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TQI capital's avatar

hi, for the profitability, is it comparable to previous year due to the one off gain of disposal (400mil) as well as the income from affiliate(In the past the income from affiliate has been negative)? I believe that if you were to remove the gain as well as income from affiliate, its margin only improve marginally due to price increase as well as cost saving.

Besides, i am just curious on the gain on RMI, based on its accounting policy, changes in fair value of RMI are recognized in earnings as a component of cost of goods sold, does it suggests that the higher profitability is mainly due to changes in inventory value instead of structural change in the company business model? My idea was that the volume didn't change much, so i would presume that their inventory increase was mainly due to revaluation instead of volume, am i right to say so?

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Lone Elm's avatar

Re: past buyout attempts by strategic acquirers

It's likely a strategic buyer knew that Bunge's margins could be improved, so were willing to pay what seemed like a high multiple (14x), which in reality is a low multiple (7x) after improving/doubling the margins. If ADM runs at 5% margins, then buying BG at 14.6x/2% margins would be a great deal.

Which is to say, I think you're right that the market has not recognized the margin improvement and repriced appropriately. ADM saw the opportunity four years ago, and now that opportunity is reality for the public to buy.

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