CHICAGO, Ill. (Reuters) — Agricultural giant Bunge Ltd. recently cut the full-year forecast for its core U.S. agribusiness unit after posting lower year-on-year profit for the third quarter in a row on flat revenue.
The company, however, said it expects a stronger fourth quarter on bumper U.S. corn and soybean harvests, and forecast better results in 2018, due partly to cost cutting.
“While the business environment remains very competitive, we can see signs of improvement and are taking proactive steps in areas we can control,” chief executive officer Soren Schroder said in a conference call with analysts.
A global oversupply of crops has hammered profits in the grain trading and processing units of Bunge and its chief rivals, forcing rounds of cost-cutting that look to spill into 2018.
Rival Archer Daniels Midland Co. reported earnings fell 44 percent from a year earlier and said it did not see conditions improving next year.
The companies are trying to diversify through acquisitions into higher margin businesses, such as food ingredients, but results have been slow to offset the challenges to their mainstay trading business from the supply glut.
Third-quarter operating profit for Bunge’s agribusiness unit, its largest in terms of volume and revenue, rose about 2.5 percent from the same quarter last year.
The company said it expects 2017 earnings before interest and taxes of US$425 million to $500 million in agribusiness.
In February, the company said it expected 2017 EBIT of $895 million and $1.05 billion for the unit, which makes money trading, storing and processing crops.
Bunge executives have said overcapacity is moving the industry toward consolidation and they are prepared to lead it, but the company itself was the target of a takeover attempt by commodities trader Glencore in May, which it rebuffed.
Bunge has since announced cost cutting and restructuring initiatives to halt a profit slump. It also issued about $1 billion in debt to secure a controlling stake in a Malaysian palm oil company to bolster its higher margin edible oils business.
Bunge said net income available to shareholders fell to $84 million, or 59 cents per share, in the quarter ended Sept. 30 from $116 million, or 83 cents per share, a year earlier.