Bunge Leadership Change

Acting CEO Announced, Along With Lower Profit Expectations for 2018

Chris Clayton
By  Chris Clayton , DTN Ag Policy Editor
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Bunge Acting CEO Gregory Heckman (Courtesy Bunge Limited)

OMAHA (DTN) -- The change in direction for Bunge Limited continued Tuesday as the commodity giant announced Greg Heckman, former president and CEO of Gavilon Group, would take over as acting CEO of Bunge.

In announcing its leadership change, Bunge also highlighted that its profitability would be lower for the full year of 2018 as the price declines from Brazil's soybean crop come home to roost. Bunge had previously expected $1.045 billion as the low end of its EBIT (earnings before interest and taxes). However, earnings are now expected to be $90 million to $100 million lower in its agribusiness segment and $60 million to $70 million lower in its sugar and bioenergy businesses -- also due to changes in Brazil.

Heckman's appointment comes in the midst of months of leadership changes in Bunge's board and officers, highlighted by former CEO Soren Schroder's announcement last month that he was stepping down from Bunge. Schroder had been with Bunge since 2000 and had been the company's CEO since 2013.

Based in White Plains, New York, Bunge has grain elevator, oilseed crush, biofuel and storage facilities throughout North America, South America, Europe and Asia.

Heckman was one of three new board of director members named at the end of October who also formed a new strategic review committee driven by shareholder Continental Grain. Continental's chairman and CEO, Paul Fribourg, was also among the new board members and put in charge of the review committee.

Heckman, 56, was a ConAgra Foods executive who became president and CEO of Gavilon Group in Omaha after ConAgra spun off the commodity trading firm in 2008. Heckman led Gavilon until the end of 2014 after the company was sold to the Japanese firm Marubeni Corp. for $3.6 billion in July 2013. Heckman then started a private investment firm, Flatwater Partners.

Heckman said he looked forward to working with Bunge's non-executive board chair, Kathleen Hyle, as well as the rest of the management team, "focusing on ways to improve performance and create shareholder value." He added, "Bunge is a great company, and our strong foundation and global leadership scale in agribusiness and food & ingredients positions us well for future growth. As a team, we will build on the forward momentum of our Strategic Review, which is focused on our portfolio, key business drivers and opportunities to enhance shareholder value."

According to a Securities and Exchange Commission filing on Oct. 31, the review committee was detailed to examine Bunge's overall business strategies, which would include making recommendations "regarding potential material mergers, acquisitions, divestitures and other key strategic transactions outside the ordinary course of the company's business," as well as help the board "evaluate bona fide proposals" that could result in strategic transactions.

Continental Grain and another firm, D.E. Shaw & Co., had pushed for a change in the board and more long-term shareholder value.

In the year before Schroder stepped down, the company had been resisting takeover talks from the trading company Glencore and held talks with Archer-Daniels-Midland Co., as well. Bloomberg reported that Schroder's resignation would reopen opportunities for other companies to make offers for Bunge.

Bunge stated its CEO search committee would continue to look for a permanent CEO and complete the work "as soon as practicable, while ensuring that the process is thorough and deliberate."

In the news release announcing Heckman's appointment, Bunge also stated the company's three longest-serving board members -- L. Patrick Lupo, Ernest Bachrach and Enrique Boilini -- would not seek re-election to the board when their terms end in May.

Bunge cited the shortfall in its agribusiness area due to "the reduction in value of the Company's Brazilian soybean ownership as factors related to China trade and demand caused Brazilian prices to converge with U.S. prices."

As DTN has noted, Brazil's FOB soybean prices were as much as $2.60 above New Orleans FOB prices in October, but Brazilian prices have steadily ticked downward and are now equal to New Orleans, holding at $9.46 a bushel as of Tuesday.

Bunge also cited that the decline in its sugar and bioenergy business comes as ethanol prices are lower in Brazil right now, and there is a reduction in yields for the Brazilian sugar-cane crop for the year, as well.

More details and actual financial results will be announced when Bunge releases its fourth-quarter and full-year 2018 reports before the market opens on Feb. 21.

Chris Clayton can be reached at Chris.Clayton@dtn.com

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Chris Clayton