February 21, 2019 / 11:42 AM / 3 months ago

UPDATE 3-Bunge's U.S.-China trade war bet leads to Q4 loss, shares dive

(Adds acting CEO quote, updates share price, adds change how Bunge will issue guidance)

By Karl Plume

Feb 21 (Reuters) - Global grains merchant Bunge Ltd reported a fourth-quarter loss on Thursday after a truce in the U.S.-China trade war ruined the company’s bets on Brazilian soy, sending shares down to a three-year low.

Bunge, under pressure from weak results over the past two years, missed Wall Street forecasts for the fourth time in five quarters.

Shares of the White Plains, New York-based company dropped 4.2 percent to $50.41.

Brazilian soy prices had swelled to a large premium to U.S. beans after China slapped steep tariffs on shipments from the United States in July. But that premium narrowed after the countries declared a temporary truce in their trade war on Dec. 1. That resulted in a $125 million loss as the value of Bunge’s soybean inventory plunged.

The gaffe was at least the second major risk management blunder by Bunge, whose executives had asserted last summer that shifts in global trade flows “play to our strengths.”

“We’re not satisfied with our performance,” acting CEO Gregory Heckman told analysts on a conference call, adding that “2018 could have and, frankly, should have been a much better year.”

Gross profit in Bunge’s agribusiness segment, historically responsible for about 80 percent of company revenue, fell to $203 million from $238 million in the fourth quarter a year earlier.

Last month, Bunge warned of lower full-year earnings in the segment as well as in its sugar and bioenergy business.

The company has been under investor pressure and the target of takeover attempts after an earlier string of weak profits. It removed long-time CEO Soren Schroder and is conducting a strategic review of its businesses that may include a sale of the 200-year-old company.

Bunge’s problems are expected to stretch into the current year. Agribusiness results in 2019 are expected to be below 2018 due to narrowing soybean crush margins, while its struggling sugar and bioenergy unit’s results are likely to be “about break-even,” the company said.

Bunge also said it would no longer offer earnings guidance estimates for its business segments, but instead give directional guidance.

The company’s net loss available to shareholders widened to $74 million, or 52 cents per share, in the fourth quarter.

Excluding one-time items, the company earned 8 cents per share, missing the average analyst estimate of 20 cents per share, according to IBES data from Refinitiv.

The company said net sales fell 0.5 percent to $11.54 billion. (Reporting by Karl Plume in Chicago, additional reporting by Shanti S Nair in Bengaluru; Editing by Maju Samuel, Chizu Nomiyama and David Gregorio)

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