The global agribusiness Bunge has written off a substantial chunk of a large edible oils acquisition that was meant to boost the company’s high-margin food ingredient sales.
The $76m goodwill impairment charge comes less than two years after the US-listed company closed its $946m purchase of a controlling stake in IOI Loders Croklaan under former chief executive Soren Schroder. Loders produces palm and other tropical oils, which Mr Schroder said would accelerate growth in value-added product sales for what has historically been a commodity business.
Mr Schroder was replaced in early 2019 by Greg Heckman after activist investors took aim at the company. On Wednesday, Mr Heckman said Loders’ sales were not growing as quickly as expected.
The writedown was one among a raft of special charges and items that pulled the company to a net loss of $51m in the fourth quarter of 2019, versus losses of $65m a year before.
Adjusted for these items, Bunge earned $1.27 per share, up from 8 cents a year earlier and almost $1 per share higher than analysts’ estimates. Adjusted operating profit more than doubled to $283m in the quarter, from $107m.
The bulk of the operating gains came from trading grain in South America, where Bunge has been a major player since the 19th century, the company said. Farmers in Brazil decided to sell to the company as the declining real, the local currency, made their crops worth more in international markets. In Argentina farmers sold in anticipation of a change in export taxes under new president Alberto Fernández.
The Loders charge came after the company’s annual test of the value of its assets, not a specific event, said John Neppl, Bunge’s chief financial officer. Mr Heckman added that the acquisition held great promise for Bunge, with vegetable oils in demand for products such as plant-based meat substitutes, for example.
“We do love the business because fats and oils is definitely on trend. It’s right in our wheelhouse,” Mr Heckman said, calling the Loders purchase “a wonderful opportunity.”
Bunge gave a tempered outlook for 2020. In its main agribusiness segment, the company said 2020 results were likely to be lower than in 2019, though dependent on factors such as China’s agreement to purchase US farm goods and the size of coming harvests.
Bunge shares gained 4 per cent in pre-market trade to $57.20.