Good morning and welcome to the Bunge Third Quarter 2019 Earnings Conference Call. All participants will be in a listen-only mode. [Operator Instructions]. After today's presentation, there will be an opportunity to ask questions. [Operator Instructions] Please also note, today's event is being recorded. At this time, I'd like to turn the conference call over to Ms. Ruth Ann Wisener, Vice President of Investor Relations. Ma'am, lease go ahead.

Thank you, operator, and thank you for joining us this morning for third quarter earnings call. Before we get started, I want to let you know that we have slides to accompany our discussion. These can be found in the Investors section of our website at bunge.com under Investor Presentations. Reconciliations of non-GAAP measures to the most directly comparable GAAP financial measure are posted on our website as well. I'd like to direct you to slide two and remind you that today's presentation includes forward-looking statements that reflect Bunge's current view 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 we encourage you to review these factors. On the call this morning are Greg Heckman, Bunge's Chief Executive Officer, and John Neppl, Chief Financial Officer. I'll now turn the call over to Greg.

Thank you, Ruth Ann. And good morning, everyone. We'll start things off on slide three with the agenda for today's call today. Today, I'll provide a high-level overview of our quarterly results and then cover the progress we're making against our key priorities, which as expected resulted in a bit of noise in our reported results. I'll then give you an overview of our outlook for the rest of the year before handing it over to John who will give you more detail around the financials. We'll then open up the line for your questions. Let's turn to slide four. Excluding notable items which were largely the accounting charges related to portfolio restructuring and our headquarters move, our core business performed ahead of our expectations for the quarter despite the uncertain and deteriorating market conditions impacting our industry. In Agribusiness, crush margins declined during the quarter, especially near the end of the period and our grain business was impacted by ongoing trade issues and a delayed US harvest. Nevertheless, our team did a great job in mitigating those challenges and our results were positively impacted by our risk management actions. Results in Edible Oils were strong, reflecting favorable industry dynamics and good execution. As I noted, a lot of the noise in our results this quarter is connected to the strategic actions we are taking. In July, we announced our agreement with BP to contribute our Brazilian sugar and bioenergy business to a new 50-50 joint venture. As a result of this, we've reclassified that business as held for sale and taken the expected $1.6 billion charge we discussed on our last call. We remain very excited about the transaction and our new partnership with BP. It checks the boxes across all of our strategic criteria, reducing our exposure to…

Thanks, Greg. Good morning, everyone. Let's turn to the earnings highlights in slide six. Our reported third quarter earnings per share from continuing operations was a loss of $10.57 compared to a gain of $2.39 in the third quarter of 2018. Adjusted EPS was $1.41 in Q3 versus $2.52 in the prior year. Our reported results included approximately $1.7 billion in charges related to portfolio initiatives, primarily consisting of approximately $1.6 billion of impairment and other charges related to our Brazilian sugarcane milling business. As shown on the next slide, as a result of this impairment, total shareholders' equity has been temporarily reduced by approximately $1.5 billion, reflecting the impairment loss recorded in the period. When the transaction closes later this year, the related $1.5 billion of cumulative translation adjustment balance will be released, effectively increasing shareholders' equity by that amount. In addition to the sugar impairment, we incurred $137 million of other charges in the quarter, primarily related to impairments and severance in our other segments as part of a broader portfolio review. Total segment EBIT was a loss of $1.44 billion in the quarter versus EBIT of $535 million in the prior-year. On an adjusted basis, which excludes notables, total segment EBIT was $304 million in the quarter versus $573 million in the prior year. Agribusiness adjusted EBIT was $153 million compared to $485 million last year. In Oilseeds, average global soy crush margins were significantly lower than in 2018, driven by a combination of farmer retention soybeans in anticipation of higher prices and soft export demand for soy meal. Results were negatively impacted by approximately $70 million of mark-to-market reversals on soy crush contracts, which favorably impacted Q2. However, a decrease in forward soy crush margins during the third quarter resulted in new mark-to-market gains of approximately…

Thanks, John. As you can see, the third quarter demonstrates what's so important that we take the steps to execute our strategic priorities of driving operational performance, optimizing our portfolio and doing it all with more financial discipline. Increased accountability, speed of decision-making, cost discipline and making sure we're leveraging our global platform to stay close to our customers and adapt to changing market dynamics are critical in this uncertain environment and a core part of our focus on delivering growth and increased returns to shareholders. And before closing, I want to say I'm especially proud of the team here at Bunge. They executed very well during this volatile quarter, while successfully managing significant changes in our business, the additional work we have underway to evolve our operating model and the move to St. Louis. We're making great progress, but we've still got a lot of work to do and I look forward to sharing more with you as we continue to execute. And with that, we'll open the call to questions.

[Operator Instructions]. Our first question today comes from Ben Bienvenu from Stephens. Please go ahead with your question.

Hey, good morning. Thanks for taking the…

Good morning.

Greg, I want to ask, you noted that you're making progress in strengthening the business, What kind of conditions do you think we need to see in the market, to see evidence of your progress? Obviously, this quarter's fundamentals were challenging. 4Q is going to be challenging. But if you could offer us any sort of commentary on important milestones that you're thinking about or a rough timeline as you think about moving forward in the turnaround process, that would be helpful.

Thanks, Ben. I think one example is just even this quarter. I don't know that we could see a much more difficult environment than we've seen. You can stack ASF, the on-again off-again trade war, the late harvest in the US and then the Argentinian elections, and I couldn't really be more pleased with the amount of change we're driving through the organization and that the team continue to execute very, very well. The other key thing that we'll be seeing, of course, is continuing to put those changes in place as we move towards 2020 and as we begin to talk about what to expect there at the end of the next quarter.

Okay, thanks. And tacking on to that, you mentioned briefly ASF, could you provide any updated thoughts, if you have any, on ASF? And you mentioned in the release, softer export demand for soy meal. Is that comment in relation to African swine fever? Any elaboration you can offer there would be helpful.

Okay. On ASF, I think the view publicly continues to be about 40% of the Chinese herd liquidated in a – I believe we spoke to that affecting bean demand versus export demand. And then, of course, we've see the re-rebalancing around the world as demand has – soybean meal demand is moving as things are starting to move – to figure out how to fill that hole in the protein demand in China. But we still continue to be thinking that we're not going to see the tiny positive tailwinds of that until the second half of 2020 and beyond.

Our next question comes from Rob Moskow from Credit Suisse. Please go ahead with your question.

Hi, Greg. I think you already answered my question about what to think about China. But just so I understand the guidance, last year, Agribusiness profits were only $55 million. Is the guidance assuming here that you probably be below that level in fourth quarter?

Let me take a quick cut. What we're trying to do, when we gave the guidance for the full year, we talked about it being flat versus prior year, and then we had reaffirmed that on our last two calls. So, when we gave that flat year-over-year originally and then confirmed it, we hadn't planned on the positive benefit that we're going to enjoy from Beyond and we hadn't planned on the positive benefit that we're going to enjoy from the change in depreciation on the sugar deal. So, rather than count those and declare victory and being higher year-over-year, we're trying to stay on the same basis and stay on the operating basis of where we called it to be flat. Taking Beyond out and taking out the benefit of the depreciation, we're saying we're going to be off on the full year $0.15 to $0.20 on an EPS, on how we've been talking to you all year. Now that being said, we've got two months to go. As grim as the forward curve has looked today, we're not giving up. The team is going to make all we can as we continue to execute here for the balance of the year and do all we can to close that $0.15 to $0.20 gap, and that's ex the benefit of Beyond and the benefit of the depreciation.

Just on the EPS basis, the two things that you're calling out here, is it about $0.90, the Beyond and the depreciation, per share?

The sugar depreciation is around $0.50.

Yeah. And then Beyond, because Beyond is – a lot of that gain is not taxable. Well, that gain really isn't taxable at all. Almost they'll let go straight through. So, we're looking at roughly a $0.60 potential impact to EPS excluding that. And those items are excluded from the numbers he's talking about.

So $1.10 altogether?

Yes.

Okay. All right. Great. Okay. I'll get back in the queue. Thanks.

Our next question comes from Ken Zaslow from Bank of Montreal. Please go ahead with your question.

Hey, good morning, everyone.

Good morning, Ken.

Good morning, Ken.

Just want to clear, just following up on the change, the only thing that's really changing is a little bit of the operating environment. It's slightly worse than you expected. Your risk management, your Edible Oils are all exceeding your expectations. So, net-net, that $0.15 to $0.20 is not that many – it's $40 million of operating profit. Is that kind of what I've just – making sure I'm understanding – it's not a huge change in terms of like-for-like?

Agree. Yeah, it is the change in the environment, on the things we can't control. So, it's primarily the change in crush margins to what we originally expected. The things that we can't control, been very pleased with the team on the execution around how we're running our facilities year-over-year, on how we're managing the risk throughout the global network and even on some of the gains we're making with key customers in some of the focused parts of our portfolio. So, happy with the execution on the things we can't control.

Just continuing on the execution, just making sure, what has changed on the execution of the Oilseed operations because, again, it didn't seem like there was any operational issues? And the next part of that is, the risk management, again, seems like that's coming in in line with expectations. And my last part is, Edible Oils, is that sustainable?

Yeah, let me start with Edible Oils. Let me start with the last part first. Yeah, we believe that the supply/demand balance on edible oils has improved and kind of expect that to continue to improve, especially in the soft oils as we go into 2020. Some of that's biodiesel. Some of that's just a little bit better demand and a little better supply/demand balance, as with these margins we've definitely seen crush slow in some areas. And then also, the team has done a really good job managing the balance between our B2C and our B2B business in balancing our refineries and just very good execution as well as our palm supply chain.

And the sustainability of risk management?

Yeah, we're very pleased with how Brian Zachman and the commercial team is working closely with Robert Wagner and the risk control team. We continue to improve systems, processes, visibility, stress testing and we'll never be done. That's a system of continuous improvement. We're never going to be happy, but we continue to make progress and very pleased how the teams are working together to manage their earnings at risk in our installed asset base here, while managing it – helping our customers at both ends of the supply chain manage their risk. But keeping in mind what the appropriate amount of risk for Bunge is based on our earnings power and based on the environment that we're operating in.

Right. I appreciate it. Thank you.

Thank you.

Our next question comes from Vincent Andrews from Morgan Stanley. Please go ahead with your question

Thank you. And good morning, everyone. I just want to follow-up on the Edible Oils, just because it was an impressive result in the quarter at $71 million. I have, in my model, the best you've ever done in a quarter was $60 million in the third quarter of 2010. So, I appreciate your comments. I just want to make sure, should we be annualizing the $70 million or is that the high end of the range you think you can do on a go-forward basis? And what should we be thinking about?

Yeah, we're sure going to try to maintain all of the improvements that we've made on execution. I can't predict the environment, the margin environment that we're going to see. But I am pleased with the progress we've made and how we're organizing the business, the changes we've made in leadership, how the team is working across what used to be multiple P&L lines, but able to make decisions faster and work more quickly with a focus on Bunge overall, on one Bunge P&L. So, we're going to hang on to all the improvement we can go where we could control things. That being said, the marketplace will ultimately drive industry margins. What we want to do is perform better than the rest.

Okay. And just on the sort of 2020 plus sort of plan, it sounds like – am I correct, at 4Q, you're going to kind of layout sort of a broader path forward to getting the return on capitals to that 9% goal or do we need to wait until all the sort of trade and Argentina and other sort of new developments sort of settle out before you can do that?

Well, look, we're in the process currently of putting our 2020 business plan together. And we can only plan with the world as it is. So, we'll provide as much clarity as we can as we get to Q4, but I think you've called out all the flags right and you've got ASF. And we'd like to think that we'll start to see some demand as we've talked in the second half. We've got the trade war which is starting to show some signs of working toward a resolution which would bring a lot of clarity for not only the farmers in North and South America, but the consumers as well. We talked about the oil. These look good and we've got some stronger biodiesel demand coming on which should support that. So, that looks like a positive going into 2020. And then, I think the thing we feel best about around the things we can control is we're getting our business organized right, with people in the right places and our priorities right, and so we will step into 2020 running a better portfolio and organized in a better manner and feel good about being able to take advantage of what opportunities we get.

Okay. Thank you very much.

Our next question comes from Adam Samuelson from Goldman Sachs. Please go ahead with your question.

Yes, thank you. Good morning, everyone.

Good morning.

I was first hoping to get a little bit more color on crush market dynamics in your major geographies, though the weakness that we've seen recently in broad crush, that's simply a function of US bean rallying on a trade deal hope or talk about kind of meal demand prospects and kind of how you see the labeling [ph] on the crash side for the next three or six months.

Yes. Since the last time we were together, we've seen the soy crush margins down double digits really everywhere. Soft crush has remained okay, but, of course, that's a smaller part of the portfolio. That has been driven, as you say, by the trade war kind of on-again, off-again, which if you want to be optimistic as a producer, you're going to wait for what you think has to happen to get you the best prices, and so that has definitely slowed producer marketing in both hemispheres, as well we talked about on the uncertainty that the Argentinean producer has been dealing with with the changes in leadership there. The kind of on-again/off-again trade war has kind of been the worst of both worlds, with the market starting to adjust as if the trade war is over when it's not over. So, it's been about as confusing an environment as we could see. And I think that, as we look towards 2020, it would be hard to imagine probably a more challenging or confusing environment than we've seen in the last 30 days or last 60 plus days in kind of what we are predicting to have to manage through here in Q4, but we believe that will begin to sort itself out in 2020.

Okay. That's helpful. And then, just on Argentina, can you maybe elaborate a little bit on how you're thinking about policy changes under the new administration there. Thinking back to the prior Kirchner regime and some of the export taxes that were in place and what that did to farmer selling and the utilization of crush assets, just help us think about some of the different moving pieces as the macro changes in Argentina?

Yeah. There is no specifics announced yet. I think what we know from history, there'll be some capital controls that are going to be disruptive and they will impact not only farmer selling, but they'll impact the crush industry and, of course, that Argentinean crush can have a big impact on the global crush. So, we're watching that very closely. I guess the good news, if there is, is that Bunge has decades of experience there. We've got a very experienced team that has seen this more than once and will do the best job managing through that for our customers and our shareholders and are on it and analyzing, prepared to do that.

Okay. I appreciate the color. I'll pass it on. Thanks.

Thank you.

Our next question comes from Tom Simonitsch from JP Morgan. Please go ahead with your question.

Good morning

Good morning.

I think most of my questions have probably been answered, but maybe you could expand on the weaker milling volumes and margins in Mexico.

Yeah. We've had a – there's a little bit overcapacity in that marketplace. We've seen customer switching and that has led us to lower volumes. And with the lower volume, we get some higher fixed costs. We've made a number of changes down there. We're making changes in how we're operating our footprint and leadership to address that. So, we expect to see some improvements in 2020, but it has hurt us this year.

Okay. And just going back to the question around slow farmer selling, clearly, US farmers had record on-farm stocks of soybeans on September 1. When do you think they will have to sell those crops and how does it impact Bunge in the coming quarters?

I think the market's proven with the amount of commercial storage, amount of on-farm storage and the ingenuity of some of the temporary storage that now exists, no one has to sell anything. But if you believe that history is any guide, as that crop continues to come in and is known and then we get some clarity around the trade war, we've got to believe there'll be more marketing. Harvest is about 20% – a little over 20% behind the five-year average. So, that's definitely weighed into that. When you add that and the trade war uncertainty, it's definitely pushed things back.

And just one last question on soy crush margins, you noted challenging forward curves there. How much of your Q4 and Q1 crush capacity is locked in at this point?

Not a lot, but enough that you saw we chewed through the $70 million of positive mark-to-market from last period – or from last quarter and then had new mark-to-market on what we had hedged of roughly $95 million, and so we were able to offset the $70 million and have $25 million of positive mark-to-market in the quarter. So, that being said, when the market's given us the opportunity to hedge our margins, we've done that and we'll continue to do that globally.

Thank you.

Thank you.

[Operator Instructions]. Our next question comes from Heather Jones from Heather Jones Research. Please go ahead with your question.

Good morning. And thank you for taking the questions.

Good morning, Heather.

So, I want to take another stab at the guidance, so just to make sure I'm understanding correctly. The last year, you were $2.71, take down that by $0.15 to $0.20. We're looking at $2.51 to $2.56 excluding any benefit from the lower depreciation for sugar in Q3 and Q4 and excluding any mark-to-market gains on the Beyond stake. Am I understanding that correctly?

Yes, that's correct.

Yep.

Okay. And excluding the mark-to-market lost in Beyond this quarter, I think you really got $1.48, $1.49. So, year-to-date, were it like $2.49 on an adjusted basis. So, we're looking at just, I don't know, call it, $0.05 to $0.10 of earnings for Q4 based upon what you foresee at this time?

Well, the $1.41 – we only had about $10 million of impact to Beyond in Q3 on an EBIT basis. So, we marked the book – that stock got marked down from $160 a share at the end of Q2 to $148 a share and then we did realize a small amount during Q3. So, that's only about a $10 million item. I think a little less on the EPS impact.

Little less? Okay. Okay. Now some industry trend questions. We've been reading, like over the last two to three weeks that there had been a pickup in farmer selling – significant pickup in farmer selling in Brazil. Did you guys see that? And what do you see in the more recent days given the rally in the currency?

Yeah, we've seen some pickup there as we talk to some of the slower selling. It was probably more focused on US and Argentina.

Okay. And then, on the crush side, so margins, they've softened considerably in the US and they've been pretty bad in South America, particularly in Brazil. And so, I get the reasons, but what are your thoughts on how crushers will respond? Have you seen any meaningful slowing? Do you expect meaningful slowing? Are people just grinding it out expecting an improvement next year?

I think that's why we've seen some of the tightness in oil. As things have slowed up, it's tightened things up in oil. So, I believe – the one thing I've probably seen in my 35 plus years is the economics will work, the market will eventually work, sometimes it takes longer than it should, but we're getting all the signals.

Okay. Final question on that, is there a significant delta between export crush margins in Brazil versus the interior or all they all materially weak?

I'd say neither are where we'd like them to be.

Okay. Perfect. Thank you so much.

Thank you.

And ladies and gentlemen, at this time, I'm showing no additional questions. We'll conclude today's question-and-answer session. I'd like to turn the conference call back over to Ms. Wisener for any closing remarks.

Thank you for joining us today and your interest in our company. If you have further questions, I'm happy to follow up. Have a good day.

Ladies and gentlemen, with that, we'll conclude today's conference call. We do thank you for joining today's presentation. You may now disconnect your lines.