BRAZIL: Bunge to explore spinning off sugar operations via IPO
Published: 05/03/2018, 7:44:05 AM
Global agricultural trader Bunge Ltd will file in Brazil as soon as this month to explore a public offering for its Brazilian sugarcane milling operations, Chief Executive Soren Schroder said on Wednesday, according to Reuters.
Bunge is a major player in the global sugar industry, both as a trader and as a producer. The company has also secured debt financing for the milling business, which could now operate on a standalone basis.
"We are prepared to take it to the next step in the form of an IPO if the markets are, let's say, open and put the right price on it," Schroder said in an interview after Bunge reported a quarterly loss.
Bunge has been seeking to get out of the sugar milling business in top-grower Brazil since 2013 as a supply glut has pushed prices lower and made it tough for industry participants to turn a profit. Its eight Brazilian mills can produce sugar and ethanol and have a capacity of more than 20 million tonnes, according to the company's website.
Bunge's sugar and bioenergy division lost US$20 million in the quarter ended on March 31, compared to a loss of US$11 million a year earlier. The company cut its forecast for the unit's 2018 earnings to a range of US$40 million to US$60 million from US$50 million to US$70 million, primarily because of low sugar prices.
Valuations for the milling business will determine whether Bunge finalizes an IPO, executives said. Investor appetite is uncertain.
"We won't know until we test the waters," Schroder said. "Can investors see that this is more than just the price of sugar?"
Bunge said in February that it was also exiting sugar trading to concentrate on its grains and oilseeds operations, and had interested parties in the business. The company has struggled to sell the trading operations, though, according to sources familiar with the matter.
"We are exploring various opportunities at the moment - whether or not we can pass the trading book and some of the relationships on to other market participants who value that," Schroder said on Wednesday.
He said the company will conclude discussions about the trading business relatively soon, declining to give a specific date.