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Bunge Limited Message Board

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  • ewblanchard ewblanchard Nov 17, 2008 12:53 PM Flag

    why BG has lot of debt with so much earnings?

    USRDCAS: tell us more. Didn't know about the two points you mentioned. Suzanne

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    • Shortly after Bunge went public, they made a major acquisition of a French company known as Cereol. Included were major consumer retail products in Europe, Central Soya in the US and CanAmera in Canada. Central Soya not only added to Bunges already large Hydrogenation footprint, but they brought along a toxic under utilized and outdated plant in Pawtucket. I say toxic because Bunge had to spend a lot of money cleaning up the site; oil had been leaking and leaching into the soil for years. The plant has many limitations and very little can be done. For instance, one of the big money makers for Bunge Oil's are their Industrial and Food Service Margerines. More margerine is consumed in the eastern US then any other part of the country. Now here is Bunge with a plant right in the middle of big margerine volume but they do not have any manufacturing capabilities. They need to bring it in from Indiana or Tenn. which adds too much freight to be competitive. They will not put any money into the Pawtucket plant and eventually it will be gone. The hydro capacity is no secret, Bunge has more then ADM or Cargill. And eventually, as I said, hydro will yield to other processes and/or biogenetics. At some point, Bunge will have to face this. On the crush side, if soybeans cannot be processed into usable fates short of hydrogentation they don't be surprised to see their US crushers begin to crush Canola in an effort to keep the large plants fully utilized. This whole industry is changing rapidly and Bunge cannot decide who they want to be; strictly commodity or a value creator. At present, they are destroying value by applying a commodity business model against the downstream value business. This will eventually bite them in the ass. My guess, they sell their brands to someone with some type of supply agreement. Or, they will be acquired by Monsanto, Dupont or some other biogenetic business that wants to capture the value in the downstream business.

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