Search Brazilian Properties Live Help Join Our Mailing List

Ethanol Production in Brazil sees profit for Bunge

Date added: 30th April, 2010 at 08:12
(view all articles from April, 2010)

Agribusiness and food company Bunge has released profitable quarter one results after the acquisition of a sugarcane and ethanol production company in Brazil.

Bunge saw a 12 per cent increase in net sales in the first quarter. In the first three months of 2010, the company made $10.35 billion (£6.75 billion) in net sales compared with $9.2 billion in 2009.

The company has reported an increased operating cash flow of $760 million due to higher net earnings and lower working capital needs.

An acquisition by Bunge of sugar and ethanol company Moema was completed in February and the firm is currently integrating its operations. The acquisition has added five new sugarcane mills to Bunge's existing three and increased the company's sugarcane milling capacity to 20 million metric tons.

Alberto Weisser, Bunge's chairman and chief executive officer, said: "With the addition of Moema to our portfolio, sugar and bio-energy has become an important segment for Bunge with attractive growth potential."

Brazil is the world's leading exporter of sugar and sugarcane ethanol and has a fast-growing domestic market as well. Bunge trades, markets and processes a variety of sugar and ethanol products in Brazil and is profiting from the growing demand.

Global sugar demand, according to Bunge's website, is rising at three per cent a year, while ethanol demand in Brazil is growing by nine per cent a year.

Sugarcane ethanol is the most economically attractive of the major bio-fuels and it also burns more cleanly than petroleum-based products. The US Environmental Protection Agency has reported that sugarcane ethanol produces 61 per cent less emissions than gasoline, making it a potentially valuable fuel in today's climate-conscious world.

Quarter one sugar traded well in a volatile period, earning the company $5 billion EBIT. Bunge's mills have the advantage of being located both close to the main domestic markets in Brazil and to export logistics systems. Several mills even have cogeneration plants, allowing them to turn excess energy into electricity which can be sold to power companies in Brazil.

Bunge, whose headquarters are based in London, began trading sugar in 2006. It also saw growth after its 2008 acquisition of Tate and Lyle's international sugar trading and marketing arm.

On the back of its quarter one results, the company has set its 2010 full-year earning guidance at $5.30-$5.80 a share. This takes into consideration the $19 million net impact of the Moema acquisition. ADNFCR-1477-ID-19752074-ADNFCR