Corn Products International, Inc. (NYSE: CPO), a leading global
provider of agriculturally derived ingredients for diversified
markets, today reported net income of $53 million, or $0.70 per
diluted common share, for the third quarter of 2009, versus the
record-setting net income and earnings per diluted common share of
$88 million and $1.15, respectively, for the same period last
year.
Third-quarter 2009 results were negatively impacted by higher
net corn costs, unfavorable foreign currency translations and
softer volumes. The estimated change in earnings per diluted share
from lower co-product prices (corn oil, feed, and meal) was a
negative $0.21; lower price/margins was negative $0.11; lower other
income was a negative $0.09; and weaker foreign currencies and
lower volumes were a negative $0.06 and $0.04 respectively. A lower
effective tax rate added $0.04, while a change in non-controlling
interest and fewer shares outstanding each added $0.01.
Net sales of $971 million in the third quarter of 2009 decreased
10 percent versus $1.08 billion in the prior-year period. The three
primary contributors to changes in net sales in the third quarter
were a negative $50 million from foreign currency translations; a
negative $38 million from price/mix attributable to co-products;
and a negative $26 million from lower volumes.
Gross profit of $153 million in the third quarter of 2009
declined 25 percent versus $204 million a year ago. The gross
margin of 15.8 percent compared with 18.8 percent last year. The
decline in gross profit is mainly attributable to the higher net
corn costs and lower volumes in the North American business. Total
Company gross corn costs per ton decreased 5 percent; however, net
corn costs per ton increased 12 percent, primarily due to lower
corn oil prices. Energy costs decreased 5 percent versus a year
ago.
Operating expenses in the third quarter were $66 million or 6.8
percent of net sales, versus $67 million, or 6.2 percent of net
sales, last year. Other income in the third quarter of 2009 was
less than $1 million compared to $11 million last year. Last year’s
other income included a $4 million insurance recovery and a $3
million gain from a land sale.
Operating income for the third quarter of 2009 was $88 million
compared to $148 million last year.
Net financing costs in the third quarter of 2009 were $9 million
versus $10 million last year, as lower net interest expense more
than offset an unfavorable foreign currency swing of $3 million.
The third quarter effective tax rate of 31.2 percent was down from
34.9 percent last year, and included an approximately $2 million
benefit from discrete items this quarter. Excluding the impact of
the discrete items, the Company estimates that the effective annual
tax rate would have been approximately 34 percent.
Diluted weighted average shares outstanding in the third quarter
of 2009 declined 1 percent to 75.7 million from 76.3 million in the
same quarter last year.
“This quarter’s diluted earnings per common share of $0.70 was
our fourth-best quarter ever, trailing only the first three
quarters of last year. We are pleased with the overall results and
the improving trend line in certain parts of the world. South
America volumes rebounded nicely, and we saw not only 2009
quarter-over-quarter sequential growth, but growth over third
quarter 2008 volumes. In North America and Asia/Africa, we saw 2009
sequential volume improvement in the third quarter,” said Ilene
Gordon, Chairman, President and Chief Executive Officer.
Regional Business Segment Performance
Regional results for the quarter ended September 30, 2009 were
as follows:
North America
Net sales of $599 million decreased 9 percent from $660 million
in 2008. The decline was due to lower volumes of $38 million,
negative price/mix of $18 million, and weaker foreign currencies of
$5 million. The decline in price/mix was due to co-products, which
declined by $34 million compared to the same quarter last year.
Operating income of $61 million fell 42 percent from $105 million
last year, primarily due to higher net corn costs and lower
volumes. Gross corn costs per ton increased 8 percent versus last
year, while net corn costs per ton increased 46 percent, with the
latter reflecting the dramatic decline in the price of co-products,
principally corn oil. Corn oil in the third quarter of last year
averaged 62 cents a pound versus 36 cents a pound in the third
quarter of this year, as reported by the Wall Street Journal.
South America
Net sales of $271 million declined 11 percent compared with $305
million a year ago, primarily due to the impact of unfavorable
foreign currency translations of $33 million, and unfavorable
price/mix of $14 million ($5 million of which was due to lower
co-product prices), partially offset by improved volumes of $13
million. Operating income declined 15 percent to $37 million
compared with $44 million in the prior year. Net corn costs were
favorable versus last year, helping to mitigate the impact of
weaker currencies and lower price/mix on operating income.
Asia/Africa
Net sales of $101 million fell 15 percent versus $119 million
last year, primarily due to the unfavorable impact of foreign
currency translations of $12 million and lower price/mix of $6
million. Higher co-product prices were positive $2 million versus
the same quarter last year. Gross and net corn costs per ton
decreased 12 percent and 15 percent, respectively. Operating income
of $4 million declined $6 million versus a year ago. The decline in
operating income reflects the weak pricing environment in South
Korea and Southeast Asia and weaker demand in Pakistan, China and
Kenya.
Balance Sheet and Cash Flow
The Company maintained a healthy balance sheet and solid
liquidity as of September 30, 2009. At the end of the third
quarter, total debt and cash and cash equivalents were $695 million
and $161 million, respectively, versus $866 million and $107
million at year-end 2008.
Cash provided by operating activities for the first nine months
of 2009 was $368 million, reflecting a $154 million improvement in
working capital. The Company fulfilled contracts for firm-price
business and recovered $121 million from our margin accounts.
Capital expenditures in the first nine months of 2009 were $98
million, while dividends paid were $34 million.
2009 Outlook
“Given how the business performed in the third quarter, we are
narrowing our full-year earnings guidance to a range between $1.80
- $2.00 per diluted common share, excluding the after tax impact of
impairment and restructuring charges of $1.47 per diluted common
share taken in the second quarter of 2009, versus the previous
range of $1.70 to $2.10,” said Ilene Gordon. “The revised range
reflects expectations of continued volume weakness in the North
American business, weaker demand and pricing pressure in Asia, as
well as anticipated favorable trends in currencies and better
prices for co-products. We remain confident in our estimate that
cash flow from operations for 2009 will be in the range of $425
million to $525 million, and we expect 2009 capital expenditures to
be approximately $150 million.”
“While the global economy is adversely affecting our earnings
this year, we are successfully managing through the uncertainty and
volatility. Our business model held up well with strong cash flow
generation. We were able to maintain a strong balance sheet and pay
down $180 million of debt. We held the dividend rate constant and
were still able to provide funding for the capital investment
program,” Gordon said.
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 719.325.4845. A replay of the audio call
will be available through Tuesday, November 10, by calling
719.457.0820 and using passcode 6446801.
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 net
sales and diluted earnings per common 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 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 turmoil in
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.
Corn Products International, Inc. ("CPI") Condensed
Consolidated Statements of Income (Loss) (Unaudited)
(In millions, except per share
amounts)
Three Months Ended
September 30,
Change
%
Nine Months Ended
September 30,
Change
%
2009 2008 2009 2008 Net sales before shipping and handling costs $
1,027.2 $ 1,155.4 (11 %) $ 2,873.7 $ 3,240.0 (11 %) Less: shipping
and handling costs 56.6 71.2 (21 %)
160.3 196.4 (18 %) Net sales $ 970.6 $
1,084.2 (10 %) $ 2,713.4 $ 3,043.6 (11 %) Cost of sales
817.3 880.4 (7 %) 2,355.6
2,479.9 (5 %) Gross profit $ 153.3 $ 203.8 (25 %) $ 357.8 $
563.7 (37 %) Operating expenses 65.9 66.8 (1 %) 181.6 207.8
(13 %) Other (income), net (0.4 ) (10.8 ) (2.5 ) (14.4 ) Impairment
/ restructuring charges - -
125.0 - Operating income $ 87.8 $ 147.8 (41 %)
$ 53.7 $ 370.3 (85 %) Financing costs, net 9.3
9.6 (3 %) 31.4 23.9 31 % Income
before income taxes $ 78.5 $ 138.2 (43 %) $ 22.3 $ 346.4 (94 %)
Provision for income taxes 24.5 48.2
33.0 119.5 Net income (loss) $ 54.0 $
90.0 (40 %) $ (10.7 ) $ 226.9 (105 %) Less: Net income attributable
to non-controlling interests (a) 1.2 1.9
(37 %) 4.5 6.1 (26 %) Net income
(loss) attributable to CPI $ 52.8 $ 88.1 (40 %) $
(15.2 ) $ 220.8 (107 %) Earnings (Loss) per Common
Share Attributable to CPI Common Shareholders: Weighted
average common shares outstanding: Basic 74.9 74.7 74.9 74.4
Diluted 75.7 76.3 74.9 76.0 Earnings (loss) per common share
of CPI: Basic $ 0.70 $ 1.18 (41 %) ($0.20 ) $ 2.97 (107 %) Diluted
$ 0.70 $ 1.15 (39 %) ($0.20 ) $ 2.90 (107 %)
(a) On January 1, 2009, CPI
adopted new accounting and reporting rules related to
non-controlling interests in subsidiaries which, among other
things, require 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)
September 30, 2009 December 31, 2008
(Unaudited)
Assets Current assets Cash and cash equivalents
$ 161 $ 107 Accounts receivable – net 557 627 Inventories 401 454
Prepaid expenses 17 10 Deferred income taxes
57 99 Total current assets
1,193 1,297 Property, plant and
equipment – net 1,543 1,447 Goodwill and other intangible assets
245 359 Deferred income taxes 4 4 Investments 9 7
Other assets 95 93
Total
assets $ 3,089 $ 3,207
Liabilities and
equity Current liabilities Short-term borrowings and current
portion of long-term debt 162 206 Accounts payable
and accrued liabilities 551 653
Total current liabilities 713
859 Non-current liabilities 138 152 Long-term debt 533 660
Deferred income taxes 109 105 Redeemable common stock (500,000
shares issued and outstanding at September 30, 2009 and December
31, 2008) stated at redemption value 14 14 Share-based payments
subject to redemption 7 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 September 30, 2009 and
December 31, 2008 1 1 Additional paid-in capital 1,081 1,086 Less:
Treasury stock (common stock; 548,368 and 776,606 shares at
September 30, 2009 and December 31, 2008, respectively) at cost (17
) (29 ) Accumulated other comprehensive loss (385 ) (594 ) Retained
earnings 874 920 Total CPI
shareholders' equity 1,554 1,384 Non-controlling interests
(a) 21 22 Total equity
1,575 1,406
Total liabilities
and equity $ 3,089 $ 3,207 (a) On
January 1, 2009, CPI adopted new accounting and reporting rules
relating to non-controlling interests in subsidiaries 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 Nine Months
Ended September 30,
( In millions ) 2009 2008
Cash provided by operating activities: Net
income (loss) $ (11 ) $ 227 Adjustments to reconcile net income
(loss) to net cash provided by operating activities: Write-off of
impaired assets 124 - Depreciation and amortization 95 98 Decrease
(increase) in margin accounts 121 (186 ) Decrease (increase) in
other trade working capital 33 (107 ) Other 6
(16 ) Cash provided by operating
activities 368 16
Cash used for investing activities: Capital expenditures,
net of proceeds on disposals (98 ) (160 ) Other
(4 ) 3 Cash used for investing
activities (102 ) (157 )
Cash
used for financing activities: Proceeds from (payments on)
borrowings, net (180 ) 101 Issuances (repurchases) of common stock,
net (1 ) 10 Dividends paid (including to non-controlling
shareholders) (34 ) (31 ) Excess tax benefit on share-based
compensation 1 3
Cash (used for) provided by financing activities (214
) 83 Effect of foreign exchange
rate changes on cash 2 (1 )
Increase (decrease) in cash and cash equivalents 54 (59 )
Cash and cash equivalents, beginning of period 107
175 Cash and cash equivalents,
end of period $ 161 $ 116
Corn Products International, Inc. ("CPI") Supplemental
Financial Information (Unaudited)
I. Geographic Information of Net
Sales and Operating Income (Dollars in millions)
Three Months Ended
September 30,
Change
Nine Months Ended
September 30,
Change 2009 2008 % 2009
2008 % Net Sales North America $ 598.3 $ 660.1 (9 %)
$ 1,714.0 $ 1,806.4 (5 %) South America 271.0 304.8 (11 %) 713.7
874.4 (18 %) Asia/Africa 101.3 119.3
(15 %) 285.7 362.8 (21 %) Total $ 970.6
$ 1,084.2 (10 %) $ 2,713.4 $ 3,043.6
(11 %) Operating Income North America $ 61.1 $ 104.9 (42 %)
$ 114.8 $ 265.7 (57 %) South America 37.3 44.1 (15 %) 91.4 112.8
(19 %) Asia/Africa 3.7 10.0 (63 %) 11.2 35.6 (69 %) Corporate
(14.3 ) (11.2 ) 28 % (38.7 ) (43.8 )
(12 %) Sub-total 87.8 147.8 (41 %) 178.7 370.3 (52 %) Impairment /
restructuring charges - -
(125.0 ) - Total $ 87.8 $ 147.8
(41 %) $ 53.7 $ 370.3 (85 %)
II.
Capital expenditures
Capital expenditures, net of
proceeds on disposals, for the quarters ended September 30, 2009
and 2008, were $32 million and $55 million, respectively. Capital
expenditures for the full year 2009 are estimated to be $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 results for the nine months ended September 30, 2009,
and of our guidance with respect to earnings per diluted share for
2009 excluding impairment and restructuring charges incurred in the
second quarter of 2009, 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) Nine Months
Ended September 30, 2009 (in millions) EPS Net (loss)
attributable to CPI ($15.2 ) ($0.20 ) Add
back: Impairment / restructuring charges, net of income tax
benefit of $14.7 million 110.3 1.47 Non-GAAP net
income $95.1 $1.27 Operating income of $53.7
million for the nine months ended September 30, 2009 includes $125
million of impairment and restructuring charges recorded in the
second quarter of 2009. Excluding the $125 million of impairment
and restructuring charges, the Company's operating income on a
non-GAAP basis was $178.7 million for the first nine months of
2009.
Corn Products International, Inc.
("CPI") Reconciliation of Non-GAAP Earnings Per Share
(“EPS”) Guidance for 2009 (Unaudited)
Prior Updated 2009 2009 Guidance
Guidance EPS EPS Earnings per share Guidance (GAAP basis),
as presented $0.23 - $0.63 $0.33 - $0.53 Add back:
Impairment and restructuring charges 1.47 1.47
Earnings per share Guidance, as presented $1.70 - $2.10
$1.80 - $2.00 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 September 30, 2009 and December 31, 2008 are as
follows:
Total Debt to Capitalization Percentage
September 30, December 31, (Dollars in
millions)
2009
2008 Short-term debt $162 $206 Long-term debt
533 660 Total debt (a) $695 $866
Deferred income tax liabilities 109 105 Redeemable
common stock 14 14 Share-based payments subject to redemption 7 11
Total equity 1,575 1,406 Total capital
$1,705 $1,536 Total debt and capital
(b) $2,400 $2,402 Debt to capitalization
percentage (a/b) 29.0 % 36.1 %
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