Bunge Ltd
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Bunge Ltd
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Good morning, and welcome to the Bunge Limited Fourth Quarter 2019 Earnings Release and Conference Call. All participants will be in a listen-only mode. [Operator Instructions] After today's presentation, there will be an opportunity to ask questions. [Operator Instructions] Please note, this event is being recorded.
I would now like to turn the conference over to Ruth Ann Wisener, Vice President of Investor Relations. Please go ahead.
Thank you, operator, and thank you for joining us this morning for our fourth quarter earnings call.
Before we get started, I want to let you know that we have slides to accompany our discussion. These can be found in the Investors section of our website at bunge.com under Investor Presentations. Reconciliations of non-GAAP measures to the most directly comparable GAAP financial measure are posted on our website as well.
I'd like to direct you to slide 2 and remind you that today's presentation includes forward-looking statements that reflect Bunge's current view with respect to future events, financial performance and industry conditions. These forward-looking statements are subject to various risk and uncertainty. Bunge has provided additional information in its reports on file with the SEC concerning factors that could cause actual results to differ materially from those contained in this presentation and we encourage you to review these factors.
On the call this morning are Greg Heckman, Bunge's Chief Executive Officer; and John Neppl, Chief Financial Officer.
I'll now turn the call over to Greg.
Thank you, Ruth Ann, and good morning, everyone. We're happy to be joining the call from our new headquarters in St. Louis this morning. So let's get started.
On slide 3, you can see the agenda for today's call. I'll start with some thoughts on our 2019 accomplishments through the lens of our key priorities, and then I'll provide an overview of the fourth quarter before handing it over to John, who'll go into more depth on our performance. I'll conclude with our outlook for 2020 and then we'll open up the line for your questions.
With that, let's turn to slide 4. In 2019, the team did an excellent job executing in the face of great complexity and many moving parts both internally and externally. We effectively managed the things under our control and made substantial progress against our key priorities. We drove improved operational performance, we took action to optimize the portfolio and we increased our financial discipline and rigor, especially around capital allocation.
On operational performance, our total oilseed crush volume and capacity utilization rates were the highest in the past five years. Our soy and sunseed crushing operations achieved the lowest industrial unit costs in that same time frame. These improvements helped us weather the difficult markets in 2019 and allowed us to capture more margin, when we had the opportunity.
We moved from a regional structure to a global operating model, simplifying how we operate and aligning incentives to the whole rather than the parts. With that, we reduced the number of bonus pools dramatically, incentivized teams to work together toward the common goals of Bunge. We've received positive internal feedback about our headquarters move with clear evidence of improved efficiency, collaboration and shared insights as a result. We'll be fully moved into St. Louis by the end of Q2.
Our new operating model allows us to focus on what's most important. Our business relationships on both ends of the value chain, farmers and customers, while facing fewer internal distractions. In short, we're working as one team better able to focus on driving results and operating the business with better visibility and more accountability.
Moving to slide 5. While we've made substantial improvements to our portfolio, we continue to execute against other identified opportunities with the goal to be substantially finished by the end of the second quarter. We completed our Sugar & Bioenergy 50-50 joint venture with BP and announced an agreement to also sell our margin to manage assets in Brazil.
Recently SIRE a U.S. ethanol producer repurchased our stake in that business. We also completed several smaller transactions, selling several idled grain facilities in Eastern Europe, and two idled wheat milling sites in Brazil, while also optimizing our South American grain footprint to improve capacity utilization by closing seven other grain facilities.
Turning to slide 6. We've increased our financial discipline and rigor, continuing our work to identify and capture cost savings opportunities. In 2019, we achieved approximately $50 million in savings from our previously established Global Competitiveness Program and are driving additional savings opportunities from our more recent efforts.
Combined with the operational and portfolio actions we took in 2019, Bunge is getting more streamlined with line of sight to additional improvement opportunities. We also changed our approach to risk management, with a focus on taking risk appropriate for the earnings power of Bunge and the environment we're operating within. This approach allows us to better capture the earnings power available in the physical and financial flows, provided by our global asset base. This is especially true, when market conditions change as they did during the fourth quarter.
We're committed to pursuing a disciplined capital allocation strategy. Capital deployment decisions will be the result of a deliberate process anchored by high-quality analysis and stress testing on the front end, as well as performing post project reviews.
Moving to the next slide. Because we're managing risk better, while running our assets harder, when margins in certain markets improved in Q4, we delivered better earnings than we had earlier anticipated. Looking ahead to 2020, we feel good about our transformation and our ability to adapt to what we expect to remain a challenging and volatile environment. We have a lot of momentum coming out of Q4 that will help us move ahead.
And taking into account the current margin environment and lack of visibility into the back half of the year, we expect 2020 EPS to be broadly in line with what we earned in 2019, when excluding notable items, our gain on Beyond Meat and the depreciation benefit of the Sugar & Bioenergy segment.
With that, I'll hand it over to John to walk us through our financial results and the 2020 outlook in greater detail.
Thanks, Greg and good morning everyone. Let's turn to the earnings highlights on slide 8. Our reported fourth quarter earnings per share from continuing operations was a loss of $0.48 compared to a loss of $0.51 in the fourth quarter of 2018. Adjusted EPS was $1.27 in the fourth quarter versus $0.08 in the prior year. Our reported results included $239 million in net charges of which approximately $102 million related to various portfolio initiatives and $76 million to the partial impairment of goodwill recorded on the acquisition of Loders Croklaan.
We have achieved the vast majority of our targeted and integration synergies associated with this acquisition and although we are making progress on revenue synergies, we are achieving them at a slower pace than we had forecast when we completed the deal. Importantly, the goodwill write-down was a result of our annual impairment test and not triggered by a specific event. Loders is the unique asset. And this charge has now -- not changed our positive view on this business or its long-term potential.
Total segment earnings before interest and taxes or EBIT was $44 million in the quarter versus $70 million in the prior year. On an adjusted basis, total segment EBIT was $283 million in the quarter versus $107 million in the prior year. Agribusiness adjusted EBIT was $177 million compared to $55 million last year. Higher segment results in the quarter, reflected improved execution, particularly in managing risk throughout our grain and oilseeds value chains.
In Oilseeds, lower soy processing results in the U.S. and Europe, reflected particularly strong margins a year ago. Softseed results improved when compared to last year due to strong oil demand and seed supplies. As expected, Oilseeds' results were negatively impacted by approximately $95 million in mark-to-market reversals on soy crushing contracts, which favorably impacted our third quarter results.
An increase in soy crush margins during the fourth quarter resulted in new mark-to-market losses on forward contracts. However, these losses were largely offset by mark-to-market gains on forward hedges, related to our softseed and palm oil supply chains that serve our downstream Edible Oils customers. As a result, we entered 2020 with only a small net mark-to-market balance. Improved results in oilseed trading and distribution were primarily due to better positioning.
In Grains, higher results were primarily driven by origination in South America. Brazilian farmer selling increased as local prices improved. And in Argentina, farmers accelerated sales in anticipation of a change in export taxes. Ocean freight results benefited from good fleet positioning and management.
Food & Ingredients adjusted EBIT was $84 million compared to $73 million in Q4 of 2018.
Edible Oils adjusted results of $67 million were up $11 million from last year driven by better results in North America and Asia, which more than offset lower results in South America.
Results in Europe were comparable to last year. Excluding approximately $13 million of favorable timing differences on hedges that will reverse in 2020 segment results were lower than in prior year.
Milling adjusted EBIT of $17 million for the quarter were similar to the prior year as higher results in Mexico were offset by lower results in the U.S. and Brazil. In Sugar & Bioenergy fourth quarter 2019 results reflect Bunge's ownership through November.
Adjusted EBIT of $52 million in the quarter was $100 million higher than the prior year. The increase is mainly due to improved agricultural yields and operational execution that drove lower unit costs as well as higher Brazilian ethanol pricing and higher sugar pricing and volume.
Results also benefited from approximately $38 million of lower depreciation when compared to last year due primarily to the business being classified as held for sale. Fertilizer adjusted EBIT of $26 million was in line with the prior year.
Adjusting for all notable items the effective tax rate for the year was approximately 16%. The lower-than-expected tax rate was primarily due to earnings mix as we report a strong fourth quarter results in regions with favorable tax rates.
Let's turn to slide 9 and SG&A. When the company announced its Global Competitiveness Program in July 2017, the goal was to achieve a reduction in SG&A cost of $250 million by the end of 2020 as compared to its 2017 addressable SG&A baseline of $1.35 billion.
With hard work and the commitment of our employees, Bunge achieved this savings one -- target one year ahead of plan. This slide bridges the savings to what we report in our SG&A expense line reflecting unaddressable costs, changes in our business portfolio such as the Loders Croklaan acquisition and other factors that impact our SG&A such as inflation, foreign exchange, GCP program costs and variable compensation.
The $252 million of cost reductions is roughly equally split between indirect spending and employee costs. The company incurred approximately $150 million of one time execution costs over the life of this program.
Moving to slide 10 cash flow highlights. For 2019, we generated approximately $1.1 billion of adjusted funds from operations a similar level to prior year. The cash flow generation enabled us to comfortably fund our CapEx and dividend and to reduce our debt.
As you can see on slide 11, our debt largely finances our inventories with approximately 80% of our net debt being used to finance readily marketable inventory at the end of 2019. Working capital ended the year a bit higher than we were targeting primarily due to elevated commercial activity in Q4 especially in South America resulting in increases in farmer advances, accounts receivable balances and unrealized gains on derivatives used to hedge commercial commitments.
Turning to slide 12 we have committed credit facilities approximately $4.3 billion all of which was available at the end of quarter and we had a cash balance of $320 million. Total committed credit facilities dropped from $5 billion last quarter to $4.3 billion as a result of a $700 million revolving credit facility being converted into a term loan and then transferred on a non-recourse basis to the Sugar & Bioenergy joint venture.
Proceeds received from the $700 million debt transfer and a further $75 million received from BP were largely used to pay down balances outstanding under the company's commercial paper program and credit facilities.
Moving to slide 13 and our full year summary of capital allocation. We generated adjusted fund from operations of approximately $1.1 million. From this total CapEx spending was $524 million which was about $25 million lower original guidance for the year.
This included $118 million CapEx for Sugar & Bioenergy, which will not be incurred by Bunge going forward. We paid $317 million in dividends to shareholders. This left us with approximately $215 million of retained cash flow that we allocated toward debt reduction and working capital.
Please turn to slide 14 and a return on invested capital. Our trailing four-quarter average adjusted return on invested capital was 7.9% overall, well above the 5% the prior year. Excluding our Sugar & Bioenergy segment, ROIC was 7.7% versus 6.5% last year.
We are currently reviewing our stated weighted-average cost of capital of 7%. Based on our preliminary review, we believe the 7% we have been referring to maybe higher than our actual lag. If we determine there is a more appropriate rate to use going forward, we will communicate that in the future quarter. Whether or not we make that change our targeted ROIC of 9% will remain unchanged.
Moving to slide 15 and our outlook for 2020. As Greg mentioned in his remarks, we expect 2020 EPS to be largely in line with what we earned in 2019, when excluding notable items our gain on Beyond Meat and the depreciation benefit in the Sugar & Bioenergy segment.
In Agribusiness, we expect full year results to be down from 2019, based upon current forward market structure. However, actual origination processing and distribution margins will evolve based on fulfillment of the U.S.-China trade agreements, crop sizes and farmer commercialization.
In Food & Ingredients, we expect full year results in Edible Oils and Milling to be similar to 2019, excluding approximately $13 million of favorable Q4 2019 timing differences, which are expected to be negative to 2020.
In Fertilizer, we expect the full year results to be down versus a particularly strong 2019 and for results to be similar to 2018. In Sugar & Bioenergy, market fundamentals have improved versus 2019, driven by sustained Brazilian ethanol market prospects and better year-over-year sugar prices.
For 2020, we expect an effective tax rate in the range of 19% to 23%, net interest expense of approximately $230 million, CapEx in the range of $400 million to $450 million, and depreciation and amortization of approximately $465 million.
With that, I'll turn the call back over to Greg for some closing comments.
Thanks, John. As John noted, we're still faced with uncertainty in 2020. We expect markets to remain volatile as long as U.S. and China trade tensions and ASF continue to create uncertainty. It's too early to tell what if any impact the coronavirus situation will have on our markets or how developments in Argentina may affect the industry this year. So, you can see why it's important that our team remains nimble.
We'll continue to focus on improving industrial operations, honing our approach to risk management, being disciplined about capital deployment and working in ways that allow us to quickly adjust to changing market dynamics to maximize the earnings potential of our global platform.
I want to reiterate how impressed and appreciative I am by the team's ability to navigate a challenging external environment this year, while also implementing significant internal change. We've got a tremendous foundation of processing and distributing assets and a great team who's improving our execution with them.
We're already seeing the benefits of those changes and we expect them to continue. I look forward to sharing more with you as we continue our work. We'll also provide more detail on our strategy and earnings power at our Investor Day, which we're planning to hold in late second quarter. More detail to come on that.
And with that, I'll open the call to questions.
We will now begin the question-and-answer session. [Operator Instructions] The first question comes from Adam Samuelson of Goldman Sachs. Please go ahead.
Yes, thanks. Good morning, everyone.
Good morning, Adam.
Greg, John I was hoping maybe to start clarify and provide a little bit more color on the guidance. So first at the EPS level, adjusted EPS in 2019 was $4.58. Beyond Meat and the sugar benefit, I believe were about $0.90. So, is that -- you're saying broadly is a roughly $3.70 of EPS. I just wanted to clarify that just on the as and when?
That's very close, yeah. The combination of sugar and Beyond was about $0.86, so you're really close.
Okay. That's super helpful. So then, digging into the operating guidance. Maybe within that just quantify I mean what -- there should be I imagine some year-on-year benefits from the SG&A reductions that you've been implementing, the headquarter rationalization, some of the asset moves that you've taken, over the course of 2019.
Just can you quantify some of those internal tailwinds that I would think are embedded in the numbers? And then, within the Agribusiness unit, maybe frame a little bit, kind of some of the puts and takes between the Grain side and Oilseeds and kind of how you're thinking about, the two sides of the market there. Thanks.
Yeah. Adam, I'm sorry. Can you repeat your question around cost side? I didn't -- I'm not sure...
Yeah, yeah, so just -- I mean in terms of the SG&A cuts that you've been implementing over the course of the last year, as you continued the Global Competitiveness Program.
I'd imagine that there would be some carryover benefit, 2020 versus 2019, embedded in your EBIT forecast. Can you quantify those? I mean just benefits from internal initiatives that you're including in the EBIT forecast that you've laid out?
Yeah. First, I think that, probably important to know the first half of the year, you know we still got some I'll say redundant costs associated with our transfer of employees to St. Louis. And some of the execution we're doing around, a rewiring.
We will continue to have some higher costs probably the first half of the year, as those programs run out. I do -- we do expect a measurable reduction next year in SG&A, particularly at the corporate level.
At this point, from just a pure overhead standpoint. If you think about a run-rate basis, we saved about $50 million last year from the beginning of the year to the end of the year of additional costs.
And I think heading into 2020, we should have a comparable -- hopefully a comparable number going throughout the year and next year, or maybe a little bit less than that.
Because as we cut deeper and deeper into the organization, it gets a little bit tougher. But, we are expecting somewhere probably in the neighborhood of $25 million to $50 million of additional cost savings next year.
Yeah. The other thing probably worth mentioning, John mentioned all the rewire work that continues to go on, in the first half. But also the resources around all the portfolio work we're doing here, in the first half.
So some of it has been announced but hasn't closed yet and some of the ongoing work. And with our target of getting the majority of that wrapped up. We're in a position to at least be able to speak to what we're doing, by the end of the second quarter, which will then give us -- get us in a position as John said, to make the balance of those changes and kind of come out of 2020 with the run rate that we're looking to go forward.
Yeah.
And of course that's the kind of thing we'll also drill into more detail, during Investor Day.
Yeah. I don't think we'll be on, our revised run rate until late -- back half of the year. And I think, once we get out of 2020, at the end of the year we should start with a much cleaner cost base, at the end of 2020, heading into 2021.
Okay. And then, just broadly just the Agribusiness unit specifically, just help a bit -- just lay out the kind of the different assumptions on crushing and the grain side.
Yeah. As we look at 2020, as we've talked, we've got pretty good momentum coming out of Q4 here. And we've got pretty good visibility into the first half. And we'd even say that the first half looks positive.
I think the challenge is, really know very, very little visibility into the second half. And then you've got the big flags around the China trade the Argentina, economic situation, coronavirus, it's possible, effect on demand.
You've got the margin curves in crush outside of U.S. -- are heavily inverted. And second half replacement margin is definitely not attractive. And then of course U.S., the soy crush margins are significantly below last year, what we've seen.
So I think that's really the drivers inside of the Agri business, which is the big piece. And then of course around the distribution is the timing of the Phase 1. And we're lacking the details, really about timing and products.
And then already some talk about, maybe a delay due to coronavirus. So, that's kind of the key drivers that we've put this together with.
Okay. I appreciate all that color. I'll pass it on. Thanks.
Thank you.
The next question is from Tom Simonitsch of JP Morgan. Please go ahead.
Hi. Good morning everyone.
Good morning, Tom
Hi, Tom.
So, on the latest goodwill impairment you noted synergies are coming slower than you expected. Can you just remind us on those synergy targets and how they've changed?
Yeah. Let me frame that up. The one thing that I want to be really clear about is, we definitely believe in the value of that platform. That was a wonderful opportunity. This is the kind of asset that only trades once and we were -- and we were glad to get that opportunity.
We've continued to deliver on all of our cost targets. We fully integrated the team. We're going to market as one company and able to continue to benefit from the combined legacy Bunge business and legacy Loders business. The gap we have had had been on the timing of delivering the top line synergies. And those are not coming as fast as we had planned.
We do love the business because fats and oils is definitely on trend. It's right in our wheelhouse. It's an adjacent space as a value -- allows us to value up our fats and oils platform. And we definitely are at the table with customers having conversations and working on projects that -- I was just with the senior sales team last week and they said, we wouldn't have been in this position a couple of years ago. And it's the global presence. It's the end-to-end product and technical capabilities, and frankly, it's the record on sustainability, which Bunge's done a really fantastic job.
And while we're on Loders, we've got some important product launches this year. In our infant nutrition, we've extended our award-winning Betapol with the new high-concentration formulas. In the confection space, we're launching a reduced sugar fat system, and we did that work with one of our venture companies. And this allows us to put less sugar to be used for the same sweetness. We're really excited about where that can go.
And then on the plant-based area, which has garnered so much activity, so much investment, we've got a line of fats to replace animal fats in a range of products from veggie burgers to beverages. And we're working with over a handful of global customers in getting some traction there. So, while we were slow in delivering the top line this is a great property and this is going to create a lot of value for shareholders long-term.
And I think this may be worth mentioning, Greg, the driver of the impairment was really just a shortfall to our overall model that we had built when we bought the business, but we still did achieve pretty good growth year-over-year inside that business. So, very positive growth just not quite at the level of what we expected when we priced the business.
So that drove the impairment, but again as I mentioned on the -- in my remarks, that was just driven by our annual review of goodwill. It wasn't any single event that created -- caused the staff to take a separate look at it.
Understood. Thank you. And then just on capital allocation, you paid down some debt with proceeds from the JV this last quarter. What needs to happen if you just start buying back shares?
Well, it's something we talked about. We haven't bought back shares for a few years now I think and as Greg and I have commented, we're taking a hard look at everything. It hasn't been a priority on capital allocation up to this point.
Certainly, it's a bucket we look at and talk about and we will do so in 2020. I think the question is really when we look at opportunities it's up to us to find good ways to create value for the shareholder by reinvesting capital. And if we can't find a better alternative then share buyback is certainly on the table.
We haven't finished sort of our plan for 2020 exactly how we want to allocate all the capital. We do have a fair amount of money earmarked as I mentioned $400 million to $450 million for CapEx. And we always hold a little bit back and determine whether or not the right thing is going to be debt reduction, if we have some sort of an acquisition opportunity or share repurchase, but it's certainly on the table. And -- but I would say at this point, we don't have any hard to signal one way or the other.
I’ll pass it on. Thank you very much.
The next question comes from Vincent Andrews of Morgan Stanley. Please go ahead.
Thank you and good morning everyone.
Hey, good morning Vincent.
If you could just clarify for me on the share repurchases and the alternative uses of capital. I mean, I guess, the way I think I would be thinking about it is that you're going to have an Analyst Day in June. Presumably you're going to tell us that your earnings power is higher than what you're run rating at and that your stock's undervalued. So why wouldn't your shares today the best alternative use of capital because you'd presumably be buying them at a discount which I think you were versus going out and paying a premium for somebody else's business?
Yeah. It's always a trade-off. I agree. And I'd like to think between now and – our plan would be between now and June to provide you a better clarity on what our capital allocation plan will be. Yeah, it's – we hear from shareholders and investors some that like share buyback and some that don't. And so for us, we really have to just look at it and say as we kind of hit the reset here with the company and develop a go-forward strategy, I would say, it'll get equal airtime discussion with anything else we have to capital. I just can't sit here today and commit to you that we're going to purchase share or how many we're going to purchase. But certainly, if it becomes clear that's the best alternative for our capital then we'd be foolish not to take that into consideration and make it part of our allocation.
Okay.
Look our first order of business is continue to execute to get the cash in the house, and that's continue to execute operationally, and continue the balance of our portfolio work, and then to be able to have that strong debate in the boardroom.
Okay. That's fair enough. And if I could just ask John a follow-up on working capital. Obviously, it built in the – towards the end of the year and obviously that was part of why the earnings were better. Should we expect some type of reversal next year holding commodity prices constant just because farmer selling was advanced and so forth? Or how should we be thinking about cash flow in 2020 relative to a roughly flat underlying EPS event?
Yeah. I think our bias right now based on what we look at today, we do – we would expect it to revert a bit. And so we would expect the change in working capital next year to be a net positive for cash flow at this point. To your point though, all else being equal commodity prices et cetera, I would agree with your comment.
Okay. Thanks very much guys. And congratulations on the quarter.
You bet.
Thank you very much.
The next question comes from Benj Bienvenu of Stephens Inc. Please go ahead.
Yeah. Thanks. Good morning, guys.
Good morning, Ben.
Good morning, Ben.
Ask about – you talked about the ROIC target. You talked about WACC. I want to ask about the ROIC as it relates to the components of that target. Would you expect a greater proportion of the move towards 9% comes from your earnings so the numerator or your reduced invested capital the denominator? Kind of how are you all thinking about the contribution as you move forward?
Yeah. That's a great question. So, yeah, there is a couple of things. One is through the portfolio of actions we've been taking throughout the year. So if you look at the gap where we finished here at 7.9% to get to 9% that's 1.1% if you think about that purely on an earnings perspective that's less than $4 a ton on our crush margin based on our volume for this year. So it puts into perspective, it could be achievable to the revenue side, but we're not going to rely on that necessarily to try to get us there. Obviously, driving earnings is an important piece of it. But as we look at the portfolio of actions, we've taken this year half that gap over half that gap could be made up just by a reduction in invested capital based on the actions we've taken.
Some of those have been announced, but haven't been executed yet. So I think we would view – our goal to get to 9% at this point to be half driven by portfolio action, half driven by driving earnings. It's probably a good baseline.
Okay. Great. That's helpful. And then I want to ask about the Edible Oils business but kind of the just the veggie oil market more broadly, obviously had a great back half of the year in palm oil, soybean oil. The market has been volatile here year-to-date with coronavirus. And so I'm just curious, if you could just give us your view to the extent you have visibility on the vegetable oil market and palm oil and soybean oil in particular in the nearest term?
Sure. The – I think one of the keys is the last time we were all together, if you remember crush margins were pretty tough. Crush has slowed in some regions. That had tightened up oil a bit. And then with the lower palm production, we saw the palm market rally at the same time rally on price at the same time that oil supplies tightened into the end of year and that – some of those dynamics is also what helped us deliver Q4. We believe that could tighten further coming here into 2020. Softseed margins continue to be good outside the EU. And then we've got biodiesel creating a lot of demand for refining capacity and that's a net positive for the oil outlook as well, when you look at the mandates the U.S. going from 2.1 billion gallons to 2.43 billion here in 2020, so there are a lot of things driving. I think the big overlay is global demand, but that's yet to be seen.
Okay. Fair enough. Thanks. Good luck.
Thank you.
The next question comes from Rob Moskow of Credit Suisse. Please go ahead.
Hi, thanks. Greg and John, the -- if I think about the potential for a rebound for your business through China, I would imagine it would be a resumption of normal trade flows, but then also rebuilding of the pig herd in China following the African swine fever impact. I imagine you've been conservative on both of those factors. Is it -- does it make sense to think of them both as incremental to your business or is one bigger than the other? Or is there any way to quantify it?
I'm not sure there's a way to quantify it. I think in China on ASF, we do think that about 40% of the herd was liquidated. It looks like we think that's done as long as we don't get ASF to come back a resurgence of it. And some of the demand has improved and some of the small people have been able to switch over to poultry to chicken quickly. And then we've seen sales rebound 2%, so hope that the worst is in there. As far as to the U.S.-China trade, no doubt we're always a big fan of markets that are economic and clear and concise and open fair and free trade, but regardless of that I'm glad we've got a global platform and this great team running it. And so we'll continue to stay in the position for a number of outcomes and not try to over guess what's going to happen.
And if you really kind of tried to frame up the drivers as you look at 2020, we took our outlook right and we based that visibility on the curves. And we didn't give any adjustments plus or minus versus what you can look through today around trade, ASF or the coronavirus. If you looked at the challenges the things you don't want to see happen, you wouldn't want to see ASF return to China or spread. You wouldn't want to see coronavirus continue to grow, which would be tough on oil and meal demand. And you wouldn't want to see these trade disruptions continue in a way that's bad for margins on crushing as well as distribution and then you wouldn't want to see animal numbers decline overall. And you also probably don't want to see Argentinian crush run up and run at high volumes uneconomically.
On the flip side, what you do want to root for would be seeing oil demand continue to tighten as we just talked about as it has been. We see the annual -- the animal numbers grow which means no spread of ASF. Argentina would remain slow as it is now. We'd see wheat continue to remain tight. And the outlook right now is there'll be less wheat fed. And of course that means it's not competing with soybean meal. It's better for soybean meal demand. And then the coronavirus ends up being a flash and goes away, so we're not even talking about it next quarter.
We see a little bit of improvement in the Brazilian economy after the pension reform last year. That was definitely positive. And so we'd like to see the Brazilian economy continue to improve. That would be good for really all of our businesses. And then see U.S. meat exports improve which would be constructive to prices and that would continue to keep the animal numbers high in the U.S. and be good for demand. So if there's -- the list of things to root for if you need me to e-mail them, I'd be happy to do that.
I think I'll just rely on the transcript. Thanks. But if I can ask you one little element of that. I think you said you would root for oil demand to continue to tighten is that what you said? Because I would think you would want demand to be stronger on oil. What I get…
Yes. Sorry. By demand growing the S&D picture tight. Sorry if that's not clear enough.
Okay. Got it. Okay. Thank you.
Thank you.
The next question comes from Heather Jones of Heather Jones Research. Please go ahead.
Good morning. Congratulations on the quarter.
Thank you very much.
Yes. I wanted to clarify something you said earlier Greg. Did you say the first half outlook for Agribusiness is positive and that you are lacking visibility -- the visibility isn't good in the back half?
That's correct. You just…
So thinking about the cadence of the quarters right now and given there's a little visibility in the back half is it fair to assume -- I know you didn't quantify how much you are anticipating Agribusiness being down but when we're thinking about how the year is going to play out are you expecting at this point that first half Agribusiness would be up year-on-year and in the back half potentially down? How should we be thinking about that?
We -- there are so many moving pieces. And in this business the one thing we've seen with it being seasonal and cyclical and the fact that we do operate across the value chain the one thing we know right is that margin can move from one area of our business to another and it can move from one quarter to another. So I'm really hesitant to try to put the specificity really around the quarters. That's why we kind of like to talk to the full year and where we're trending. So as we talked about momentum out of Q4 we feel that momentum and what we've been able to do to protect margins in the first half and kind of the outlook of -- as we look through we feel good about the momentum coming in. If you look first half year-over-year Q2 was pretty big prior year.
Okay. Okay. But Q1 an easier comp. And then moving on to edible oil. So your comments were all bullish and -- which I share that view. So given that -- I was sort of surprised about the outlook language. I mean you guys had mentioned that Q3 of 2019 that it was probably not good to run rate that because pretty much everything went right but you talked about fundamentals being good. And now you're talking about similar year-on-year excluding the timing effect. And so just wondering because your qualitative commentary sounds really bullish, but then the quantitative commentary doesn't sound as much. And just wondering if you could help me reconcile the two.
Well, the flip side would maybe be some of the things in Brazil. What we've seen while it's been helpful for the Agribusiness has probably been a little bit challenging for Food & Ingredients. So there are a number of puts and takes across the portfolio. I think we are concerned from a demand overall with -- just as we talked about the number of unknowns in the marketplace between the ASF the Coronavirus Argentinian situation. Yes. And I don't know if I have a better -- a more specific look than that.
So there's some conservatism built into that commentary related to potential demand impact from Coronavirus?
I think what we've tried to do is look through and tell you what we can see and not what we hope is going to happen.
Okay. Perfect. Thank you so much.
The next question comes from Ken Zaslow of Bank of Montreal. Please go ahead.
Hey. Good morning, everybody.
Good morning, Ken.
Just a couple of questions. One is when you think about the portfolio change that you've done can you quantify if that was not done how much your profits would have been down relative to where you were? Or kind of said differently based on what you've done how much have you improved off a base level or some sort of quantitative view on that?
Yes. I think the -- if you think about the actions that we've actually taken or that had been announced, so I'll go that way because we've got a couple that are going to close here a couple of small things that are going to close here shortly. Now -- and one of those of course our margarine and mayo business that we sold and announced in South America.
We would -- just on the things that we've announced or executed, we would expect EBIT -- EBIT is going to accrete $10 million to $15 million, but probably more importantly should be an accretion on the share price around $0.25, driven by both EBIT accretion and lower interest cost going forward from proceeds. So that would of course include sugar and that's assuming our sugar JV performs at what we expect it to on the earnings side. So, we do expect some reasonable amount of accretion here based on what we've done already. And then of course, we're continuing to look at other opportunities.
And what about the utilization rate. I thought you said also that there was a greater -- I think the first comment that was said was the utilization rate was all-time high and cost is all-time low or something like that -- or five-year low. I think that was interesting. So I'm just trying to figure out, how that all played out because that doesn't seem to always be included in the hard numbers.
Yes. And some of that is really the operating model and how the commercial teams and the industrial teams are really working hand in glove about getting the assets one in shape to run when the margins are there and then getting us positioned to get -- to capture the earnings at risk existing in that asset base, so that we can run our assets harder and not have any unscheduled downtime, whether it's for maintenance or whether it's for commercial things.
So, I think the team has been much more nimble and especially in this environment being able to flex our global system and keep our assets full when the margins are there. So, that's been a result of some footprint, but a lot operating model in the team. And then as John talked about, some of the portfolio changes that we've made as those things close and we unwire them from the organization then worked to get the stranded costs out. Those are things that are in fly. They're not an overnight flip the switch.
Yes, I agree. It just seems like there's more -- I guess what I was trying to figure out is out of all these building blocks, it sounds like there's at least $50 million to $75 million of incremental profit that has been built up through corporate actions and I don't know for sure, but that's what it seems like. I just didn't know if there's a way to quantify utilization rates costs and portfolio management into three buckets of how to actually think of the incremental earnings from internal actions.
Well, what we're going to try to do is prove it by delivering quarter at a time and then being real transparent about how we deliver it.
My follow-up question is, when you think about your portfolio management by the end of the second quarter, is that really the end of it? Because it seems like there is still a fair bit of assets under the Bunge umbrella that may be earning return on invested capital that might be dilutive to your 9%. How much has to be done after that? And what is the progression in terms of how we're going to expect to see that? And I'm going to leave...
Yes. How we've been talking about internally, we had -- going to be initial portfolio review and put our target list together and the things that you've seen done and the things that we have teams working against today and that are underway. Those were pushing to be able as we said to have finished or in a position to announce our intentions by the end of the second quarter, when we do the Investor Day because, what -- our goal is to be clear about what asset base. We continue to run going forward and be able to talk about the earnings power of that and our growth plans.
That doesn't mean and as we've told the team, running a great business is constantly challenging in the things that aren't making the return hurdles that they either have a plan to get there on a very short time line or they have exit plans. And that never stops. That's continuous improvement. That's like GCP is a muscle memory and now we are challenging and chasing our best metrics across our global platform to continue to drive cost out in a continuous improvement just like risk management. We're never going to be perfect. It's always trying to get better. It's continuous improvement. So, this just becomes the culture of how we're running the company. So, that it's not an event it's an everyday event.
Okay. I appreciate it. Thank you, very much.
Thank you.
This concludes our question-and-answer session. I would like to turn the conference back over to Ruth Ann Wisener for any closing remarks.
Thanks for your interest in Bunge. And if you have any further questions, please follow-up with me. Have a good day.
The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.