2nd UPDATE: Bunge 4Q Net Falls 16% On Higher Costs; Revenue Beats Views

Bunge Ltd. (BG) reported a drop in fourth-quarter earnings but outperformed peers among the big global grain traders, buoyed by an expanding sugar business and the contribution of a recently acquired shipping facility in the Ukraine.

Rivals Archer Daniels Midland Co. (ADM) and Cargill Inc. have in recent weeks reported sharp falls in earnings and job cuts as volatile markets and excess oilseed processing capacity hit margins.

Bunge's positioning in the key Black Sea region helped mitigate what the U.S. company viewed as a still-volatile global grain market and continuing problems in the domestic oilseed sector.

The fourth-quarter performance beat analysts' expectations, and its shares were recently up 5.3% to $62.90.

Bunge sounded a cautiously optimistic note for 2012, saying that large global crops will help grain merchandising volumes and that it will see full-year contributions from new export terminals, including one in the Ukraine and one in Washington state. It expects full-year profits to exceed those in 2011.

"We expect to produce good results in 2012, but recognize that the year will be challenging," said Drew Burke, Bunge's chief financial officer.

Bunge was "very, very cautious" in its grain trading in 2011, and could remain so in 2012, Chief Executive Alberto Weisser told analysts on a conference call. He said earnings in its agribusiness segment, which fell 46% in the fourth quarter, could improve this year, but that it was too soon to say for sure. Large grain merchandisers such as Bunge have struggled in recent months to navigate volatile grain markets that have at times been driven by worries about broader macroeconomic problems rather than supply and demand fundamentals.

Increased grain merchandising volumes stemming from the company's 2011 purchase of an export terminal in the Ukraine, where exports have boomed recently, helped limit the drop in earnings. Weisser also said that North America oilseed processing margins show signs of improving.

The company is counting on continued improvement in its sugar and bioenergy business, as efforts to plant more sugarcane to feed two new mills in Brazil start to pay off. Bunge said it expected to harvest 17 million to 19 million metric tons of sugar cane this year to feed its mills, up from 14 million last year, and that it would be able to fill the mills' 21-million ton capacity in 2013.

The company's sugar and bioenergy segment swung to a profit of $3 million in the fourth quarter after losing $56 million the prior year.

Bunge's grain export business in the Ukraine could suffer depending on how badly crops are damaged by extreme winter weather, but Weisser said he's "not yet worried."

He added that drought in South America, which has damaged corn and soybean crops there, could have a positive impact on the company, as crops are small enough to boost demand for North America grain but big enough to maintain South America volumes.

Bunge reported a profit of $254 million, or $1.65 a share, down from $301 million, or $1.95, a year earlier. Excluding items such as impairment charges, earnings were $1.99 a share in the year-earlier quarter. Sales jumped 29% to $16.4 billion as total volume grew 22%.

Analysts polled by Thomson Reuters had most recently forecast earnings of $1.57 on revenue of $13.73 billion.

-By Ian Berry, Dow Jones Newswires; 312-750-4072; ian.berry@dowjones.com

--Melodie Warner contributed to this article.

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