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Ukrainian Grain & Oilseed Market

Ukrainian Grain&Oilseed Market

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Bunge reported first quarter 2020 results: Q1 GAAP EPS of $(1.46) vs. $0.26 in the prior year

07.05.2020 16:50 "Agro Perspectiva" (Kyiv) — Q1 GAAP EPS of $(1.46) vs. $0.26 in the prior year; $(1.34) vs. $0.36 on an adjusted basis

Agribusiness executed well; results impacted by approximately $385 million of temporary

mark-to-market losses on forward hedges

Strong quarter in Edible Oils; results impacted by timing differences

Progress on portfolio optimization with the announcement to sell 35 US grain elevators

Implemented additional safety measures in response to COVID-19

Maintaining strong liquidity position and durable balance sheet

Overview

Greg Heckman, Bunge’s Chief Executive Officer, commented, «I am incredibly proud and grateful for our team’s commitment and performance during this highly challenging period. Bunge is a critical part of the global food infrastructure, and our team remains dedicated to ensuring that key feed and food ingredients

are getting from farmers to consumers as we navigate this global crisis together.

»Our underlying business performed well during the quarter, and the mark-to-market adjustments we incurred are expected to reverse in the coming quarters. The work we have done to improve our operations, streamline our portfolio, and refine our approach to risk management has allowed us to remain nimble and adapt to evolving business and operational demands. We did not experience significant disruptions to our business from COVID-19 in the first quarter, although we did start to see the impact of changing consumer behavior in parts of our Edible Oils business in March.

«Without question this will continue to be a challenging year, but we have a strong platform, a resilient team, and a remarkable base of customers on both ends of the supply chain that will allow us to continue to perform our critical role in the global food infrastructure and drive value along the way.»

First Quarter Results

Agribusiness

In Oilseeds, average soy processing margins were lower in all regions compared to a strong prior year, with the exception of China, which benefited from tight soymeal supplies and reduced bean availability.

Average softseed processing margins were higher in all regions. As COVID-19 began to spread globally, concerns about soymeal availability caused global oilseed processing margins to spike toward the end of the quarter. As a result of these increasing processing margins, we incurred approximately $100 million of mark-to-market losses related to forward oilseed crushing contracts. In addition, as vegetable oil values declined during the quarter, we recorded a mark-to-market loss of $195 million on forward hedges related to our oil pipeline that serves our downstream Edible Oils customers. We expect the majority of these timing losses to reverse during the course of the year.

Results in Grains were primarily driven by origination in Brazil as the pace of farmer commercialization accelerated in response to an increase in local prices caused by the devaluation of the Brazilian real.

Ocean Freight also had a strong quarter, benefiting from excellent execution; however, results were impacted by approximately $90 million of mark-to-market losses, primarily related to forward bunker fuel hedges, driven by the decline in global energy prices. We expect the majority of these timing losses to

reverse during the course of the year.

Edible Oil Products

Higher results in North America, Europe and Argentina were more than offset by lower results in Brazil and Asia. Excluding approximately $20 million of net unfavorable timing differences, $6 million of which are expected to reverse in future periods, results were higher than prior year. The impact of COVID-19

was relatively limited as lock-downs and restrictions varied by region. However, toward the latter part of the quarter, we started to see reduced demand from foodservice and biofuel channels.

Milling

Improved performance in Brazil, which benefited from higher volumes from food processors, was more than offset by lower results in North America due to a decline in margins from lower yields.

Sugar & Bioenergy

Segment results for this quarter reflect our share of the earnings of our 50/50 joint venture with BP. By contrast, first quarter 2019 results reflected our 100 percent ownership of the Brazilian sugar and bioenergy operations that we contributed to the joint venture in December 2019. Additionally, results of

the joint venture are reported on a one-month lag.

The loss in the quarter reflects the seasonally slow intercrop period, as well as approximately $25 million in foreign exchange translation losses on U.S. dollar denominated debt of the joint venture due to depreciation of the Brazilian real.

Fertilizer

Higher segment results reflect improved performance in our Argentine operation which benefited from higher margins, which more than offset lower volume.

Cash Flow

Cash used by operations in the quarter ended March 31, 2020 was $439 million compared to cash used of $402 million in the same period last year. Adjusting for the beneficial interest in securitized trade receivables, cash used by operating activities was $9 million compared with cash used by operating activities of $158 million in the prior year. This increase was primarily driven by improved working capital management.

Income Taxes

For the quarter ended March 31, 2020, the Company recognized an income tax benefit of $55 million.

Agro Perspectiva

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07.05.2020

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