May 3, 2017 / 2:05 PM / a year ago

UPDATE 2-Bunge profit dives as grain glut hits margins; shares drop

(Recasts, adds share price drop, adds CEO quote, adds earnings guidance, adds byline)

By Karl Plume

CHICAGO, May 3 (Reuters) - U.S. agricultural trader Bunge Ltd reported on Wednesday a sharply lower first-quarter profit and cut its full-year earnings forecast as slow crop sales by farmers in South America squeezed margins in its core agribusiness unit, sending shares tumbling.

White Plains, New York-based Bunge said net income available to shareholders plunged 82 percent in the quarter, led by a steep drop in agribusiness, which buys, sells, stores, processes and transports crops around the world.

Bunge shares dropped more than 9 percent, the steepest decline in 15 months, to $68.62.

The earnings miss came a day after rival grain trader Archer Daniels Midland Co reported its third global trading loss in five quarters and warned of a weaker year ahead in grain trading, dealing ADM shares their biggest loss in eight years.

Low grain prices and a global grain glut have eroded margins for agribusinesses including Bunge, ADM and competitors Cargill Inc and Louis Dreyfus Corp. The companies, collectively known as the ABCDs, dominate the global grain trading business.

Earnings before interest and tax in Bunge’s agribusiness segment, its largest unit in terms of volumes and sales, fell more than 61 percent to $109 million.

“Farmers in South America still have not sold over 70 percent of their crops, record crops, and have held back in expectation of better prices,” Bunge Chief Executive Soren Schroder said in a conference call with analysts.

The company said it expects “solid earnings growth” this year, but it cut its full-year earnings target for agribusiness by $95 million to $125 million and trimmed its food and ingredients unit target by $25 million.

Farmers in Brazil and Argentina are harvesting bumper corn and soybean crops this year, in contrast to 2016, when farmers held back crops that were reduced by weather.

Net income available to Bunge’s shareholders fell to $39 million, or 27 cents per share, in the first quarter ended March 31, from $222 million, or $1.54 per share, a year earlier.

On a per-share basis, profit from continuing operations was 31 cents in the latest reported quarter, down from $1.60 per share a year ago. (Additional reporting by Swetha Gopinath in Bengaluru; Editing by Shounak Dasgupta and Paul Simao)

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