Corn Products International, Inc. Reports Second Quarter 2004
Earnings Company Sets Quarterly Record; WESTCHESTER, Ill., July 29
/PRNewswire-FirstCall/ -- Corn Products International, Inc.
(NYSE:CPO) today announced improved sales and earnings for the
second quarter and first six months of 2004. For the quarter ended
June 30, 2004, the Company reported earnings of $0.79 per diluted
share, a 58-percent increase over earnings of $0.50 per diluted
share in the same period in 2003. Second-quarter results included a
gain of 7 cents per diluted share due to a change in the Company's
effective tax rate to 30 percent, down from 36 percent in the first
quarter. The Company expects an effective tax rate of 33 percent
for this year. The change in the effective tax rate is the result
of a reduction in foreign income tax expense, which the Company
believes will only affect 2004. "I am pleased to report that our
Company's results for the quarter set a new record and were up
significantly from last year," said Sam Scott, chairman, president
and chief executive officer of Corn Products International. "We
benefited from increased sales, improved pricing and greater
volumes throughout most of our businesses. Gross margins increased
from 14.7 percent to 16 percent, continuing their year-over-year
upward trend. We are particularly gratified by our performance in
North America where, although further improvement is required in
our US business, we continue to make progress in restoring this
region to acceptable operating income margins. "Strategically,
during the second quarter, we took steps to expand our global reach
by establishing our first manufacturing presence in China," Scott
said. Results for the second quarter 2004 as compared to the same
period in 2003 were as follows: -- Net sales were $572 million, up
from $539 million -- Operating income was $54 million, up from $42
million -- Net income was $29 million, up from $18 million BUSINESS
BREAKDOWN BY REGION On a regional basis, results for the second
quarter compared to the same period in the prior year were as
follows: In North America: -- Net sales were $363 million, up from
$346 million -- Volume increased 2 percent -- Operating income was
$24 million, up from $14 million The improved performance in North
America reflects favorable volumes in the region, better pricing in
Mexico covering corn cost increases, and a positive foreign
exchange impact from the strengthening Canadian dollar. All of the
above contributed to the 57-percent improvement in the North
American operating margin to 6.6 percent, up from 4.2 percent in
the second quarter of 2003. The bilateral industry negotiations
designed to resolve the Government of Mexico's tax on beverages
sweetened with high fructose corn syrup are continuing. The Company
supports those ongoing negotiations. In South America: -- Net sales
were $131 million, up from $119 million -- Volume improved 8
percent -- Operating income was $24 million, up from $20 million
The South American region reported very strong operating results
for the quarter. Solid volume growth in Brazil and the Southern
Cone and better pricing in the Andean region were somewhat offset
by energy cost increases in the Southern Cone. The operating income
margin for South America increased to 18.4 percent from 17 percent
in the same period last year. In Asia/Africa: -- Net sales were $78
million, up from $74 million -- Volume decreased 7 percent --
Operating income was $13 million, down from $15 million Higher
volumes in Pakistan and Thailand helped to offset the volume
decline in South Korea caused by a weaker economy. Price/product
mix was favorable across the region. The South Korean won
strengthened, as did the Thai baht, contributing to a positive
exchange variance. The operating margin for the Asia/Africa region
was 16.7 percent, down from 19.7 percent due to the combination of
higher corn and freight costs in the region -- particularly in
South Korea. Construction continued on the Company's new plant in
Pakistan, which is expected to begin operation this quarter. During
the second quarter, the Company announced a new joint venture in
China, Golden Far East (Shouguang) Modified Starch Company, Ltd.,
which produces modified corn starches. Government approval is
expected within the next several months. The alliance reflects the
Company's continued confidence in the growth prospects of its
Asia/Africa division. SIX MONTHS 2004 RESULTS Results for the first
six months of 2004 compared to the prior year period were as
follows: -- Net sales were $1,122 million, up from $1,019 million
-- Operating income was $108 million, up from $78 million -- Net
income was $55 million, up from $32 million -- Earnings per diluted
share were $1.49, up from $0.88 Cash provided by operations for the
first six months of 2004 was $79 million. Total debt at June 30 was
$577 million, compared to $550 million at the end of 2003, while
net debt (or total debt minus cash) was $433 million, down $47
million from the end of 2003. Working capital increased $48 million
in the quarter due to higher corn inventories and changes in the
margin accounts. OUTLOOK "We are increasing our guidance for the
full year 2004," Scott said. "We are now calling for earnings
improvement in the range of 21 to 26 percent over 2003, up from our
earlier outlook of a 12 to 17 percent earnings-per-share gain. Of
this projected increase, 5 percent is attributable to the impact of
the lower effective tax rate. "Our expectations of an exceptionally
strong first half of 2004 were on target, with two consecutive
record-setting quarters," Scott said. "Looking forward, we expect
that 2004 will be a record year for our Company, even without the
aid of the tax rate change. At the same time, we continue to
forecast higher raw material, energy and freight costs for the
remainder of the year. "We are confident that our shift to a
multiple pathway strategy, first announced in our 2003 Annual
Report and detailed in our Analyst/Portfolio Manager Conference and
press release, will lead to ongoing growth in 2004 and beyond,"
said Scott. "As we implement our strategy, we plan to leverage our
recent acquisition of GTC Nutrition and our new joint venture in
China, complete our recently announced expansions in Asia and South
America, and continue to expand our portfolio." ABOUT CORN PRODUCTS
INTERNATIONAL, INC. Corn Products International, Inc. 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 is the number-one worldwide producer of dextrose and a
leading regional producer of starch, high fructose corn syrup and
glucose. In 2003, the Company recorded net sales of $2.1 billion
with operations in 19 countries at 36 plants, including wholly
owned businesses, affiliates and alliances. Headquartered in
Westchester, Ill., it was founded in 1906. The Company is listed on
the New York Stock Exchange under the symbol CPO. Additional
information can be found on the World Wide Web at
http://www.cornproducts.com/ . This press release contains or may
contain forward-looking statements concerning the Company's
financial position, business and future earnings and prospects, in
addition to other statements using words such as "anticipate,"
"believe," "plan," "estimate," "expect," "intend" and other similar
expressions. These statements contain certain inherent risks and
uncertainties. 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 conveyed
in these statements, based on various factors, including
fluctuations in worldwide commodities markets and the associated
risks of hedging against such fluctuations; fluctuations in
aggregate industry supply and market demand; general political,
economic, business, market and weather conditions in the various
geographic regions and countries in which we manufacture and sell
our products, including fluctuations in the value of local
currencies, energy costs and availability and changes in regulatory
controls regarding quotas, tariffs, taxes and biotechnology issues;
increased competitive and/or customer pressure in the corn-refining
industry; the outbreak or continuation of hostilities; stock market
fluctuation and volatility; and the resolution of the current
uncertainties relating to the Mexican HFCS tax. 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. 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 risk factors, see the Company's most recently filed Annual
Report on Form 10-K and subsequent reports on Forms 10-Q or 8-K.
CORN PRODUCTS INTERNATIONAL, INC. Condensed Consolidated Statements
of Income (Unaudited) (All figures are in millions, except per
share amounts) Three Months Ended Change Six Months Ended Change
June 30, % June 30, % 2004 2003 2004 2003 Net sales before shipping
and handling costs $615.5 $583.3 6% $1,207.8 $1,101.3 10%
Less:shipping and handling costs 43.5 44.0 -1% 85.4 82.6 3% Net
sales 572.0 539.3 6% 1,122.4 1,018.7 10% Cost of sales 480.4 460.3
4% 936.3 870.9 8% Gross profit 91.6 79.0 16% 186.1 147.8 26%
Operating expenses 40.4 35.9 13% 80.7 70.5 14% Other income
(expense), net 2.3 (0.7) 429% 2.2 0.6 267% Operating income 53.5
42.4 26% 107.6 77.9 38% Financing costs 8.1 10.0 -19% 17.5 19.2 -9%
Income before taxes 45.4 32.4 40% 90.1 58.7 53% Provision for
income taxes 13.6 11.7 29.7 21.1 31.8 20.7 54% 60.4 37.6 61%
Minority interest in earnings 2.3 2.5 -8% 5.2 5.8 -10% Net income
$29.5 $18.2 62% $55.2 $31.8 74% Weighted average common shares
outstanding: Basic 36.5 36.0 36.4 35.9 Diluted 37.2 36.2 36.9 36.0
Earnings per common share: Basic $0.81 $0.50 62% $1.51 $0.88 72%
Diluted $0.79 $0.50 58% $1.49 $0.88 69% CORN PRODUCTS
INTERNATIONAL, INC. Condensed Consolidated Balance Sheets (In
millions, except share amounts) June 30, December 31, 2004 2003
(Unaudited) Assets Current assets Cash and cash equivalents $144
$70 Accounts receivable - net 289 252 Inventories 229 215 Prepaid
expenses 10 10 Total current assets 672 547 Property, plant and
equipment - net 1,157 1,187 Goodwill and other intangible assets
327 319 Deferred tax assets 57 61 Investments 28 29 Other assets 55
67 Total assets $2,296 $2,210 Liabilities and equity Current
liabilities Short-term borrowings and current portion of long-term
debt $98 $98 Accounts payable and accrued liabilities 311 296 Total
current liabilities 409 394 Non-current liabilities 105 112
Long-term debt 479 452 Deferred income taxes 189 196 Minority
interest in subsidiaries 79 78 Redeemable equity - Redeemable
common stock (1,223,500 and 1,913,500 shares issued at June 30,
2004 and December 31, 2003, respectively) stated at redemption
price 55 67 Stockholders' 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 - 35,746,387 issued
at June 30, 2004 and December 31, 2003 1 1 Additional paid in
capital 1,018 1,006 Less: Treasury stock (common stock; 826,446 and
1,494,101 shares at June 30, 2004 and December 31, 2003,
respectively) at cost (16) (35) Deferred compensation - restricted
stock (2) (3) Accumulated other comprehensive loss (352) (343)
Retained earnings 331 285 Total stockholders' equity 980 911 Total
liabilities and equity $2,296 $2,210 CORN PRODUCTS INTERNATIONAL,
INC. Condensed Consolidated Statements of Cash Flows (Unaudited)
For The Six Months Ended June 30, (In millions) 2004 2003 Cash
provided by (used for) operating activities: Net income $55 $32
Adjustments to reconcile net income to net cash provided by (used
for) operating activities: Depreciation 51 51 Increase in trade
working capital (33) (27) Other 6 9 Cash provided by operating
activities 79 65 Cash provided by (used for) investing activities:
Capital expenditures, net of proceeds on disposal (31) (27)
Payments for acquisitions, net (2) (48) Other 1 - Cash used for
investing activities (32) (75) Cash provided by (used for)
financing activities: Proceeds from borrowings, net 23 25 Issuance
of common stock 18 2 Dividends paid (14) (11) Cash provided by
financing activities 27 16 Effect of foreign exchange rate changes
on cash - 1 Increase in cash and cash equivalents 74 7 Cash and
cash equivalents, beginning of period 70 36 Cash and cash
equivalents, end of period $144 $43 CORN PRODUCTS INTERNATIONAL,
INC. Supplemental Financial Information (Unaudited) (Dollars in
millions, except per share amounts) I. Geographic Information of
Net Sales and Operating Income Three Months Ended Change Six Months
Ended Change June 30, June 30, 2004 2003 % 2004 2003 % Net sales
North America $362.5 $345.9 5% $701.4 $653.2 7% South America 131.5
119.3 10% 267.4 224.7 19% Asia/Africa 78.0 74.1 5% 153.6 140.8 9%
Total $572.0 $539.3 6% $1,122.4 $1,018.7 10% Operating income North
America $24.0 $14.4 67% $48.0 $26.3 83% South America 24.2 20.3 19%
47.6 36.6 30% Asia/Africa 13.0 14.6 -11% 29.6 28.1 5% Corporate
(7.7) (6.9) 12% (17.6) (13.1) 34% Total $53.5 $42.4 26% $107.6
$77.9 38% II. Estimated Sources of Earnings Per Share for the Three
and Six Months Ended June 30 The following is a list of the major
items that impacted our second quarter and year-to-date results.
The amounts are calculated on a net after-tax basis and attempt to
estimate total business effects. Earnings Per Share Earnings Per
Share Three Months Six Months Earnings per share June 30, 2003
$0.50 $0.88 Change Volumes 0.03 0.15 Operating margin 0.16 0.28
Foreign currency translation 0.01 0.10 Financing costs 0.03 0.03
Minority interest 0.01 0.02 Effective tax rate 0.07 0.07 Shares
outstanding (0.02) (0.04) Net change 0.29 0.61 Earnings per share
June 30, 2004 $0.79 $1.49 III. Capital expenditures Capital
expenditures for the quarters ended June 30, 2004 and 2003, were
$16 million and $20 million, respectively. DATASOURCE: Corn
Products International, Inc. CONTACT: investors, Richard
Vandervoort, +1-708-551-2595, or media, Mark Lindley,
+1-708-551-2602, both of Corn Products International, Inc. Web
site: http://www.cornproducts.com/
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