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Bunge's new chief challenges status quo in first months on job

By Tom Polansek

CHICAGO (Reuters) - Soren Schroder is shaking up Bunge Ltd five months after taking the helm of the 195-year-old agricultural trading house.

After vowing in February that he would make no major strategy changes when he became chief executive, the company's first new leader in 14 years has said that financial results must improve and chopped capital expenditure plans.

On Thursday, Schroder told a quarterly earnings call that the status quo was unacceptable for Bunge's loss-making Brazilian sugar milling business and that he will explore options, including a sale, for the business.

Schroder, 52, also has ramped up discussions about share repurchases to the delight of investors who have watched as Bunge shares have failed to keep pace with those of rival Archer Daniels Midland Co . Bunge shares are up 13 percent so far this year, compared to gains of nearly 46 percent for ADM.

Analysts say the changes are promising signs for Bunge, one of the world's top oilseed processors and a major agricultural force in South America. Global grain companies need aggressive management amid intense competition to feed fast-developing countries like China, they said.

Bunge has launched a "strategic shift toward a focus on returns and returning capital to shareholders," BMO Capital Markets analyst Ken Zaslow said on Friday.

"There are initial signs that new CEO Soren Schroder appears both more inclined and more capable of returning cash to shareholders," Zaslow said.

Schroder, who studied economics at Connecticut College, took over from Alberto Weisser, 58, as CEO on June 1. Weisser transformed Bunge into one of the world's largest agricultural trading houses from a regional operator over 14 years as CEO and will serve as executive chairman through the end of the year.

Schroder's annual base salary is $1 million, compared to $1.2 million for Weisser. Like Weisser, he is eligible for substantial bonuses.

A former employee of rival Cargill, Schroder joined Bunge in 2000 and led the company's North America operations for three years before becoming CEO.

TEAM EFFORT

Schroder, in an interview after Bunge reported third-quarter earnings on Thursday, said the company was making a team effort to improve results.

Bunge reported revenue during the quarter slipped to $14.7 billion from $16.5 billion a year earlier, and came in below analysts' average forecast of $16.9 billion, according to Thomson Reuters I/B/E/S.

"The team is looking at the business very seriously, is committed to driving returns," Schroder told Reuters. "We're being very frank about what's working and what's not."

Schroder cut capital expenditure plans for 2014 to $900 million after reducing plans for 2013 by 16 percent to $1 billion. He said the company would postpone projects, such as expanding oilseed processing in China, with the goal of "buying time to grow into our own capacity."

North America and Brazil remain two areas of focus for growth because acquisitions would be "natural add-ons" to Bunge's food and ingredients business in the regions, Schroder said. In North America, Bunge is open to adding rice, wheat and corn mills, he said.

Bunge on Wednesday said it struck a deal to buy Grupo Altex wheat mills in Mexico for an undisclosed amount.

MAKING HIS MARK

Bunge Chief Financial Officer Drew Burke told analysts on Thursday that share repurchasing was "very much on our agenda," although no specific new program has been announced.

Bunge initiated a $700 million program to buy back shares in 2010. The company expanded the program to $950 million in 2012 and extended its duration indefinitely. It has used about $450 million of the $950 million so far.

"There's been a lot of talk about return of capital and probably more than the last several years combined," said Ari Gendason, managing principal for Arlon Group, a New York-based firm that invests in agricultural commodities and owns Bunge shares.

Schroder "has the benefit of knowing the culture and the people and the operations but also saying I'm going to put my own mark on this as CEO," Gendason said.

(Reporting by Tom Polansek; Editing by Tim Dobbyn)

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