Bunge Global SA (BG) Earnings Call Transcript & Summary

Welcome to the 2020 Annual Meeting for Bunge Limited. Our host for today's call is Kathi Hyle, Chairman of the Board of Directors. [Operator Instructions] I would now like to turn the call over to your host. Ms. Hyle, you may begin.

Thank you. Good afternoon and welcome to Bunge Limited's 2020 Annual General Meeting of Shareholders. I'm Kathi Hyle, Chair of the Board of Directors of Bunge Limited. And on behalf of the entire Board, our officers and employees, I would like to thank you for attending Bunge's Annual General Meeting of Shareholders. I'm joined today by the company's Chief Executive Officer and Director, Greg Heckman; the company's Chief Financial Officer, John Neppl; and the company's Corporate Secretary, Greg Billhartz. Due to the implications arising from the global novel coronavirus pandemic, we are hosting our meeting virtually via the Internet. At today's meeting, following the introduction of the members of our Board of Directors, we will conduct the formal portion of annual meeting, followed by a question-and-answer session. I would now like to introduce you to the other members of our Board who are attending today's meeting: Sheila Bair; Vinita Bali; Carol Browner, who chairs our Sustainability and Corporate Responsibility Committee; Andrew Ferrier, who chairs our Human Resources and Compensation Committee; Paul Fribourg; Erik Fyrwald, who chairs our Corporate Governance and Nominations Committee; Bernardo Hees; Jay Winship, who chairs our Audit Committee; and Mark Zenuk, who chairs our Enterprise Risk Management Committee. All the members of our executive leadership team are also joining us for today's meeting. Representatives of Deloitte & Touche, our independent auditors, are also present today and will be available to answer appropriate questions during the question-and-answer session of the meeting. Finally, the company has appointed Broadridge Financial Services as inspector of election, and Tony Carideo, a representative of Broadridge is with us today. I will now call the 2020 Annual General Meeting of Shareholders to order. I'll be serving as the chair of the meeting and Greg Billhartz will serve as secretary of the meeting. Greg will now begin the formal matters of today's meeting. Greg?

Thank you, Kathi, and good afternoon, shareholders. We will now conduct the formal business as set forth in the notice of meeting and proxy statement, which was mailed to all shareholders of record as of March 26, 2020. On or about April 8, 2020, Bunge's shareholders as of the record date were sent notice of the annual meeting, along with the proxy statement and request for proxy, by the Board of Directors. The notice of annual meeting also stated the date, time and meeting purpose, along with the web address for participating in today's virtual meeting. I'm pleased to announce that there are present by proxy a sufficient number of the voting shares of the company to constitute a quorum. Accordingly, this meeting is duly called to order. A copy of the notice, the proxy statement and the formal proxies as well as an affidavit of distribution of Broadridge Financial Services shall be made a part of the record of this meeting. As a reminder, shareholders attending the virtual meeting can vote their shares online from now through the closing of the polls by logging on to the meeting website as a shareholder and clicking the Vote Here button on their screen. If you have previously voted by proxy and do not wish to change your vote, your vote will be cast as you previously instructed. No further action is required. At this point, the polls are now open for voting. We will close the polls after the proposals have been presented. There are 4 proposals to be considered during this meeting, all of which were described in detail in the proxy statement that we furnished to shareholders. The first item of business is the election of the 11 directors named in the proxy statement for a 1-year term. The second item of business is to appoint Deloitte & Touche as the company's independent auditors for fiscal year 2020 and to authorize the Audit Committee to determine the independent auditors' fees. The third item of business is an advisory vote to approve executive compensation. And the fourth item of business is an amendment to the Bunge Limited 2016 Equity Incentive Plan. This concludes the presentation of the items of business that you've been asked to vote on at today's meeting. The polls are now closed. I have received preliminary voting results from the inspector of elections based on the proxies received as of the opening of the polls at today's meeting. I am pleased to report that all 11 director nominees have been elected and that proposals 2 and 4 have been approved. Proposal 3 was not approved. The final voting results will be reported in a Form 8-K that the company will file with the Securities and Exchange Commission within 4 business days following this meeting. This concludes the formal portion of our 2020 Annual Shareholders Meeting. I'll now turn the meeting back over to Kathi.

Thank you, Greg. I would like now to open up the meeting to general questions regarding the company. [Operator Instructions] So let us take a minute to assemble the questions. And then when we're ready, we'll take the questions.

We have a few questions that have been submitted by shareholders. First one, Mr. Heckman, would you please provide a short summary of the strategic position of competitors, Glencore Agriculture and COFCO International, please?

Yes. Both Glencore Agriculture and COFCO International are global players with regional strengths. Glencore has a larger presence in Canada and Australia after their acquisition of Viterra a few years back and then they've got strength in the Black Sea. I should probably mention, the parent of COFCO International, COFCO China, has a very large presence in the China crushing and downstream oils. And COFCO International has been very active over the years, last few years, in Brazilian origination through their acquisition of Noble and Nidera with a focus on exporting beans to their China crush operations. Both Glencore and COFCO International have a presence in Argentine crush and neither have large presence in the U.S.

Mr. Heckman, we have another question. Does the announced sale of Bunge's U.S. grain elevators include any barge assets?

No. We only sold elevators. The barges and actually 5 elevators are part of our SCF JV, and we've retained that. We also have retained 3 elevators to do with our Morristown cluster, which supports our crush value chain. We also have retained 4 elevators that are in our EGT joint venture that supports our PNW export value chain.

We have two more financially oriented questions, which I'll refer to Mr. Neppl, Bunge's Chief Financial Officer. Because of the impact of foreign currency on Bunge's shareholders' equity, is ROIC, or return on invested capital, a reliable metric for measuring company performance?

Yes. Thanks for the question. I mean, often, ROIC is looked at as a measure. But like many measures, it's not perfect in and of itself. Given the weakening of our currency over time, our equity has certainly been impacted. And so ROIC, the invested capital portion of that, declines as you look at how currency has impacted it. So we have to look at ROIC as one measure. But when you have extreme moves in currency, like we've experienced over the last 3 to 6 months, in particular in South America, it does have an impact on the equity. And so that would tend to overstate performance on invested capital or return on invested capital. So we look at that a number of other ways. We look at return on invested capital with a static assumption on currencies. We also look at other measures like cash flow returns and adjusted returns on invested capital, considering, as I said, the static currency. So there are a number of ways to look at it, but we certainly take into consideration the impact of FX.

A second question, considering a rapidly changing market environment due to COVID-19 as well as the large mark-to-market impact that Bunge had during the first quarter, would you please discuss how Bunge is managing counterparty risk associated with customers as well as with farmers?

Certainly, I think first and foremost, we should note, we have not seen any material defaults across our system. In a time like this when there's a lot of volatility in the market, it is important for us to look at not only credit limits but also open market exposure. And we look at that on a number of ways. One is we look obviously at the individual customers and the individual counterparties, whether it's a farmer on one end or a customer on the other. But we also have to look at exposure across particular parts of the industry and by country as well because different countries have -- are at different points along the COVID outbreak. But the important thing is we look at that holistically, not just from a credit standpoint but also the market exposure. And we do that because our credit team and our market risk team are one team and they work closely together. While we have 75 professional -- credit professionals across our network, they work very closely with our market risk team as well as our commercial teams to manage exposure.

Mr. Heckman, what has been done in the field of digital transformation since last year?

We have recently launched just this year a truck freight booking application by the name of Vector in Brazil. And this is -- couldn't have been more timely, very proud of the team. We really leverage our intellectual expertise, our customer volumes and, of course, our leading asset footprint in Brazil. And we've seen volume -- we launched that in mid-January, and we've seen volume continue to grow with -- we're on pace for almost half of our volume to be booked now through the app. But it's connected to our systems and really helping us connect with our truckers as well as our customers.

And we have one last question. Mr. Heckman, McKinsey Consulting recently released a study, which quantified the probability of harvest failures and the risk to crop production due to extreme weather events in major production regions. How will this affect a company like Bunge in the future? And can the industry in general adapt and thrive in such extreme conditions?

Well, I can't speak for the industry. What I can do is speak for Bunge. And Bunge is the infrastructure of the food chain. One of the greatest benefits of our global footprint and our local regional expertise is when there are interruptions in one region, whether that relates to weather, politics, crop failures or local economies, we're able to continue to serve our customers. And that's the inherent optionality and strength built into our global system.

At this time, there are no further questions.

Well, thank you. That concludes the 2020 Annual General Meeting of Shareholders. Thank you for being here today, and thank you for your interest and continued support of Bunge.

This now concludes the meeting. Thank you for joining, and have a pleasant day.