of a second half business volume-wise than it was previously. The nutrients business, it usually had a pretty good second quarter. The distribution businesses are smaller in the second quarter and the volumes come in the second half of the year. So as you get into the higher volume period and as we're able to capture market share, as Alberto said, in the right way, you get the leverage you need to start to see the profits.

Okay. We saw some proof [ph] anticipatory buying in Brazil. That's why I was a little surprised second quarter wasn't a little bit better there. But I understand the commentary, thank you. And then, Drew, going back, just expanding on Rob Moskow's question on the tax rate, is there anything in this tax strategy that maybe offsets the effect of a stronger real? Or how should we think about the real in the second half?

We use a variety of strategies to mitigate the impact of the real and capital structure is one of the opportunities. But I wouldn't say it's directly related to tax. It's related to broader strategies. I think certainly a stronger real is a little bit negative for us, but we factored it in to everything we've said about the second half of the year. And again, our business mix is better than historically because the mining business was much more susceptible to a strong real than the sugar businesses is. So clearly a headwind, but I don't think it's -- I think it's factored in to all our comments. And the biggest thing we've done is we've talked about the one Brazil program. And the best way for us to address it is to continually get more efficient and drive our SG&A costs out and industrial costs out that are exposed to the real. So when you put that all together, I think we're managing it pretty well.

Okay. And last question, Alberto, if we think about soybean production, we have less acreage in the U.S., less acreage in China. Argentina may be planting less beans and more corn. So I wanted to get your view on how you think it will play out, I think, over the next 6 to 12 months. And also, if we see China start to rebuild their hog herd and their soybean meal demand increase, do you think it's going to be a lot of supply coming out of Brazil in this circumstance and what would that mean?

These higher prices obviously have allowed also farmers to use much more technology. So we have seen that the harvests we are finishing now in the Southern Hemisphere, the yield was higher than expected. And based on the purchasing of fertilizer we are seeing in South America, we continue believing that there will be above trend yields. So it's very early to say because planting really in the Southern Hemisphere will start only in September. But all indications are that we also should see a strong crop from the Southern Hemisphere. So it's a little bit early to talk about Southern Hemisphere because we are not even in yet. We are not even done yet with the complete growth in the Northern Hemisphere. But we see -- we are seeing the right increase in supply. The supply is expanding at the rate that is in line or a little bit above demand. So we hope that the supply-demand imbalances will diminish.

Our next question comes from Christine McCracken of Cleveland Research.

Just on your drop in sugar volume expectations, I assume that's largely tied to the weather. But has there been in any delays or structural issues at your plants that are reducing your overall volume expectations?

Absolutely not. We are very happy with all the issues we had last year with the 2 mills that were not running perfectly. All 8 mills are running very well. The yields are good. I think we were when we said -- the beginning of the year, we indicated the crush volumes, we were a little bit optimistic. So we have fine-tuned this, and we see these volumes much more realistic. Obviously, it's always weather-related. But as Drew said, the reduction in volume was offset with higher prices. So we see this year and next year exactly as we have seen it before, in terms of earnings. We are very comfortable where we are in sugar & bioenergy.

And then just a follow-up then, in terms of the backup at the ports, a delay in the season, I think, has contributed to that. But it seems like it's a little worse this year than maybe in prior years, lasting a little longer. Is there anything you're doing to help alleviate that? How is that impacting your overall returns in volumes? Maybe you could talk a little bit about that.

Well, I thought last year was worse because there was an imperfection in the futures market, which made people run to the port with deliveries. And I think it's the traditional imperfections of the Brazilian port system and the logistics. But I thought last year was worse.

And is anything being done to alleviate the situation?

Well, we are investing as well. Everybody is investing. This year is not a significant increase in the volumes for exports, but everybody is investing along the chain. We are also considering investing in this area, the expanding our Paraguay operations. I think we are more efficient in Santos this year. We have fine-tuned the whole chain the way we bring in the costs, the real costs and so on. So Bunge is performing better this year than it's performing last year, so -- and we will continue working on it.

Our next question comes from Diane Geissler from CLSA. Diane Geissler - Credit Agricole Securities (USA) Inc.: I just want to follow up on the sugar question. So is the reduction of volume primarily related to the freeze? Or is it because you have that drought last year and nobody really knew sort of what kind of impact that would have on yields this year? Can you give me some idea about that? And what's really behind the question is as we look into 2012, obviously, I know it's really early, but are your -- obviously, freeze would be a much shorter-lived event, right, versus a drought. So I'm just trying to get an idea about will it impact your expectations about 2012. And then I have a follow-up on oilseeds.

Yes, it's both. It's a better view on how deep the impact was on the drought at the end of the season and also some related to the frost [indiscernible]. But as I mentioned before, this will completely offset with the higher prices. So the prices are both on ethanol and sugar are higher. And it's early to talk about next year, but what is important is that our planting program is on track. So for next year, we feel comfortable. Even if for what reason ever, we should have a smaller crop. We are confident -- comfortable because prices are higher than they were before. So it's too early to say, but the picture for next year is positive. Diane Geissler - Credit Agricole Securities (USA) Inc.: What will your total processing capabilities be in 2012 in sugar?

It's 21 million tons. Diane Geissler - Credit Agricole Securities (USA) Inc.: 21 million.

Yes. So we are doing our utmost to get wherever we can close to that number. Diane Geissler - Credit Agricole Securities (USA) Inc.: Sure. Sure, okay. And then just I wanted to ask on your commentary, Drew, and the outlook about the long tail of the South American harvest and its impact on North American margins in the oilseed crush. I've had a lot of conversations with sort of people in the industry. And I think your biggest competitor was under the impression that things are going to improve in sort of 6 months time. But based on your comments here today on the outlook, it would suggest that margins in at least North American crush will remain pressured for at least 6 to 9 months a year. Do you have a viewpoint on when we might see some improvement in the North American crush margins?

I think the improvement in the North American crush margins will mainly driven by demand. And then I think what we're signaling, we think we see in the fourth quarter is the export demand being more out of South America than prior years. So it will put a little bit of pressure on the margins. For us, overall, that's not necessarily that negative because we crush in South America too. Alberto may want to give his view, but I do think it's going to take a while for the U.S. to work through the excess capacity. We need to have the demand grow into it. The oil side feels pretty good, but the mill side still feels pretty weak.

Yes, we don't want to give you the wrong impression. This year, it's going to be the harvest is going to help. We -- next year, it's a little bit early to say, but demand is not that strong. Obviously, global meat demand is up, poultry 3%, pork 1.5%. So things are moving. And so let's wait and see a little bit more. We need to see a little bit more demand in U.S. On the other side, there are some positives. We have, over the years, developed a much better export market into Mexico and Central America, which is 40 million people living in Central America and nearly 100 million in Mexico. So that is a new market that was not so much available before and also with less DDGS getting into the market. So we will see a pickup on the soybean meal demand. So we are cautiously optimistic, but it's too early to say when it exactly will happen.

Our next question comes from Tim Tiberio from Chardan Capital.

I guess my question is regarding crush margins in South America. How are you seeing crush margins, I guess, develop within Brazil versus Argentina? Has there been a material difference? I know we've heard some concerns about farmers delaying selling beans in Argentina and just was curious how that is potentially developing.

I think margin in both countries have converging over the years, and they have been good. It's one of the reasons we did well, so the crush margins have been well. But obviously, it's now coming to the end of the season. So naturally, it's the time of the year when margins start to be reduced and that's why we use risk management tools to lock in margins at the earlier time. But margins have been good and in a very seasonal way are reducing now.

And just one last question back to the tax issue. Looking out to 2012, should we still assume this 10% effective rate? Or is this a situation where maybe because of lower Chinese soybean exports in the first half and lower sugar ethanol exports compared historically, is that a situation where you're just recovering more of the VAT tax in Brazil and is that one of the key drivers of the lower tax rate?

It's not the VAT or the export taxes. For 2012, I would use a slightly higher rate. I think you're going to see much stronger sugar and fertilizer profits next year than you saw this year. And those profits will occur in a relatively high tax rate entity for us. So I would expect to see it creep up but actually because of profits in those 2 businesses and being more of a percentage of our total percentage than any other reason.

Our next question comes from Jeff Farmer of Jefferies & Company. Jeffrey Farmer - Jefferies & Company, Inc.: You guys have -- earlier in the call, you outlined several grain and oilseed investments. Some have either recently come online or sounds like they're about to come online. As you look out to 2012, what could that mean to your agribusiness volume growth?

Look, let me give you a little bit broader picture. In the last 2 years, we have invested more or less $2.5 billion in sugar, bioenergy, agribusiness and everything. So far, very little has come from these investments. And over the next 12 to 18 months, all of them are going to in one way or the other start contributing. So obviously, it's a pain to get through all buying and building, but all of this is coming out through. So we think we will be continue, more or less, investing half of our CapEx or around half of it is in agribusiness. So when you think about it, it is probably more or less around $500 million. So this means in agribusiness, we expect to continue also growing our earnings similar to the whole company, 10%, 12% per annum. The demand is there. It's a very strong demand around the world, and we are continuing investing in it. But obviously, we are all happy that after this massive investments over the last 2 years, we are going to start seeing not only profits but also cash flow from it. Jeffrey Farmer - Jefferies & Company, Inc.: If you look at these facilities again, just from a volume perspective, there's a common sort of step function or once you get these facilities open, the volume numbers come quickly. You reach capacity utilization quickly. And I guess as a follow-up to that, when you open some of these new facilities, are you taking volume from other facilities, a little bit of cannibalization, or typically do you see pretty much all-new volume you're able to win?

I think what is happening more is that as we're increasing our market share and because if poultry is growing at 3% per annum, soybean meal demand this year should be growing at 8%, next year, 5%, so this is huge amounts. This requires 1, 2 plants per year. So this is more or less, most of the time when you're talking about oilseed processing, most of them is ramping them up pretty fast to full capacity. Now on sugar & bioenergy, and it's a little bit more complicated as we have been explaining it, which is we need to planting, and going from 13.5 last year. Although we didn't run all the plants, we had problems this year, all plants are running well. But we only have 15.5 million tons of sugarcane, next year, we hope to get as close as possible to full capacity. So there is a ramp-up in the sugar & bioenergy. And in the case of the terminals, I would say the first 6 months, you need to ramp them up, so the Nikolayev and the Longview probably will not see large contribution this year. But we should see them operating at full capacity next year. So that's why when we say all this $2.5 billion coming online, it's over the next 12 to 18 months. So by the end of 18 month, all of them should be running at full capacity. Jeffrey Farmer - Jefferies & Company, Inc.: Okay, and just a follow-up on the sugarcane. You've outlined this on the prior call, and I think, offline, I've been given some color on this. But in terms of getting that $21 million, it sounds like at least over the last few months, you have pretty good confidence about your ability to do that based on I'd say, sort of replanting. A lot more of that cane than it normally would? And then the fact that some of that newer cane is going to have a much higher yield? So can you give us some color on that and again just get us a little more confident about that $21 million -- or that 21 million ton number in 2012?

It is much too early. So it is too early, but we are still planting. So we really, confidently, we will only be able to tell this in the February call for next year. And the only comment I make is let's assume a similar situation that we have this year. Let's assume we would have a lower volume. What I want the market to understand is it is not only volume. Today, the prices of ethanol and sugar more than offset the drop in 1 million ton that we had this year. So we have to see the combination of two: prices and volume. Because it is the contribution margin in this business is so high, price has as much of an impact as volume has. So we feel good about this year, and we feel very good about next year. I want to take a little bit the concern away. There are lots of people talking about shorter crop this year, and we have to see always both. And we feel very good about this year and next year.

Yes, just to add one thing to that so everybody has the same understanding. I think we are probably one of the leaders in planting sugarcane crop this year and planting more than others are as a percentage of our volume. So if there is a crop shortfall for us, it will be industry-wide in all likelihood. And I think that's why Alberto -- I know that's what Alberto is saying, it's going to be reflected in pricing because it's not Bunge-specific issue, it would be an industry issue.

Our next question is from Christine Healey of Scotia Capital.

Alberto, you've recently made some comments in the press on your plans to expand into Canada with the imminent removal of the Canadian Wheat Board. Maybe you can talk about why this makes Canada more attractive for Bunge and also give us an idea on how you expect to grow here, given that Viterra, Cargill and Richardson control 80% of the market? Would M&A be an option to Bunge?

It was taken a little bit out of context, my comment, because we were in Canada, the groundbreaking ceremony to expand, double our capacity in Altona. And journalists asked about it and my answer was a very general answer, that for us, it's very important to have free trade in general. And it was more reacting to the news that we were reading about the intention of the federal government in Canada to move in that direction. And my reaction, my comment was in an environment like that, it is very natural that companies like us, who are the largest canola processor, who have all the infrastructure on origination and so on, that we will also try to get involved on grain to make everything more efficient, so -- but we are obviously in the wait-and-see situation. This has been going on for a while. We have to wait until the decision is taken by the authorities on what to do.

Okay. And if legislation is introduced in the fall, like it's planned, and we here think it is going to happen, would Bunge be interested then in getting grain elevators in Western Canada? Or would you be looking to just try to merchandise with those actual infrastructure?

Well, I will not tell you exactly what our plans are, but let me tell you we have 6 elevators in the Eastern Canada. We have one in Western Canada. But I think it would be very natural that we would start adding and improving, using all of our infrastructure to also do some participate in the grain business.

Our next question comes from David Driscoll from Citi Investment Research.

This is Cornell Burnette with a question for David. Just wanted to know the timing on the new capacity, oilseed processing capacity in Canada. When is that expected to come online? And then secondly, given maybe some of the weakness we've seen in the North American processing market due to overcapacity, do you think this new capacity can be absorbed by the market?

We think so, absolutely. This is expected to come on stream sometime in the first half of 2013. So Altona is not in my $2.5 billion list that I mentioned of '12. So this is something later. And we believe there is worldwide -- we know it is very, very clear, the demand picture is very strong. Canola is a very important oilseed, and Canada is able to expand its production. It has already nearly doubled in over the last 5 years -- 8 years, and it can do more. There's fallow land, there's -- or land available, and we see the right supply-demand. And what is even more important for us is that we want to have the most efficient plan. So we will -- this is one, but we will also be working on our other plans to make them all part of the first quartile in terms of efficiencies. So we think there is enough demand and there is also enough supply for us to do that. Now the picture in soybean processing in U.S. is a little bit different. So we do think also it will stabilize, but we don't know if it's going to be by the end of this year or it will be next year. Demand has to continue picking up. Demand is positive from the soy oil, especially on biodiesel. And as mentioned also the last competition from DDGS, we expect also that the demand will pick up on protein, so -- but these are 2 different pictures. Canola and soy are different.

And our next question comes from Ken Zaslow of BMO Capital Markets.

Just a housekeeping question. The 45-55 split, is that EPS or operating profit split when you think about it?

I think both. We normally talk EPS and net income, but it's both.

And even with the third quarter -- and then, can you just clarify why the third quarter is -- and I can't fare exactly from your commentary if it's going to be weaker. It sounds like fourth quarter is going to be the strongest. But what's going on in the third quarter to make it somewhat less opportunistic, I guess?

I don't think it's more or less opportunistic, Ken. I think we see 2 factors that I would say are the primary ones. We do think that North American harvest will prove seasonally, our North America cross margins with the harvest, and we expect most of that to show up in the fourth quarter. We're also looking at a big sunseed crop in Europe, with expanded margins probably both in our crushing business and our food business and that will mostly realize in the fourth quarter. So it's really the crop cycle versus anything that's happening in our business and the way it will play out. And maybe we're paying a little too much attention to it. We just wanted to let everybody else know how our earnings were likely going to flow the rest of the year. It's not a severe thing, but it's just the way it's going to play. I think maybe the way we said it, people are thinking it's more severe than it is.

Also, the reason we mentioned it is also you got -- you were used just in the past to see much stronger third quarter because we had the nutrients business. So we will find out how it is slightly more weighted and sugar & bioenergy is strong in both quarters but a little bit stronger in the fourth quarter. Fertilizer is probably a little bit better in the third quarter than in the fourth. So we don't know -- we don't want to say exactly the percentage as these things are shaping up, but it's likely more in the fourth quarter.

Do you think that the increase in the trade out of the Black Sea is actually positive or negative for you guys? I was just confused in the wording and your commentary on that.

It's very positive. Remember, we had all that fixed-cost overheads that we really need the volumes. And the world needs them, the Middle East, Northern Africa really needs all that products. It's positive.

And, Ken, remember earlier this year, we bought the Nikolayev port that has 3 million tons of export capacity coming out of the Black Sea region.

So your product that you move around the world, you're indifferent to wheat, soybeans and corn? I guess what will be coming out of the Eastern Europe would be more wheat-based, right?

It is more wheat. But it's also more -- there's also some seeds. There's barley. There are other kind of products.

Are you going to capitalize on the greater Russian and Ukrainian wheat crop? Is that where you're moving? Or you're moving the rapeseed out of -- through the Black Sea? I was just trying to...

No, no. It's really the grain. It's mostly wheat, but also barley, sunseed out of Russia, Ukraine and a little bit Kazakhstan.

Okay. So you're indifferent to what product is moving on your boat?

We are indifferent, yes.

That's what I was trying to figure out.

Yes. Also, I think we have to remember that it is positive for us because we have been -- we got used a little bit to these high prices. But you have to remember that this is not always very good for high price -- it's not good for the end consumer. So if prices -- if there's more supply and prices come down, you pick up on the demand side. You might have a little bit less margin, but you have more volume. So we tend to be indifferent on commodity prices. If prices are lower, we tend to pick it up on higher volumes.

Okay. No, but I guess I was trying to figure out, I think there was a -- one of your competitors would probably not benefit from the increased trade flow out of Eastern Europe. And it sounds like you guys would actually benefit from -- that's usually implied as a negative for the industry when Russia comes on because that means less soybean meal going to Europe, all that stuff. That's why I was just trying to figure out how it's playing out, but you guys seem positive on it.

Very positive. We have become quite large in that part of the world and, normally, it contributes. And last year, we had 0 contribution. In fact, no contribution in some -- negative contribution from that. We are very happy that the supply is abundant and not perhaps as abundant as it can be, but it's very positive.

Can you talk about the difference between the Brazilian crush margins that maybe we're seeing versus your optimism on the crush margin side in Brazil? It's hard for us to -- and I know there's a lot of things going on but the crush margins we're looking at seem somewhat negative almost, not good at all, and you guys seem pretty optimistic again. So I'm just trying to -- is it how you're buying it? Is it how you're moving it? What is actually the difference?

No, you're right, the replacement margins, this time of the year, go to 0 because whoever want to operate spot will not make any money. So you obviously have to have a program where you buy early and you crush. So spot, the margins are -- it's the tail of the crop and they tend to be very bad. But it's all about how you position yourself early and how you buy, how you hedge, so results were very good and things are fine. So going into -- but it's tailing off.

And our next question comes from Vincent Andrews of Morgan Stanley.

I hate to beat this horse, but I just want to make sure I understand what you're saying, Alberto. It's clear you've got some new facilities in the Black Sea, just the fact that you're going to be able to move volume through is going to be a positive to you. But I just want to make sure that to be clear, you're saying that incremental positive of having those new facilities there and having product there, which you didn't have last year, is still better than -- we know there's going to be some offset from the global market unwinding slightly, as Russia begins to export again. But your view is at a net positive even though there is -- there's some type of giveback in there from a dislocation perspective?

Yes, that's positive because last year, we missed 25 million tons of the grains. So imagine the whole world missed this 25 million, but it was compensated by higher margins. But now you have these 25 million tons, so you will have lower margin around the world. But for us, this is net-net positive in our grain business.

That was our last question. Are there any closing remarks?

We do not. Thank you, everyone, for tuning in. Have a good day. Thank you.

Thank you. Thank you, ladies and gentlemen. This concludes today's conference. Thank you for participating. You may now disconnect.