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Bunge Ltd (NYSE:BG)
Q1 2019 Earnings Call
May. 8, 2019, 8:00 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Good day and welcome to the Bunge Limited First Quarter 2019 Earnings Release and Conference Call. All participants will be in listen-only mode. (Operator Instructions) After today's presentation, there will be an opportunity to ask questions. Please note this event is being recorded.

I would now like to turn the conference over to Ruth Ann Wisener, Vice President, Investor Relations. Please go ahead.

Ruth Ann Wisener -- Vice President Investor Relations

Thank you, operator, and thank you for joining us this morning. It's great to be here at Bunge. Before we get started, I want to let you know that we have slides to accompany our discussion. This can be found in the Investor section of our website at bunge.com under Investor Presentations. Reconciliations of non-GAAP measures to the most directly comparable GAAP financial measure are posted on our website as well.

I'd like to direct you to Slide 2 and remind you that today's presentation includes forward-looking statements that reflect Bunge's current view with respect to future events, financial performance and industry conditions. These forward-looking statements are subject to various risks and uncertainties. Bunge has provided additional information in its reports on file with the SEC concerning factors that could cause actual results to differ materially from those contained in this presentation and we encourage you to review these factors.

On the call this morning are Greg Heckman, Chief Executive Officer; and Thom Boehlert, Chief Financial Officer.

I'll now turn the call over to Greg.

Gregory A. Heckman -- Chief Executive Officer

Thank you, Ruth Ann, and good morning. I'm honored to have the opportunity to serve as Bunge's new CEO and we have a lot to discuss today. But first, I'd like to welcome Ruth Ann Wisener, our new Head of Investor Relations. Ruth Ann joined Bunge in March and brings a wealth of experience in food and agricultural industries from Tyson Foods and ADM among others. Ruth Ann's relationships with analysts and investors will be a great asset for us, and I'm delighted to welcome her to the Bunge team.

We are aggressively moving forward on the priorities we discussed last quarter and we continue to ramp up the important efforts already under way to improve our business and operations. This morning, I want to share with you why I'm excited about the company's prospects. I'll then cover some organizational changes that we announced today, we will review our strategic priorities, and then Thom will provide additional detail on our first quarter results. And then finally, we'll open it up for Q&A.

Over the past several months, I focused on getting to know Bunge better by visiting many of our locations and meeting with our people across the globe. In South America, Europe and U.S., I've seen some of our operations up close and received valuable feedback from employees on their ideas to improve how we operate. I have also seen the depth of our employees' knowledge, passion and commitment to the success of our business going forward. I've gained new insights into our business segments complement each other and how we can use those relationships to better leverage our assets.

For example, as we had expected integrating Loders Croklaan into our legacy portfolio is giving us opportunities to become a valued supplier of additional products and services to both new and existing customers. Bunge has a powerful global franchise in oilseeds and oils. We are the number one crusher in the world with the largest South American footprint, strong positions in other key geographies and a new and evolving oils platform. Combined with our worldwide grains distribution network and regional milling footprint, this provides us with unmatched scale and expertise. We can better execute on the opportunities generated by our scale on our internal structure, systems, processes and people are aligned. This requires a new level of speed and execution across the organization.

To achieve this, we'll shift to a global operating model from our current regional structure, as we detailed in a separate announcement this morning. This new structure will simplify how we operate, drive greater transparency and accountability, reduce costs and support our renewed and deeper focus on customers and execution. As part of this reorganization, our commercial activities will be aligned around our handling and processing assets, management of physical product flows and the risk management and optimization associated with our global business.

In addition, Bunge Loders Croklaan will now report directly to me. I want to ensure this business is positioned appropriately and achieves its full potential. Also as you've seen, John Neppl will be joining us at the end of the month as our new Chief Financial Officer. I worked with John for many years. His expertise in the agribusiness, food and ingredients industries and a successful track record will enable him to make a significant contribution here. Thom Boehlert will stay on to ensure a smooth transition with John. Thom's been a great contributor to Bunge. Including and a spearheading our successful Global Competitiveness Program and we're fortunate to have a world-class financial team that he has assembled. I also want to express my personal gratitude to Thom for his key role in supporting Board Chair Kathi Hyle and me in our new roles over the past several months. We have a deep and talented bench within our key businesses and I have full confidence in the team.

Together, we're working aggressively against our three strategic priorities, driving operational performance, optimizing the portfolio and strengthening financial discipline. Regarding operational performance, while we missed opportunities and did not operate our plants at the full utilization in the market provided last year, our network and physical facilities are sound. Over the last three months, I've worked with the team to tighten up how we operate and better manage the inherent value at risk. Expectations are clear and I'm very pleased with the level of engagement.

Through the process of portfolio optimization, we have identified specific assets and established dedicated teams of internal and external resources to rationalize the portfolio. We're making progress on these projects, which will ultimately improve Bunge's earnings and returns. We know you're eager to hear more and we will share developments and additional information when we can.

We are also continuing to strengthen our financial discipline, reemphasizing controls on working capital and capital spending. Any future investments will be carefully scrutinized and aligned with our strategic priorities. We will be reluctant to spend growth capital on any project that is not funded by improvements in business results or execution on portfolio changes.

On operating costs, I'm very pleased with what we've achieved through our Global Competitiveness Program. The GCP has already gone a long way to reduce cost, simplify how we work and help us think differently.

We will use this momentum along with the changes to our operating model to develop a cost structure for the cyclical nature of our industry. We'd still have work to do to get our processes and operations where they need to be and that's a key focus over the coming weeks and months. However, I am encouraged by the energy and engagement of the team and the direction the company's heading.

Turning to Q1 results. They were largely in line with our expectations. Soy crush margins were better year-over-year in the U.S., Brazil and Europe, partly offsetting weaker results in Argentina and China. Higher results in Edible Oils were driven by a full quarter of Loders' ownership and continued synergy benefits. In addition, I want to commend our North American team, which kept facilities operating at very good levels, despite severe weather, the disrupted operations and logistics in the U.S.

Based on current market conditions, our view on the 2019 full year consolidated results has not changed from what we shared with you in February. That said, there are a number of unprecedented factors in the market. First, African swine fever has caused the largest decline of animal protein supplies in recent memory. The decline equal to the entire U.S. swine herd and the full impact of this disease remains to be seen.

Second, the most recent USDA forecast, adjusted global soybean inventories will exceed 107 million metric tons as of September 1st, a record high. Additionally, most of these inventories remain in the hands of producers, and we believe future producer marketing patterns will be affected by how the U.S.-China trade discussions evolve. While these dynamics should create positive catalysts for our globally diverse footprint, the timing and the magnitude of these potential benefits remain unclear.

I'll now turn the call over to Thom to go through the numbers in greater detail.

Thomas M. Boehlert -- Executive Vice President and Chief Financial Officer

Thanks, Greg. Good morning everybody. Let's turn to the earnings highlights on Page 4. Reported first quarter earnings per share from continuing operations was $0.26 compared to a loss of $0.20 in the first quarter of 2018. Adjusted earnings per share was $0.36 in the first quarter versus the $0.06 loss in the prior year. Notable pre-tax charges totaled $15 million during the quarter, primarily related to the Global Competitiveness Program and an impairment charge.

Total segment EBIT for the quarter was $151 million versus $61 million in the prior year. On an adjusted basis, total segment EBIT was $166 million versus $85 million in the prior year. In Agribusiness, adjusted EBIT was $120 million compared to $52 million in the prior year. Starting with oilseeds, both quarters were negatively impacted by crush margin mark-to-market timing effects. In the first quarter of 2019 by mark-to-market gains taken in 2018 related to the first quarter production and in the first quarter of 2018 by mark-to-market losses related to future production. Adjusting for these two effects, first quarter 2019 adjusted EBIT would have been approximately $146 million compared to $86 million in 2018, an increase of $60 million. Crush results, adjusted for mark-to-market with a primary driver of the increase year-over-year.

Both soy and soft crushed volumes were slightly higher than last year. Soy crush margins were higher, as we locked in a significant portion of our first quarter production last year before margins weekend. Margins were higher in North America, Brazil, and Europe, but lower in China due to the effects of the African swine fever, and in Argentina, which was negatively impacted by farmer retention of soybeans. And soft crush margins also rose as higher vegetable oil prices improved performance in Europe and Canada. This more than offset lower results in China.

Oilseeds trading and distribution results were down as margins declined only partially offset by higher volumes. Risk management results were positive in both periods.

Moving to Grains. The segment generated EBIT of $22 million versus $86 million a year ago, primarily on lower origination volumes and margins in both North America and South America. In North America, results were negatively impacted by weather related disruptions, farmer retention and reduced export demand from China. In Brazil, farmer selling was limited amid to a decrease in premiums related to crop size and lower export demand due to the African swine fever. Results in grain trading and distribution were lower than last year, reflecting a decline in volumes and margins. Both origination and distribution were somewhat lackluster in the first quarter with the lack of U.S. China trade news and the continued spread of ASF.

In total, we estimate that the challenging U.S. weather conditions during the quarter negatively impacted the Agribusiness segment results by approximately $20 million.

Food & Ingredients adjusted EBIT was $68 million compared to $54 million in the first quarter of 2018. Edible Oils adjusted EBIT was $51 million, up from $35 million last year, primarily driven by full quarter of Loders Croklaan ownership and higher margins in Brazil resulting from tight oil supplies and reduced industrial costs. Results in Asia were slightly lower. Milling EBIT was $17 million down from an adjusted $19 million last year. Improved results in Brazil were more than offset by lower margins and volumes in Mexico, while the U.S. results were similar to last year. Sugar & Bioenergy had an adjusted EBIT loss of $23 million, similar to the $20 million loss last year. Results were due to lower ethanol and sugar prices largely offset by lower costs.

As the first quarter is the inter-crop period, our mills only began producing for the season toward the end of March. The sugar and ethanol we sold during the quarter was inventory from the previous harvest .

Fertilizer EBIT was $1 million compared to a loss of $1 million in the prior year. The higher results were driven by our Argentine operation where lower costs more than offset lower margins.

Our tax expense for the quarter was $38 million. The effective tax rate of 43% was unusually high because we had losses in certain entities, for which we cannot record a tax benefit.

Let's turn to Slide 5, the cash flow highlights. Cash used for operations for the first three months of the year was $402 million compared to cash used of approximately $1.8 billion in the same period last year. The year-over-year variance is primarily due to a decrease in inventories. Our trailing 12 month adjusted funds from operations were $1.2 billion.

On Slide 6, net debt of approximately $5.5 billion increased as compared to approximately $5 billion at the beginning of the quarter due to an increase in working capital. Our debt largely finances our inventories. As the slide shows, more than 80% of our net debt was used to finance readily marketable inventories during the quarter. In connection with the new accounting lease standard, we recorded approximately $1 billion of operating lease assets and offsetting liabilities in the first quarter.

Let's turn to Slide 7, and our capital allocation philosophy. We remain committed to our financial policy, targeting a BBB credit rating and maintaining access to committed liquidity sufficient to comfortably support our Agribusiness flows. We are rated BBB flat by S&P and the equivalent of BBB- minus by Moody's and Fitch.

We had committed credit facilities of approximately $5 billion, of which $4.3 billion was undrawn and available at the end of the quarter and we had a cash balance of $464 million. Within our capital structure and liquidity framework, we allocate capital to CapEx, portfolio optimization and shareholders in a manner that we believe provides the most long-term value. We've continued to maintain discipline in CapEx spending, investing a $119 million in the first quarter compared to $105 million in the first quarter of 2018.

Annual capital expenditures in this year and last are 35% below the prior five-year annual average. We did not invest in acquisitions during the quarter and we paid $79 million in dividends to shareholders.

Let's turn to Slide 8, and our return on invested capital. Our trailing four quarter average return on invested capital was 5.6% overall and 7.2% for our core Agribusiness and Food segments, above our cost of capital. Our goal is to earn 200 basis points above our 7% cost of capital on the Agribusiness and Food segments.

Regarding that Global Competitiveness Program, when we announced the program in July 2017, our goal was to reduce SG&A cost by $250 million by 2020 compared to our 2017 addressable SG&A baseline of $1.35 billion. We expect to reach our $250 million savings target this year, a year ahead of plan. The $50 million in incremental savings that we expect in 2019 will be primarily driven by the continued standardization of processes and a move to shared services, IT rationalization and reductions in indirect spend. As we move into the asset optimization work and continue to streamline the organization, the company will apply the discipline we've developed to identify and capture additional savings.

Let's turn to the 2019 full year outlook on Slide 9. Given current market conditions, we continue to expect the full year 2019 results to be similar to 2018, but with the change in the mix. In Agribusiness, Oilseeds results would be lower than in 2018 as forward soy crush margins are materially lower than last year and historical averages.

Actual crush margins over the balance of the year are likely to evolve based on U.S.-China trade relations, the size of the North American crop, pace of farmer selling in North America and South America, the evolution of ASF among other factors. Based on the soft seed crush margin environment, the outlook would be slightly improved compared to 2018, actual margins will be impacted by the size of the soft seed crops which will be harvested later in the year.

Improvements in risk management and how we operate should support higher results in Grains versus last year. Again, the U.S.-China trade dynamic and the rate of farmer selling will affect the timing and the geographic location of origination margins. In Food & Ingredients, full year results will benefit from 12 months of ownership of Loders Croklaan and increased synergies from the integration with our B2B business. In addition, favorable milling operating environments in Brazil and the U.S. will be partially offset by more challenging conditions in Mexico.

Moving to Slide 10. In Sugar & Bioenergy, we expect results to be approximately breakeven, a significant improvement from last year, and in Fertilizer results to be slightly lower versus 2018. Also, we continue to expect CapEx of approximately $550 million, DD&A of approximately $650 million, net interest expense to be in the range of $290 million to $310 million and the full year effective tax rate in the range of 22% to 26% based on the anticipated mix of earnings.

Regarding the second quarter, we would expect overall results to be slightly lower than the first quarter. The Agribusiness environment has not changed significantly since the first quarter, F&I results are expected to be lower as a result of the timing of spending and seasonal factors, and we expect similar seasonally driven losses in Sugar & Bioenergy and Fertilizer in the second quarter as we had in the first quarter. This outlook does not include any new crush, mark-to-market or timing differences which would be determined by market prices as of the end of the quarter.

I'll now turn the call back over to Greg.

Gregory A. Heckman -- Chief Executive Officer

Thank you again for joining us today. The changes we have under way will help to simplify our internal structure and processes, allowing us to leverage the depth of our expertise and increase accountability across Bunge. We're making progress against our strategic priorities, which will result in tangible benefits for our shareholders and customers.

And with that, operator, let's open the line for questions.

Questions and Answers:

Operator

We will now begin the question-and-answer session.

(Operator Instructions)

Our first question comes from Robert Moskow of Credit Suisse. Please go ahead.

Robert Moskow -- Credit Suisse -- Analyst

Hi. Thank you for the question. Greg, on the -- historically was run on a very regional basis and there were regional Presidents who had a lot of authority, and I think that probably limited that the capability of the company to leverage it's global footprint. So, can you talk a little bit about the cultural change that this reorganization will require? And can you talk about the potential for execution risk as you shift to this new model? Are there other ag business companies like, well, peers of yours that have shifted to this model successfully that you are -- you're using as a comp also? Thank you.

Gregory A. Heckman -- Chief Executive Officer

Good morning, Rob. This is about performance. This is about simplification, accountability and speed. And in real we're looking to improve the accountability and speed in through simplification is going to help a lot of that. We're going to organize around customers and markets, customers that we serve and the assets and people that operates in the markets that drive our margins.

Robert Moskow -- Credit Suisse -- Analyst

Okay. Can you talk about whether this is a big cultural change for the company?

Gregory A. Heckman -- Chief Executive Officer

Eliminating the regional matrix is definitely a cultural change, but I think the journey that company's been on the last two years, if you look at the Global Competitiveness Program, the functions had moved to global, and the company's been transitioning in there. And then if you look at the acquisition of Loders, so the Bunge Loders Croklaan on our B2B oils platform, the company positioned that as a global platform when they decided how that would best operates. So, there's already been a couple of big ships there with a lot of success behind them over the last two years . So, I think the evolution was started and it was time to go all the way.

Robert Moskow -- Credit Suisse -- Analyst

Okay. Great. And one follow-up. You mentioned that Loders will now report directly to you and it shifted to a global platform. What you say that, does that mean that it has now integrated with Bunge's heritage Edible Oils operations, were part of Bunge's heritage operations, like is this a -- is this now operating like a global Edible Oils business, or there are still kind of regional areas of Edible Oils that are separate from it? Thanks.

Gregory A. Heckman -- Chief Executive Officer

Yes. The team positioned it as a global platform. So, the Bunge's Loders Croklaan JV and our legacy business to business oils platform now operates as one platform under Aaron. No change there. The only change is he'll be reporting to me.

Robert Moskow -- Credit Suisse -- Analyst

Okay. Because the reason I ask is, because I guess it gets down to like, does it still get down to like the consumer level in Brazil, like a retail bottled oils operations that even have some brands attached to it, or is that part of this network or kind of separate or not?

Gregory A. Heckman -- Chief Executive Officer

No. That's attached to oilseed value chain. So, those were attached to our value chains. But in all of these business they -- even in a global business there are certain things that are always of course executed locally and that's part of getting that the business model right and being able to be very clear about who has the accountability and being able to make decisions that commercial speed for our customers and across our network for our shareholders.

Robert Moskow -- Credit Suisse -- Analyst

Okay. All right. I'll stop there. Thank you.

Gregory A. Heckman -- Chief Executive Officer

All right. Thank you.

Operator

The next question comes from Adam Samuelson of Goldman Sachs. Please go ahead.

Adam Samuelson -- Goldman Sachs -- Analyst

Yes. Thanks. Good morning everyone.

Gregory A. Heckman -- Chief Executive Officer

Good morning.

Adam Samuelson -- Goldman Sachs -- Analyst

So, I guess first, Greg, just wanted to dig a little bit more on some of the strategic actions and there was an allusion in your remarks to portfolio optimization and not specifically identifying businesses and I get that first sensitivity reasons, but any way to frame how big that bucket could be, whether it's in terms of how much invested capital represents, what the multi-year average earnings of those businesses were, just framing kind of what in terms of portfolio changes, how big those that could be?

Gregory A. Heckman -- Chief Executive Officer

Let me walk you through the work how we're moving that forward. So, we've taken and prioritized into three buckets, if you will, between what we want to do and what we know we can do, and that first bucket are all our active projects. And we've dedicated internal and external resources and that work is well under way and those will be the things in the first bucket that you'll hear about first, when we're able to share it.

The second bucket are the things that are in late stage where we've made a decision about what we're going to do and now we're probably between two paths on how we do it in order to create the most shareholder value. And so those are late stage and they'll be moving into the active stage and having additional resources applied to those. And then the things that are in the third stage are things of maybe a little more complex and where we've got some analysis ongoing or whether maybe a bigger strategic question. So, that's to kind of frame where we're at right now.

Adam Samuelson -- Goldman Sachs -- Analyst

Okay. But you're not at a point where you're growing at least, especially that first group kind of frame how big and how big that is, just at a high level even (inaudible) businesses.

Gregory A. Heckman -- Chief Executive Officer

Just can't do that right now.

Adam Samuelson -- Goldman Sachs -- Analyst

Okay. And then just shifting gears on the macro, just obviously a lot of moving pieces in the world today between U.S.-China trade and ASF, and appreciating that the timing and the exact outcomes of each is still unclear. But I was hoping you could just frame how you're seeing -- how the company is approaching both of those from an opportunity and risks perspective over the balance of the year into 2020?

Gregory A. Heckman -- Chief Executive Officer

Okay. Let's start with ASF. As we said, the timing and the magnitude of the eventual impact really tough and so we're not going to try to predict that. That being said, we are running a number of scenarios and our team is seeing everything you're saying publicly, and then of course looking across our portfolio with the information that we have. We believe over the long-term that should provide us some tailwinds, but we're just not willing to say when that's going to be right now.

Adam Samuelson -- Goldman Sachs -- Analyst

Okay. And then U.S.-China trade?

Gregory A. Heckman -- Chief Executive Officer

U.S.-China trade, it's also a timing issue. This -- even if you knew the timing, you need to know the content of what the outcome is going to be and we don't know either about the resolution. So, again, I think our teams done a very good job and in what's a difficult environment and ensuring that we continue to manage the earnings at risk in our portfolio and also protect the company from many of the stroke of pin risk that existed in this type of scenario. So, we got no specific call on that.

Adam Samuelson -- Goldman Sachs -- Analyst

Okay. I appreciate that color. I'll pass it on. Thanks.

Operator

Next question comes from Tom Simonette of JPMorgan. Please go ahead.

Thomas Simonette -- JPMorgan -- Analyst

Good morning.

Gregory A. Heckman -- Chief Executive Officer

Good morning, Tom.

Thomas Simonette -- JPMorgan -- Analyst

You mentioned farmer retention of soybeans impact in Q1 results. Can you just provide some more color by region? And how do you expect farmer selling to evolve from here? And how are you managing the supply of beans in South America?

Gregory A. Heckman -- Chief Executive Officer

Okay. Our team, we've got a great footprint in South America and a great team there is doing a very good job of managing what we need. The Argentinean farmer has continued to retain the majority of his soybeans after after marketing corn and wheat and he is seeing that as a hedge against the upcoming possible financial turmoil with an election in Q4.

In Brazil, I think we know he is well marketed, there the farmer is well marketed early and then slowed things down and he'll really be driven by price we think on a go-forward. And then of course the American farmers waiting to get in the field and hoping he'll get a little dry weather and be busy in the historical pattern, this is probably we get into Q3. He'll have a good look at it how is crops coming along and what he ended up planting and he'll have to make some choices.

Thomas Simonette -- JPMorgan -- Analyst

That's helpful. Thank you. And also could you go through the soft seed crush fundamentals by region, maybe outline where you see the most upside or downside risks to margins through this year?

Gregory A. Heckman -- Chief Executive Officer

I'd say, just overall, it looks a lot like last year right now and then as crops come off later in the year that will be the key and that calling any big change to what we saw last quarter. When we put the business plan together.

Thomas Simonette -- JPMorgan -- Analyst

I'll pass it on. Thank you very much.

Gregory A. Heckman -- Chief Executive Officer

Thank you.

Operator

The next question comes from David Driscoll of Citi. Please go ahead.

David Driscoll -- Citigroup -- Analyst

Good morning. This is Cornell Bennett in for seed collection for David.

Gregory A. Heckman -- Chief Executive Officer

Good morning, Cornell.

David Driscoll -- Citigroup -- Analyst

Okay. Great. Just wanted to start off, it sounds like we'll building kind of the forecast here that and in Agribusiness that the -- on the oilseed side, you're basically just looking at the current strip for crush margins and assuming that kind of the hoax. And then on the grain distribution side, it just sounds like I would assume that you're not really expecting a deal with China. Just wanted to know, is that the case. And then, if so, kind of, how do you look at ASF and the potential for a China deal kind of really impacting the numbers, just to get the sense that perhaps you know kind of the forecast overtime could have some upside related to it, because of these events, so maybe the bias is just a little bit higher than where it was perhaps three months ago?

Gregory A. Heckman -- Chief Executive Officer

I mean let me start with the first two and then maybe you will have to help me on come back on the last two. The first, I think you've got them right. We are continuing to look at what the market is telling us and providing with the forward curves. So, you're correct there. And then on the origination and distribution, marketing business, again, we continue to look at the current marketplace and the outlook there. And that is tied, as you said to U.S.-China trade because we continue to have no resolution, we've got traditional trade flows interrupted and that they are distorted, it's very disruptive to the system and then not being able to put longer term programs together, while we're staying in a very close in the position until things are clear, it definitely changes the soybean seaborne trade with the share of that market to China is.

David Driscoll -- Citigroup -- Analyst

Okay.

Thomas M. Boehlert -- Executive Vice President and Chief Financial Officer

Let me just add to that. On the margins, there has been a run up a bit in board crush over the course of April. When you look at our portfolio, a little less than half, it's really correlated very directly to board crush. So, that's our U.S. production and our European production. But our Brazil and Argentine production as well as China are not really that correlated to the board crush. So -- and those margins are lower than board crush at the moment.

So, when we look at the outlook, we're really looking at the market overall across all of our regions. The increase in our board crush recently has given us confidence in our outlook, but of course based on the conditions and the factors that we've talked about globally, those market prices can change pretty quickly.

David Driscoll -- Citigroup -- Analyst

And then we just kind of thinking about like Argentina and Brazil you know I would assume kind of on a year-over-year basis with the outlook for Argentina, just I feel like it has to be better with the new crops just given that you didn't really have much soy to work with down that jet. And then in Brazil equally, I think kind of at certain points in the year, you had Brazilian soy prices trading at big premiums that perhaps what you saw in the U.S. markets, so maybe based this was a little bit difficult for Bunge in those regions. So, just kind of putting those two factors together understanding that South America is structurally going to have somewhat lower crush margins than the U.S. which is kind of on a year-over-year basis, are you a little bit more optimistic about the South American business relative to perhaps which transpired last year?

Gregory A. Heckman -- Chief Executive Officer

I think crush margins are lower around the globe compared to last year. I mean, last year was a historically high year. So, that's what our outlook incorporates, you know, a crush margin environment which reflects the current market, much lower than last year.

Thomas M. Boehlert -- Executive Vice President and Chief Financial Officer

If you look at the marketplace, well, you know North America is a little better now, still below last year than South America. The market is telling us with the current board is that it's not going to stay that way. And then in South America, which is well below last year at this time, the market is saying they could get somewhat better, so it's a real mixed bag.

David Driscoll -- Citigroup -- Analyst

Okay. Thanks a lot. I'll pass it on.

Gregory A. Heckman -- Chief Executive Officer

Okay. Thank you.

Operator

The next question comes from Vincent Andrews of Morgan and Stanley. Please go ahead.

Vincent Andrews -- Morgan Stanley -- Analyst

Thank you. Greg, could you maybe talk a little bit about sort of your philosophy around sort of how you want to drive the company's earnings and you could bring in risk management on that? And I guess what I'm asking is this, are you playing to aspire to some type of aspirational earnings per share target, and are you going to sort of encourage risk management that would sort of encourage really swinging forth when an opportunity is there in taking risks or not, or are you going to encourage more of a toll booth model where you're trying to take the volatility out of earnings and demonstrate sort of a sustainable level of earnings power, so maybe you'd get a higher multiple? So, maybe you could just touch on some of those thematics.

Gregory A. Heckman -- Chief Executive Officer

Sure. Our short-term goal is to get Bunge position to reach the full potential of what is a fantastic portfolio and a really talented workforce, and that's number one. As far as risk management, we've got billions of dollars of assets investments, and it's our job true risk management to maximize the earnings that are available through that asset base, but to ensure that the risk is appropriate for the environment that we're operating in, which as we've kind of been talking about here the last half an hour is quite dynamic right now.

We want to use the phenomenal capabilities that this company's got, but we have to have a risk adjusted approach for the earnings that this portfolio will make.

Vincent Andrews -- Morgan Stanley -- Analyst

Okay. And maybe just as a follow-up on farmer selling which has been an issue for the industry increasingly and you noted in the USDA report, how much of the beans were on farm which was pretty remarkable. Is there anything structurally that you think the company can do to improve the flow of beans from the farmer, maybe if the -- even if that means accepting a lower margin over time than he might get if you just sort of weighted around and hope the farmer sold it at the attractive time for both of you. I mean what can change about that farmer selling dynamic?

Gregory A. Heckman -- Chief Executive Officer

Ultimately, the farmer is going to manage his business. But he is an important customer for us on that into the supply chain. And so we're going to operate as we always do and try to be helpful, giving him insights, and providing liquidity, providing logistics if he need it. And then using the balance of our system defined the best points of demand and then trying to get it from origin to destination as cheaply as fast. So, we'll continue to try to help that customer be successful. We need to all our customers to be as profitable and growing that makes this industry a lot more fun.

Vincent Andrews -- Morgan Stanley -- Analyst

Okay. Thanks. I'll pass it along.

Operator

The next question comes from Heather Jones of Vertical Group. Please go ahead.

Heather Jones -- Vertical Group -- Analyst

Good morning.

Gregory A. Heckman -- Chief Executive Officer

Good morning, Heather.

Heather Jones -- Vertical Group -- Analyst

Good morning. So, I guess I want to start with your oil price outlook. So, you've mentioned that your overall outlook for the company hasn't changed much, but so -- but I want to dive into oil specifically. There are some positive demand drivers this year, but at least one of them, the Brazilian increase in the biodiesel mandate has been delayed. So, I was just wondering if you overall has your outlook for the -- for oil pricing for the year changed at all, or do you think there are other things that could offset that Brazilian factor?

Gregory A. Heckman -- Chief Executive Officer

And you've called out one of the things was helpful here in Q1, no doubt. But, there are a number of puts and takes in the portfolio. So, we haven't called that out particularly I think this again is part of what we're doing here with our operating models to ensure in an environment that this dynamic that they are capturing all of the margin possible and that through managing the oil and the meal and the beans, and that the team is focused on making those decisions commercial stake (ph) .

Heather Jones -- Vertical Group -- Analyst

Okay . And my second question is on ASF, and I understand that you have been pretty clear that you won't talk to timing, you won't talk magnitude understandably. But one of the things we're discovering is that there is some doubt as to whether ASF can be a positive for companies like you and all, when Chinese soybean meal demand is clearly down and going to be down considerably for an extended period. So, could you help us understand how -- forget timing magnitude, but just how ASF could play out as a positive for Bunge with this existing footprint even with lower demand in China? How would that look?

Gregory A. Heckman -- Chief Executive Officer

Sure. Sure. And I might go back and just say one thing on timing, that probably is important that ties into the answer is how we think about, it's really our customers, the animal protein has to see the price signals and then choose to expand. So, we're a second derivative of that demand. So, that's the thing that makes timing tough. And that's why it's probably those tailwinds are farther out.

Now, about 15% of our crushes in China, so we really like being globally diversified with our footprint, because we believe as the amount of beans slowing down -- slowdown going to China, because of the slowdown meal demand there that the animal protein will expand at some point and that'll be outside of China where the majority of our crushes that should be good for meal demand. As the amount of beans going there, our push back to origins that around the world, again that's where the balance of our crushing exists and again that should be good for margins. So, that's how we're going to thinking about it.

Heather Jones -- Vertical Group -- Analyst

Okay. Perfect. Thank you so much.

Gregory A. Heckman -- Chief Executive Officer

You bet.

Operator

The next question comes from Ken Zaslow of Bank of Montreal. Please go ahead.

Ken Zaslow -- Bank of Montreal -- Analyst

Hey, good morning everyone.

Gregory A. Heckman -- Chief Executive Officer

Good morning, Ken.

Thomas M. Boehlert -- Executive Vice President and Chief Financial Officer

Hey, Ken.

Ken Zaslow -- Bank of Montreal -- Analyst

Just a couple of five follow-ups more than anything else, if you and following up on one of the questions, if you had reorganized in the way you are going to go in the future, how much do you think that would have contributed to your past performance over the last five years? How would that have need a difference in the earnings potential over the last five years? It's my first question.

Gregory A. Heckman -- Chief Executive Officer

So, Ken, you're starting with the easy one. I've got to say -- we've got to -- you know, we're doing this because we believe it makes us better operators of our assets and to serve customers better. So, the easiest thing to look at would be kind of self-inflicted mistakes that we would be able to avoid. That's the easiest thing to look at going backwards. That's why we talked about the faster commercial decision making and ultimately about trying to unleash the full potential of this portfolio. So, I don't have a number for you. It's more, and to be continued I guess.

Ken Zaslow -- Bank of Montreal -- Analyst

Okay. The second easy question I have is, when you break up the portfolio into those three buckets, and I'm not asking which one is booked, in the active, how -- what percentage are you there on the active that you're actually doing something, or are you still in that third category where we're still analyzing? I guess I'm trying to figure out is what's the speed to which will start to see the actions, right? So, if your 90% in bucket one versus 10% in bucket one, there is probably a difference in timing right? Is that not a fair way of thinking of that, and can you give us some perspective on that?

Gregory A. Heckman -- Chief Executive Officer

So, you got that right. The timing as we bucket and you're going to hear about the things in bucket one first, when I say active projects where we've got not only dedicated internal people working on it, we've brought dedicated external people and resources to bear, and there are conversations ongoing. So, those are the ones you'll hear about first.

Ken Zaslow -- Bank of Montreal -- Analyst

So, there's nothing in that bucket yet, is that you were saying, there's nothing in that bucket where you're all in bucket two and three at this point and...

Gregory A. Heckman -- Chief Executive Officer

No. No. No. We have a number of active projects in bucket one. We have a number of active projects with conversations going on way. Going on now which are paving the way for a change.

Ken Zaslow -- Bank of Montreal -- Analyst

Okay. And then just one clarification on the African swine fever, and correct me if I'm wrong. So, China obviously does not buy soybean meal. So, the decrease in soybean meal demand by China is not a one-for-one on the global market. But if there is an expansion outside of China is a one-for-one relationship to soybean meal demand, is on a global prices. Is that why there is a potential that African swine fever would actually be a net benefit over time to you? And is that the right way of thinking about it? And saying I'm wrong, it's fine too. I was just curious.

Gregory A. Heckman -- Chief Executive Officer

No. No. I think that's the right way. That's the right way to think about. Of course you've got to make assumptions on which species the protein, where does that protein demand get switched to by species and then by geographically. But yes, the soybean meal demand if it was like-for-like by species it'd be one-for-one on the meal demand. And then of course, without the meal demand being in China, they don't need these maybe beans. So, yeah, yeah I agree, you're right.

Ken Zaslow -- Bank of Montreal -- Analyst

Right. I appreciate. Thank you guys.

Gregory A. Heckman -- Chief Executive Officer

You bet. Thank you.

Operator

And we have a follow-up from Robert Moskow of Credit Suisse. Please go ahead.

Robert Moskow -- Credit Suisse -- Analyst

Hi. Thanks for the follow-up. At the risk of storing up trouble, one of your competitors has I think provided a much more bullish outlook for the back half of the year based on the thesis that the entire world will need to increase livestock supplies to make up for the depletion of the Chinese herd. And I think based on that they thought that soybean meal prices would go higher, margins would to go higher. And your tone today Greg that I think it's much more conservative than that, is that and it sounds like a purposeful choice and maybe a reasonable choice. But can you see I guess a lot of upside to that thesis if it plays out for your business?

Gregory A. Heckman -- Chief Executive Officer

Yes. You're correct. We probably are taking a measured approach from the analysis we've done and it's basically thinking about the animal life cycle, right. So, we've got to send the price signals to the market and then get the animals in place to create the demand and we think that's beyond 2019.

Robert Moskow -- Credit Suisse -- Analyst

Got it. Okay. Thank you .

Gregory A. Heckman -- Chief Executive Officer

Thank you.

Operator

And we have a question, I see from Vincent Andrews of Morgan Stanley.

Vincent Andrews -- Morgan Stanley -- Analyst

Thanks for taking the follow-up. Just to go back on the China and the ASF and the the soybean meal. I guess my question is, is if, you know, with the change to the herd there and theory they need to import fewer soybeans and that means as more soybeans available in the Rest of the World. So, I guess my question is just if crush margins do indeed increase because meal demand is higher, aren't there excess beans around to be crushed to chase after that higher meal price and ultimately when the market find an equilibrium, perhaps a better margins than today, but maybe not at sort of the fantastical crush margins that could be in place for a period of time?

Gregory A. Heckman -- Chief Executive Officer

I think you said it, well I agree with you. And that's why the outlook is what it is, wonderful thing, the market works and it'll -- it will adjust. So, I think that's right.

Vincent Andrews -- Morgan Stanley -- Analyst

Okay. Thanks very much guys.

Gregory A. Heckman -- Chief Executive Officer

Sure.

Operator

This concludes our question-and-answer session. I would like to turn the conference back over to Ruth Ann Wisener for any closing remarks.

Ruth Ann Wisener -- Vice President Investor Relations

Thanks for your time today. And if you have follow-up questions, please feel free to reach out to me.

Operator

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.

Duration: 54 minutes

Call participants:

Ruth Ann Wisener -- Vice President Investor Relations

Gregory A. Heckman -- Chief Executive Officer

Thomas M. Boehlert -- Executive Vice President and Chief Financial Officer

Robert Moskow -- Credit Suisse -- Analyst

Adam Samuelson -- Goldman Sachs -- Analyst

Thomas Simonette -- JPMorgan -- Analyst

David Driscoll -- Citigroup -- Analyst

Vincent Andrews -- Morgan Stanley -- Analyst

Heather Jones -- Vertical Group -- Analyst

Ken Zaslow -- Bank of Montreal -- Analyst

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