Bunge Limited (NYSE:BG)
Q4 2015 Earnings Conference Call
February 11, 2016 10:00 AM ET
Mark Haden - Director of Investor Relations
Soren Schroder - Chief Executive Officer and Director
Andrew Burke - Chief Financial Officer
Cornell Burnette - Citigroup Inc
Ann Duignan - JPMorgan
Adam Samuelson - Goldman Sachs
Neel Kumar - Morgan Stanley & Co.
Farha Aslam - Stephens Inc.
Kenneth Zaslow - Bank of Montreal
Welcome to the Fourth Quarter 2015 Bunge Earnings Conference Call. My name is Vanessa, and I'll be your operator for today's call. At this time, all participants are in a listen-only mode and later, we will conduct a question-and-answer session. Please note that this conference is being recorded.
And I will now turn the call over to Mr. Mark Haden, Director of Investor Relations. Sir, you may begin.
Thank you, Vanessa, and thank you everyone for joining us this morning. 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 these contained in this presentation and encourages you to review these factors.
Participating on the call this morning are Soren Schroder, Chief Executive Officer; and Drew Burke, Chief Financial Officer.
I'll now turn the call over to Soren.
Thank you, Mark, and welcome to everybody. In 2015, the Bunge team achieved important milestones. Record Agribusiness EBIT driven by strong results in Brazil and good risk management, approximately $125 million of savings from performance improvement initiatives in our segments. Positive EBIT and free cash flow in sugarcane milling which all contributed to a four quarter trailing ROIC of 10% in Agribusiness and Food and an EVA of $152 million for Bunge Limited as a whole.
With a strong foundation and the right focus we expect to achieve modest earnings growth in 2016 and ROIC well in excess of WACC for our core Agribusiness and Foods operations. Some of the challenges we faced in 2015 will continue and we are focused on improvement. We had a record year in Bunge Brazil, but the economic contraction led to significantly reduce volumes and margins in our Food business. It will take time for the economy to normalize so we are restructuring and reducing cost.
Our performance improvement programs in Food and Ingredients are generating real results and we are convinced that the segment overall will see improved run rates as 2016 progresses. With a larger share of global Ag trade flowing from South America where we have strong position. The U.S grain export industry is likely to remain under pressure and we are therefore taking steps to make our footprint more efficient and flexible.
In China, we made important improvements in 2015, but in general gross margins remain weak despite strong demand growth. Their focus on improving efficiency, expanding our downstream activities and being very disciplined on how we manage capacity. There are also several positive market signals that play well to Bunge’s strength. Global demand for our core Agribusiness products continues to grow and South America Bunge’s largest region will lead the market with big crop, large export flows and good margins.
Our Food business will continue to grow in North America, Europe and Asia benefiting from leaner operations, consumer driven innovation and tighter working relationships with key customers. In sugar we are entering the period of declining stocks and the Brazilian industry after several years of struggles is unlikely to respond with quick supply increases. So the outlook for sugar markets is constructive.
We continue to improve our cost base in milling and the value of our footprint will eventually reflect these better fundamentals. Near-term it’s a mixed environment but Bunge have structural advantages and clear path forward to perform well in 2016 and realize our full earnings potential going forward.
First, we have an outstanding team that has proven its ability to manage the variety of market environments. Second, we are focused on the right things, standing for safety, driving best-in-class operations, enhancing our wining footprint, and achieving the right balance of businesses. Third, our strong balance sheet will enable us to move quickly when opportunities arise and if the past is any precedent they will.
Finally, while margins are currently under pressure in some regions global soy crush fundamentals are positive looking forward and this is our biggest business. Last year global soy demand grew by 7% and crops utilization rates will continue to improve. We have [placed] our capacity increase as well and we will benefit due to a well-balanced and highly efficient footprint as industry and fundamentals improve.
Global trade in grains and oilseeds also continue to grow and as we returned to more normal conditions in Brazil foods and U.S. grains and we get the full benefit from our improvement programs across all segments. We see a clear line of sight to the $8.50 per share of earnings power in the coming years.
We are guided by a clear strategy and a disciplined approach to capital allocation. Our CapEx is likely to grow into 2016 from the low levels of 2015. The accumulated CapEx for Agribusiness and food in the 2015 to 2017 period were lower than $2.1 billion, we have previously advised.
We bought a $100 million of our shares in January and we expect that share buybacks will continue to be an ongoing part of our balanced approach. Bunge is a safer, better performing and better balanced company today than we were a year ago. We have a strong foundation and the right focus and I'm confident that we’ll continue to make great progress in 2016.
And now I’d like to turn over to Drew for the financial highlights.
Let’s turn to Page 4, and the earnings highlights. Even with the challenging market conditions Soren discussed, our total adjusted segment EBIT for the year was a $1.229 billion and higher than the prior year's $1.206 billion.
Agribusiness adjusted EBIT was a new record at a $1.054 billion and is 18% higher than the prior year's $895 million as both oilseeds and grains achieved increased results. This performance was driven by the strength of our soy processing in South American franchises.
Soybean processing volumes increased 8%, while grains volumes declined. Food & Ingredients adjusted EBIT declined from $301 million in 2014 to $192 million in 2015 primarily reflecting difficult market conditions in Brazil and Eastern Europe. Sugar & Bioenergy had a loss of $22 million versus a loss of $35 million in the prior year. Importantly, our sugar milling business achieved positive EBIT and generated positive cash flow.
Our 2015 adjusted earnings per share was $4.83 versus $4.10 in 2014. In the quarter, our total adjusted segment EBIT was $337 million versus $397 million in the prior year. We reported $43 million of certain gains and charges in the quarter primarily related to the impairment of an equity investment in a freight shipping company in Europe and goodwill impairment and restructuring charges in our Brazilian food business.
Agribusiness adjusted segment EBIT for the quarter was $268 million versus $319 million in the prior year. Oilseed results were $185 million versus $197 million in the prior year. Soy processing results were higher in South America, Europe and China. U.S. results and margins declined from last year's record as anticipated competition from Argentina pressured margins.
Softseed margins in Europe remained under pressure from a combination of farmer retention of crops and excess rapeseed processing capacity. Grains adjusted EBIT declined from $122 million in 2014 to $83 million in 2015 due to lower margins and volumes in the United States was by slow farmer selling and increased export competition.
Our Ports & Services operations performed well benefiting from increased grain exports out of South America and the Black Sea. In Food & Ingredients adjusted EBIT declined from $83 million in 2014 to $46 million in 2015, while EBIT increased from the third quarter, the fourth quarter performance was lower than expected as the recovery in the Brazilian market was slower than anticipated. Both our wheat milling and oil business had volumes and margins below prior year.
Our North American and European food profits were in line with prior year as our performance improvement and customer focus efforts will offset difficult market conditions and currency effects in Eastern Europe and a weaker peso in Mexico.
Our Sugar segment had an adjusted EBIT of $10 million versus a loss of $21 million in the prior year quarter. For the full-year sugar milling was both EBIT and cash flow positive reflecting improvements in our agricultural and industrial operations and improved market conditions.
Ethanol demand remained strong and sugar and ethanol pricing have improved. Our Brazilian renewable oils joint venture incurred losses in the quarter and full-year as that our sugar and trading and merchandising operations which face challenging market conditions and aggressive competition. Our diluted adjusted earnings per share from continuing operations for the quarter was $1.49 versus $1.12 in the prior year.
Let's turn to Page 5, and our return on invested capital. One of our leading objectives over the last years has been to increase our return on invested capital to a level above our weighted average cost of capital. As the chart shows we have made significant and consistent improvement over the last three years, while we’ve had some tailwinds from lower agricultural prices and currency, we have benefited from a disciplined approach to capital allocation, strong working capital management and increasing results.
For total Bunge, our return on invested capital for 2015 was 8.3%, 1.3 points above our cost of capital. For our core Agribusiness and Food business our 2015 return on invested capital was 10% and 3% overall ROIC.
Let's turn to Page 6, and our cash flow highlights. Our liquidity position remains strong cash provided by operating activities was $610 million comprising $1.2 billion of funds from operations and an outflow of $593 million related to an increase in working capital. The increase working capital was primarily related to grain origination activities in South America. Additionally, we have $4.3 billion of financing available under our committed credit lines at December 31, 2015.
Let's turn to Page 7, and our capital allocation process. Our first priority is to maintain a strong balance sheet with an investment-grade credit rating. We are pleased that we are now rated the equivalent of BBB stable by all the agencies. We have been discipline in allocating our capital to the activities that will maximize long-term value for our shareholders.
In 2015, we returned $549 million to shareholders to dividends and share repurchases. We have purchased $600 of shares in 2014 and 2015 combined and have purchased an additional $100 million in the first part of 2016. Our M&A transactions totaled $392 million in 2015 primarily focus on foods to the acquisition of wheat milling business in Brazil and smaller transaction in the United States that increases our value-added capacity. Our CapEx was relatively modest $649 million as we both deferred and reduced spending.
Let's turn to Page 8, and the outlook. The market environment is difficult, in some of our businesses we expect to achieve modest earnings growth and provide a return on investment well above our cost of capital for our core Agribusiness and Food operations. In Agribusiness markets are well supplied, but demand remain strong. The USDA is projecting growth in consumption of 7% for soybean meal and 5% for soy oil. Soybean crush margins will be down from the recent highs but still provide reasonable returns.
South American results should be strong. Brazil will benefit from large crop, strong domestic meal demand and a competitive global cost structure following a decline in the value of the real. Given the new governments policies in the face of the valuation were Argentina should significantly increase volumes.
Near-term U.S. margins and export volumes will be under pressure from South American competition, but the new harbor should bring improvement. While demand in China is strong, margins remain under pressure as excess crushing capacity exists.
Softseed margins are likely to be mixed, Canadian canola margins should improve from 2015, but will remain below historical levels. Sunseed margins should improve with the new harvest while rapeseed margins remain pressure due to weak biodiesel demand and overcapacity.
In grains, South America should perform well given the size of the crops, good farmer economics or advantage footprint and cost position. Our U.S. grains business should improvement with new crops later in the year, but will remain under pressure from South American competition.
Moving to Page 9. We’re expecting foods to perform better in 2016, but not reach the levels achieved in 2014. Our oil business should perform better as market stabilized and our cost improvement efforts yield results. Our milling businesses will benefit from the integration and contributions of our new acquisitions and a continued commitment to cost reduction and operational efficiency.
In fertilizer, improved farmer profitability in Argentina and the change in export taxes on grains should encourage farmers to increase their purchases of crop inputs. Our sugar business is expected to grow both earnings and free cash flow. This is the most favorable environment we have had in a long time. Sugar prices are hedged at attractive levels, ethanol demand and pricing is favorable.
Following the decline in the real, Brazil was once again the lowest cost global sugar producer. And our cost will be lower as we see the benefits of our agricultural and industrial productivity program. As always sugar results will be stronger in the second half of the year following the crop cycle.
While the markets will be tough in 2016, our underlying business model and continued commitment to operational excellence should allow us to continue to achieve earnings growth and above cost of capital returns. We expect the results to be more weighted to the second half of the year as harvest arrive food results achieve sequential improvement and sugar follows normal crop cycle.
We will now turn it back to Vanessa to take your questions.
Thank you. We will now begin the question-and-answer session. [Operator Instructions] And I see we have our first question from David Driscoll with Citi. Please go ahead.
Good morning, guys. This is Cornell [indiscernible] for David.
Good morning, Cornell.
Okay. First I just want to start out with a quick question on the guidance in the prepared comments you mentioned modest earnings growth for 2016. So is that putting 2016 earnings kind of in the range of $5 to $5.25?
Cornell, we don't give guidance as you know. So you can interpret that as you like. We have a very - we have a strong business, we have fundamentals that are in some parts of the world very positive South America clearly has the potential to deliver another very strong year for us. U.S. is a big challenge for the next couple of quarters. Improvement in softseeds in Canada and Europe should be in the horizon second half of the year.
Food business we believe will improve sequentially as we go through the year and sugar has some upside as Drew mentioned. So there is reason to believe that our earnings could grow or will grow from 2015 levels, but exactly how much at this point it is difficult to say it’s early in the year, but the potential is there for another good year for us.
By saying modest you’re basically saying look we can have some growth but it's hard to see anything double-digits a greater. Is that a fair way to interpret it?
I wouldn’t say that double-digits is not impossible, it’s not impossible, it’s early in the year Cornell and we don’t want to get too far ahead of ourselves. But we have the potential, we have the footprint to have a very good year under the right circumstances and many of the elements are in place as I mentioned South America clearly being the one.
Okay and then following up on that kind of going one-year out, I know you’ve in the past communicated a target of $8.50 for 2017. Is that target still in play or given kind of your comments of possibly modest growth this year and if you think that kind of 2017 objective maybe too high at this point.
The $8.50 as I mentioned in my opening remarks we believe is absolutely the potential of our current business platform and footprint. We can get there, the question is timing and I would say at this point as we indicated also in the third quarter call 2017 will be a little bit too aggressive.
So it will be a bit beyond that but the potential for Agribusiness to get to the 1.4 billion and for foods to get to 400 million over a reasonable period of time here is absolutely there and I think I described some of the elements that will make that happen, we believe that our soy crush footprint in particular will continue to gain and value over time.
The fact that our food business is in Brazil and particular will return to more normal conditions and then U.S. grain will as well plus we have as you know several improvement programs across all the segments that deliver real results every quarter.
So we can get to the $8.50 a share but it will be extended beyond 2017 and exactly what date that will be it’s just too difficult to predict that at the moment. But we are committed to the number.
Okay. Great and then one last question if I may, just kind of focusing on the oilseed process and markets I mean given that we’ve heard very little news of any new meaningful capacity being built globally, why do think the market got so lot of balance so quickly I would say between the third and the fourth quarter and soy crush and then kind of when you look at Argentina how much new soy crush you kind of estimate has become available out of Argentina?
I think in general it’s fair to say that the market has probably all reacted a bit on the downside in terms of global margins and as a result of the Argentine, let’s say freeing up of Argentina as you mentioned correctly global soy crush utilization rates continues to go up year-after-year last year was a big year for growth in soybean crushing globally both in the U.S. but everywhere in the world.
And we can see how that continues over the next several years and that’s one of the reasons for our optimism in our earnings power and because there is very little new capacity coming on stream. So the fundamentals are good and medium-term, short-term, the freeing up of the – whatever 12 million to 15 million tons of soybeans that have been sort of [indiscernible] in Argentina for a while has led to a first quarter Argentine crush that I think will be an all-time record.
And that sort of avalanche of export meal and oil is what has put this very sudden pressure on crushing margins particular in the U.S., which last year supplied most of the world trade in that period. I think as we get into the second and third quarter that will all normalize and certainly the second half of the year I think will be back to healthier soy margins in general.
In South America they are pretty good in any event; it’s really in the U.S. that you felt the impact of this. So we are optimistic about long-term crush margins and utilization rates and we think the second half of the year maybe even starting in the second quarter will be better than what we are seeing now.
Okay. Sounds good. Thank you guys.
Thank you. Our next question comes from Ann Duignan with JPMorgan.
Hi, good morning.
Good morning, Ann.
Can we focus on Argentina, again can you talk a little bit more about your outlook for Argentina's role in global exports not just of meal, but also sweetened corn and what net impact could that have on Brazil and on your operations in Brazil?
Okay. In terms of crush it’s clear that Argentina is back in style and first quarter crush will be extremely strong, second and third quarter crush will be up a little bit, but in reality Argentina ran at capacity close to it even in the last couple of years despite the difficult economic conditions. So I think the most of the impact in Argentina, we are feeling here early on and then beyond that is probably more about margin improvement relative to what we’ve been in the last couple of years.
So we think that soy crush in Argentina for us will be very good this year. The impact in the system of that is probably going to be more negative to the U.S. and it is Brazil. Brazil still looks like it's going to be a very favorable crushing season, strong domestic demand and a lot of beans have already been bought and priced for crush. So I think Argentina and Brazil combined will be a very strong season in crush.
And then the U.S. will pick up I believe again in the second half or the fourth quarter as demands switches back there. So it’s really a first half affect, but it’s mostly a positive one for us. In terms of grains, the Argentine corn crop this year is a little bit less than it was last year, but with no export quotas now it will flow freely and we believe that our share of those exports will grow so that’s a positive.
And as we get into the second part of the year and the new crop wheat, we believe that there will be a significant expansion in wheat production in Argentina coming into the second – the fourth quarter really the north December period. And that will benefit both our operations in Argentina, but also our wheat milling business in Brazil, which will be back being a 100% supplied most likely by Argentine wheat flowing into Brazil. And as an extension of that argument our Newport and milling operation in Santos will be a direct beneficiary of that. So overall the Argentine freeing up so to speak, we believe is a positive for us.
Thank you. Our next question comes from Adam Samuelson with Goldman Sachs.
Yes. Thanks, good morning everyone.
Good morning, Adam.
So I wanted to come back to this idea of the 850 EPS target, which if I’m recalling correctly, we are still in completely X sugar item so comparable to the way you presented your returns X sugar in the last couple of years. You had basically flat [no pad] for three years and your invested capital has gone down about $3.5 billion largely on currency because net income after dividends and repurchases has been modestly positive I believe.
And so you're talking about medium-term in expectation of $500 million or so of EBIT improvement in the Agribusiness and Food & Ingredients businesses. I presume you're not expecting significant incremental capital investments into those businesses of large quantities. The dollar would seem to be – expected to stay strong.
And so under that math, your return on invested capital to get to an 850 EPS target would expand something on the order of 400 basis point – something on the order of 14%. Does that math makes sense and if so I mean why should we have confidence of that’s actually going to happen?
Well the math - just made sense to the extend that working capital stays where it is, but I think we are now at rather low commodity prices relative to what we’ve been in the last four years or five years with chances that prices will be higher over the period probably bigger than they will be lower, but your math is correct roughly the EBIT bridge from where we are now to where we, but we think we can get is between $400 million and $500 million for the EBIT.
And a lot of it is really [rooted] and what I mentioned earlier the value of our soy crush franchise, we’ve got 37 million tons of soy capacity globally plus softseed, but let’s just take the soy for the moment. $400 and $500 improvement in margins over the next two years or three years is absolutely in the cards. We’ve got a Food business in Brazil, which has really struggled this past year, but has the potential to deliver probably the order of magnitude of $100 million more than it does today.
And we’ve got improvement programs across all the segments, but that excludes sugar for the moment, but Ag and food that are delivering in excess of $100 million a year. U.S. grain this past year was I think an exception relative to history so you get back to more normal conditions and it’s not difficult to make that bridge $400 or $500 million worth of EBIT with everything else remaining more or less as it is.
So we are convinced that that is in the cards. The question of timing and we gave this 2017 as an indication back in last year in 2014 that's turning out to be a little bit too aggressive or too early for a lot of reasons. Things have changed a lot in the meantime, but the portfolio and the business itself can deliver this earnings and we’re convinced that it will be the case over the next years.
Okay. And if I can just squeeze in one follow-up on sugar, I mean clearly you’ve talked about a better outlook for the sugar business in 2016, the industry data point support that. Anyway of banding kind of how big of an impact that could actually be I mean you said the milling business was EBIT positive in the year though you're still negative in the segment from trading in the JVs, but the band in the earnings and improvement expected from the milling in aggregate in 2016 would be helpful?
Yes. I would say between $30 million and $50 million is probably be the right spread of improvement relative to the milling business is going to end up this year, but we are still early in the season than we are growing the cane and it will all be about crushing it when we get into peak season, but the sugar pricing and the hedges we put on including the real are at very attractive levels, so its really about execution now.
And the ethanol market in Brazil continues to be very favorable so the conditions really are there for 2016 to be a very good year for milling. Is all about execution, but we’ve improved on that as well. So we believe that there is some reasonable upside in the sugar segment for this coming year certainly compared to last.
All right. Thank you very much.
Thank you. Our next question comes from Vincent Andrews with Morgan Stanley.
Hi, this is Neel Kumar calling in for Vincent. I was wondering if you can may just talk a little bit about how working capital is expected to trend in 2016. And also will there be a reversal in the secured advance to suppliers line item and why did receivables spike?
Let me try to get him one at a time. How working capital play out in the next year probably has quite a bit to do about our grain business and the structure of the market. The market moves more than we carry, we are likely to carry a little bit more grain and if margins come back into that business would build inventories a little bit.
So it's not a number we project in advance, it’s a number where we react to the market and opportunities to do profitable business at that right returns and we let our volumes follow. Right now we would expect some increase, but not a large increase, but it is very dynamic number that moves along as we go through the cycle.
The advances of farmers naturally reverse themselves at the appropriate timing in the latter half of the year. The Brazilian farmer came to market and sold forward quite a bit of the 2016 crop and we were buyer of that crop so that’s what you are seeing there in the inventories. And in receivables it's just a matter of timing, there's nothing in particular on our receivable number that I would call special or different or permanent.
Thank you. [Operator Instructions] And our next question comes from Farha Aslam with Stephens.
Hi, good morning.
I have a question on your milling business your wheat milling usually that business is pretty stable is being impacted near-term by the Brazilian wheat situation how long should we expect that impact to last? And what can we look for the business to deliver in 2016?
The variance in results in 2015 really was mostly in Brazil and it was related to the dramatic slowdown in consumer off take particularly in the Foodservice segment in Brazil. So why we were able to hold margins constant in local currency, the loss of volume and the resulting dollar margins what created the negative variance in milling.
We are working very hard to integrate our new assets so the Pacifico acquisition that we made back in November will allow us to rationalize our footprint in the São Paulo region that's a major move towards gaining better efficiency with the freeing up of Argentine wheat now that will flow into Brazil that’s another benefit and then mid-year we will have our new mill in Rio come into place and will take the old one down, which will bring another level of efficiency.
So Brazil will definitely increase results in milling next year compared to 2015 and I would suspect the impact overall to December around 30 million to 40 million across the milling platform in general relative to this past year. But it will be - it won't be all in the first quarter it will come sequentially I’d say skewed more towards the second quarter and third quarter.
Yes, we also have the rebuild of our mill in Rio with the shift, so that will get much more efficient and much more productive and the debt benefit will really show up in 2017 not so much in 2016.
Okay and then we’ve gone through sugar and milling so far in terms of outlook 2016 versus 2015. Can I ask for a little bit more color on edible oil you said that you expect to be better than 2015 but not quite up to 2016 levels any thoughts on the cadence of the recovery et cetera and how we can think about that?
The majority of the improvement will also come from Brazil that’s what we had the biggest variance this past year in both margarines and in bottled oil. And it’s likely to be skewed towards the second half of the year we are not really assuming that Brazil as a country will improve much throughout 2016 so it’s really our own efforts to improve operations, reduce costs, more efficient go to market strategies and so forth that will get us there.
So figure that the improvement will be more towards the third and fourth quarter then the beginning of the year. We are still in the middle of a significant restructuring of that business in Brazil making it fit for a longer period or a more prolonged period of economic challenges. So I think you should it put as an improvement that comes in the third and the fourth quarter.
Brilliant and just on fertilizer, our volumes are falling normally in Argentina given that we now have that evaluation?
Yes, I think fertilizer in Argentina really represents it’s a small business relative to rest of Bunge but it’s a nice upside for us this year as the Argentine farm economy normalizes. Over the last couple of years fertilizer application in Argentina has really fallen off a cliff and that’s been as low as it’s ever been. So we believe there is big growth in fertilizer application as we go through the year and especially as we get into the fourth quarter – third and fourth quarter as farmers buy fertilizer for their wheat and their corn crops.
So fertilizer could be a nice modest but nonetheless a nice upside for our business in Argentina as you know it is very closely linked with our Agribusiness operations origination and fertilizer are closely linked. So it'll be a very nice add-on to what is promising to be a good year in Argentina in any event.
Great. And last final question is on sugar. Any strategic move on sugar that we should anticipate this year kind of how are you thinking about sugar longer-term in your portfolio?
Our view hasn’t changed. It’s still focused on reducing exposure to the milling piece of the segment, but doing it in a very disciplined way and as we’ve been able to prove our ability to run those assets well over the last couple of years with all the improvements that we’ve made in reducing costs and improving efficiencies and now entering what looks to be the beginning of a very positive cycle in sugar globally.
We think this year will be the year were the value of assets will become better reflected and so we’ll take our time and be discipline, continue to do what you do even better. And over the next year or so I'm sure that there will be an appreciation for the asset base we’ve got in Brazil and then we’ll take a look. So our long-term ambition of reducing exposures and tax, but the timing at the moment frankly feels like is on our side to get a better value out of it.
That’s helpful. Thank you.
Thank you. Our next question comes from Ken Zaslow with Bank of Montreal.
Hey, good morning everyone.
Good morning Ken.
And Soren in your opening comments, you said that, you think Bunge has structural advantages and your team possess or positioned or shown that that you've been able to go through different environment. It seems like in the last couple of years results I’m not sure if I would say that has proven out as much as what you're saying.
So my first question is how do you get to the point that you do, that you have illustrated these structural advantages and that your team is positioned to go through a lot of environments. And then a follow-up to that is do you think you are actually optimizing your asset base?
Okay. Well we just posted a record result in Agribusiness. The result is best ever and with returns that are well above anything we've ever achieved. So we achieved those results in a disciplined way and they were really all about optimizing the asset base. We made the absolute most of our crushing assets and our grain origination assets in Brazil last year, we got a nice piece of the Argentine improvement towards the end of the year.
And in the U.S., our soy crush operations had a record year as well. The part of the equation that we really couldn't control was the decline in U.S. grains exports in the fourth quarter. I think that’s an industry-wide phenomenon. And the fact that softseed crush in Canada and Europe was a real headwind for us in Agribusiness.
So we overcame all that and still delivered a record result. I think that proves that we’ve got a team and an approach in place that that can handle adversity. And in Food & Ingredients, it was a disappointing year in many ways, but I think the problems we faced in Brazil with the economy, which was really the majority of the variance masks a lot of improvements that are being made elsewhere in Mexico, in the U.S., and in Europe.
And I'm convinced that as we normalized a bit all those things will come to bear. So I actually believe that we are able to – we have demonstrated that we can navigate through difficult environments. And that we’ve got a process and a team that’s capable of continuing to do so.
Okay. So my question is there seems to be a disconnect between the market and how you feel? So is there other options for bigger opportunities in terms of the asset changes or anything like that to better optimize your value to the market?
I’m not sure exactly what you mean. Can you go a little deeper on that?
Yes. I mean besides the sales of sugar asset, the market obviously may not agree a 100% with what you're saying versus how you are optimizing your assets right, because your trading close the book value, so there is a disconnect. So my question is, is there a process to which that you kind of review to see if there is a way to maximize the shareholder value relative to how you think about. And is there an option for you to do something more than just selling the sugar asset, is there something like breakup the divisions, sell divisions; do something to kind of create the value that you see that the market may not fully appreciate.
I think it is sugar, let’s keep that separate from the discussion because that’s not really I think what you are addressing. Our Agribusiness and food integrated business I believe is delivering good results. We had a positive EBA that was significant this past year, a big jump from any of the previous years.
And when you look at the value of our crushing footprint globally as I mentioned in my introductory remarks, it is the conviction that those assets and managed as a global whole can continue to drive earnings growth and continue to improve returns that gives us confidence towards the 850 a share, that's a big, big piece it. That is a global footprint, you can't break it up, you wouldn't want to break it up and the vast majority of it is performing well above cost of capital.
There are always pieces that that you can improve China as I mentioned is one area that we will have to continue to focus on getting improvements on, but the rest of our crushing footprint South America, U.S., Southern Europe soy is super strong and delivering results.
So our Food businesses are in many parts of the world linked to our Agribusiness both through the soy crush and refining chain and also through the grain origination chain and we cannot be looked at in isolation either and also there we feel we have significant upside earnings potential. So I think it's a matter of giving us a little bit more time to prove this out.
At the moment, we’ve entered a period in the cycle that is not particularly easy, but despite that you still feel we can grow earnings and looking beyond the next year or so we can grow earnings by quite a bit. So I don't know why we would consider any of the things you're suggesting. We feel very confident about what we’ve got and our ability to grow earnings and continue with very strong returns, and I think we proven it.
Ken, I would just add that we're always reviewing our portfolio I mean if you take a look at Canada last year, where we took our assets and combined them into partnership with the former Canadian Wheat Board, and our farmers, and SALIC or our partners that was – to the extend where we’ve had an asset that we think we could maximize in its current state and we went ahead and do the transaction that restructured it in a way that we think we will provide a lot more value over the long-term.
I think the transaction in Brazil where we went ahead and acquired Pacifico was a way to strengthen our wheat milling platform and make that stronger for the long-term. So we are very open and continuously going through our asst base and what we have and what needs to be strengthened and frankly it doesn't fit. So it is a continuous process that we've been doing if you look over the last couple years.
My last question is in 2015 you called modest growth, there is obviously debate if it’s 7% or 15% or whatever, but the reality is 2015 number to $8.50 is over 67% increase. So there have to be year in which that you have a hockey stick type of growth. So the question is what – is there an environment we have to wish for that is there asset change, is there an execution and there are people change, what is that gets you away from the modest growth and say look we are reestablishing our earnings platform? Okay, I’ll leave it there.
Yes. For 2017 I think we said is not likely to be the year, it could happen, but it is not likely, it’s a bit further out than that. I think it is the conviction that as the market grows into the existing over capacity in global crush and last year was a 7% reduction in over capacity just by demand growth alone and that continues over the next three years or four years.
There is a point within the not-too-distant future were soy crush margins more or less on a global scale will have to be at such levels that the industry will have to reinvest. And that comes at higher margins and what we have had on average for the last couple of years. And so I think it's a gradual process maybe it can be exaggerated one-year with specific circumstances or dislocation, but I think it is a three-year process for our asset base, the biggest part of Bunge will continuously appreciate in value as margins do.
So that's one big chunk of the earnings growth and it’s likely to come not in one big chunk at one-time, but more spread out over the next three years. And in food and ingredients it is really getting on the other side of the Brazilian challenge and we are working very hard on that. We believe we can get that solved within 2016 and that we can get back on growth and earnings and food starting in the latter half of 2016 and then into 2017.
So I believe it is more of a gradual improvement, but is going to be a big one when you look at it from where we ended 2015 to say some number $8.50 X-years into the future, but not-too-distant. A lot of good things have to happen, but we believe that they are eluded in fundamentals and will happen.
You have to be above modest growth of employee. So I appreciate it.
End of Q&A
And thank you. It seems we have no further questions at this time. I will now turn the call back over to Mr. Mark Haden for closing remarks.
Great. Thank you Vanessa, and thank everyone for joining us today.
Thank you, ladies and gentlemen. This concludes today's conference. We thank you for participating. And you may now disconnect.
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