Bunge sheds baking business

Related tags Bunge Petroleum

Hot on the heels of weak third quarter results, US agri-giant Bunge
said on Tuesday that it has signed a definitive agreement to sell
its bakery business to US company Dawn Food Products for $76
million in a bid to focus on the core business of edible oils.

In October Bunge reported a slip in earnings on the back of weaker profits sorely felt in the agribusiness division.

Margins during the period were severely hit in North America and western Europe due to a cut in the supply of raw materials. Despite sales volumes increasing by 42 per cent, profits from operations in Bunge's agribusiness division dropped by a staggering 75 per cent, or $213 million for the quarter in 2002, to $71 million in 2003.

According to Bunge, the sale, which includes the facilities that manufacture, market and sell mixes, frozen dough, syrups and toppings, is a drive to focus on core business of edible oils.

Still open to regulatory approval, the imminent sale of Bunge's bakery operations announced on Tuesday would give Bunge about $4 million, or 4 cents a share, after transaction-related expenses of about $2 million.

The company said its fourth-quarter earnings estimate of $59 million to $69 million, or 58 cents to 68 cents a share, excludes the gain.

In October, Bunge said that its move into European oils helped lift the third quarter figures with the recently acquired French oil business Cereol boosting results in the food division.

Profit for the division rose 43 per cent, or $9 million, to $30 million, reflecting improved results in both the edible oil and milling and baking products segments. Bunge reported that higher margins in its margarines and mayonnaise business in Brazil, as a result of various restructuring moves including cost cutting and portfolio rationalisation , also contributed to the lift in the food products division.

On Tuesday, Bunge said that the bakery-mix-related assets in Seattle, Illinois and Modesto, California and frozen bakeries in Mexico, Missouri and Tustin and Modesto are included in the sale. In addition, the sale includes the syrups and toppings plant in Seattle and the bakery research and development facilities in Seattle and St. Louis.

Revealing a clear move to expand oil operations a few months after acquiring Unilever's Indian fats business Hindustan Lever, in September, Bunge purchased the India-based assets of private edible oils company Prestige Foods.

Under the terms of the deal, carried out through Bunge's Indian subsidiary, Gee Pee Ceval Proteins, the US oil company took over an oilseed processing unit, an integrated vegetable oil refinery and packaging facility, and a production capacity of 150 tons per day of refined oil and 100 tons per day of vanaspati, a butter substitute used in India.

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