Corn Products International, Inc. (NYSE: CPO), a leading global
provider of agriculturally derived ingredients for diversified
markets, today reported a net loss of $85 million, or a negative
$1.13 per diluted common share, for the second quarter of 2009. The
results include pre tax impairment and restructuring charges of
$125 million, $110 million after tax, with a negative earnings per
diluted share impact of $1.47. Excluding the after tax charges for
impaired assets and restructuring, the Company earned $0.34 per
diluted common share for the second quarter of 2009, down from
$0.90 per diluted common share a year ago. Included in last year’s
results was a $0.04 per diluted share negative impact from costs
related to the subsequently terminated proposed merger with Bunge
Limited (NYSE: BG).
The $125 million pre tax impairment and restructuring charges
are comprised of $119 million pre tax, $106 million after tax, for
the South Korean goodwill write-off and $6 million pre tax, $4
million after tax, in an asset write-off and international
restructuring charges.
Second-quarter 2009 results were negatively impacted by higher
net corn costs, unfavorable foreign currency translations and
softer volumes. Excluding the after tax impact from the impairment
and restructuring charges of a negative $1.47 earnings per diluted
share, the estimated change in earnings per diluted share from
improved price/margins was $0.08; lower co-product prices was a
negative $0.47; and weaker foreign currencies and lower volumes
were a negative $0.09 and $0.07 respectively. Higher financing
costs had a negative $0.03 impact while a lower effective tax rate
and change in non-controlling interest each added $0.01.
Net sales of $912 million in the second quarter of 2009
decreased 11 percent versus $1.03 billion in the prior-year period.
The three primary contributors to changes in net sales in the
second quarter were improved price/mix of $24 million, offset by a
negative $91 million from foreign currency translations and a
negative $50 million from lower volumes.
Gross profit of $112 million in the second quarter of 2009
declined 40 percent versus $187 million a year ago. The gross
margin of 12.2 percent compared with 18.1 percent last year.
Successful sweetener and starch product pricing actions across all
three regions were not enough to offset reduced co-product prices,
negative foreign currency translations, and weaker volumes. Gross
corn costs per ton increased 5% percent; however, net corn costs
per ton increased 41 percent primarily due to lower corn oil
prices. Energy costs decreased 7 percent versus a year ago.
Operating expenses in the second quarter were $61 million versus
$73 million last year. Operating expenses last year included
approximately $4 million in merger related costs.
The operating loss for the second quarter of 2009 was $73
million compared to an operating profit of $116 million last year.
Excluding the impairment and restructuring charges of $125 million,
the operating income for the second quarter was $52 million.
Net financing costs in the second quarter of 2009 were $11
million versus $7 million last year due to $1 million higher net
interest expense and an unfavorable foreign currency swing of $3
million. The second quarter effective tax rate of 1.1 percent was
down from 34.9 percent last year, reflecting the impact of the
South Korean goodwill impairment charge. The Company estimates that
the full year effective annual tax rate will be 67 percent.
Excluding the impact of the South Korean goodwill impairment, the
Company estimates that the effective annual tax rate would have
been approximately 34 percent.
“While we saw sequential improvement in the second quarter, the
issues we outlined during our 2009 first quarter call in late April
were clearly present in our second quarter results,” said Ilene
Gordon, Chairman, President and Chief Executive Officer. “We expect
the second half of 2009 to be stronger than the first half
primarily due to anticipated lower net corn costs.
Regional Business Segment Performance
Regional results for the quarter ended June 30, 2009 were as
follows:
North America
Net sales of $584 million decreased 4 percent from $609 million
in 2008. Improved price/mix of $26 million was more than offset by
the impact of lower volumes of $35 million, and weaker foreign
currencies of $16 million. Operating income of $33 million fell 61
percent from $86 million last year due primarily to higher net corn
costs and lower volumes. Gross corn costs per ton increased 26
percent versus last year, while net corn costs per ton increased 89
percent, with the latter reflecting the dramatic decline in the
price of co-products, principally corn oil. For example, as
reported by the Wall Street Journal, corn oil in the second quarter
of last year averaged 86 cents a pound versus 36 cents a pound in
the second quarter of this year.
South America
Net sales of $228 million declined 23 percent compared with $298
million a year ago, primarily due to the impact of unfavorable
foreign currency translations of $54 million, lower volumes of $9
million, and an unfavorable price/mix of $7 million. The decline in
co-product prices offset the positive starches and sweeteners
pricing. Operating income declined 28 percent to $26 million
compared with $37 million in the prior year. Net corn costs were
favorable versus last year, helping to mitigate the impact from
weaker currencies and reduced volumes on operating income.
Asia/Africa
Net sales of $99 million fell 19 percent versus $122 million
last year primarily due to the unfavorable impact of foreign
currency translations of $21 million. Improved pricing of $5
million was offset by $7 million in lower volumes. Gross and net
corn costs per ton decreased 11 percent and 10 percent,
respectively. Operating income of $6 million compared with $13
million a year ago reflected the performance of the South Korean
business and the impact of lower volumes and generally weaker
currencies. As the Company has previously discussed, the South
Korean business has been challenged over the past two years by
structural changes in the marketplace and a competitive environment
that did not allow it to pass on higher corn and freight costs. At
the end of the second quarter a determination was made that the
Company would not fully recover sales to the carbonated beverage
industry, and that the fair value of the business was less than its
carrying amount. This resulted in a write-off of the entire balance
of the South Korean goodwill. As corn and freight costs trend back
to more historical levels, the Company would expect better business
performance going forward, although not to the same level as seen
prior to 2007.
Balance Sheet and Cash Flow
The Company maintained a healthy balance sheet and solid
liquidity as of June 30, 2009. At the end of the second quarter,
total debt and cash and cash equivalents were $820 million and $175
million, respectively, versus $866 million and $107 million at
year-end 2008.
Cash provided by operating activities for the first half of 2009
was $211 million. Capital expenditures in the first half of 2009
were $66 million, while dividends paid were $23 million.
2009 Outlook
“We are maintaining our 2009 diluted earnings per share guidance
in the range of $1.70 to $2.10 excluding a negative $1.47 diluted
earnings per share impact of the impairment and restructuring
charges,” said Ilene Gordon. “We expect the second half of 2009 to
be stronger than the first half due to anticipated lower corn
costs. We expect volumes in North America to continue to be on the
same trend as the first half, while we expect the rest of the
world’s volumes to pick up.
“While the global economy is adversely affecting our earnings
this year, we believe we have a strategic advantage in this
difficult environment, which is our healthy balance sheet and solid
liquidity. We operate from a position of strength and flexibility.
Our expectation for significant cash flow from operations of $425
million to $525 million in 2009 should give us ample options and
maneuverability as we work through the global recession.
“The Company expects to hold capital expenditures to between
$125 million and $150 million for full-year 2009, with much of the
capital spending this year representing projects continued from
2008.
“As we work through this challenging environment, we will
continue to focus on our cost structure and on maintaining our
healthy balance sheet and solid liquidity.
“Our emphasis remains on creating shareholder value over the
long term.”
Conference Call and Webcast
Corn Products International will conduct a conference call today
at 8:30 a.m. Eastern Time (7:30 a.m. Central Time) to be hosted by
Ilene Gordon, Chairman, President and Chief Executive Officer, and
Cheryl Beebe, Vice President and Chief Financial Officer.
The call will be broadcast in a real-time webcast. The broadcast
will consist of the call and a visual presentation accessible
through the Corn Products International web site at
www.cornproducts.com. The “listen-and-view-only” presentation will
be available to download approximately 60 minutes prior to the
start of the call. A replay of the webcast will be available at
www.cornproducts.com.
Individuals without Internet access may listen to the live
conference call by dialing 719.325.2488. A replay of the audio call
will be available through Friday, August 7, by calling 719.457.0820
and using passcode 2136445.
About the Company
Corn Products International is one of the world's largest corn
refiners and a major supplier of high-quality food ingredients and
industrial products derived from the wet milling and processing of
corn and other starch-based materials. The Company, headquartered
in Westchester, Ill., is a leading worldwide producer of dextrose
and a major regional producer of starch, high fructose corn syrup
and glucose. In 2008, Corn Products International reported record
net sales and diluted earnings per share of $3.94 billion and
$3.52, respectively, with operations in 15 countries at 33 plants,
including wholly owned businesses, affiliates and alliances. For
more information, visit www.cornproducts.com.
Forward-Looking Statements
This news release contains or may contain forward-looking
statements within the meaning of Section 27A of the Securities Act
of 1933, as amended, and Section 21E of the Securities Exchange Act
of 1934, as amended. The Company intends these forward-looking
statements to be covered by the safe harbor provisions for such
statements. These statements include, among other things, any
predictions regarding the Company’s prospects or future financial
condition, earnings, revenues, expenses or other financial items,
any statements concerning the Company’s prospects or future
operations, including management’s plans or strategies and
objectives therefor and any assumptions, expectations or beliefs
underlying the foregoing. These statements can sometimes be
identified by the use of forward looking words such as “may,”
“will,” “should,” “anticipate,” “believe,” “plan,” “project,”
“estimate,” “expect,” “intend,” “continue,” “pro forma,” “forecast”
or other similar expressions or the negative thereof. All
statements other than statements of historical facts in this
release or referred to in this release are “forward-looking
statements.” These statements are based on current expectations,
but are subject to certain inherent risks and uncertainties, many
of which are difficult to predict and are beyond our control.
Although we believe our expectations reflected in these
forward-looking statements are based on reasonable assumptions,
stockholders are cautioned that no assurance can be given that our
expectations will prove correct. Actual results and developments
may differ materially from the expectations expressed in or implied
by these statements, based on various factors, including the
effects of the current global economic recession and its impact on
our sales volumes and pricing of our products, our ability to
collect our receivables from customers and our ability to raise
funds at reasonable rates; fluctuations in worldwide markets for
corn and other commodities, and the associated risks of hedging
against such fluctuations; fluctuations in the markets and prices
for our co-products, particularly corn oil; fluctuations in
aggregate industry supply and market demand; the behavior of
financial markets, including foreign currency fluctuations and
fluctuations in interest and exchange rates; continued volatility
and further deterioration of the capital markets; the commercial
and consumer credit environment; general political, economic,
business, market and weather conditions in the various geographic
regions and countries in which we manufacture and/or sell our
products; future financial performance of major industries which we
serve, including, without limitation, the food and beverage,
pharmaceuticals, paper, corrugated, textile and brewing industries;
energy costs and availability, freight and shipping costs, and
changes in regulatory controls regarding quotas, tariffs, duties,
taxes and income tax rates; operating difficulties; boiler
reliability; our ability to effectively integrate acquired
businesses; labor disputes; genetic and biotechnology issues;
changing consumption preferences and trends; increased competitive
and/or customer pressure in the corn-refining industry; and the
outbreak or continuation of serious communicable disease or
hostilities including acts of terrorism. Our forward-looking
statements speak only as of the date on which they are made and we
do not undertake any obligation to update any forward-looking
statement to reflect events or circumstances after the date of the
statement as a result of new information or future events or
developments. If we do update or correct one or more of these
statements, investors and others should not conclude that we will
make additional updates or corrections. For a further description
of these and other risks, see “Risk Factors” included in our Annual
Report on Form 10-K for the year ended December 31, 2008 and
subsequent reports on Forms 10-Q or 8-K. This news release also may
contain references to the Company’s long term objectives and goals
or targets with respect to certain metrics. These objectives, goals
and targets are used as a motivational and management tool and are
indicative of the Company’s long term aspirations only, and they
are not intended to constitute, nor should they be interpreted as,
an estimate, projection, forecast or prediction of the Company’s
future performance.
Corn Products International, Inc. ("CPI")
Condensed Consolidated Statements of Income (Losses)
(Unaudited) (In
millions, except per share amounts)
Three Months Ended June
30,
Change %
Six Months Ended June
30,
Change %
2009 2008 2009 2008 Net sales before shipping and
handling costs $ 965.6 $ 1,093.6 (12 %) $ 1,846.4 $ 2,084.6 (11 %)
Less: shipping and handling costs 54.0 65.1
(17 %) 103.7 125.2 (17 %) Net sales $ 911.6 $
1,028.5 (11 %) $ 1,742.7 $ 1,959.4 (11 %) Cost of sales 800.1
841.9 (5 %) 1,538.3 1,599.5
(4 %) Gross profit $ 111.5 $ 186.6 (40 %) $ 204.4 $ 359.9
(43 %) Operating expenses 61.0 73.4 (17 %) 115.7 140.9 (18
%) Other (income) expense, net (1.3 ) (2.6 ) (2.2 ) (3.6 )
Impairment / restructuring charges 125.0 -
125.0 - Operating income (loss) $ (73.2 ) $
115.8 (163 %) $ (34.1 ) $ 222.6 (115 %) Financing costs, net 10.8
6.9 57 % 22.2 14.3 55 %
Income (loss) before income taxes $ (84.0 ) $ 108.9 (177 %) $ (56.3
) $ 208.3 (127 %) Provision (benefit) for income taxes (0.9 )
38.0 8.5 71.3 Net income (loss)
$ (83.1 ) $ 70.9 (217 %) $ (64.8 ) $ 137.0 (147 %) Less: Net income
attributable to non-controlling interests (a) 1.7 2.5
(32 %) 3.3 4.3 (23 %) Net income (loss)
attributable to CPI $ (84.8 ) $ 68.4 (224 %) $ (68.1 ) $
132.7 (151 %) Earnings (Loss) per Common Share
Attributable to CPI Common Shareholders: Weighted average
common shares outstanding: Basic 74.8 74.4 74.8 74.2 Diluted 74.8
76.2 74.8 75.9 Earnings (loss) per common share of CPI:
Basic ($1.13 ) $0.92 (223 %) ($0.91 ) $1.79 (151 %) Diluted ($1.13
) $0.90 (226 %) ($0.91 ) $1.75 (152 %) (a) On January
1, 2009, CPI adopted Statement of Financial Accounting Standards
No. 160, "Noncontrolling Interests in Consolidated Financial
Statements-an Amendment of ARB No. 51" which, among other things,
requires that minority interests be re-named non-controlling
interests and that a company present a consolidated net income
measure that includes the amount attributable to such
non-controlling interests for all periods presented.
Corn
Products International, Inc. ("CPI")
Condensed Consolidated Balance
Sheets
(In millions, except share and per share
amounts) June 30, 2009 December 31, 2008
(Unaudited)
Assets Current assets Cash and cash
equivalents $175 $107 Accounts receivable – net 529 627 Inventories
440 454 Prepaid expenses 17 10 Deferred income taxes
79 99 Total current assets 1,240
1,297 Property, plant and equipment – net
1,494 1,447 Goodwill and other intangible assets 242 359 Deferred
income taxes 3 4 Investments 9 7 Other assets 95
93
Total assets $3,083
$3,207
Liabilities and equity Current
liabilities Short-term borrowings and current portion of long-term
debt 168 206 Accounts payable and accrued liabilities
575 653 Total current liabilities 743
859 Non-current liabilities 144 152
Long-term debt 652 660 Deferred income taxes 99 105
Redeemable common stock (500,000
shares issued and outstanding
at June 30, 2009 and December 31, 2008) stated at redemption value
13 14 Share-based payments subject to redemption 6 11
Equity CPI shareholders' equity: Preferred stock – authorized
25,000,000 shares- $0.01 par value, none issued - - Common stock –
authorized 200,000,000 shares- $0.01 par value – 74,819,774 shares
issued at June 30, 2009 and December 31, 2008 1 1 Additional
paid-in capital 1,084 1,086 Less: Treasury stock (common stock;
678,018 and 776,606 shares at June 30, 2009 and December 31, 2008,
respectively) at cost (22 ) (29 ) Accumulated other comprehensive
loss (490 ) (594 ) Retained earnings 831 920
Total CPI shareholders' equity 1,404 1,384 Non-controlling
interests (a) 22 22 Total equity 1,426
1,406
Total liabilities and equity $3,083
$3,207 (a) On January 1, 2009, CPI adopted
Statement of Financial Accounting Standards No. 160,
"Noncontrolling Interests in Consolidated Financial Statements-an
Amendment of ARB No. 51" which, among other things, requires that
minority interests be re-named non-controlling interests and that a
company present such non-controlling interests as equity for all
periods presented.
Corn Products International,
Inc. ("CPI")
Condensed Consolidated
Statements of Cash Flows
(Unaudited)
For the Six Months Ended
June 30,
( In millions ) 2009 2008 Cash
provided by operating activities: Net income (loss)
attributable to CPI $ (68 ) $ 133 Adjustments to reconcile net
income (loss) to net cash provided by operating activities:
Write-off of impaired assets 124 - Depreciation and amortization 62
65 Decrease in margin accounts 127 101 Increase in other trade
working capital (31 ) (64 ) Other (3 ) (2 )
Cash provided by operating activities 211
233
Cash used for investing activities:
Capital expenditures, net of proceeds on disposals (66 ) (105 )
Other (1 ) 5 Cash used for
investing activities (67 ) (100 )
Cash used
for financing activities: Payments on debt, net (50 ) (10 )
Issuances (repurchases) of common stock, net (2 ) 10 Dividends paid
(including to non-controlling shareholders) (23 ) (20 )
Excess tax benefit on share-based compensation -
3 Cash used for financing activities
(75 ) (17 ) Effect of foreign exchange rate
changes on cash (1 ) 1 Increase in cash and
cash equivalents 68 117 Cash and cash equivalents, beginning
of period 107 175 Cash and cash
equivalents, end of period $ 175 $ 292
Corn Products International, Inc. ("CPI")
Supplemental Financial Information (Unaudited)
I. Geographic Information of
Net Sales and Operating Income (Dollars in
millions)
Three Months Ended June
30,
Change
Six Months Ended June
30,
Change 2009 2008 % 2009
2008 % Net Sales North America $ 584.4 $ 609.3 (4 %)
$1,115.7 $1,146.2 (3 %) South America 228.2 297.6 (23 %) 442.7
569.6 (22 %) Asia/Africa 99.0 121.6 (19 %) 184.3
243.6 (24 %) Total $ 911.6 $ 1,028.5
(11 %) $1,742.7 $1,959.4 (11 %) Operating
Income (Loss) North America $ 33.4 $ 85.5 (61 %) $ 53.8 $ 160.8 (67
%) South America 26.4 36.5 (28 %) 54.1 68.7 (21 %) Asia/Africa 5.6
12.7 (56 %) 7.4 25.6 (71 %) Corporate (13.6 ) (18.9 ) (28 %) (24.4
) (32.5 ) (25 %) Sub-total 51.8 115.8 (55 %) 90.9 222.6 (59 %)
Impairment / restructuring charges (125.0 ) - (125.0
) - Total $ (73.2 ) $ 115.8 (163 %) $ (34.1 )
$ 222.6 (115 %)
II. Capital
expenditures Capital expenditures, net of proceeds on
disposals, for the quarters ended June 30, 2009 and 2008, were $30
million and $57 million, respectively. Capital expenditures for the
full year 2009 are estimated to be in the range of $125 million to
$150 million.
III. Non-GAAP Information The
presentation below contains information that is not prepared in
accordance with Generally Accepted Accounting Principles ("GAAP")
and is provided for analytical purposes only. Management believes
that this non-GAAP information (1) provides a more meaningful
presentation of the Company's second quarter and first half 2009
results, on a basis consistent with the way in which management
evaluates operating performance and (2) provides investors with
additional information to assess and facilitate a more clear
understanding of our financial results. The information presented
should not be used as a substitute for our financial results under
GAAP.
Corn Products International,
Inc. ("CPI") Reconciliation to Non-GAAP Earnings Per Share
("EPS") (Unaudited) Three Months
Ended Six Months Ended June 30, 2009 June 30,
2009 (in millions) EPS (in millions) EPS Net
(loss) attributable to CPI ($84.8) ($1.13) ($68.1) ($0.91)
Add back: Impairment / restructuring charges, net of income
tax benefit of $14.7 million 110.3 1.47 110.3 1.47
Non-GAAP net income $25.5 $0.34
$42.2 $0.56
As a result of the second quarter 2009 impairment and
restructuring charges totaling $125.0 million (pretax), the Company
incurred operating losses of $73.2 million and $34.1 million in the
second quarter and first half of 2009, respectively. Excluding the
$125.0 million of impairment and restructuring charges, the
Company's operating income on a non-GAAP basis was $51.8 million
and $90.9 million for the second quarter and first half of 2009,
respectively.
The Company uses certain key metrics to better monitor our
progress towards achieving our strategic business objectives. Among
these metrics is the Total Debt to Capitalization Percentage, which
is not calculated in accordance with Generally Accepted Accounting
Principles (“GAAP”). Management believes that this non-GAAP
information provides investors with a meaningful presentation of
useful information on a basis consistent with the way in which
management monitors and evaluates the Company’s operating
performance. The information presented should not be considered in
isolation and should not be used as a substitute for our financial
results calculated under GAAP. In addition, these non-GAAP amounts
are susceptible to varying interpretations and calculations, and
the amounts presented below may not be comparable to similarly
titled measures of other companies. Our calculations of the Total
Debt to Capitalization Percentage at June 30, 2009 and December 31,
2008 are as follows:
Total Debt to Capitalization Percentage
June 30, December 31, (Dollars in millions)
2009 2008 Short-term debt $168 $206 Long-term
debt 652 660
Total debt (a)
$820 $866 Deferred income tax liabilities 99 105 Redeemable
common stock 13 14 Share-based payments subject to redemption 6 11
Total equity 1,426 1,406 Total capital $1,544 $1,536
Total debt and capital (b)
$2,364 $2,402
Debt to capitalization percentage
(a/b)
34.7% 36.1%
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