Bunge Global S.A. (BG) Q2 2012 Earnings Report, Transcript and Summary

Welcome to the Q2 2012 Bunge Limited Earnings Conference Call. My name is Larissa, and I'll be your operator for today's call. [Operator Instructions] Please note that this conference is being recorded. I'll now turn the call over to Mark Haden. Mr. Haden, you may begin.

Thank you, Larissa, and thank you, everyone, for joining us this morning. Welcome to Bunge Limited Second Quarter 2012 Earnings Conference Call. Before we get started, I want to inform you that we have prepared a slide presentation to accompany our discussion. It can be found in the Investors section of our website at bunge.com, under Investor Presentations. Reconciliations of non-GAAP measures disclosed verbally on this conference call to the most directly comparable GAAP financial measure are posted on our website in the Investors section. I'd like to direct you to Slide 2 and remind you that today's presentation includes forward-looking statements that reflect Bunge's current views with respect to future events, financial performance and industry conditions. These forward-looking statements are subject to various risks and uncertainties. Bunge has provided additional information in its reports on file with the SEC concerning factors that could cause actual results to differ materially from those contained in this presentation and encourages you to revise -- to review these factors. Participating on the call this morning are Alberto Weisser, Bunge's Chairman and Chief Executive Officer; and Drew Burke, Bunge's Chief Financial Officer. I'll now turn the call over to Alberto.

Good morning, everyone. Before Drew offers details about Bunge's performance in the second quarter and our outlook for the rest of the year, I would like to start by discussing conditions in the agribusiness market. Weather is always an important variable in the agribusiness and food industries, but this year it's particularly significant. Global stocks of corn and soybeans are already tight, and severe drought in the U.S. has lowered expectations for replenished supply this fall and driven commodity futures prices to record levels. As the world adjusts to these developments, we are likely to see a tempering of near-term demand among commercial customers, the emergence of nontraditional trade flows, both within regions and globally, as well as a massive planting by farmers in the Southern Hemisphere. Large crops next spring from farmers in South America will help provide relief to a stressed market. We expect Bunge will have a strong second half of the year, not only because we are confident in our business and our approach, our global presence in agribusiness, our investment in sugar and our downstream and fertilizer businesses, but also because we are confident that the role we play as a company is both meaningful and valued. In times of tight commodity stocks and price volatility, farmers depend on a trusted outlet for their crops. Commercial customers rely on a responsive supplier, and the world requires flexible trade that can move products smoothly and safely from where they are to where they need to be. Bunge's strong balance sheet, efficient operations, diverse product portfolio and global asset network enable us to provide these services in the most challenging of times. Of course, record commodity prices spark concern for the food security of vulnerable communities. However, while corn and soybean stocks are low, global stocks of other key staples, including wheat and rice, are at more comfortable levels. The availability of these crops, combined with rational approaches by governments to domestic food, agriculture and trade policies, fast response from aid agencies and cooperation from industry, should help the world respond quickly and effectively to potential issues. I will now turn the call over to Drew, who will take you through the quarter and our outlook.

Thank you, Alberto. Let's go to our earnings highlights on Page 3. We again achieved strong volume growth. Total volumes were 40.6 million tons, a 14% increase over the prior year. The volume increase was driven by Agribusiness, as volumes went from 29 million to 35 million tons. This increase resulted from increased grain merchandising business in Europe due to increased supplies in our new port in the Black Sea and in the North America as our Pacific Northwest port and related great origination facilities were in operation. Oilseed volumes also increased. The second quarter of 2011 volumes were negatively impacted by the 2010 drought in the Black Sea. Our total EBIT for the quarter was $403 million. Included in this amount are gains of $85 million related to the sale of our minority interest in the Solae joint venture and $36 million related to our purchase of a controlling interest in a wheat milling joint venture in which we previously held a minority share. Excluding these gains, our total segment EBIT was $282 million. The comparable prior year number was $336 million. Our Agribusiness EBIT, excluding the gain on the sale of the minority interest in Solae, was $301 million. This was higher than the comparable prior year amount of $271 million, which excludes a gain on a sale of our share of a European oilseed joint venture. Agribusiness results were driven by strong performances in oilseed processing and grain merchandising in South America. Our European business, which includes our new Ukrainian port operation, also performed well. Sugar & Bioenergy reported a loss of $28 million. While the second quarter is the weakest business seasonally, we had expected a result around breakeven. The shortfall versus expectation was caused by an unusual level of rain in June, which resulted in lower crushing volumes and higher unit costs. The prior year result of $18 million benefited from unusually high ethanol prices related to a tight supply situation in Brazil. The lower sugar volumes in the quarter were attributed to our merchandising business. Food & Ingredients reported a quarter result of $46 million. This amount includes a gain of $36 million related to our purchase of a controlling share of a Mexican wheat milling business in which we previously had a minority interest. The adjusted 2012 result of $10 million compares to a prior year result of $52 million. Our edible oil results were lower as volatile raw material prices in the quarter resulted into reduced margins, and we recorded impairment charge of approximately $5 million related to the closing of a European margarine plant as part of a facilities consolidation program to improve efficiency. Our wheat milling results were lower than expected due to combination of lower margins and continuing challenges related to the implementation of an SAP system that impacted volumes and margins. Core milling continued to perform well, but results were slightly below a strong quarter last year. Our Fertilizer business reported a loss of $1 million in the quarter versus a profit of $12 million in the prior year. The prior year amount is adjusted for $17 million of onetime charges. Volumes increased over the prior year, but margins continue to be affected by high cost inventories from earlier in the year when international prices decreased. Our tax rate in the quarter is 19% compared to 11% in the prior year. The higher rate was due to our earnings mix and the gain on the sale of the minority interest in Solae. The net income attributable to Bunge was $274 million, and our earnings per share, excluding the gains of -- on transactions, was $1.20. Let's move to Page 4. We have indicated that we have been consistently investing in our sugar plantations that have the ability to produce at full capacity. This chart compares the performance of our cane fields and mills to the center south industry as a whole. The comparison period is crop year-to-date at June 30. Cane milling volume for the industry has declined by 28% from last year's crop to this year's. At the same time, our cane milling volume has increased by 10%. A similar result is seen in sugar production, and in ethanol the variance is even larger. The only area where we show a decline is in total recoverable sugar. This reduction was due to the rains in June, which reduced the concentration of sugar in the cane. As with the other measures, our performance is better than the industry's as we showed a decline of 2% versus 4% for the industry. In 2012, we are continuing to invest significantly in sugarcane plantations. We will plant approximately 70,000 hectares. As a result of these investments, we expect to have enough cane available to produce at full capacity next year. Let's turn to Page 5 in the balance sheet. Our balance sheet remains strong. During the quarter, our inventories increased $1.6 billion reflecting higher crop prices and increased inventories in South America following the normal pattern during the harvest season. Our debt level increased by a similar amount. At June 30, we had $2.1 billion of available and unused capacity under our committed credit lines. Turning to Page 6 in our cash flow statement. Our funds from operations for the 6 months ended June 30 were $401 million, primarily reflecting our net income of $355 million plus the gain on the Solae and wheat milling transactions plus depreciation, depletion and amortization of $264 million. Changes in operating assets and liabilities of $3.1 billion primarily reflects the increase in inventory levels. Our capital expenditures to date are $473 million, and we are on track with our full year spend of $1.2 billion. Let's turn to our full year outlook on Page 7. We continue to expect the strong finish to the year. Agribusiness should perform well. In oilseed processing, we expect good margins. North American soy crushing will benefit from export demand due to tight supplies in South America. Our Canadian canola and Eastern European sunseed margins should be strong as crops are large and demand will benefit from the tight global soybean supply. European soy margins are also good, while rapeseed margins remain under pressure. China crushing margins are expected to improve as high soybean inventory levels are drawn down later in the year. However, the higher crop prices we are seeing will cause demand to slow down. The corn balance sheet is particularly tight as a result of North American drought. The world's grain needs will have to be served by nontraditional trade flows, and our asset base and logistic network are well positioned to meet that need. Our strong balance sheet and risk management capabilities are essential in the current high price, volatile environment. Let's turn to Page 8. In sugar, we are entering the seasonally stronger half of the year. As the harvest progresses, we have greater visibility as to the crop size, and we continue to expect to mill 17 million to 18 million tons of cane. However, for the year, we expect results to be below our prior estimates. While we should be able to recover the million volume loss during the second quarter, we are not expecting to be able to make up the entire earnings shortfall from the second quarter. As mentioned earlier, we are on track to plant about 70,000 hectares of cane this year. The development of this cane was helped by the June rains, so our confidence is increasing that we would be able to operate at full capacity next year. We expect our Food & Ingredients business to return to its previous level of profitability in the second half as prices align with raw material costs. Please turn to the next page. Fertilizer is entering its peak season. Farmers are profitable, and the market needs a large South American crop. This should translate into strong volumes for our business. We are now forecasting a tax rate for the year of 17% to 20%, driven by our earnings mix and the Solae transaction. As we approach the end of 2012 and the beginning of 2013, we are confident our businesses will perform well. Our global footprint, strong merchandising and logistics capabilities and risk management skills position us well in the current agribusiness environment. The expected large crops in South America next year should support our continued growth. Our food business should benefit from having an integrated supply chain with our agribusiness operation. Our investments in sugarcane planning are starting to pay off and should be reflected starting -- in our profits starting in the third quarter and thereafter. We'll now be happy to answer your questions. Larissa will lead us through that process.

[Operator Instructions] Ken Zaslow from BMO Capital Markets is online.

So I wanted to talk about the Brazilian crush outlook. And can you just talk about -- so the fact crush margins for Brazil are obviously not that great. Can you talk about your ability to actually own the soybeans versus how you can sell it? And can just help us out what the outlook for your Brazilian crush margins would look like for the next, call it, 3 to 6 months?

Ken, the fees -- the crush fees of South America is fully in swing. Obviously, we have already bought most of the beans that we need to crush. Crush margins are okay, so they have been quite good and we feel comfortable where we are.

Okay. So would you think that, that would be better year-over-year or in line with year-over-year? How do you kind of think about it going forward like that?

Obviously, the structural margins have been better in South America vis-à-vis last year, and we expect it to continue being strong until the end of the season.

Okay. And then in terms of the inventory levels, year-over-year it's about $1 billion bigger than it what it was last year. Is that comprised mostly of volume or pricing?

I would say it's mostly price, but we have expanded somewhat our market share.

Okay. And then with the Safrina crop coming out, does that change the logistic opportunity that you would have given the tightness of the supply in the U.S.? And how does that work out? Obviously, it's supposed to be much bigger than last year. Does that create a -- somewhat of a bridge to offset some of the U.S. crush margin outlook?

Well, the Safrina is related to corn and so the margins here also have been very strong and -- for domestic and export businesses so this has been -- in fact, this is not Safrina anymore, it's very large Safra [ph]. So we have good inventory, good forward business this year and margins are structurally strong.

Okay. So I guess relative to your outlook in the first quarter, would you say that the composition of your earnings in the Agribusiness is going be stronger or weaker than you expected? And what is the composition based on crush margins versus logistics?

Look, we feel as strong as we felt in the last quarter. For the rest of the year, I think we are very well positioned, and South America is performing extremely well. And so if there is some weakness, perhaps in crush margins in Europe like rapeseed and in North America, it's offset by the stronger performance of South America. So our outlook is as robust as we thought about in the last quarter. Obviously, it's a little bit different because the harvest is looking different, but we feel very comfortable about the second half.

And my last question is on capital projects. Can you give us an update on how you think the return characteristics of certain of your capital projects will go from the Northwest port to some of the smaller projects? How does that all play out relative to your expectations going forward?

It's -- the good news is that many of the investments that we launched are now in full swing like Nikolayev in the Ukraine and the Pacific Northwest, the -- some of the Vietnam plant and so on. So they are performing as expected. So -- also, the acquisitions in the food sector in India and in Brazil. So we are comfortable with how they are performing in terms of returns as expected. Obviously, some a little bit better or some a little bit less good, but we are very comfortable the way they are moving.

Okay. So I guess I lied when I said one last question. Are you more optimistic, less optimistic, or dissimilar? I can't really figure out which way you're feeling relative to last quarter. It sounds like you're kind of more optimistic but not really sure. I'm just trying to take your temperature on that. Are you feeling better about the next 18 months or not as strong?

I feel, at least, as strong as in the last quarter. Let's -- we obviously are quite worried with the shorter crop in North America. But the way Bunge is positioned with a very strong global asset network logistics, I think we will be able to participate and help the customers to feed wherever it is needed. So we feel very good even with the change in the picture of the harvest, and we have probably one of the strongest balance sheet in the industry, and we are being able to fund the expansion of the business with the higher prices. So as you see -- saw our inventory going up, we are ready. So we feel very, very well positioned.

Ken, let me just add to that because you took it out, how do we feel over a longer period of time into next year, right? I think we're feeling pretty good about next year. You're going to have very large crops in South America, and we're very well positioned to both process and handle the crop in that market, and I think you'll see a big harvest in South America and big volumes used domestically, but particularly for exports because the world's going to need that product.

Even that should offset the U.S. crush outlook, which is probably less good than you thought it was, but the South America should more than make up for it, I guess?

Yes. I would think so, Ken. One, it's hard to predict the U.S. because we're in a difficult weather position. So the soybean crop isn't made yet and it's under some stress. But I think the feeling is that the fourth quarter will be -- third and fourth quarter will be okay in the U.S. but they'll run out of product earlier -- early in the first quarter of next year that there won't be a whole lot that can be exported out of the states, at which time the Brazilian crop will come in. So I think on a net-net balance, yes, we do see the opportunities for us in the future of Brazil outweighing what we might give up because of the smaller U.S. crop.

We feel very good about the next 18 months. Also, Sugar & Bioenergy will start showing the results, and we are seeing it already the way it is performing in July. So we are comfortable with the next 18 months, the outlook.

The next question comes from Ryan Oksenhendler from Bank of America.

Drew, can you just talk about the shortfall or the magnitude of the shortfall, I guess, in terms of EBIT margin for sugar? I think the last time you -- or last quarter, you'd pointed to slightly below the normalized range of 8 to 10. I guess, can you point to what it would be this year?

Yes, we can. I think it'll be a little bit lower again, Ryan, because what's happened is in the second quarter, we lost crushing volume. And we still have the same crop. We have 17 million to 18 million tons. So as long as there's nothing very unusual in the Brazilian weather pattern, we'll be able to meet our crushing targets for the year. But the other significant thing in the sugar business is how much sugar you recover in the cane. Storing the cane we produced in the second quarter, the total recoverable sugars were lower than historical levels because the cane was wet, in effect, from the rain. So that piece of the profit, we're not going to be able to earn back over the rest of the year because that crushing is done and that sugar is gone or was never there. So I think it will be slightly below than we thought last time.

Okay. And I think -- I mean, I guess, can you just talk about where the improvement from 2Q to the back half of the year? So I look at your milling volumes, you already milled -- you did, I guess, 5 million. I think, at most, that would be in the second quarter because you probably don't start harvesting until April. And you've got 12 or so million to go, so let's just say you do 6 million in each quarter and you're only going to pick up an extra million tons per quarter. And then the TRS from what I've been reading is that given that the rains have increased in the second quarter, that continues to drain the sugar content and TRS may not actually tick up that much in the second half of the year. So how do you bridge that gap in getting better volume -- or better margins in the back half?

Okay. Let's take it one at a time. And then if you want more details after that, I suggest you give Mark a call, he'd be happy to take you through it. In Brazil, we start the harvest in the second quarter. At that time, the cane is not that mature and the total recoverable sugars are lower, lowest of the season. And as you move through the harvest, the sugar continues to mature and the concentration of sugar in the cane grows higher as you move out and then it declines again. So as you enter the third quarter and the beginning of the fourth quarter, you have the highest recoverable sugar rate. So a kind [ph] of crush is not a ton of crush. Material crush from September forward -- or excuse me, from July forward, starts to have the higher total recoverable sugar than sugar recovered earlier. So that's one factor. So you actually get better yield in that period and that's why we've always said sugar is a second half business and we earn our highest profits in the second half in sugar. If you look at total recoverable sugar, they do recover during -- as the crop moves along. I think the UNICA data is showing that the total recoverable sugars are getting higher. How high they'll get versus historical has a lot to do with the weather and other factors, and that's very difficult to predict. Our projections are based on kind of a normalized ATR development through the crop cycle.

Okay. And I guess just to follow up on Ken's question. I mean, it just seems strange that you -- I'm just curious how you could have such a huge shift in Agribusiness and the supply-demand balance is where you go from one of the biggest crops in U.S. history to one of the worst droughts in 25 years. And your outlook hasn't changed at all, especially with demand dropping off here. Is there a scenario where it's actually not good for you guys? Like what -- like how are both scenarios that good for both of you that your outlook is so strong for Agribusiness?

Well, you have to understand that we are very strong in South America, and the South American harvest was a very good one. It was lower than originally expected, but I think it was the third or fourth largest ever. So -- and therefore, the world needed their products and they needed the infrastructure and the kind of assets and capabilities we have so the margins are good. So -- and when we look into next year, South America will again be a major contributor. It is a shorter crop in U.S. but it is going to be a good crop. So we will have enough beans and grains to process until the end of the year. And we have to remember also that we have expanded in the Black Sea area where we have generated significant amount of volumes, and it was not there last year. I think what you are hearing from us is Bunge is, because of its geographic breadth and also the product portfolio, we are very well positioned. That is exactly where our strength comes to play. When there are problems in some areas, we are able to compensate it with products and geographies from other areas. So that's exactly our business model.

The next question comes from Vincent Andrews from Morgan Stanley.

What -- as you look at the U.S. soy crop, where do you think the yield comes in? Are you guys closer to where USDA is? Or are you much below it?

I would say we are where the USDA is, and there's still time, and there's quite a way to go with the soybean crop. So there are a couple of rains out there so we are where the USDA is as well.

Okay. Let's take this a scenario where the USDA just happens to be wrong, and they're really wrong, and the yield comes in 3, 4, 5 bushels below where they are so we're somewhere in the high 30s and soybeans go into the high teens, maybe to $20. What type of situation would that be for you?

We are in the middle of it so we earn our spread, so what we would do is you might have -- the fourth quarter should be reasonable because we will have the availability. You might have, earlier in the beginning of the first quarter of next year, not enough beans to supply for exports. So you have to remember that Brazil starts harvesting at the very end of December already. So Brazil would have to kick in even earlier. So I would say that the scenario is tight, but it is reasonable. We think we will be able to serve our customers.

And $20 beans from a balance sheet perspective or maybe, Drew, it will be helpful if you just could sort of -- just sort of give us a little more detail about how the balance sheet is functioning. I see you still have $2.1 billion last of credit facilities even though inventory went up in the quarter. So what is the comfort level of beans going to $20? Is that -- I mean, is that fine? Or how should we think about that type of scenario in the balance sheet?

I think, Vincent, I don't want to give too precise of an answer because it's a very dynamic situation and what it would mean to us varies on how much inventory we decide to carry and how much of a position we have on the exchanges. What I would say is we are very comfortable with our balance sheet and our debt capacity at the moment and think we'll be okay in all the scenarios that we are envisioning for the market going forward. So we don't see that as an issue at the moment. It could be at a point in time, but right now we don't see it as something that's going to impact us in a great way.

Okay, that's helpful. And just one question for me is can you just -- the tax rate that you guided to for the full year went up and I know your tax rate can move around for a variety of reasons. Can just help us understand what the reasons are in this case?

Yes. I think the 2 in the press release, the one is very straightforward, which is we had a gain on the sale of Solae, which is tax in a high tax rate jurisdiction. So that is having straight some pressure and moving it higher. The second one and the one that causes volatility in our rates is the earnings mix. That is always difficult for us to project. We do business in, I think, over 40 countries. They all have unique tax rate and their tax rates range from very low up to about 35%. And as we've said in the past, the earnings moves throughout the chain in our business quite frequently, so we may be expecting to make it in origination and end up making it in distribution, and that transactions are likely to be in different countries. So that's what causes the volatility in getting it to move up. There are many drivers of wide increase but I would say the biggest driver in this year is the fact that we see both increased operating earnings in Brazil and we see lower financing costs in Brazil. So our pretax income in Brazil is increasing, and that is a fairly high tax rate jurisdiction for us. The other thing I'd point out is while we don't like high tax rates, if it's caused mainly by higher earnings it's not such a bad thing. So -- but we would prefer a lower rate. But when it comes to the other way, it's not. But I would actually say it's strength in Brazil pretax profits that is causing the biggest increase in our estimate for this year.

The next question comes from Christine McCracken from Cleveland Research.

Alberto, you talked about the global supplies of wheat and rice being ample. It seems like we've seen some estimates coming down here recently on those crops. I'm curious, rumors about hoarding, again, politically motivated kind of changes in policy. I'm wondering how that affects your outlook for availability, if it does at all, and whether or not you have any protection this time around? Or how it might be different if there were to be any kind of export bans?

Well, one situation is -- one message is very clear. I think it is the one thing we don't need and would be very detrimental is government interventions about limiting exports. As we have seen in the past, this is very, very negative for the whole world and we don't have any indications. We think it is -- we have enough inventories, and we have enough ending stocks. So we feel it is comfortable. But obviously, government interventions are always tricky and problematic.

Is there anything different this time, like who controls the supply? I think that shifted a bit since we had these issues before. I'm not -- at least that's what we hear from the trade.

I'm not so sure. I think we are having this time -- okay, we have the issue that we don't have enough feed input, which is corn and soybeans, are smaller but this is -- goes into the livestock industry. So I think that's a little bit different. But rice and wheat is available. The Chinese crop is good. I think we have enough, although a little bit lower in Europe, but we have enough production of wheat. We have enough stocks in U.S. and the crops should be okay. So I would hope everybody stays reasonable and just remember the issues with corn and with soybeans.

And then with the increase in prices of seeds specifically, we're hearing about quite a bit of liquidation globally on the high cost feeds supply. I'm wondering how that changes your demand projections, if it does at all, and how you are working with customers maybe to secure physical supplies.

We would say at the moment, the change in demand is more that we, 6 weeks ago -- 6 weeks -- or 2 months ago, we expected a higher, in fact, an increase and we are not seeing the increase, so that is the delta. And I think the live -- the meat industry and some end customers are being more careful and not expanding. So we think there is enough supply until at least beginning of next year. And physically, I think we have supply and there might be substitutions. There might be some rationalization and there might be odd trade flows, and we are working with our customers with these different scenarios. And so far, I think, obviously, the biggest impact is high price, which is obviously negative for the end consumer.

Right. And just one last question then on the Brazilian policy on the blend rate. I'm curious if you have any update on how that might go.

We know that the government would like to increase. But as you have seen from -- also from our chart, the production of sugar and ethanol from cane sugar has not increased. So there's only so much that can be done to increase the blending rate. So first, the prices have to go up before you would see significantly more expansion of cane production and then you could see an increase in the blending rate.

So nothing expected this year?

We don't know. But obviously, because the country is importing a lot of gasoline, which is very expensive and obviously, they would prefer to have local production of ethanol. So the government is thinking and working on what to do to help to expand the ethanol production. So I think that would be probably the first step and then the second step would be increase the blend.

The next question comes from Tim Tiberio from Miller Tabak. Tim J. Tiberio - Miller Tabak + Co., LLC, Research Division: We've seen, I guess, a report out this morning that China might be pressuring edible oil producers to keep wholesale prices stable. Just wanted to get your sense of how that could potentially impact some of your commentary that Food & Ingredient business should improve on the edible oil side in the second half and Chinese crush margins have the potential to improve.

We have very, very small de minimis business to the end customer in China. So these kind of things happen from time to time. We have seen it before, so we plan for this when there are difficulties increasing prices. Even if it's not the government, not always we are able to pass on all the increases in price to the end customers so that is why you saw also, because of the volatility of prices, you saw the drop in margins in our quarter. This does not mean, as a company as a whole, that this is automatically negative because sometimes the margin is picked up in Agribusiness. So -- but over time, we are able to pass on the prices to -- into the market. Now when I talk about improvement in crush margins in China, it's more that we see there's ample inventories, a lot was bought. And as these inventories are crushed, we see an improvement in the margins. Tim J. Tiberio - Miller Tabak + Co., LLC, Research Division: Okay. And just one last question, I guess, to drill down at your commentary on South America. Is this -- the confidence in South America, is that primarily driven by the fact that you were able to buy more beans at December, January levels and now you're essentially selling a lot of the products that you're crushing at July, August mill and oil prices? Is that really where the spread has opened up for you this year?

I would say we -- it's obviously also how you position yourself commercially when you buy. We start buying the crop for the -- sometimes already in July, August for next year. So it depends, obviously, when you buy it and what kind of margins you can accomplish. And -- but the structure, the global structure in the world allowed for the farmers to make significant amount of money and the margin expanded for the processors and the merchandisers like us. And this is normal when you have a large crop and you do not have too much competition from other regions. So the picture is very constructive for South America this year and also for next year.

The next question comes from David Driscoll from Citi Research.

Alberto, I joined the call a little bit late so apologies. The slew of earnings reports' out. Can you pull together the full year for us a little bit? And does the disappointing second quarter mean that the full year outlook is reduced? And then I've got a number of follow-ups, but can we start there?

Overall, I would say the quarter was good because Agribusiness performed better than we thought. Now we had some issues in Sugar & Bioenergy and in Food & Ingredients. Now I would say our outlook for the second half in Agribusiness continues to be very strong, and in Sugar & Bioenergy, probably stronger for the second half than we thought in April, but we will not be able to recuperate everything, the amount we lost in the second quarter because there was more rain in June than we expected that increased our costs. And in Food & Ingredients, we think we will be able to do at least what we did last year. It should be better because we have a couple of acquisitions that came in. So we feel very good about the second half and also next year.

Okay. So then versus your comments 3 months ago and looking at the full year, this is definitively a more back-half-weighted year and it got even more so given what happened in sugar in the quarter and the expectation that Agribusiness will continue to improve in the back half. Is that a fair summary?

Yes, that's fair.

I wanted also to ask a little bit about crushing margins. So this is -- I get a lot of questions on this from clients. They see Chicago Board of Trade crush margins decline on the front month contract in a nonseasonal period, i.e. old crop beans, and we know we're running out of those. So what I'd really like to focus on here is how much visibility do you guys have on your crushing margins in the second half of the year? And then to expand on this a little bit, it seems to me that there was a very good opportunity during the quarter to lock in the board crush margins at attractive levels. So did you do this? And can we feel comfortable that the business will perform well in the back half, i.e. do you actually have business locked up rather than just an expectation that it will be good?

Look, let me tell you the way I see generally the crush margins. They have been and are good in South America. They have not -- are not good in U.S. They are good in Canada. Soybean in Europe and sunseeds are very good. Rapeseeds are not so good, and China is improving. So the general picture of crushing margins so far this year and the outlook for the rest of the year are better this year than they are last year. And obviously, Dave, we can't tell you exactly what we did in our strategies for the second half of the year in U.S. But we feel we are very confident that the crush margins will be quite good in the fourth quarter in U.S. as well.

Okay. And then one final question here on sugar. So I understand your comments a moment ago, but maybe I need a little clarification on something. So if the rains in the second quarter are good for sugar yields in the third and fourth quarter and if those are the quarters where you produce most of the product, why is it that you can't still meet your profit goals in the sugar business? Isn't it logical to think that you would produce at least as much sugar on a recovered basis as you had originally projected, if not more?

Dave, I think what you're going to see is the third and fourth quarters would've been stronger than what we're thinking about originally. I know we didn't publish those numbers, but that is correct because what we weren't able to crush in the second quarter, we're crushing in the third and fourth quarters. However, what we did crush in the second quarter was crushed with less total recoverable sugar. So the amount of sugar in the cane was less because when the cane gets wet, you have volume but you have less sugar there. That delta that we lost of total recoverable sugars in the second quarter, we're not going to be able to make up later in the year.

We have no further questions at this time.

Well, Larissa, thank you very much. And thank you, everyone, for tuning in today. Thank you for your appreciation, and we'll look forward to seeing you in the next call.

Thank you, ladies and gentlemen. This concludes today's conference. Thank you for participating. You may now disconnect.