BUNGE GLOBAL SA The following should be read in conjunction with "Cautionary Statement Regarding Forward Looking Statements" and our combined consolidated financial statements and notes thereto included in Item 15 of this Annual Report on Form 10-K. Operating Results Factors Affecting Operating ResultsBunge Limited , aBermuda company, together with its subsidiaries, is a leading global agribusiness and food company with integrated operations that stretch from farmer to consumer. The commodity nature of the Company's principal products, as well as regional and global supply and demand variations that occur as an inherent part of the business, make volumes an important operating measure. Accordingly, information is included in "Segment Results" that summarizes certain items in our consolidated statements of income and volumes by reportable segment. The common unit of measure for all reported volumes is metric tons. A description of reported volumes for each reportable segment has also been included in the discussion of key factors affecting results of operations in each of our business segments as discussed below. Agribusiness In the Agribusiness segment, we purchase, store, transport, process and sell agricultural commodities and commodity products. Profitability in this segment is affected by the availability and market prices of agricultural commodities and processed commodity products and the availability and costs of energy, transportation and logistics services. Profitability in our oilseed processing operations is also impacted by volumes procured, processed and sold and by capacity utilization rates. Availability of agricultural commodities is affected by many factors, including weather, farmer planting and selling decisions, plant diseases, governmental policies, and agricultural sector economic conditions. Reported volumes in this segment primarily reflect (i) grains and oilseeds originated from farmers, cooperatives or other aggregators and from which "origination margins" are earned; (ii) oilseeds processed in our oilseed processing facilities and from which "crushing margins" are earned, representing the margin from the industrial separation of the oilseed into its protein meal and vegetable oil components, both of which are separate commodity products; and (iii) third party sales of grains, oilseeds and related commodity products merchandised through our distribution businesses and from which "distribution margins" are earned. The foregoing subsegment volumes may overlap as they produce separate margin capture opportunities. For example, oilseeds procured in our South American grain origination activities may be processed in our oilseed processing facilities inAsia-Pacific and will be reflected at both points within the segment. As such, these reported volumes do not represent solely volumes of net sales to third-parties, but rather where margin is earned, appropriately reflecting their contribution to our global network's capacity utilization and profitability. Demand for our purchased and processed Agribusiness products is affected by many factors, including global and regional economic conditions, changes in per capita income, the financial condition of customers and customer access to credit, worldwide consumption of food products, particularly pork and poultry, population growth rates, relative prices of substitute agricultural products, outbreaks of disease associated with livestock and poultry, and demand for renewable fuels produced from agricultural commodities and commodity products. We expect that the factors described above will continue to affect global supply and demand for our Agribusiness products for the foreseeable future. We also expect that, from time to time, imbalances will likely exist between oilseed processing capacity and demand for oilseed products in certain regions, which impacts our decisions regarding whether, when and where to purchase, store, transport, process or sell these commodities, including whether to change the location of or adjust our own oilseed processing capacity. Additionally, price fluctuations and availability of commodities may cause fluctuations in our working capital, such as inventories, accounts receivable and borrowings over the course of a given year. For example, increased availability of commodities at harvest times often causes fluctuations in our inventories and borrowings. Increases in agricultural commodity prices will also generally cause our cash flow requirements to increase as our operations require increased use of cash to acquire inventories and fund daily settlement requirements on exchange traded futures that we use to hedge our physical inventories. Edible Oils and Milling In Edible Oil Products and Milling Products segments, our operating results are affected by changes in the prices of raw materials, such as crude vegetable oils and grains, the mix of products that we sell, changes in consumer eating habits, changes in per capita income, consumer purchasing power levels, availability of credit to customers, governmental dietary guidelines and policies, changes in regional economic conditions and the general competitive environment in our markets. Raw material inputs to our production processes in the Edible Oil Products and Milling Products segments are largely sourced at 27
--------------------------------------------------------------------------------
Table of Contents
market prices from our Agribusiness segment. Reported volumes in these segments reflect third-party sales of our finished products and, as such, include the sales of products derived from raw materials sourced from the Agribusiness segment as well as from third-parties. The unit of measure for these volumes is metric tons as these businesses are linked to the commodity raw materials, which are their primary inputs. Fertilizer In the Fertilizer segment, demand for our products is affected by the profitability of the agricultural sectors we serve, the availability of credit to farmers, agricultural commodity prices, the types of crops planted, the number of acres planted, the quality of the land under cultivation and weather-related issues affecting the success of the harvests. Our profitability is impacted by international selling prices for fertilizers and fertilizer raw materials, such as phosphate, sulfur, ammonia and urea, ocean freight rates and other import costs, as well as import volumes at the port facilities we manage. As our operations are inSouth America , primarilyArgentina , our results in this segment are typically seasonal, with fertilizer sales normally concentrated in the third and fourth quarters of the year due to the timing of the South American agricultural cycle. Reported volumes in this segment reflect third-party sales of our finished products. Sugar and Bioenergy Our Sugar and Bioenergy segment primarily comprises our 50% interest inBP Bunge Bioenergia , the joint venture formed inDecember 2019 by the combination of our Brazilian sugar and bioenergy operations with the Brazilian biofuels business of BP. Our Brazilian sugar and bioenergy operations formed the majority of our Sugar and Bioenergy segment through which we produced and sold sugar and ethanol derived from sugarcane, as well as energy derived from the sugar and ethanol production process.BP Bunge Bioenergia operates on a stand-alone basis with a total of 11 mills located across the Southeast, North and Midwest regions ofBrazil .BP Bunge Bioenergia is now the second largest operator by effective crushing capacity in the Brazilian sugarcane ethanol biofuel industry. As a result of this transaction, we no longer consolidate our Brazilian sugar and bioenergy operations in our consolidated financial statements and instead account for our interest in the joint venture under the equity method of accounting. Accordingly, our reported Sugar and Bioenergy results for 2020 include our share of the net earnings inBP Bunge Bioenergia , whereas our Sugar and Bioenergy results for 2019 reflect our former 100% ownership interest in the Brazilian sugar and bioenergy operations contributed to the Joint Venture. Although we are committed to supporting the growth and development ofBP Bunge Bioenergia , our long-term goal is to seek strategic opportunities for our investment in the joint venture. Profitability in this segment is affected by the profitability of the joint venture and, therefore the value of our investment and the amount and timing of distributions we receive, if any. In turn, the profitability of the joint venture is affected by the availability and quality of sugarcane, which impacts capacity utilization rates and the amount of sugar that can be extracted from the sugarcane, and by market prices of sugar and ethanol. The availability and quality of sugarcane is affected by many factors, including weather, geographical factors such as soil quality and topography, and agricultural practices. Once planted, sugarcane may be harvested for several continuous years, but the yield decreases with each subsequent harvest. As a result, the current optimum economic cycle is generally five to seven consecutive harvests, depending on location. The joint venture owns and/or has partnership agreements to manage farmland on which it grows and harvests sugarcane and also purchases sugarcane from third parties. Prices of sugarcane inBrazil are established by Consecana, thestate of São Paulo sugarcane, sugar and ethanol council, and are based on the sucrose content of the cane and the market prices of sugar and ethanol. Demand for the joint venture's products is affected by such factors as changes in global or regional economic conditions, the financial condition of customers and customer access to credit, worldwide consumption of food products, population growth rates, changes in per capita income and demand for and governmental support of renewable fuels produced from agricultural commodities, including sugarcane. In addition to these industry related factors which impact our business areas, our results of operations in all business areas and segments are affected by the following factors: Foreign Currency Exchange Rates Due to the global nature of our operations, our operating results can be materially impacted by foreign currency exchange rates. Both translation of our foreign subsidiaries' financial statements and foreign currency transactions can affect our results. On a monthly basis, for subsidiaries whose functional currency is a currency other than theU.S. dollar, subsidiary statements of income and cash flows must be translated intoU.S. dollars for consolidation purposes based on weighted-average exchange rates in each monthly period. As a result, fluctuations of local currencies compared to theU.S. dollar during each monthly period impact our consolidated statements of income and cash flows for each reported period (per quarter and year-to-date) and also affect comparisons between those reported periods. Subsidiary balance sheets are translated using exchange rates as of the balance sheet date with the resulting translation adjustments reported in our consolidated balance sheets as a component of Accumulated other comprehensive income (loss). 28
--------------------------------------------------------------------------------
Table of Contents
Additionally, we record transaction gains or losses on monetary assets and liabilities that are not denominated in the functional currency of the entity. These amounts are remeasured into their respective functional currencies at exchange rates as of the balance sheet date, with the resulting gains or losses included in the entity's statement of income and, therefore, in our consolidated statements of income as Foreign exchange gains (losses). We primarily use a combination of equity and intercompany loans to finance our subsidiaries. Intercompany loans that are of a long-term investment nature with no intention of repayment in the foreseeable future are considered permanently invested and as such are treated as analogous to equity for accounting purposes. As a result, any foreign currency translation gains or losses on such permanently invested intercompany loans are reported in Accumulated other comprehensive income (loss) in our consolidated balance sheets. In contrast, foreign currency translation gains or losses on intercompany loans that are not of a permanent nature are recorded in our consolidated statements of income as Foreign exchange gains (losses). Income Taxes As aBermuda exempted company, we are not subject to income taxes on income in our jurisdiction of incorporation. However, our subsidiaries, which operate in multiple tax jurisdictions, are subject to income taxes at various statutory rates ranging from 0% to 34%. The jurisdictions that significantly impact our effective tax rate areBrazil ,the United States ,Argentina andBermuda . Determination of taxable income requires the interpretation of related and often complex tax laws and regulations in each jurisdiction in which we operate, and the use of estimates and assumptions regarding future events. Non-U.S. GAAP Financial Measures Total segment earnings before interest and taxes ("EBIT") is an operating performance measure used by our management to evaluate segment operating activities. Our management believes total segment EBIT is a useful measure of operating profitability, since the measure allows for an evaluation of the performance of its segments without regard to its financing methods or capital structure. In addition, EBIT is a financial measure that is widely used by analysts and investors in our industries. Total Segment EBIT is a non-U.S. GAAP financial measure and is not intended to replace Net income (loss) attributable toBunge , the most directly comparableU.S. GAAP financial measure. Cash provided by (used for) operating activities, adjusted is calculated by including the Proceeds from beneficial interested 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 comparableU.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. 2020 Overview Net Income (Loss) Attributable toBunge - For the year endedDecember 31, 2020 , net income attributable toBunge was$1,145 million , an increase of$2,425 million compared to a net loss attributable toBunge of$1,280 million for the year endedDecember 31, 2019 . The increase is due to higher Segment EBIT in our Core and Non-core segments, as further discussed in the Segment Overview and Results of Operations section below. Earnings Per Common Share - Diluted - For the year endedDecember 31, 2020 , net income attributable toBunge common shareholders, diluted, was$7.71 per share, an increase of$17.05 per share, compared to a loss of$9.34 per share for the year endedDecember 31, 2019 . EBIT - For the year endedDecember 31, 2020 , Total Segment EBIT was$1,633 million , an increase of$2,524 million compared to EBIT of$(891) million for the year endedDecember 31, 2019 . The increase in Total Segment EBIT for the year endedDecember 31, 2020 was due to higher Segment EBIT in our Core and Non-core segments, as further discussed in the Segment Overview and Results of Operations section below, which provides a reconciliation of net income (loss) attributable toBunge to Total Segment EBIT. Income Tax (Expense) Benefit - Income tax expense was$248 million for the year endedDecember 31, 2020 compared to income tax expense of$86 million for the year endedDecember 31, 2019 . The increase in income tax expense for the year endedDecember 31, 2020 was primarily due to higher pretax income, resulting from higher EBIT in our Core and Non-core segments, as noted above. 29
--------------------------------------------------------------------------------
Table of Contents
Liquidity and Capital Resources - AtDecember 31, 2020 , working capital, which equals total current assets less total current liabilities, was$5,196 million , an increase of$1,543 million , compared to working capital of$3,653 million atDecember 31, 2019 . The increase in working capital is primarily due to increased readily marketable inventories ("RMI") purchases associated with strong farmer selling activity inBrazil during the twelve months endedDecember 31, 2020 as well as higher commodity prices atDecember 31, 2020 . Segment Overview and Results of Operations Our operations are organized, managed and classified into five reportable segments based upon their similar economic characteristics, nature of products and services offered, production processes, types and classes of customer, and distribution methods. We further organize these reportable segments into Core operations and Non-core operations. Core operations comprise our Agribusiness, Edible Oil Products, Milling Products, and Fertilizer segments. Non-core operations comprise our Sugar and Bioenergy segment, which itself primarily comprises our 50% interest inBP Bunge Bioenergia , a joint venture formed with BP inDecember 2019 by the combination of our Brazilian sugar and bioenergy operations with the Brazilian biofuels business of BP. Therefore, our reported Sugar and Bioenergy results for 2020 include our share of the net earnings inBP Bunge Bioenergia , whereas our Sugar and Bioenergy results for 2019 reflect our former 100% ownership interest in the Brazilian sugar and bioenergy operations contributed to the joint venture. Our remaining operations are not reportable segments, as defined by the applicable accounting standard, and are classified as Corporate and Other. EffectiveJanuary 1, 2020 , we changed our segment reporting to separately disclose Corporate and Other activities from our reporting segments, as further described in Note 28- Segment Information. Certain reclassifications of prior period amounts within the reporting segments have been made to conform to current presentation. A reconciliation of Net income (loss) attributable toBunge to Total Segment EBIT follows: Year Ended December 31, (US$ in millions) 2020 2019 2018 Net income (loss) attributable to Bunge$ 1,145 $ (1,280) $ 267 Interest income (22) (31) (31) Interest expense 265 339 339 Income tax expense 248 86 179 (Income) loss from discontinued operations, net of tax -
- (10)
Noncontrolling interests' share of interest and tax (3)
(5) (7)
Total segment EBIT$ 1,633
Agribusiness Segment EBIT 1,482
682 848
Edible Oil Products Segment EBIT 440
121 174
Milling Products Segment EBIT 78 88 114 Fertilizer Segment EBIT 85 62 46 Core Segment EBIT 2,085 953 1,182 Corporate and Other EBIT (365) (245) (342) Sugar & Bioenergy Segment EBIT (87) (1,599) (103) Non-core Segment EBIT (87) (1,599) (103) Total Segment EBIT$ 1,633 $ (891) $ 737 30
--------------------------------------------------------------------------------
Table of Contents
Core Segments
Agribusiness Segment
Year Ended
December 31,
(US$ in millions) 2020 2019 2018
Volumes (in thousand metric tons) 142,959 139,968 146,309
Net sales $ 29,529 $ 28,407 $ 32,206
Cost of goods sold (27,749) (27,314) (30,759)
Gross profit 1,780 1,093 1,447
Selling, general and administrative expense (517) (487) (531)
Foreign exchange gains (losses) 148 (34)
(122)
EBIT attributable to noncontrolling interests (18) 2 (14) Other income (expense) - net 43 65 41 Income (loss) from affiliates 46 43 27 Total Agribusiness Segment EBIT$ 1,482 $ 682 $ 848 2020 Compared to 2019 Agribusiness segment Net sales increased by$1,122 million , or 4%, to$29,529 million for the year endedDecember 31, 2020 , compared to$28,407 million for the year endedDecember 31, 2019 . The net increase was due to the following: •In Oilseeds, Net sales increased$1,586 million primarily due to higher soybean sales volumes and prices in our Chinese, Brazilian, European, and North American oilseed processing businesses, primarily driven by increased meal demand inChina and increased oil demand inNorth America , higher sales volumes and prices in our European and Canadian oilseed processing businesses, and higher sales prices in our global oilseed trading and distribution businesses, partially offset by lower overall trading and distribution volumes. •In Grains, Net sales decreased$464 million due to lower sales volumes and prices in our grain trading and distribution businesses, lower sales volumes and prices in our European grain origination business, and lower sales prices in our Brazilian origination business. These decreases were partially offset by higher volumes in our Brazilian grain origination business driven by increased farmer selling in response to depreciation of Brazilian real versus theU.S. dollar earlier in the year, and higher volumes in our North American grain origination business driven by increased demand fromChina following an easing of trade restrictions in place for much of the prior year. Cost of goods sold increased by$435 million , or approximately 2%, to$27,749 million for the year endedDecember 31, 2020 compared to$27,314 million for the year endedDecember 31, 2019 . The net increase was primarily due to the following: •In Oilseeds, Cost of goods sold increased by$1,242 million due to higher Net sales in our oilseed processing and trading and distribution businesses, as described above, as well as unfavorable mark-to-market results in our oilseed processing businesses, partially offset by favorable translation impacts on industrial costs, as most currencies in which such expenses are denominated depreciated versus theU.S. dollar during the year, and non-recurring prior year property, plant and equipment (PP&E) impairment charges at various facilities associated with portfolio rationalization initiatives. •In Grains, Cost of goods sold decreased by$807 million due to the decrease in Net sales noted above, risk management and optimization in our trading and distribution businesses, favorable translation impacts on industrial costs as most currencies in which such expenses are denominated depreciated versus theU.S. dollar during the year, and non-recurring prior year PP&E impairment charges at various facilities associated with portfolio rationalization initiatives. Gross profit increased by$687 million , or 63%, to$1,780 million for the year endedDecember 31, 2020 , compared to$1,093 million for the year endedDecember 31, 2019 . The increase was primarily due to the following: 31
--------------------------------------------------------------------------------
Table of Contents
•In Oilseeds, an increase of$344 million was due to higher Net sales in excess of Cost of goods sold, as described above. •In Grains, an increase of$343 million was due to lower Cost of goods sold, which more than offset lower Net sales, primarily in our North American operations as described above. SG&A expenses increased$30 million , or 6%, to$517 million for the year endedDecember 31, 2020 , compared to$487 million for the year endedDecember 31, 2019 . The increase was mainly due to higher variable incentive costs on the back of improved overall company profitability, partially offset by savings associated with ongoing cost initiatives, lower expenses due to COVID-19 travel restrictions, favorable translation impacts, as most currencies in which SG&A expenses are denominated depreciated versus theU.S. dollar during the year, and an$11 million prior year write-off of an indemnification asset associated with the reversal of an uncertain tax position. Foreign exchange results increased$182 million , to a gain of$148 million for the year endedDecember 31, 2020 , compared to a loss of$34 million for the year endedDecember 31, 2019 . Foreign exchange results were primarily driven by gains onU.S. dollar denominated loans receivable in non-U.S. functional currency operations. Other income (expenses) - net decreased$22 million , to income of$43 million for the year endedDecember 31, 2020 , compared to income of$65 million for the year endedDecember 31, 2019 . The decrease was primarily due to lower results from our financial services activities during the current year. Segment EBIT increased$800 million , or 117%, to$1,482 million for the year endedDecember 31, 2020 , compared to$682 million for the year endedDecember 31, 2019 . The increase was primarily due to the following: •In Oilseeds, an increase of$440 million was primarily due to higher Gross profit and increased foreign exchange results, as described above. •In Grains, an increase of$360 million was primarily due to higher Gross profit and increased foreign exchange results as described above. 2019 Compared to 2018 Agribusiness segment Net sales decreased by$3,799 million , or 12%, to$28,407 million for the year endedDecember 31, 2019 , compared to$32,206 million for the year endedDecember 31, 2018 . The net decrease was due to the following: •In Oilseeds, Net sales decreased$1,979 million due to lower average sales prices following increased global soybean meal availability due to increased Argentinian supply compared to the 2018 drought and limited harvest, coupled with lower Chinese demand as a result of the African Swine Fever outbreak. •In Grains, Net sales decreased$1,820 million due to lower sales volumes in our grain origination, trading and distribution businesses, associated with lower supply inNorth America due to adverse weather conditions and the ongoing US-China trade dispute, and lower farmer selling inBrazil through much of 2019. Cost of goods sold decreased by$3,445 million , or 11%, to$27,314 million for the year endedDecember 31, 2019 , compared to$30,759 million for the year endedDecember 31, 2018 . The net decrease was primarily due to the following: •In Oilseeds, Cost of goods sold decreased by$1,669 million due to lower purchase prices and improved trading results in our oilseed businesses, partially offset by unfavorable mark-to-market results in our oilseed processing business, and approximately$87 million of impairment charges related to PP&E at various facilities associated with portfolio rationalization initiatives. •In Grains, Cost of goods sold decreased by$1,776 million due to lower sales volumes and purchase prices in our grain origination, trading and distribution businesses, partially offset by stronger results in our ocean freight business. Gross profit decreased by$354 million , or 24%, to$1,093 million for the year endedDecember 31, 2019 , compared to$1,447 million for the year endedDecember 31, 2018 . The net decrease was primarily due to the following: •In Oilseeds, a decrease of$310 million was due to lower Net sales in excess of lower Cost of goods sold, as described above. •In Grains, a decrease of$44 million was due to lower Net sales in excess of lower Cost of goods sold, as described above. 32
--------------------------------------------------------------------------------
Table of Contents
SG&A expenses decreased$44 million , or 8%, to$487 million for the year endedDecember 31, 2019 , compared to$531 million for the year endedDecember 31, 2018 . The decrease was mainly due to savings from actions associated with the Global Competitiveness Program ("GCP"), as well as lower charges recognized in connection with the execution of the GCP itself, in addition to depreciation of the Brazilian real against theU.S. dollar. These decreases were partially offset by impairment charges at facilities associated with portfolio rationalization initiatives and the write-off of a tax indemnification asset associated with the reversal of an uncertain tax position recorded in a previous year. Foreign exchange gains (losses), on a net basis, increased$88 million , or 72%, to a loss of$34 million for the year endedDecember 31, 2019 , compared to a loss of$122 million for the year endedDecember 31, 2018 . Foreign exchange results are primarily driven by funding non-U.S. functional currency operations. Results in 2018 were primarily driven by the devaluation of the Argentine peso onU.S. dollar loans to fund operations inArgentina . Other income (expenses) - net increased$24 million , to income of$65 million for the year endedDecember 31, 2019 , compared to income of$41 million for the year endedDecember 31, 2018 . The increase was primarily due to higher income earned from financial services activities and improved results from our soy crush investments inSouth America . Segment EBIT decreased$166 million , or 20%, to$682 million for the year endedDecember 31, 2019 , compared to$848 million for the year endedDecember 31, 2018 . The net decrease was primarily due to the following: •In Oilseeds, a decrease of$252 million was primarily due to lower profits in our oilseed processing business, including an unfavorable mark-to-market impact on forward contracts compared to the prior year. •In Grains, an increase of$86 million was primarily due higher results in our ocean freight business, better results in our financial services businesses, lower SG&A expenses, and higher net foreign exchange results, partially offset by lower profits in our grain origination, trading and distribution businesses. Edible Oil Products Segment Year Ended December 31, (US$ in millions) 2020 2019
2018
Volumes (in thousand metric tons) 9,515 9,606 9,024 Net sales$ 9,601 $ 9,186 $ 9,129 Cost of goods sold (8,863) (8,574) (8,571) Gross profit 738 612 558 Selling, general and administrative expense (388) (376)
(348)
Foreign exchange gains (losses) (2) (1)
(1)
EBIT attributable to noncontrolling interests (3) 7
(12)
Other income (expense) - net 95 (121)
(23)
Total Edible Oils Products Segment EBIT$ 440 $ 121 $ 174 2020 Compared to 2019 Edible oil products segment Net sales increased by$415 million , or 5%, to$9,601 million for the year endedDecember 31, 2020 , compared to$9,186 million for the year endedDecember 31, 2019 , due to higher sales volumes and prices in our business-to-consumer ("B2C") operations, driven by increased at-home consumption associated with COVID-19 stay-at-home orders, and higher prices in our business-to-business ("B2B") operations, partially offset by lower overall B2B volumes as lower food services volumes more than offset higher food processor volumes, again due to COVID-19. The year endedDecember 31, 2020 also benefited from$47 million of indirect tax credits related to the favorable resolution of a Brazilian indirect tax claim. Cost of goods sold increased by$289 million , or 3%, to$8,863 million for the year endedDecember 31, 2020 , compared to$8,574 million for the year endedDecember 31, 2019 . The increase in Cost of goods sold was due to higher Net sales, partially offset by favorable translation impacts, unfavorable prior year mark-to-market results, and approximately$30 million of non-recurring prior year PP&E impairment charges at various facilities associated with portfolio rationalization initiatives. Gross profit increased by$126 million , or 21%, to$738 million for the year endedDecember 31, 2020 , compared to$612 million for the year endedDecember 31, 2019 . The increase was primarily due to higher Net sales in excess of Cost of 33
--------------------------------------------------------------------------------
Table of Contents
goods sold, primarily related to our consumer business margin expansion resulting from COVID-19 related supply shortage, as described above. SG&A expenses increased$12 million , or 3%, to$388 million for the year endedDecember 31, 2020 , compared to$376 million for the year endedDecember 31, 2019 . The increase was primarily due to higher variable incentive costs on the back of improved overall company profitability, increased bad debt expense, partially offset by favorable translation impacts and lower travel costs associated with COVID-19 travel restrictions. EBIT attributable to noncontrolling interests, an expense when subsidiaries with noncontrolling interests generate earnings before interest and tax, versus income when subsidiaries with noncontrolling interests generate loss before interest and tax, decreased by$10 million , to expense of$3 million for the year endedDecember 31, 2020 , compared to income of$7 million for the year endedDecember 31, 2019 . The decrease was primarily due to earnings before interest and tax associated with our non-wholly-owned Edible Oil Products subsidiaries, primarily Loders, for the year endedDecember 31, 2020 , compared to losses before interest and tax in the same businesses for the year endedDecember 31, 2019 , in both years primarily driven by factors mentioned above. Other income (expenses) - net increased$216 million to income of$95 million for the year endedDecember 31, 2020 compared to expense of$121 million for the year endedDecember 31, 2019 , due to a gain on the sale of our Brazilian margarine and mayonnaise assets, which closed in the fourth quarter of 2020, and a non-recurring prior year goodwill impairment charge of$108 million associated with Loders. Segment EBIT increased by$319 million , or 264%, to$440 million for the year endedDecember 31, 2020 , compared to$121 million for the year endedDecember 31, 2019 . The increase was primarily due to higher Gross profit and Other income (expenses) - net, as described above. 2019 Compared to 2018 Edible oil products segment Net sales increased by$57 million , or 1%, to$9,186 million for the year endedDecember 31, 2019 , compared to$9,129 million for the year endedDecember 31, 2018 . Increased sales volumes driven by our acquisition of Loders onMarch 1, 2018 , were offset by lower prices in theU.S. ,Europe , andBrazil . Cost of goods sold increased slightly by$3 million , or zero percent, to$8,574 million for the year endedDecember 31, 2019 , compared to$8,571 million for the year endedDecember 31, 2018 . The small increase was due to impairment charges related to PP&E at various facilities associated with portfolio rationalization initiatives and indirect tax charges, partially offset by lower raw material prices in theU.S. ,Europe , andBrazil . Gross profit increased by$54 million , or 10%, to$612 million for the year endedDecember 31, 2019 , compared to$558 million for the year endedDecember 31, 2018 . The increase was primarily due to higher sales volumes in theU.S. andEurope , and higher sales volumes and a more favorable product mix inArgentina . These increases were partially offset by the impairment charges and indirect tax charges noted above. SG&A expenses increased$28 million , or 8%, to$376 million for the year endedDecember 31, 2019 , compared to$348 million for the year endedDecember 31, 2018 . The increase was driven by a full year ownership of Loders, as well as impairment charges related to the relocation of a distribution center inBrazil , partially offset by lower costs inEurope andBrazil due to depreciation of the euro and Brazilian real against theU.S. dollar, and from savings associated with the GCP. Other income (expenses) - net increased$98 million , or 426%, to expense of$121 million for the year endedDecember 31, 2019 compared to expense of$23 million for the year endedDecember 31, 2018 . The increase in expense was primarily due to a goodwill impairment charge of$108 million recorded in 2019 associated with our 2018 acquisition of Loders. Segment EBIT decreased by$53 million , or 30%, to$121 million for the year endedDecember 31, 2019 , compared to$174 million for the year endedDecember 31, 2018 . The decrease was primarily due to the goodwill and other impairment charges discussed above, partially offset by higher gross profit in theU.S. ,Europe , andArgentina also discussed above. 34
--------------------------------------------------------------------------------
Table of Contents
Milling Products Segment
Year Ended
December 31,
(US$ in millions) 2020 2019 2018
Volumes (in thousand metric tons) 4,663 4,531 4,604
Net sales $ 1,648 $ 1,739 $ 1,691
Cost of goods sold (1,477) (1,579) (1,461)
Gross profit 171 160 230
Selling, general and administrative expense (97) (98) (105)
Foreign exchange gains (losses) 6 4
2
EBIT attributable to noncontrolling interests - -
-
Other income (expense) - net (1) 22
(13)
Income (loss) from affiliates (1) -
-
Total Milling Products Segment EBIT$ 78 $ 88 $ 114 2020 Compared to 2019 Milling products segment Net sales decreased by$91 million , or 5%, to$1,648 million for the year endedDecember 31, 2020 , compared to$1,739 million for the year endedDecember 31, 2019 . The decrease was primarily due to lower average sales prices inBrazil andMexico , and lower sales prices in ourU.S. corn milling business, which more than offset higher volumes. Cost of goods sold decreased by$102 million , or 6%, to$1,477 million for the year endedDecember 31, 2020 , compared to$1,579 million for the year endedDecember 31, 2019 . The decrease was due to lower Net sales, as described above, favorable translation impacts on industrial costs, following the depreciation of the Brazilian real and Mexican peso versus theU.S. dollar, and approximately$28 million of non-recurring prior year impairment charges associated with ourU.S. extrusion business and portfolio rationalization initiatives. Gross profit increased by$11 million , or 7%, to$171 million for the year endedDecember 31, 2020 , compared to$160 million for the year endedDecember 31, 2019 . The increase was due to a decrease in Cost of goods sold in excess of the decrease in Net sales, as described above. SG&A expenses decreased by$1 million , or 1%, to$97 million for the year endedDecember 31, 2020 , compared to$98 million for the year endedDecember 31, 2019 as favorable translation impacts and lower travel costs associated with COVID-19 restrictions were offset by higher variable compensation costs on the back of improved overall company profitability. Other income (expense) - net decreased by$23 million , or 105%, to expense of$1 million for the year endedDecember 31, 2020 , compared to income of$22 million for the year endedDecember 31, 2019 . The decrease is primarily due a$19 million gain on the sale of two facilities inBrazil during the prior year. Segment EBIT decreased by$10 million , or 11%, to$78 million for the year endedDecember 31, 2020 , compared to$88 million for the year endedDecember 31, 2019 . The decrease was primarily due to lower Other income (expense) - net, partially offset by higher Gross profit, as described above. 2019 Compared to 2018 Milling products segment Net sales increased by$48 million , or 3%, to$1,739 million for the year endedDecember 31, 2019 , compared to$1,691 million for the year endedDecember 31, 2018 . The increase was primarily driven by higher sales prices for wheat products inBrazil , the acquisition of two corn mills in theU.S. ("Minsa") during the first quarter of 2018, and higher sales prices in ourU.S. rice milling business. These increases were partially offset by lower sales volumes inMexico . Cost of goods sold increased by$118 million , or 8%, to$1,579 million for the year endedDecember 31, 2019 , compared to$1,461 million for the year endedDecember 31, 2018 . The increase was primarily due to higher raw material costs inBrazil , higher raw material costs in ourU.S. rice milling business, impairment charges associated with various portfolio rationalization initiatives, as well as additional costs associated with the acquisition ofMinsa . These increases were partially offset by lower sales volumes inMexico . 35
--------------------------------------------------------------------------------
Table of Contents
Gross profit decreased by$70 million , or 30%, to$160 million for the year endedDecember 31, 2019 , compared to$230 million for the year endedDecember 31, 2018 . The decrease was primarily associated with lower margins inBrazil , lower volumes inMexico , and the impairment charges noted above. SG&A expenses decreased by$7 million , or 7%, to$98 million for the year endedDecember 31, 2019 , compared to$105 million for the year endedDecember 31, 2018 . The decrease was primarily due to savings from the GCP and the depreciation of the Brazilian real against theU.S. dollar. Additionally, 2018 was impacted by acquisition costs related toMinsa . Other income (expenses) - net increased$35 million , to income of$22 million for the year endedDecember 31, 2019 , compared to expense of$13 million for the year endedDecember 31, 2018 . The increase was primarily due to a gain on an arbitration settlement in theU.S. in 2019. Segment EBIT decreased$26 million , or 23%, to$88 million for the year endedDecember 31, 2019 , compared to$114 million for the year endedDecember 31, 2018 . The decrease was primarily due to lower gross profit inBrazil andMexico , as well as impairment charges associated with certain portfolio rationalization initiatives, partially offset by a gain on the sale of wheat milling assets inBrazil , an arbitration settlement gain, and lower overall SG&A expenses. Fertilizer Segment Year Ended December 31, (US$ in millions) 2020 2019 2018 Volumes (in thousand metric tons) 1,537 1,508 1,328 Net sales$ 484 $ 520 $ 460 Cost of goods sold (386) (442) (390) Gross profit 98 78 70 Selling, general and administrative expense (11) (13)
(17)
Foreign exchange gains (losses) - -
(6)
EBIT attributable to noncontrolling interests (2) (3)
(2) Other income (expense) - net - - 1 Income (loss) from affiliates - - - Total Fertilizer Segment EBIT$ 85 $ 62 $ 46 2020 Compared to 2019 Fertilizer segment Net sales decreased by$36 million , or 7%, to$484 million for the year endedDecember 31, 2020 , compared to$520 million for the year endedDecember 31, 2019 . The decrease was due to lower average sales prices inArgentina andBrazil , partially offset by higher sales volumes inArgentina . Cost of goods sold decreased by$56 million , or 13%, to$386 million for the year endedDecember 31, 2020 , compared to$442 million for the year endedDecember 31, 2019 . The decrease was primarily due to lower Net sales, as described above, as well as favorable translation impacts on industrial costs following the depreciation of the Brazilian real and Argentinian peso versus theU.S. dollar. Gross profit increased$20 million , or 26%, to$98 million for the year endedDecember 31, 2020 , compared to$78 million for the year endedDecember 31, 2019 . The increase was primarily due to margin expansion resulting in higher Gross profit despite lower Net sales. SG&A expenses decreased$2 million , or 15%, to$11 million for the year endedDecember 31, 2020 , compared to$13 million for the year endedDecember 31, 2019 . The decrease was primarily due to a current period bad debt recovery against a prior year provision, as well as favorable translation impacts. Segment EBIT increased$23 million , or 37%, to$85 million for the year endedDecember 31, 2020 , compared to$62 million for the year endedDecember 31, 2019 . The increase was due to higher Gross profit and lower SG&A expenses, as described above. 36
--------------------------------------------------------------------------------
Table of Contents
2019 Compared to 2018 Fertilizer segment Net sales increased$60 million , or 13%, to$520 million for the year endedDecember 31, 2019 , compared to$460 million for the year endedDecember 31, 2018 . The increase was primarily due to higher sales volumes inArgentina . Cost of goods sold increased$52 million , or 13%, to$442 million for the year endedDecember 31, 2019 , compared to$390 million for the year endedDecember 31, 2018 . The increase was primarily due to higher sales volumes. Gross profit increased$8 million , or 11%, to$78 million for the year endedDecember 31, 2019 , compared to$70 million for the year endedDecember 31, 2018 . The increase was primarily due to higher sales volumes and favorable foreign currency impacts compared to the prior year. SG&A expenses decreased$4 million , or 24%, to$13 million for the year endedDecember 31, 2019 , compared to$17 million for the year endedDecember 31, 2018 . The decrease was primarily due to bad debt recoveries during 2019. Segment EBIT increased$16 million , or 35%, to$62 million for the year endedDecember 31, 2019 , compared to$46 million for the year endedDecember 31, 2018 . The increase was primarily due to higher Gross profit, lower overall expenses, and favorable foreign exchange results. Corporate and Other Year Ended December 31, (US$ in millions) 2020 2019 2018 Net sales $ - $ - $ - Cost of goods sold (5) 3 (22) Gross profit (5) 3 (22)
Selling, general and administrative expense (345) (339)
(348)
Foreign exchange gains (losses) (2) 3
20
EBIT attributable to noncontrolling interests - -
-
Other income (expense) - net (13) 88
8
Income (loss) from affiliates - -
-
Total Corporate and Other EBIT$ (365) $ (245) $ (342) 2020 Compared to 2019 Corporate and Other EBIT decreased$120 million , or 49%, to a loss of$365 million for the year endedDecember 31, 2020 , compared to a loss of$245 million for the year endedDecember 31, 2019 . The decrease is primarily due to higher current period variable incentive costs on the back of improved overall company profitability,$66 million in charges for a bad debt reserve in relation to a disputed account receivable balance stemming from a business transaction dating back to 2015 and positive prior year mark-to-market results on one of our corporate venture capital unit investments, partially offset by non-recurring prior year impairment charges and related employee severance costs associated with the relocation of our corporate headquarters and lower current period travel costs due to COVID-19 restrictions. 2019 Compared to 2018 Corporate and Other EBIT increased$97 million , or 28%, to a loss of$245 million for the year endedDecember 31, 2019 , compared to a loss of$342 million for the year endedDecember 31, 2018 . The increase is primarily due to our corporate venture capital unit activities, which benefited from the initial public offering of one of its investments, and subsequent gains on sales of such securities in 2019, partially offset by costs incurred with the relocation of our global headquarters. 37
--------------------------------------------------------------------------------
Table of Contents
Non-core Segment
Sugar & Bioenergy Segment
Year Ended
December 31,
(US$ in millions) 2020 2019 2018
Volumes (in thousand metric tons) 334 3,836 6,509
Net sales $ 142 $ 1,288 $ 2,257
Cost of goods sold (139) (2,692) (2,274)
Gross profit 3 (1,404) (17)
Selling, general and administrative expense - (38) (74)
Foreign exchange gains (losses) - (89)
6
EBIT attributable to noncontrolling interests - - 1 Other income (expense) - net 2 (65) (23) Income (loss) from affiliates (92) (3) 4 Total Sugar and Bioenergy Segment EBIT$ (87) $ (1,599) $ (103) 2020 Compared to 2019 Sugar and Bioenergy segment Net sales decreased by$1,146 million , or 89%, to$142 million for the year endedDecember 31, 2020 , compared to$1,288 million for the year endedDecember 31, 2019 . The decrease in Net sales was primarily due to the contribution of our Brazilian sugar and bioenergy operations, comprising the majority of our Sugar and Bioenergy segment, to theBP Bunge Bioenergia joint venture during the fourth quarter of 2019. Remaining sales comprise corn-based ethanol distribution activities inNorth America . Cost of goods sold decreased by$2,553 million , or 95%, to$139 million for the year endedDecember 31, 2020 , compared to$2,692 million for the year endedDecember 31, 2019 . The decrease was primarily due to a significant non-recurring impairment charge in the third quarter of 2019, in addition to the decrease in Net sales resulting from the contribution of the majority of our Brazilian sugar and bioenergy operations to theBP Bunge Bioenergia joint venture during the fourth quarter of 2019, as described above. Gross profit increased by$1,407 million , or 100%, to$3 million for the year endedDecember 31, 2020 , compared to a loss of$1,404 million for the year endedDecember 31, 2019 . The increase was due to a significant non-recurring impairment charge in the third quarter of 2019, in addition to the decrease in Net sales resulting from the contribution of the majority of our Brazilian sugar and bioenergy operations to theBP Bunge Bioenergia joint venture during the fourth quarter of 2019, as described above. SG&A expenses were zero for the year endedDecember 31, 2020 , compared to$38 million for the year endedDecember 31, 2019 . The change was primarily due to the contribution of the majority of our Brazilian sugar and bioenergy operations to theBP Bunge Bioenergia joint venture during the fourth quarter of 2019, as discussed above. Income (loss) from affiliates decreased by$89 million to a loss of$92 million for the year endedDecember 31, 2020 , compared to a loss of$3 million for the year endedDecember 31, 2019 . The decrease was due to our share of losses associated with our investment in theBP Bunge Bioenergia joint venture. Segment EBIT increased$1,512 million , or 95%, to a loss of$87 million for the year endedDecember 31, 2020 , from a loss of$1,599 million for the year endedDecember 31, 2019 . The increase was mainly due to a significant non-recurring impairment taken in 2019 and lower SG&A in 2020, partially offset by a decrease in Income (loss) from affiliates, as described above. 2019 Compared to 2018 Sugar and Bioenergy segment Net sales decreased$969 million , or 43%, to$1,288 million for the year endedDecember 31, 2019 , compared to$2,257 million for the year endedDecember 31, 2018 . The decrease was primarily due to the exiting of our international trading and merchandising business in 2018, as well as lower global sugar sales volumes and prices, partially offset by higher ethanol sales volumes and prices inBrazil . Additionally, inDecember 2019 we contributed our Brazilian sugar and bioenergy operations to our then-newly-formed joint venture,BP Bunge Bioenergia , as discussed above. 38
--------------------------------------------------------------------------------
Table of Contents
Cost of goods sold increased$418 million , or 18%, to$2,692 million for the year endedDecember 31, 2019 , compared to$2,274 million for the year endedDecember 31, 2018 . The increase was primarily due to non-recurring impairment charges of$1,524 million associated with the contribution of our Brazilian sugar and bioenergy operations to theBP Bunge Bioenergia joint venture, as discussed above. This increase was partially offset by lower costs aligned with the decrease in Net sales noted above. Gross profit decreased$1,387 million , or 8,159%, to a loss of$1,404 million for the year endedDecember 31, 2019 , compared to a loss of$17 million for the year endedDecember 31, 2018 . The decrease was primarily associated with lower sales and higher costs of goods sold, including the non-recurring impairment charges associated with the contribution of our Brazilian sugar and bioenergy operations to theBP Bunge Bioenergia joint venture, as discussed above. SG&A expenses decreased$36 million , or 49%, to$38 million for the year endedDecember 31, 2019 , compared to$74 million for the year endedDecember 31, 2018 . The decrease was primarily associated with the exiting of our international trading and merchandising business in 2018, lower bad debt expenses, savings and lower costs associated with the GCP, the impact of depreciation of the Brazilian real against theU.S. dollar, as well as the contribution of our Brazilian sugar and bioenergy operations to theBP Bunge Bioenergia joint venture, as discussed above. Foreign exchange gains (losses), on a net basis, decreased$95 million , or 1,583%, to a loss of$89 million for the year endedDecember 31, 2019 , compared to a gain of$6 million for the year endedDecember 31, 2018 . Foreign exchange losses in 2019 were primarily associated with intercompany loans related to our Brazilian sugar and bioenergy operations that were classified as held for sale in the third quarter of 2019. Previously, these loans were classified as permanently invested and any related foreign exchange impact was recorded in Other comprehensive income (loss). However, upon classification of our sugar and bioenergy operations as held for sale, such loans could no longer be determined to be permanently invested. As such, any foreign exchange impact was recorded in the consolidated statement of income. Other income (expense) - net was a loss of$65 million for the year endedDecember 31, 2019 , compared to a loss of$23 million for the year endedDecember 31, 2018 . The increase in expense was primarily related to charges associated with the contribution of our Brazilian sugar and bioenergy operations to our newly formed joint-venture,BP Bunge Bioenergia , as discussed above. Segment EBIT decreased by$1,496 million , or 1,452% to a loss of$1,599 million for the year endedDecember 31, 2019 , compared to a loss of$103 million for the year endedDecember 31, 2018 . The decrease was mainly due to$1,673 million in non-recurring charges incurred in 2019 associated with the contribution of our Brazilian sugar and bioenergy operations to theBP Bunge Bioenergia joint venture, as discussed above.
Interest-A summary of consolidated interest income and expense follows:
Year Ended
December 31,
(US$ in millions) 2020 2019 2018
Interest income $ 22 $ 31 $ 31
Interest expense (265) (339) (339)
Interest income decreased $9 million to $22 million for the year ended
December 31, 2020 , compared to $31 million for the year ended December 31, 2019 .
Interest expense decreased $74 million to $265 million for the year ended
December 31, 2020 , compared to $339 million for the year ended December 31,
2019 . The net decrease was the result of lower average interest rates on
outstanding debt during the current year.
Interest income remained constant during 2019 and 2018 at $31 million . Interest
expense also remained constant at $339 million in 2019 and 2018. Average debt
balances were lower in 2019 than in 2018, however total interest expense
remained flat due to interest rates applicable to our overall debt mix.
Liquidity and Capital Resources
Our main financial objectives are to prudently manage financial risks, ensure
consistent access to liquidity and minimize cost of capital in order to
efficiently finance our business and maintain balance sheet strength. We
generally finance our ongoing operations with cash flows generated from
operations, issuance of commercial paper, borrowings under various bilateral and
syndicated revolving credit facilities, term loans and proceeds from the
issuance of senior notes. Acquisitions and long-lived assets are generally
financed with a combination of equity and long-term debt.
39--------------------------------------------------------------------------------
Table of Contents
Working Capital
As of December 31,
US$ in millions, except current ratio 2020 2019
Cash and cash equivalents $ 352 $ 320
Trade accounts receivable, net 1,717 1,705
Inventories 7,172 5,038
Other current assets(1) 6,940 3,185
Total current assets $ 16,181 $ 10,248
Short-term debt $ 2,828 $ 771
Current portion of long-term debt 8 507
Trade accounts payable 2,636 2,842
Current operating lease obligations 235 216
Other current liabilities(2) 5,278 2,259
Total current liabilities $ 10,985 $ 6,595
Working capital(3) $ 5,196 $ 3,653
Current ratio(3) 1.47 1.55
(1)Comprises Assets held for sale and Other current assets (2)Comprises Liabilities held for sale and Other current liabilities
(3)Working capital is defined as Total current assets less Total current liabilities; Current ratio represents Total current assets divided by Total current liabilities
Working capital was$5,196 million atDecember 31, 2020 , an increase of$1,543 million , or 42%, from working capital of$3,653 million atDecember 31, 2019 . Cash and Cash Equivalents - Cash and cash equivalents were$352 million atDecember 31, 2020 , an increase of$32 million from$320 million atDecember 31, 2019 . Cash balances are managed in accordance with our investment policy, the objectives of which are to preserve the principal value of our cash assets, maintain a high degree of liquidity and deliver competitive returns subject to prevailing market conditions. Cash balances are invested in short-term deposits with highly rated financial institutions and inU.S. government securities. Trade accounts receivable, net - Trade accounts receivable, net were$1,717 million atDecember 31, 2020 , an increase of$12 million from$1,705 million atDecember 31, 2019 . The increase is primarily due to the timing of collections in our trading and distribution business, mostly offset by negative foreign exchange impacts inBrazil , and the recording of a bad debt reserve in relation to collection proceedings involving an historical outstanding account receivable due from a customer. Inventories - Inventories were$7,172 million atDecember 31, 2020 , an increase of$2,134 million from$5,038 million atDecember 31, 2019 . The increase is primarily related to an increase in RMI resulting from higher commodity prices in the current year, coupled with increased inventory quantities on hand following our deliberate decision to increase volumes during the year to optimize our earnings potential. RMI comprises agricultural commodity inventories, including soybeans, soybean meal, soybean oil, corn, and wheat that are readily convertible to cash because of their commodity characteristics, widely available markets and international pricing mechanisms. Total RMI reported at fair value were$5,961 million and$3,934 million atDecember 31, 2020 andDecember 31, 2019 , respectively (see Note 5- Inventories, to our consolidated financial statements included as part of this Annual Report on Form 10-K). Other current assets - Other current assets were$6,940 million atDecember 31, 2020 , an increase of$3,755 million from$3,185 million atDecember 31, 2019 . The increase is primarily due to unrealized gains on derivative contracts, as well as the reclassification of certain of ourU.S. grain assets and our oils refinery inRotterdam, Netherlands as held for sale (see Note 2- Portfolio Rationalization Initiatives, to our consolidated financial statements). 40
--------------------------------------------------------------------------------
Table of Contents
Short-term debt - Short-term debt, including the current portion of long-term debt, was$2,836 million atDecember 31, 2020 , an increase of$1,558 million from$1,278 million atDecember 31, 2019 . The increase was to fund higher seasonal working capital levels, primarily RMI. Trade accounts payable - Trade accounts payable were$2,636 million atDecember 31, 2020 , a decrease of$206 million from$2,842 million atDecember 31, 2019 . The decrease is due to the timing of payments on account as well as the reclassification of liabilities associated with certain of ourU.S. grain assets and our oils refinery inRotterdam, Netherlands as held for sale.
Other current liabilities - Other current liabilities were
Debt
Financing Arrangements and Outstanding Indebtedness-We conduct most of our financing activities through a centralized financing structure that provides the company efficient access to debt and capital markets. This structure includes a master trust, of which the primary assets consist of intercompany loans made toBunge Limited and its subsidiaries. Certain ofBunge Limited's 100% owned finance subsidiaries,Bunge Limited Finance Corp. ,Bunge Finance Europe B.V. andBunge Asset Funding Corp. , fund the master trust with short and long-term debt obtained from third parties, including through our commercial paper program and certain credit facilities, as well as the issuance of senior notes. Borrowings by these finance subsidiaries carry full, unconditional guarantees byBunge Limited . Revolving Credit Facilities-AtDecember 31, 2020 , we had$5,565 million of aggregate committed borrowing capacity under our commercial paper program and various revolving bilateral and syndicated credit facilities, of which$4,072 million was unused and available. The following table summarizes these facilities as of the periods presented: Total Committed Borrowings Capacity Outstanding Commercial Paper Program and Revolving Credit December 31, Facilities Maturities December 31, 2020 2020 December 31, 2019 Commercial Paper 2023 $ 600$ 549 $ - Revolving Credit Facilities 2021 - 2023 4,965 944 - Total $ 5,565$ 1,493 $ - OnOctober 22, 2020 , we entered into an unsecured$1,250 million 364-day Revolving Credit Agreement (the "Credit Agreement") with a group of lenders. The Credit Agreement includes a$1,000 million tranche ("Tranche A") and a$250 million tranche ("Tranche B"). Borrowings under the Credit Agreement will bear interest at LIBOR plus an applicable margin, as defined in the Credit Agreement. Each lender under Tranche A is required to fund all borrowing requests delivered by us unless such lender has delivered a declining lender notice to the administrative agent by9.00am (New York City time) on the date such borrowing request is delivered. The lenders under Tranche B do not have the right to deliver a declining lender notice to us. We may also, from time to time, request one or more of the existing or new lenders to increase the total participations and commitments under Tranche A and Tranche B of the Credit Agreement by an aggregate amount up to$250 million pursuant to an accordion provision. The Credit Agreement matures onOctober 21, 2021 . We had$250 million outstanding atDecember 31, 2020 , under the Revolving Credit Facility. We had$554 million of borrowings outstanding atDecember 31, 2020 under our$1,750 million unsecured syndicated revolving credit facility with certain lenders party thereto maturingDecember 12, 2022 (the ''$1.75 Billion 2022 Facility''). Borrowings under the$1.75 Billion 2022 Facility bear interest at LIBOR plus a margin, which will vary from 0.30% to 1.30% per annum, based on the credit ratings of our senior long-term unsecured debt. The applicable margin is also subject to certain premiums or discounts tied to criteria determined by certain sustainability targets. We also pay a fee that varies from 0.10% to 0.40% per annum, based on the utilization of the$1.75 Billion 2022 Facility. Amounts under the$1.75 Billion 2022 Facility that remain undrawn are subject to a commitment fee payable quarterly in arrears at a rate of 35% of the margin specified above, which varies based on the rating level at each quarterly payment date. We may, from time to time, with the consent of the facility agent, request one or more of the existing lenders or new lenders to increase the total commitments under the$1.75 Billion 2022 Facility by up to$250 million pursuant to an accordion provision. 41
--------------------------------------------------------------------------------
Table of Contents
We had no borrowings outstanding atDecember 31, 2020 under our unsecured$1,100 million five-year syndicated revolving credit agreement (the "Credit Agreement") with certain lenders party thereto maturingDecember 14, 2023 . We have the option to request an extension of the maturity date of the Credit Agreement for two additional one-year periods, subject to the consent of the lenders. Borrowings under the Credit Agreement will bear interest at LIBOR plus a margin, which will vary from 1.00% to 1.625%, based on the credit ratings of our senior long-term unsecured debt ("Rating Level"). Amounts under the Credit Agreement that remain undrawn are subject to a commitment fee at rates ranging from 0.09% to 0.225%, varying based on the Rating Level. We may, from time to time, request one or more of the existing lenders or new lenders to increase the total commitments under the Credit Agreement by up to$200 million pursuant to an accordion provision. We had$140 million of borrowings outstanding atDecember 31, 2020 under our unsecured$865 million revolving credit facility, maturingSeptember 6, 2022 (the "2022 Facility"). Borrowings under the 2022 Facility bear interest at LIBOR plus a margin, which will vary from 1.00% to 1.75% per annum, based on the credit ratings of our senior long-term unsecured debt. Amounts under the 2022 Facility that remain undrawn are subject to a commitment fee payable quarterly based on the average undrawn portion of the 2022 Facility at rates ranging from 0.125% to 0.275%, based on the credit ratings of our senior long-term unsecured debt. Our commercial paper program is supported by committed back-up bank credit lines (the ''Liquidity Facility'') equal to the amount of the commercial paper program provided by lending institutions that are required to be rated at least A-1 byStandard & Poor's and P-1 byMoody's Investor Services . The cost of borrowing under the Liquidity Facility would typically be higher than the cost of issuance under our commercial paper program. AtDecember 31, 2020 ,$549 million of borrowings were outstanding under the commercial paper program and no borrowings were outstanding under the Liquidity Facility. The Liquidity Facility is our only revolving credit facility that requires lenders to maintain minimum credit ratings. In addition to committed credit facilities, from time to time, through our financing subsidiaries, we enter into bilateral short-term credit lines as necessary based on our financing requirements. AtDecember 31, 2020 there were$550 million of borrowings outstanding under these bilateral short-term credit lines. Short and long-term debt-Our short and long-term debt increased by$2,294 million atDecember 31, 2020 fromDecember 31, 2019 , primarily due to increased working capital requirements at the end of the year. For the year endedDecember 31, 2020 , our average short and long-term debt outstanding was approximately$6,100 million compared to approximately$6,142 million for the year endedDecember 31, 2019 . Our long-term debt outstanding balance, including the current-portion of such long-term debt, was$4,460 million atDecember 31, 2020 compared to$4,223 million atDecember 31, 2019 . The following table summarizes our short-term debt activity atDecember 31, 2020 . Weighted Weighted Average Highest Average Outstanding Interest Balance Average Interest Balance at Rate at Outstanding Balance Rate December 31, December 31, During During During (US$ in millions) 2020 2020 2020 2020 2020 Bank Borrowings (1)$ 2,279 6.75 %$ 2,565 $ 1,272 7.30 % Commercial Paper 549 0.27 % 599 341 0.80 % Total$ 2,828 5.49 %$ 1,613 5.92 % (1)Includes$558 million of local currency borrowings in certain Central and Eastern European, South American, andAsia-Pacific countries at a local currency based weighted average interest rate of 24.54% as ofDecember 31, 2020 . OnAugust 17, 2020 , we completed the sale and issuance of$600 million aggregate principal amount of 1.630% unsecured senior notes ("Notes") dueAugust 17, 2025 . The Notes are fully and unconditionally guaranteed byBunge . The offering was made pursuant to a shelf registration statement on Form S-3 (Registration No. 333-231083) filed byBunge Limited and BLFC with theU.S. Securities and Exchange Commission . Interest on the Notes is payable semi-annually in arrears in February and August of each year, commencing onFebruary 17, 2021 . At any time prior toJuly 17, 2025 (one month before maturity of the Notes), we may elect to redeem and repay the Notes, at any time in whole, or from time to time in part, at a redemption price equal to 100% of the principal amount of the Notes being redeemed on the redemption date. The net proceeds of the offering were approximately$595 million after deducting underwriting commissions, the original issue discount and offering fees and expense payable by us. We used the net proceeds from this offering for general corporate purposes, including the repayment of certain short-term debt that included borrowings under the commercial paper program. 42
--------------------------------------------------------------------------------
Table of Contents
The following table summarizes our short and long-term debt:
December 31,
(US$ in millions) 2020 2019
Short-term debt: (1)
Short-term debt (2) $ 2,828 $ 771
Current portion of long-term debt 8 507
Total short-term debt 2,836 1,278
Long-term debt:
Term loan due 2024 - three-month Yen LIBOR plus 0.75% (Tranche A) 297 281
Term loan due 2024 - three-month LIBOR plus 1.30% (Tranche B) 89 89
3.50% Senior Notes due 2020 - 499
3.00% Senior Notes due 2022 399 398
1.85% Senior Notes due 2023 - Euro 982 899
4.35% Senior Notes due 2024 597 596
1.63% Senior Notes due 2025 595 -
3.25% Senior Notes due 2026 696 696
3.75% Senior Notes due 2027 595 595
Other 210 170
Subtotal 4,460 4,223
Less: Current portion of long-term debt (8) (507)
Total long-term debt (3) 4,452 3,716
Total debt $ 7,288 $ 4,994
(1) Includes secured debt of $1 million and $1 million at December 31, 2020 and
December 31, 2019 , respectively.
(2) Includes $558 million and $348 million of local currency borrowings in
certain Central and Eastern European, South American, and Asia-Pacific countries
at a weighted average interest rate of 24.54% and 27.16% as of December 31, 2020
and December 31, 2019 , respectively.
(3) Includes secured debt of $5 million and $15 million at December 31, 2020
and December 31, 2019 , respectively.
We have also entered into standby letters of credit and surety bonds with
financial institutions primarily relating to the guarantee of our future
performance on certain contracts. Contingent liabilities on outstanding standby
letter of credit agreements and surety bonds aggregated to $1,226 million and
$1,156 million as of December 31, 2020 and 2019, respectively.
Credit Ratings-Bunge 's debt ratings and outlook by major credit rating agencies
at December 31, 2020 were as follows:
Short-term Long-term
Debt(1) Debt Outlook
Standard & Poor's A-1 BBB Stable
Moody's P-1 Baa3 Stable
Fitch F1 BBB- Stable
(1)Short-term rating applies only to Bunge Asset Funding Corp. , the issuer under
our commercial paper program.
Our debt agreements do not have any credit rating downgrade triggers that would
accelerate the maturity of our debt. However, credit rating downgrades would
increase our borrowing costs under our credit facilities and, depending on their
severity, could impede our ability to obtain credit facilities or access the
capital markets in the future on competitive terms. A significant increase in
our borrowing costs could impair our ability to compete effectively in our
business relative to competitors with higher credit ratings.
43--------------------------------------------------------------------------------
Table of Contents
Our credit facilities and certain senior notes require us to comply with specified financial covenants, including minimum net worth, minimum current ratio, a maximum debt to capitalization ratio, and limitations on secured indebtedness. We were in compliance with these covenants as ofDecember 31, 2020 .Trade Receivable Securitization Program-The Company , and certain of its subsidiaries participate in a trade receivable securitization program (the "Program") with a financial institution, as administrative agent, and certain commercial paper conduit purchasers and committed purchasers (collectively, the "Purchasers") that provides for funding of up to$800 million against receivables sold into the Program. The Program, which provides us with an additional source of liquidity, terminates onMay 26, 2021 . Our risk of loss following the sale of the trade receivables under the program is limited to the deferred purchase price receivable (the "DPP"), which atDecember 31, 2020 and 2019 had a fair value of$177 million and$105 million , respectively, and is included in other current assets in our consolidated balance sheets (see Note 4- Trade Accounts Receivable and Trade Receivable Securitization Program, to our consolidated financial statements included as part of this Annual Report on Form 10-K). The DPP will be repaid in cash as receivables are collected, generally within 30 days. Delinquencies and credit losses on trade receivables sold under the Program during the years endedDecember 31, 2020 , 2019 and 2018 were insignificant. Interest Rate Swap Agreements-We may use interest rate swaps as hedging instruments and record the swaps at fair value in the consolidated balance sheets with changes in fair value recorded contemporaneously in earnings. Additionally, the carrying amount of the associated debt is adjusted through earnings for changes in the fair value due to changes in benchmark interest rates. Equity-Total equity is set forth in the following table:December 31 , (US$ in millions) 2020
2019
Convertible perpetual preference shares$ 690 $ 690 Common shares 1 1 Additional paid-in capital 5,408 5,329 Retained earnings 7,236 6,437 Accumulated other comprehensive income (6,246) (5,624) Treasury shares, at cost (2020-15,428,313 and 2019-12,882,313) (1,020) (920) Total Bunge shareholders' equity 6,069 5,913 Noncontrolling interests 136 117 Total equity$ 6,205 $ 6,030 TotalBunge shareholders' equity was$6,069 million atDecember 31, 2020 compared to$5,913 million atDecember 31, 2019 . The increase inBunge shareholders' equity during the year endedDecember 31, 2020 was primarily due to$1,145 million of Net income attributable toBunge , offset by$622 million of Other comprehensive loss, primarily currency translation adjustment,$282 million and$34 million of declared dividends to common and preferred shareholders, respectively, and$100 million of common share repurchases. Noncontrolling interest increased to$136 million atDecember 31, 2020 from$117 million atDecember 31, 2019 primarily due to Net income attributable to our noncontrolling interest entities, offset by dividends paid to non-controlling interest holders. At December 31, 2020, we had 6,899,683 4.875% cumulative convertible perpetual preference shares outstanding with an aggregate liquidation preference of$690 million . Each convertible perpetual preference share has an initial liquidation preference of$100 , which will be adjusted for any accumulated and unpaid dividends. The convertible perpetual preference shares carry an annual dividend of$4.875 per share payable quarterly. As a result of adjustments made to the initial conversion price because cash dividends paid onBunge Limited's common shares exceeded certain specified thresholds, each convertible perpetual preference share is convertible, at the holder's option, at any time into 1.2585Bunge Limited common shares, based on the conversion price of$79.4592 per share, subject to certain additional anti-dilution adjustments (which represents 8,683,251Bunge Limited common shares atDecember 31, 2020 ). At any time, if the closing price of our common shares equals or exceeds 130% of the conversion price for 20 trading days during any consecutive 30 trading days (including the last trading day of such period), we may elect to cause the convertible perpetual preference shares to be automatically converted intoBunge Limited common shares at the then-prevailing conversion price. The convertible perpetual preference shares are not redeemable by us at any time. 44
--------------------------------------------------------------------------------
Table of Contents
Share repurchase program - InMay 2015 , we established a program for the repurchase of up to$500 million of our issued and outstanding common shares. The program has no expiration date.Bunge repurchased 2,546,000 common shares under this program during the year endedDecember 31, 2020 , for$100 million . Total repurchases under the program from its inception inMay 2015 throughDecember 31, 2020 were 7,253,440 shares for$400 million . Cash Flows Year ended December 31, US$ in millions 2020 2019 2018 Cash provided by (used for) operating activities$ (3,536) $ (808) $ (1,264) Cash provided by (used for) investing activities 1,813 1,503 410 Cash provided by (used for) financing activities 1,763 (771) 631 Effect of exchange rate changes on cash and cash equivalents and restricted cash 19 5 11 Net increase (decrease) in cash and cash equivalents and restricted cash $ 59
Our cash flows from operations vary depending on, among other items, the market prices and timing of the purchase and sale of our inventories. Generally, during periods when commodity prices are rising, our Agribusiness operations require increased use of cash to support working capital to acquire inventories and fund daily settlement requirements on exchange traded futures that we use to minimize price risk related to the purchase and sale of our inventories. 2020 Compared to 2019 For the year endedDecember 31, 2020 , our cash and cash equivalents, and restricted cash increased$59 million , compared to a decrease of$71 million for the year endedDecember 31, 2019 . Operating: Cash used for operating activities was$3,536 million for the year endedDecember 31, 2020 , an increase of$2,728 million compared to cash used for operating activities of$808 million for the year endedDecember 31, 2019 . The increase was due to higher working capital funding requirements, primarily RMI and proceeds from beneficial interests in securitized trade receivables, both primarily driven by higher commodity prices, partially offset by higher net income during the year endedDecember 31, 2020 . Year ended December 31, US$ in millions 2020 2019 Cash provided by (used for) operating activities $
(3,536)
1,943 1,312
Cash provided by (used for) operating activities, adjusted
Cash used for operating activities, adjusted for proceeds from beneficial interest in securitized trade receivables was$1,593 million for the year endedDecember 31, 2020 , compared to cash provided by operating activities of$504 million for the year endedDecember 31, 2019 . The change in cash provided by (used for) operating activities is due to higher working capital funding requirements, primarily RMI, partially offset by higher net income during the year endedDecember 31, 2020 . Certain of our non-U.S. operating subsidiaries are primarily funded withU.S. dollar-denominated debt, while currency risk is hedged withU.S. dollar-denominated assets. The functional currency of our operating subsidiaries is generally the local currency. The financial statements of our subsidiaries are calculated in the functional currency, and when the local currency is the functional currency, translated intoU.S. dollar.U.S. dollar-denominated loans are remeasured into their respective functional currencies at exchange rates at the applicable balance sheet date. Also, certain of ourU.S. dollar functional operating subsidiaries outside theU.S. are partially funded with local currency borrowings, while the currency risk is hedged with local currency denominated assets. Local currency loans inU.S. dollar functional currency subsidiaries outside theU.S. are remeasured intoU.S. dollars at the exchange rate on the applicable balance sheet date. The resulting gain or loss is included in our consolidated statements of income as foreign exchange gains or losses. For the year endedDecember 31, 2020 we recorded a foreign currency gain on net debt of$206 million versus a foreign currency loss on net debt for the year endedDecember 31, 2019 of$139 million , which were included as adjustments to reconcile Net income to Cash used for operating activities in the line item "Foreign exchange (gain) loss on net debt" in our consolidated statements of cash flows. This adjustment is required 45
--------------------------------------------------------------------------------
Table of Contents
as these losses are non-cash items that arise from financing activities and therefore will have no impact on cash flows from operations. Investing: Cash provided by investing activities was$1,813 million for the year endedDecember 31, 2020 compared to$1,503 million for the year endedDecember 31, 2019 , an increase of$310 million . The increase was primarily due to higher proceeds from beneficial interests in securitized trade receivables, lower capital expenditures, and higher cash inflows from settlements of net investment hedges, offset by lower net proceeds from investments and the divestiture of businesses and property, plant and equipment for the year endedDecember 31, 2020 . For the year endedDecember 31, 2020 , cash from beneficial interests in securitized trade receivables was$1,943 million . In addition, we received proceeds from investments of$305 million , primarily promissory notes related to financial services investments, which were more than offset by payments of$337 million for such investments. We also made payments for capital expenditures of$365 million related to capital projects at various facilities. For the year endedDecember 31, 2019 , cash from beneficial interests in securitized trade receivables was$1,312 million . In addition, we received proceeds from investments of$449 million , primarily from promissory notes related to financial services investments, partially offset by payments of$393 million made for such investments. We also made payments for capital expenditures of$524 million , which primarily related to the replanting of sugarcane in our Brazilian sugar and biofuels business that was contributed to theBP Bunge Bioenergia joint venture in late 2019, as well as other capital projects at various facilities. Financing: Cash provided by financing activities was$1,763 million for the year endedDecember 31, 2020 , an increase of$2,534 million , compared to cash used by financing activities of$771 million for the year endedDecember 31, 2019 , For the year endedDecember 31, 2020 , we had net cash proceeds from short-term and long-term debt of$2,202 million , primarily used to fund seasonal working capital requirements, mostly comprising RMI. We also paid dividends of$316 million to our common shareholders and holders of our convertible preference shares, and repurchased$100 million of common shares. For the year endedDecember 31, 2019 , net cash repayments from short-term and long-term debt were$438 million , primarily due to lower overall debt needs following the transfer of our industrial sugar business inBrazil to theBP Bunge Bioenergia joint venture. In addition, we paid dividends of$317 million to our common shareholders and holders of our convertible preference shares. 2019 Compared to 2018 In 2019, our cash and cash equivalents, and restricted cash decreased by$71 million , compared to a decrease of$212 million in 2018. Operating: Cash used for operating activities was$808 million for the year endedDecember 31, 2019 , compared to cash used for operating activities of$1,264 million for the year endedDecember 31, 2018 . Net cash outflows from operating activities was lower for the year endedDecember 31, 2019 , primarily due to the lower use of cash associated with beneficial interests in securitized trade receivables, partially offset by higher working capital requirements, when compared to the year endedDecember 31, 2018 . Year ended December 31, US$ in millions 2019 2018 Cash provided by (used for) operating activities $
(808)
1,312 1,888
Cash provided by (used for) operating activities, adjusted
Cash provided by operating activities, adjusted for proceeds from beneficial interest in securitized trade receivables was$504 million for the year endedDecember 31, 2019 , compared to$624 million for the year endedDecember 31, 2018 . The decrease was due to lower net income and higher working capital requirements when compared to the year endedDecember 31, 2018 . For the years endedDecember 31, 2019 andDecember 31, 2018 , we recorded foreign currency losses of$139 million and$139 million , respectively, which were included as adjustments to reconcile Net income to Cash used for operating activities in the line item "Foreign exchange (gain) loss on net debt" in our consolidated statements of cash flows. This adjustment is required as these gains or losses are non-cash items that arise from financing activities and therefore will have no impact on cash flows from operations. Investing: Cash provided by investing activities was$1,503 million for the year endedDecember 31, 2019 compared to cash provided by investing activities of$410 million for the year endedDecember 31, 2018 . During 2019, payments were made for capital expenditures of$524 million , primarily related to replanting of sugarcane for our industrial sugar business inBrazil , 46
--------------------------------------------------------------------------------
Table of Contents
which were subsequently transferred to theBP Bunge Bioenergia joint venture inDecember 2019 , as well as other capital projects at various facilities. In addition, payments were made for investments of$393 million , primarily related to deposits inSouth America and promissory notes related to financial services, which were more than offset by proceeds from such investments and the sale of equity securities associated with an investment subsequent to its initial public offering of$449 million . Cash provided by investing activities was primarily associated with proceeds of$1,312 million from beneficial interests in securitized trade receivables and$729 million from the divestiture of businesses and disposals of property, plant, and equipment. During 2018, payments were made for capital expenditures of$493 million , primarily related to replanting of sugarcane for our industrial sugar business inBrazil , which were subsequently transferred to theBP Bunge Bioenergia joint venture inDecember 2019 , and the upgrade of our crush facility inItaly , as well as other capital projects at various facilities. In addition, we acquired Loders for$908 million , net of cash acquired, andMinsa USA for$73 million , net of cash acquired. Further, payments were made for investments of$1,184 million , primarily related to deposits, treasuries and bonds inSouth America related to financial services, which were substantially offset by proceeds from such investments of$1,098 million . Cash provided by investing activities was primarily associated with proceeds of$1,888 million from beneficial interests in securitized trade receivables, as well as cash inflows related to settlements of net investment hedges of$66 million in the year endedDecember 31, 2018 , primarily driven by the depreciation of the Brazilian real relative to theU.S. dollar in 2018. Financing: Cash used for financing activities was$771 million in the year endedDecember 31, 2019 , compared to cash provided by financing activities of$631 million for the year endedDecember 31, 2018 . For the year endedDecember 31, 2019 , net cash repayments from short-term and long-term debt were$438 million , primarily related to lower overall debt needs following the transfer of our industrial sugar business inBrazil to theBP Bioenergia joint venture. In addition, we paid dividends of$317 million to our common shareholders and holders of our convertible preference shares. For the year endedDecember 31, 2018 , net cash proceeds from short-term and long-term debt were$956 million , primarily related to the funding of acquisitions, capital expenditures and working capital needs. In 2018, dividends paid to our common shareholders and holders of our convertible preference shares were$305 million . Brazilian Farmer Credit Background-We advance collateralized funds to counterparties (farmers and crop resellers), primarily to secure the origination of soybeans for our soybean processing facilities inBrazil . These activities are generally intended to be short-term in nature. The ability of our counterparties to repay these amounts is affected by agricultural economic conditions in the relevant geography, which are, in turn, affected by commodity prices, currency exchange rates, crop input costs and crop quality and yields. As a result, these arrangements are typically secured, including by a farmer's crop and, in many cases, land and other assets. In the event of counterparty default, we generally initiate legal proceedings to recover the defaulted amounts. However, the legal recovery process through the judicial system is a long-term process, generally spanning a number of years. Additionally, we may seek to renegotiate certain terms of our contract with the defaulting supplier in order to accelerate the recovery of amounts owed. Because Brazilian farmer credit exposures are denominated in local currency, reported values are impacted by movements in the value of the Brazilian real when translated intoU.S. dollars. FromDecember 31, 2019 toDecember 31, 2020 , the Brazilian real depreciated by approximately 23%, decreasing the reported farmer credit exposure balances when translated intoU.S. dollars. We periodically evaluate the collectability of our farmer receivables and record allowances if we determine that collection is doubtful. We base our determination of the allowance on analyses of the credit quality of individual accounts, also considering the economic and financial condition of the farming industry and other market conditions, as well as the value of any collateral related to amounts owed. We continuously review defaulted farmer receivables for impairment on an individual account basis. We consider all accounts in legal collections processes to be defaulted and past due. For such accounts, we determine the allowance for uncollectible amounts based on the fair value of the associated collateral, net of estimated costs to sell. For all renegotiated accounts (current and past due), we consider changes in farm economic conditions and other market conditions, our historical experience related to renegotiated accounts, and the fair value of collateral in determining the allowance for doubtful accounts. Secured Advances to Suppliers and Prepaid Commodity Contracts-We purchase soybeans through prepaid commodity purchase contracts (advance cash payments to suppliers against contractual obligations to deliver specified quantities of soybeans in the future) and secured advances to suppliers (advances to suppliers against commitments to deliver soybeans in the future), primarily inBrazil . These financing arrangements are typically secured by the farmer's future crop and mortgages on the farmer's land, buildings and equipment, and are generally settled after the farmer's crop is harvested and sold. Interest earned on secured advances to suppliers of$31 million ,$26 million and$30 million for the years endedDecember 31, 2020 , 2019 and 2018, respectively, is included in Net sales in the consolidated statements of income. 47
--------------------------------------------------------------------------------
Table of Contents
The table below shows details of prepaid commodity contracts and secured
advances to suppliers outstanding at our Brazilian operations as of the dates
indicated. See Note 6- Other Current Assets and Note 12- Other Non-Current
Assets, to our consolidated financial statements included as part of this Annual
Report on Form 10-K for more information.
December 31 ,
(US$ in millions) 2020 2019
Prepaid commodity contracts$ 141 $ 98 Secured advances to suppliers (current) 374
336
Total (current) 515
434
Commodities not yet priced(1) (30)
(9)
Net 485
425
Secured advances to suppliers (non-current) 81
134
Total (current and non-current) 566
559
Allowance for uncollectible amounts (current and non-current)
$ (65) (1)Commodities delivered by suppliers that are yet to be priced are reflected at prevailing market prices atDecember 31, 2020 and 2019. Capital Expenditures Our cash payments made for capital expenditures were$365 million ,$524 million and$493 million for the years endedDecember 31, 2020 , 2019 and 2018, respectively. We intend to make capital expenditures of approximately$450 million in 2021. Our priorities for 2021 are to maintain the cash generating capacity of our assets through non-discretionary projects, such as maintenance, safety and compliance, as well as discretionary investment in growth and productivity projects, focusing on our strategy to strengthen our oilseeds platform, increase participation in biofuels and plant-based proteins, as well as growing our value added oils business. We intend to fund these capital expenditures primarily with cash flows from operations. Off-Balance Sheet Arrangements Guarantees We have issued or were party to the following guarantees atDecember 31, 2020 : Maximum Potential (US$ in millions) Future Payments Unconsolidated affiliates guarantee (1) $ 267 Residual value guarantee (2) 258 Total $ 525 (1)We have issued guarantees to certain financial institutions related to debt of certain of our unconsolidated affiliates. The terms of the guarantees are equal to the terms of the related financings which have maturity dates through 2034. There are no recourse provisions or collateral that would enable us to recover any amounts paid under these guarantees. In addition, one of our subsidiaries has guaranteed the obligations of two of its affiliates and in connection therewith has secured its guarantee obligations through a pledge of one of its affiliate's shares plus loans receivable from the affiliate to the financial institutions in the event that the guaranteed obligations are enforced. Based on the amounts drawn under such debt facilities atDecember 31, 2020 , our potential liability was$245 million and we have recorded a$12 million obligation related to these guarantees. (2)We have issued guarantees to certain financial institutions which are party to certain operating lease arrangements for railcars and barges. These guarantees provide for a minimum residual value to be received by the lessor at conclusion of the lease term. These leases expire at various dates from 2021 through 2026. AtDecember 31, 2020 , no obligation has been recorded related to these guarantees. Any obligation recorded would be recognized in Current operating lease obligations or Non-current operating lease obligations (see Note 27- Leases, to our consolidated financial statements). 48
--------------------------------------------------------------------------------
Table of Contents
We have provided a guaranty to the Director of theIllinois Department of Agriculture as Trustee forBunge North America, Inc. ("BNA"), an indirect wholly-owned subsidiary, which guarantees all amounts due and owing by BNA, to grain producers and/or depositors in theState of Illinois who have delivered commodities to BNA'sIllinois facilities. In addition, we have provided full and unconditional parent level guarantees of the outstanding indebtedness under certain credit facilities entered into, and senior notes issued by, our subsidiaries. AtDecember 31, 2020 , our consolidated balance sheet includes debt with a carrying amount of$6,760 million related to these guarantees. This debt includes the senior notes issued by two of our 100% owned finance subsidiaries,Bunge Limited Finance Corp. andBunge Finance Europe B.V. There are largely no restrictions on the ability ofBunge Limited Finance Corp. andBunge Finance Europe B.V. or any otherBunge subsidiary to transfer funds toBunge Limited . Contractual Obligations The following table summarizes our scheduled contractual obligations and their expected maturities atDecember 31, 2020 , and the effect such obligations are expected to have on our liquidity and cash flows in the future periods indicated.
Payments due by period
2026 and
(US$ in millions) Total 2021 2022 - 2023 2024 - 2025 thereafter
Short-term debt $ 2,828 $ 2,828 $ - $ - $ -
Long-term debt(1) 4,387 13 1,497 1,584 1,293
Variable interest rate obligations 15 6 7 2 -
Interest obligations on fixed rate debt 484 120 198 112 54
Non-cancelable lease obligations(2) 925 261 365 168 131
Capital commitments 51 51 - - -
Freight supply agreements(3) 101 101 - - -
Inventory purchase commitments 641 628 13 - -
Power supply purchase commitments 82 32 22 17 11
Other commitments and obligations(4) 136 53 57 23 3
Total contractual cash obligations(5) $ 9,650 $ 4,093 $ 2,159 $ 1,906 $ 1,492
(1)Excludes components of long-term debt attributable to fair value hedge
accounting of $92 million and deferred financing fees and unamortized premiums
of $19 million .
(2)Represents future minimum payments under non-cancelable leases with initial
terms of one year or more. Minimum lease payments have not been reduced by
minimum sublease income receipts of $23 million due in future periods under
non-cancelable subleases.
(3)Represents purchase commitments for time on ocean freight vessels and
railroad freight lines for the purpose of transporting agricultural commodities.
The ocean freight service agreements are short term contracts with a duration of
less than a year. Ocean freight service agreements with terms in excess of one
year are included in non-cancelable lease obligations. The railroad freight
service agreements require a minimum monthly payment regardless of the actual
level of freight services used. The costs of our freight supply agreements are
typically passed through to our customers as a component of the prices we charge
for our products. However, changes in the market value of such freight services
compared to the rates at which we have contracted them may affect margins on the
sales of agricultural commodities.
(4)Represents other purchase commitments and obligations, such as take-or-pay
contracts, throughput contracts, and debt commitment fees.
(5)Does not include estimated payments of liabilities associated with uncertain
income tax positions. As of December 31, 2020 , Bunge had uncertain income tax
liabilities of $52 million , including interest and penalties. At this time, we
are unable to make a reasonably reliable estimate of the timing of payments in
individual years in connection with these tax liabilities; therefore, such
amounts are not included in the above contractual obligations table. See Note
14- Income Taxes to our consolidated financial statements.
49--------------------------------------------------------------------------------
Table of Contents
Employee Benefit Plans We expect to contribute$21 million to our defined benefit pension plans and$4 million to our postretirement benefit plans in 2021. Critical Accounting Policies and Estimates Our accounting policies are more fully described in Note 1- Nature of Business, Basis of Presentation and Significant Accounting Policies to our consolidated financial statements included as part of this Annual Report on Form 10-K. As disclosed in Note 1, the preparation of financial statements in conformity withU.S. GAAP requires management to make substantial judgment or estimation in their application that may significantly affect reported amounts in the financial statements and accompanying notes. Actual results could differ significantly from those estimates. We believe the following discussion addresses our most critical accounting policies, which are those that are most important to the portrayal of our financial condition and results of operations and require management's most difficult, subjective and complex judgments. Offsetting In the normal course of its operations we routinely enter into transactions resulting in the recognition of assets and liabilities stemming from unconditional obligations, for example trade receivables and trade payables, or conditional obligations, for example unrealized gains and losses on derivative contracts at fair value, with the same counterparty. We generally record all such assets and liabilities on a gross basis, even when they are subject to master netting agreements. However, we also engage in various trade structured finance activities to leverage the value of our global trade flows. These activities include programs under which we generally obtainU.S. dollar-denominated letters of credit ("LCs"), each based on an underlying commodity trade flow, from financial institutions and time deposits denominated in either the local currency of the financial institutions' counterparties or inU.S. dollars, as well as foreign exchange forward contracts, and other programs in which trade related payables are set-off against receivables when all related assets and liabilities are subject to legally enforceable set-off agreements and the criteria of ASC 210-20, Offsetting, has been met. Cash inflows are offset by the related cash outflows resulting from placement of the time deposits and repayment of the LCs. All cash flows related to the programs are included in operating activities in the consolidated statements of cash flows. Translation of Foreign Currency Financial Statements Our reporting currency is theU.S. dollar. The functional currency of the majority of our foreign subsidiaries is their local currency. As such, amounts included in the consolidated statements of income, comprehensive income (loss), cash flows, and changes in equity are translated using average exchange rates during each period. Assets and liabilities are translated at period-end exchange rates and resulting foreign currency translation adjustments are recorded in the consolidated balance sheets as a component of accumulated other comprehensive income (loss). However, in accordance withU.S. GAAP, if a foreign entity's economy is determined to be highly inflationary, then such foreign entity's financial statements are remeasured as if the functional currency were the reporting currency. We have significant operations inArgentina and, up untilJune 30, 2018 , had utilized the official exchange rate of the Argentine peso published by the Argentine government when recording applicable transactions and remeasuring applicable assets and liabilities in its financial statements.Argentina has experienced negative economic trends, as evidenced by multiple periods of increasing inflation rates, devaluation of the peso, and increasing borrowing rates, requiring the Argentine government to take mitigating actions. During the second quarter of 2018, it was determined thatArgentina's economy should be considered highly inflationary, and as such, beginning onJuly 1, 2018 , our Argentine subsidiaries changed their functional currency to theU.S. Dollar. This change in functional currency did not have a material impact on our consolidated financial statements. Foreign Currency Transactions Monetary assets and liabilities denominated in currencies other than the functional currency are remeasured into their respective functional currencies at exchange rates in effect at the balance sheet date. The resulting exchange gain or loss is included in our consolidated statements of income as Foreign exchange gain (loss) unless the remeasurement gain or loss relates to an intercompany transaction that is of a long-term investment nature and for which settlement is not planned or anticipated in the foreseeable future. Gains or losses arising from remeasurement of such transactions are reported as a component of Accumulated other comprehensive income (loss) in our consolidated balance sheets. 50
--------------------------------------------------------------------------------
Table of Contents
Inventories and Derivatives
Our RMI, forward RMI purchase and sale contracts, and exchange traded futures
and options are primarily valued at fair value. RMI are freely-traded, have
quoted market prices, may be sold without significant additional processing and
have predictable and insignificant disposal costs. We estimate fair values of
commodity inventories and forward purchase and sale contracts on these
inventories based on commodity futures exchange quotations, broker or dealer
quotations, or market transactions in either listed or over-the-counter ("OTC")
markets with appropriate adjustments for differences in local markets where our
inventories are located. Certain inventories may utilize significant
unobservable data related to local market adjustments to determine fair value.
The significant unobservable inputs for RMI and physically settled forward
purchase and sale contracts relate to certain management estimations regarding
costs of transportation and other local market or location-related adjustments,
primarily freight related adjustments in the interior of Brazil and the lack of
market corroborated information in Canada . In both situations, we use
proprietary information such as purchase and sale contracts and contracted
prices to value freight, premiums, and discounts in our contracts. Changes in
the fair values of these inventories and contracts are recognized in our
consolidated statements of income as a component of Cost of goods sold. If we
used different methods or factors to estimate fair values, amounts reported as
Inventories and unrealized gains and losses on derivative contracts in the
consolidated balance sheets and Cost of goods sold in the consolidated
statements of income, respectively, could differ. Additionally, if market
conditions change subsequent to year-end, amounts reported in future periods as
Inventories, Unrealized gains and losses on derivative contracts, and Cost of
goods sold could differ.
Allowances for Uncollectible Accounts
Trade Accounts Receivable-Trade accounts receivable is stated at historical
carrying amounts net of write-offs and allowances for uncollectible accounts. We
establish allowances for uncollectible trade accounts receivable based on
lifetime expected credit losses utilizing an aging schedule for each pool of
trade accounts receivable. Pools are determined based on risk characteristics
such as the type of customer and geography. A default rate is derived using a
provision matrix with data based on Bunge 's historical receivables information.
The default rate is then applied to the pool to determine the allowance for
expected credit losses. Given the short term nature of our trade accounts
receivable, the default rate is only adjusted if significant changes in the
credit profile of the portfolio are identified (e.g., poor crop years, credit
issues at the country level, systematic risk), resulting in historic loss rates
that are not representative of forecasted losses. Uncollectible accounts are
written off when a settlement is reached for an amount that is less than the
outstanding historical balance or when we have determined that collection of the
balance is unlikely.
Specifically, in establishing appropriate default rates as of December 31, 2020 ,
we took into consideration expected impacts on our customers and other debtors
in view of the COVID-19 pandemic, as well as other factors, which did not result
in a material impact on our financial statements.
We record and report accrued interest receivable within the same line item as
the related receivable. The allowance for expected credit losses is estimated on
the amortized cost basis of the trade accounts receivable, including accrued
interest receivable. We recognize credit loss expense when establishing an
allowance for accrued interest receivable.
Secured Advances to Suppliers-Secured advances to suppliers is stated at
historical carrying amounts net of write-offs and allowances for uncollectible
accounts. Secured advances to suppliers are expected to be settled through
delivery of non-cash assets and as such, allowances are established when
collection is not probable. We establish an allowance for secured advances to
suppliers, generally farmers and resellers of grain, based on historical
experience, farming economics and other market conditions as well as specific
customer collection issues. Uncollectible accounts are written off when a
settlement is reached for an amount below the outstanding historical balance or
when we have determined that collection is unlikely.
Secured advances to suppliers bear interest at contractual rates that reflect
current market interest rates at the time of the transaction. There are no
deferred fees or costs associated with these receivables. As a result, there are
no imputed interest amounts to be amortized under the interest method. Interest
income is calculated based on the terms of the individual agreements and is
recognized on an accrual basis.
We follow accounting guidance on the disclosure of the credit quality of
financing receivables and the allowance for credit losses, which requires
information to be disclosed at disaggregated levels, defined as portfolio
segments and classes. Under this guidance, secured advances to suppliers are
considered impaired, based on current information and events, if we determine it
probable that all amounts due under the original terms of the receivable will
not be collected. Recognition of interest income is suspended once the borrower
defaults on the originally scheduled delivery of agricultural commodities as the
collection of future income is determined not to be probable. No additional
interest income is accrued from the point of default until ultimate recovery, at
which time amounts collected are credited first against the receivable and then
to any unrecognized interest income.
51--------------------------------------------------------------------------------
Table of Contents
When we acquire a business, the consideration is first assigned to identifiable assets and liabilities, including intangible assets, based on estimated fair values, with any excess recorded as goodwill. Determining fair value requires significant estimates and assumptions based on an evaluation of a number of factors, including market participants, projected growth rates, the amounts and timing of future cash flows, and the discount rates applied to the cash flows. Determining the useful life of an asset also requires significant judgment. Our goodwill balance is not amortized to expense. Instead, it is tested for impairment at least annually. We generally perform our annual impairment analysis during the fourth quarter. If events or indicators of impairment occur between annual impairment analyses, we perform an impairment analysis at that date. These events or circumstances could include a significant change in the business climate, legal factors, operating performance indicators, competition, or sale or disposition of a significant asset. In testing for a potential impairment of goodwill, we: (1) determine our reporting units; (2) allocate goodwill to our various reporting units to which the acquired goodwill relates; (3) determine the carrying value, or book value, of our reporting units; (4) estimate the fair value of each reporting unit using a discounted cash flow model and/or using market multiples; (5) compare the fair value of each reporting unit to its carrying value; and (6) if the estimated fair value of a reporting unit is less than the carrying value, we recognize an impairment charge for such amount, but not exceeding the total amount of goodwill allocated to that reporting unit. The process of evaluating the potential impairment of goodwill is subjective and requires significant judgment at many points during the analysis, including the identification of our reporting units, identification and allocation of the assets and liabilities to each of our reporting units, and determination of fair value. In estimating the fair value of a reporting unit for the purposes of our annual or periodic impairment analysis, we make estimates and significant judgments about the future cash flows of that reporting unit aligned with management's strategic business plans. Changes in judgment related to these assumptions and estimates could result in goodwill impairment charges. We believe the assumptions and estimates used are appropriate based on the information currently available to management. Estimates based on market earnings multiples of peer companies identified for the reporting unit may also be used, where available. Critical estimates in the determination of fair value under the income approach include, but are not limited to, assumptions about variables such as commodity prices, crop throughput and production volumes, profitability, future capital expenditures and discount rates, all of which are subject to a high degree of judgment. During the fourth quarter of 2020, we performed our annual impairment assessment and determined the estimated fair values of each of our goodwill reporting units exceeded each of their carrying values. See Note 8-Goodwill , to our consolidated financial statements. During the fourth quarter of 2019, we recorded a goodwill impairment charge of$108 million related to what had been ourBunge Loders Croklaan reporting unit. Property, Plant and Equipment and Other Finite-Lived Intangible Assets Long-lived assets include property, plant and equipment and other finite-lived intangible assets. Property, plant and equipment and finite-lived intangible assets are depreciated or amortized over their estimated useful life on a straight line basis. When facts and circumstances indicate the carrying values of these assets may be impaired, an evaluation of recoverability is performed by comparing the carrying value of the assets to the undiscounted projected future cash flows to be generated by such assets from their use and ultimate disposal. If it appears the carrying value of our assets is not recoverable, we compare the carrying value of the assets to the discounted projected future cash flows to be generated by such assets from their use and ultimate disposal, and if the carrying value is greater, recognize an impairment loss for the difference between the discounted projected future cash flows and the carrying value of the assets as a charge against results of operations. Our judgments related to the expected useful lives of these assets and our ability to realize undiscounted cash flows in excess of the carrying amount of such assets are affected by factors such as the ongoing maintenance of the assets, changes in economic conditions and changes in operating performance. As we assess the ongoing expected cash flows and carrying amounts of these assets, changes in these factors could cause us to realize material impairment charges. We recorded impairment charges of$180 million for property, plant and equipment and intangible assets during the year endedDecember 31, 2019 , primarily related to portfolio rationalization initiatives. Contingencies We are a party to a large number of claims and lawsuits, primarily non-income tax and labor claims inBrazil and non-income tax claims inArgentina , and we make provisions for potential liabilities arising from such claims when we deem them probable and reasonably estimable. These estimates of probable loss have been developed in consultation with in-house and outside counsel and are based on an analysis of potential results, assuming a combination of litigation and settlement strategies. Future results of operations for any particular quarterly or annual period could be materially affected by changes in our assumptions or the effectiveness of our strategies relating to these proceedings. For more information on tax and labor claims inBrazil , see "Item 3. Legal Proceedings" 52
--------------------------------------------------------------------------------
Table of Contents
Income Taxes We record valuation allowances to reduce our deferred tax assets to the amount that we are likely to realize. We consider projections of future taxable income and prudent tax planning strategies to assess the need for and the amount of the valuation allowances. If we determine that we can realize a deferred tax asset in excess of our net recorded amount, we decrease the valuation allowance, thereby decreasing income tax expense. Conversely, if we determine that we are unable to realize all or part of our net deferred tax asset, we increase the valuation allowance, thereby increasing income tax expense. We apply a "more likely than not" threshold to the recognition and de-recognition of tax benefits. Accordingly, we recognize the amount of tax benefit that has a greater than 50 percent likelihood of being ultimately realized upon settlement. The calculation of our uncertain tax positions involves complexities in the application of intricate tax regulations in a multitude of jurisdictions across our global operations. Future changes in judgment related to the ultimate resolution of unrecognized tax benefits will affect the earnings in the quarter of such change. AtDecember 31, 2020 and 2019, we had recorded uncertain tax positions of$52 million and$53 million , respectively, in our consolidated balance sheets. For additional information on income taxes, please refer to Note 14- Income Taxes to our consolidated financial statements included as part of this Annual Report on Form 10-K. Recoverable Taxes We evaluate the collectability of our recoverable taxes and record allowances if we determine that collection is doubtful. Recoverable taxes include value-added taxes paid upon the acquisition of property, plant and equipment, raw materials and taxable services and other transactional taxes, which can be recovered in cash or as compensation against income taxes, or other taxes we may owe, primarily inBrazil andEurope . Management's assumption about the collectability of recoverable taxes requires significant judgment because it involves an assessment of the ability and willingness of the applicable federal or local government to refund the taxes. The balance of these allowances fluctuates depending on the sales activity of existing inventories, purchases of new inventories, percentages of export sales, seasonality, changes in applicable tax rates, cash payments by the applicable government agencies and the offset of outstanding balances against income or certain other taxes owed to the applicable governments, where permissible. AtDecember 31, 2020 and 2019, the allowance for recoverable taxes was$58 million and$78 million , respectively. We continue to monitor the economic environment and events taking place in the applicable countries and in cases where we determine that recovery is doubtful, recoverable taxes are reduced by allowances for the estimated unrecoverable amounts. New Accounting Pronouncements See Note 1- Nature of Business, Basis of Presentation and Significant Accounting Policies to our consolidated financial statements included as part of this Annual Report on Form 10-K.
© Edgar Online, source
