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July 27, 2022, 4:34 p.m. EDT

10-Q: BUNGELTD

(EDGAR Online via COMTEX) -- ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Second Quarter 2022 Overview

You should refer to "Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations - Factors Affecting Operating Results" in our Annual Report on Form 10-K for the year ended December 31, 2021 for a discussion of key factors affecting operating results in each of our business segments. In addition, you should refer to "Item 9A, Controls and Procedures" in our Annual Report on Form 10-K for the year ended December 31, 2021 and to "Item 4, Controls and Procedures" in this Quarterly Report on Form 10-Q for the period ended June 30, 2022 for a discussion of our internal controls over financial reporting.

Non-U.S. GAAP Financial Measures

Total segment earnings before interest and taxes ("EBIT") is an operating performance measure used by Bunge's management to evaluate segment operating activities. Bunge also uses Core Segment EBIT, Non-core Segment EBIT and Total Segment EBIT to evaluate the operating performance of Bunge's Core reportable segments, Non-core reportable segments, and Total reportable segments together with our Corporate and Other activities. Core Segment EBIT is the aggregate of the earnings before interest and taxes of each of Bunge's Agribusiness, Refined and Specialty Oils, and Milling segments. Non-core Segment EBIT is the earnings before interest and taxes of Bunge's Sugar & Bioenergy segment. Total Segment EBIT is the aggregate of the earnings before interest and taxes of Bunge's Core and Non-core reportable segments, together with its corporate and other activities. Bunge's management believes Core Segment EBIT, Non-core Segment EBIT and Total Segment EBIT are useful measures of operating profitability since the measures allow for an evaluation of the performance of its segments without regard to financing methods or capital structure. In addition, EBIT is a financial measure that is widely used by analysts and investors in Bunge's industry. Total Segment EBIT is a non-U.S. GAAP financial measure and is not intended to replace Net income (loss) attributable to Bunge, the most directly comparable U.S. GAAP financial measure. Further, Total Segment EBIT excludes EBIT attributable to noncontrolling interests and is not a measure of consolidated operating results under U.S. GAAP and should not be considered as an alternative to Net income (loss) or any other measure of consolidated operating results under U.S. GAAP. See the reconciliation of Net income (loss) attributable to Bunge to Total Segment EBIT below.

Cash provided by (used for) operating activities, adjusted is calculated by including the Proceeds from beneficial interests in securitized trade receivables with Cash provided by (used for) operating activities. Cash provided by (used for) operating activities, adjusted is a non-GAAP financial measure and is not intended to replace Cash provided by (used for) operating activities, the most directly comparable U.S. GAAP financial measure. Our management believes presentation of this measure allows investors to view our cash generating performance using the same measure that management uses in evaluating financial and business performance and trends.

Executive Summary

Net Income (Loss) Attributable to Bunge - For the three months ended June 30, 2022, Net income attributable to Bunge was $206 million, a decrease of $156 million compared to $362 million for the three months ended June 30, 2021. For the six months ended June 30, 2022, Net income attributable to Bunge was $894 million, a decrease of $300 million, compared to $1,194 million for the six months ended June 30, 2021. The decreases for the three and six months ended June 30, 2022 were due to lower Segment EBIT in our Core segments and Corporate and Other activities, as further discussed in the Segment Overview & Results of Operations section below.

Earnings Per Common Share - Diluted - For the three months ended June 30, 2022, Net income attributable to Bunge common shareholders, diluted, was $1.34 per share, a decrease of $1.03 per share, compared to income of $2.37 per share for the three months ended June 30, 2021. For the six months ended June 30, 2022, Net income attributable to Bunge common shareholders, diluted, was $5.81 per share, a decrease of $2.04 per share, compared to income of $7.85 per share for the six months ended June 30, 2021.

EBIT - For the three months ended June 30, 2022, Total Segment EBIT was $322 million, a decrease of $137 million compared to Total Segment EBIT of $459 million for the three months ended June 30, 2021. For the six months ended June 30, 2022, Total Segment EBIT was $1,215 million, a decrease of $330 million compared to Total Segment EBIT of $1,545 million for the six months ended June 30, 2021. The decreases in Total Segment EBIT for the three and six

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Income Tax (Expense) Benefit - Income tax expense was $36 million for the three months ended June 30, 2022 compared to income tax expense of $50 million for the three months ended June 30, 2021. Income tax expense was $144 million for the six months ended June 30, 2022 compared to $242 million for the six months ended June 30, 2021. The decreases in income tax expense for the three and six months ended June 30, 2022 were primarily due to lower pretax income.

Liquidity and Capital Resources - At June 30, 2022, working capital, which equals Total current assets less Total current liabilities, was $6,631 million, a decrease of $603 million, compared to working capital of $7,234 million at June 30, 2021, and a decrease of $505 million, compared to working capital of $7,136 million at December 31, 2021. The decreases in working capital at June 30, 2022 compared to June 30, 2021 and compared to December 31, 2021, were primarily due to an increase in the current portion of long-term debt due to the reclassification from long-term debt of the current portion of our 1.85% Senior Notes, due 2023.

Segment Overview & Results of Operations

Our operations are organized, managed and classified into four reportable segments based upon their similar economic characteristics, nature of products and services offered, production processes, types and classes of customer, and distribution methods. We further organize these reportable segments into Core operations and Non-core operations. Core operations comprise our Agribusiness, Refined and Specialty Oils, and Milling segments. Non-core operations comprise our Sugar & Bioenergy segment, which itself primarily comprises the Company's 50% interest in the net earnings of BP Bunge Bioenergia, a joint venture with BP

Our remaining operations are not reportable segments, as defined by the applicable accounting standard, and are classified as Corporate and Other. Corporate and Other includes salaries and overhead for corporate functions that are not allocated to our individual reportable segments because the operating performance of each reportable segment is evaluated by the Company's chief operating decision maker exclusive of these items, as well as certain other activities including Bunge Ventures, the Company's captive insurance activities and securitization program, as well as certain income tax assets and liabilities.

Effective January 1, 2022, we changed our methodology for reporting volumetric data for our reportable segments to simplify and more closely align our volume reporting with our primary income-generating activities. The primary change comprises the elimination of grain and oilseed volumes originated from our suppliers. Volumes are now reported as follows:

In our Agribusiness segment, reported Processing volumes comprise oilseed volumes crushed (processed) during a period, which approximate sales volumes to third parties during the same period, and Merchandising volumes represent sales volumes to third party customers.

Refined and Specialty Oils segment volumes represent sales volumes to third party customers.

Milling segment volumes represent feedstock ground (processed) during a period, again approximating sales volumes during the same period.

No volumes will be reported for our Sugar and Bioenergy segment, which primarily comprises the Company's net earnings from its 50% interest in BP Bunge Bioenergia, or our Corporate and Other activities, which have no material revenue-generating activities.

Certain reclassifications of prior period volumes have been made to conform to current presentation.

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A reconciliation of Net income (loss) attributable to Bunge to Total Segment EBIT follows:







                                                             Three Months Ended                      Six Months Ended
                                                                  June 30,                               June 30,
        (US$ in millions)                                 2022                2021               2022                2021
        Net income (loss) attributable to Bunge       $      206          $     362          $      894          $   1,194
        Interest income                                      (11)                (6)                (20)               (15)
        Interest expense                                      92                 54                 203                127
        Income tax expense (benefit)                          36                 50                 144                242
        Noncontrolling interests' share of interest
        and tax                                               (1)                (1)                 (6)                (3)
        Total Segment EBIT                            $      322          $     459          $    1,215          $   1,545
        Agribusiness Segment EBIT                             93                364                 792              1,200
        Refined and Specialty Oils Segment EBIT              218                102                 391                410
        Milling Segment EBIT                                  97                 34                 147                 42
        Core Segment EBIT                                    408                500               1,330              1,652
        Corporate and Other EBIT                             (92)               (60)               (155)              (146)
        Sugar and Bioenergy Segment EBIT                       6                 19                  40                 39
        Non Core Segment EBIT                                  6                 19                  40                 39
        Total Segment EBIT                            $      322          $     459          $    1,215          $   1,545
        Core Segments
        Agribusiness Segment
                                                            Three Months Ended            Six Months Ended
                                                                 June 30,                     June 30,
        (US$ in millions, except volumes)                   2022           2021          2022          2021
        Volumes (in thousand metric tons)                   19,490        21,649        39,560        43,293
        Net sales                                       $   12,747      $ 11,654      $ 23,978      $ 21,444
        Cost of goods sold                                 (12,431)      (11,244)      (22,798)      (20,149)
        Gross profit                                           316           410         1,180         1,295
        Selling, general and administrative expense           (119)         (114)         (240)         (194)
        Foreign exchange gains (losses)                        (93)           36           (84)           29
        EBIT attributable to noncontrolling interests          (13)           (3)          (17)          (11)
        Other income (expense) - net                           (14)           24           (77)           46
        Income (loss) from affiliates                           16            11            30              35
        Total Agribusiness Segment EBIT                 $       93      $    364      $    792      $  1,200
        


Three Months Ended June 30, 2022 Compared to Three Months Ended June 30, 2021

Agribusiness segment Net sales increased $1,093 million, or 9%, to $12,747 million for the three months ended June 30, 2022, compared to $11,654 million for the three months ended June 30, 2021. The net increase was primarily due to the following:

In Processing, Net sales increased $812 million, primarily due to higher average sales prices in our soybean processing businesses in all regions and in our European softseed processing businesses, both primarily resulting Table of Contents

In Merchandising, Net sales increased $281 million, primarily due to higher average sales prices in our global corn, wheat and oils businesses, as a result of higher global commodity prices following the onset of the Ukraine-Russia war, which exacerbated an already tight commodity supply environment, and strong execution and higher prices in our ocean freight business. The above increases were partially offset by lower overall sales volumes, due to both the Ukraine-Russia war and the completion of the sale of a portfolio of grain elevators in the interior of the United States during the third quarter of 2021.

Cost of goods sold increased $1,187 million, or 11%, to $12,431 million for the three months ended June 30, 2022 compared to $11,244 million for the three months ended June 30, 2021. The net increase was primarily due to the following:

In Processing, Cost of goods sold increased $957 million, primarily due to higher average commodity prices, as noted in Net sales above, increased industrial input costs, in particular energy, unfavorable mark-to-market results, as well as $44 million in charges for losses sustained in relation to the Ukraine-Russia war, primarily related to inventories physically located in occupied territories in Ukraine, or in difficult to access locations with high costs of recovery.

In Merchandising, Cost of goods sold increased $230 million, primarily due to the higher average commodity prices, as noted in Net sales above, as well as $25 million in charges for losses sustained in relation to the Ukraine-Russia war, primarily related to inventories physically located in occupied territories in Ukraine, or in difficult to access locations with high costs of recovery, partially offset by more favorable mark-to-market results, primarily in our ocean freight business, when compared to the prior year period.

Gross profit decreased $94 million, or 23%, to $316 million for the three months ended June 30, 2022, compared to $410 million for the three months ended June 30, 2021. The net decrease was primarily due to the following:

In Processing, a decrease of $145 million was due to higher Cost of goods sold in excess of higher Net sales, primarily driven by higher industrial input costs, in particular energy, as well as unfavorable mark-to-market results, as described above.

In Merchandising, an increase of $51 million was due to higher Net sales in excess of higher Cost of goods sold, primarily driven by strong execution and higher prices in our ocean freight business and more favorable mark-to-market results, again primarily in our ocean freight business, compared to the prior year period.

Selling, general and administrative ("SG&A") expenses increased $5 million, or 4%, to $119 million for the three months ended June 30, 2022, compared to $114 million for the three months ended June 30, 2021. The increase was primarily driven by increased variable incentive costs.

Foreign exchange results decreased $129 million, or 358%, to a loss of $93 million for the three months ended June 30, 2022, compared to a gain of $36 million for the three months ended June 30, 2021. Foreign exchange results were primarily driven by losses on U.S. dollar denominated loans payable in non-U.S. functional currency operations, due to a strengthening U.S. dollar.

Other income (expense) - net decreased $38 million, to expense of $14 million for the three months ended June 30, 2022, compared to income of $24 million for the three months ended June 30, 2021. The decrease was primarily due to a $5 million loss on marketable securities and other short-term investments with exposures to Ukraine, following the onset of the Ukraine-Russia war, as well as lower results from our financial services activities.

Segment EBIT decreased $271 million, or 74%, to $93 million for the three months ended June 30, 2022, compared to $364 million for the three months ended June 30, 2021. The net decrease was primarily due to the following:

In Processing, a decrease of $327 million was primarily due to lower Gross profit, higher SG&A, lower Foreign exchange results and lower Other income (expense) - net, as described above.

In Merchandising, an increase of $56 million was primarily due to higher Gross profit, partially offset by higher SG&A and lower Other income (expense) - net, as described above.

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Six Months Ended June 30, 2022 Compared to Six Months Ended June 30, 2021

Agribusiness segment Net sales increased by $2,534 million, or 12%, to $23,978 million for the six months ended June 30, 2022, compared to $21,444 million for the six months ended June 30, 2021. The net increase was primarily due to the following:

In Processing, Net sales increased $1,668 million, primarily due to higher average sales prices in our soybean processing businesses in all regions and in our European softseed processing businesses, both primarily resulting from higher global commodity prices following the onset of the Ukraine-Russia war, which exacerbated an already tight commodity supply environment, as well as higher volumes in North America due to strong oil and meal demand. The above increases were partially offset by lower sales volumes, primarily in our European softseeds businesses, due to limited operations in Ukraine as a result of the Ukraine-Russia war, as well as in China, due to lower soybean meal demand earlier in the current year.

In Merchandising, Net sales increased $866 million, primarily due to higher average sales prices in our global wheat, corn, and oil businesses, as a result of higher global commodity prices following the onset of the Ukraine-Russia war, which exacerbated an already tight commodity supply environment, and strong execution and higher prices in our ocean freight business. The above increases were partially offset by lower sales volumes in our global corn, wheat, and oil businesses, as a result of both the Ukraine-Russia war, as well as the completion of the sale of a portfolio of grain elevators in the interior of the United States during the third quarter of 2021.

Cost of goods sold increased by $2,649 million, or 13%, to $22,798 million for the six months ended June 30, 2022, compared to $20,149 million for the six months ended June 30, 2021. The net increase was primarily due to the following:

In Processing, Cost of goods sold increased $2,001 million, primarily due to higher average commodity prices, as noted in Net sales above, increased industrial input costs, in particular energy, unfavorable mark-to-market results, as well as $52 million in charges for losses sustained in relation to the Ukraine-Russia war, primarily related to inventories physically located in occupied territories in Ukraine, or in difficult to access locations with high costs of recovery.

In Merchandising, Cost of goods sold increased $648 million, primarily due to the higher average commodity prices, as noted in Net sales above, as well as $28 million in charges for losses sustained in relation to the Ukraine-Russia war, primarily related to inventories physically located in occupied territories in Ukraine, or in difficult to access locations with high costs of recovery, partially offset by more favorable mark-to-market results, primarily in our ocean freight business, when compared to the prior year period.

Gross profit decreased by $115 million, or 9%, to $1,180 million for the six months ended June 30, 2022, compared to $1,295 million for the six months ended June 30, 2021. The net decrease was primarily due to the following:

In Processing, a decrease of $333 million was due to higher Cost of goods sold in excess of higher Net sales, primarily driven by higher industrial input costs, in particular energy, as well as unfavorable mark-to-market results, as described above.

In Merchandising, an increase of $218 million was due to higher Net sales in excess of higher Cost of goods sold, primarily driven by strong execution and higher prices in our ocean freight business and more favorable mark-to-market results, again primarily in our ocean freight business, when compared to the prior year period.

SG&A increased by $46 million, or 24%, to $240 million for the six months ended June 30, 2022, compared to $194 million for the six months ended June 30, 2021. The increase was primarily driven by increased variable incentive costs.

Foreign exchange results decreased $113 million, or 390%, to a loss of $84 million for the six months ended June 30, 2022, compared to a gain of $29 million for the six months ended June 30, 2021. Foreign exchange results were primarily driven by losses on U.S. dollar denominated loans payable in non-U.S. functional currency operations during the second quarter, due to a strengthening U.S. dollar.

Other income (expense) - net decreased by $123 million, or 267%, to expense of $77 million for the six months ended June 30, 2022, compared to income of $46 million for the six months ended June 30, 2021. The decrease was

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primarily due to a $69 million loss on marketable securities and other short-term investments with exposures to Ukraine, following the onset of the Ukraine-Russia war.

Segment EBIT decreased by $408 million, or 34%, to $792 million for the six months ended June 30, 2022, compared to $1,200 million for the six months ended June 30, 2021. The net decrease was primarily due to the following:

In Processing, a decrease of $505 million was primarily due to lower Gross profit, higher SG&A, lower Foreign exchange results and lower Other income (expense) - net, as described above.

In Merchandising, an increase of $97 million was primarily due to higher Gross profit, partially offset by higher SG&A, lower Foreign exchange results and lower Other income (expense) - net, as described above.







        Refined and Specialty Oils Segment
                                                              Three Months Ended                        Six Months Ended
                                                                   June 30,                                 June 30,
        (US$ in millions, except volumes)                   2022                 2021               2022                2021
        Volumes (in thousand metric tons)                  2,328                 2,242               4,624              4,419
        Net sales                                     $    4,445             $   3,198          $    8,421          $   5,924
        Cost of goods sold                                (4,120)               (3,003)             (7,834)            (5,494)
        Gross profit                                         325                   195                 587                430
        Selling, general and administrative expense          (87)                  (90)               (176)              (176)
        Foreign exchange gains (losses)                       (8)                    1                  (8)                 2
        EBIT attributable to noncontrolling interests         (7)                   (5)                 (4)               (83)
        Other income (expense) - net                          (5)                    1                  (8)               237
        Income (loss) from affiliates                          -                     -                   -                  -
        Total Refined and Specialty Oils Segment EBIT $      218             $     102          $      391          $     410
        


Three Months Ended June 30, 2022 Compared to Three Months Ended June 30, 2021

Refined and Specialty Oils segment Net sales increased $1,247 million, or 39%, to $4,445 million for the three months ended June 30, 2022, compared to $3,198 million for the three months ended June 30, 2021, primarily due to higher average sales prices in all regions, driven by strong oil demand for use as renewable diesel feedstock as well as strong food services demand across all regions.

Cost of goods sold increased $1,117 million, or 37%, to $4,120 million for the three months ended June 30, 2022, compared to $3,003 million for the three months ended June 30, 2021. The increase in Cost of goods sold was primarily due to higher average commodity prices in all regions, as described for Net sales above, accelerated depreciation in relation to our Wormerveer facility located in the Netherlands, which during the fourth quarter of 2021 we announced would be closing in 2025, and increased industrial input costs, in particular energy, during the current year, partially offset by more favorable mark-to-market results.

Gross profit for the three months ended June 30, 2022 increased $130 million, or 67%, to $325 million, compared to $195 million for the three months ended June 30, 2021. The increase was due to the increase in Net sales in excess of the increase in Cost of goods sold, primarily driven by strong oil demand for use as renewable diesel feedstock and in food services, as described above.

SG&A expenses decreased $3 million, or 3%, to $87 million for the three months ended June 30, 2022, compared to $90 million the three months ended June 30, 2021. The decrease is primarily driven by lower bad debt expense resulting from collections that had been reserved previously due to the onset and uncertainty of the Ukraine-Russia war.

Segment EBIT increased $116 million, or 114%, to $218 million for the three months ended June 30, 2022, compared to $102 million for the three months ended June 30, 2021. The increase was primarily due to higher Gross profit as described above.

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Six Months Ended June 30, 2022 Compared to Six Months Ended June 30, 2021

Refined and Specialty Oils segment Net sales increased $2,497 million, or 42%, to $8,421 million for the six months ended June 30, 2022, compared to $5,924 million for the six months ended June 30, 2021, primarily due to higher average sales prices in all regions, driven by strong oil demand for use as renewable diesel feedstock as well as strong food services demand across all regions.

Cost of goods sold increased by $2,340 million, or 43%, to $7,834 million for the six months ended June 30, 2022, compared to $5,494 million for the six months ended June 30, 2021. The increase in Cost of goods sold was primarily due to higher average commodity prices in all regions, as described for Net sales above, as well as unfavorable mark-to-market results, accelerated depreciation in relation to our Wormerveer facility, located in the Netherlands, which during the fourth quarter of 2021 we announced would be closing in 2025, and increased . . .

Jul 27, 2022

COMTEX_411107043/2041/2022-07-27T16:34:11

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