The Company reported record net sales and earnings for the year ended December 31, 2008. Diluted earnings per share of $3.52 in 2008 improved 36 percent versus $2.59 per diluted share in 2007. Net income of $267 million rose 35 percent compared with prior-year net income of $198 million.
03/02/09 Corn Products International, Inc., a leading global provider of agriculturally derived ingredients for diversified markets, reported net income of $46 million and diluted earnings per share of $0.61 for the fourth quarter ended December 31, 2008, in line with last year’s results. Included in the 2008 fourth-quarter results was a 9-cent per share negative impact from the reimbursement of expenses in connection with the termination of the proposed merger with Bunge Limited.
2008 fourth-quarter results included the continuing impact of strong starch and sweetener product prices, the unfavorable impact of foreign currency devaluations and softer volumes.
Net sales of $900 million in the fourth quarter of 2008 improved slightly versus $895 million in the prior-year period. Favorable price/product mix of $147 million was essentially offset by unfavorable currency translations of $95 million and lower volumes of $47 million.
Gross profit of $141 million in the fourth quarter of 2008 compared with $143 million a year ago. Net corn costs increased 7 percent and manufacturing expenses were lower versus last year.
Operating expenses of $67 million in the fourth quarter of 2008 compared with $65 million a year ago. Operating expenses as a percentage of net sales in the fourth quarter were 7.4 percent versus 7.2 percent last year. Other income (expense), net in the fourth quarter of 2008 included the reimbursement of Bunge’s merger-related expenses.
Operating income of $64 million in the fourth quarter of 2008 declined 21 percent compared with $81 million a year ago.
Net financing costs in the fourth quarter of 2008 were $5 million versus $9 million in the prior year. The change was due principally to a foreign exchange gain of $6 million. The 2008 fourth-quarter effective tax rate of 17 percent versus 34 percent in the fourth quarter of 2007 reflected a reduction of the 2008 full-year tax rate from 34.5 percent to 32 percent resulting from a change in tax mix and discrete items in the quarter.
Regional Business Segment Performance
Regional results for the quarter ended December 31, 2008 were as follows:
North America
Net sales of $563 million increased 11 percent versus $508 million in 2007 due to improved price/product mix of $88 million. The devaluation of the Canadian dollar negatively impacted net sales by $21 million and volumes declined $12 million. Operating income improved 3 percent to $48 million compared with $46 million last year.
South America
Net sales of $246 million decreased 11 percent compared with $276 million a year ago. Unfavorable currency translations of $46 million and lower volumes of $16 million more than offset improved price/product mix of $32 million. Operating income of $38 million in 2008 was essentially unchanged from the prior year. Improvements in the Southern Cone and Andean regions were substantially offset by lower results in Brazil.
Asia/Africa
Net sales of $91 million fell 18 percent versus $111 million last year. Positive price/product mix and unfavorable currency translations were offsetting at $28 million each, while volumes decreased by $20 million. Operating income of $3 million declined from $9 million in the prior year due predominantly to lower results in South Korea, which continued to struggle with a slow economy impacting volumes and higher costs.
2008 Full-Year Results
The Company reported record net sales and earnings for the year ended December 31, 2008. Diluted earnings per share of $3.52 in 2008 improved 36 percent versus $2.59 per diluted share in 2007. Net income of $267 million rose 35 percent compared with prior-year net income of $198 million. The 2008 results included a 14-cent negative impact from costs related to the proposed merger with Bunge which was terminated in November 2008. The 2007 results included a 5-cent gain from the Company’s holdings in CME Group, Inc.
Net sales of $3.94 billion grew 16 percent versus $3.39 billion in the prior-year period. Favorable price/product mix of $677 million was the primary reason for the improvement. Volumes fell $117 million.
Gross profit of $705 million in 2008 rose 20 percent versus $586 million in 2007. The gross margin climbed to 17.9 percent in 2008 compared with 17.3 percent a year ago. The improved North and South American results were primarily due to improved pricing. Net corn costs were significantly higher, while energy costs rose slightly.
Operating expenses as a percentage of net sales in 2008 were 7.0 percent versus 7.3 percent in 2007. Operating income of $434 million in 2008, a record annual level, was a 25 percent improvement compared with $347 million a year earlier. The operating margin increased to 11.0 percent in 2008 versus 10.2 percent in 2007.
The $13 million decrease in net financing costs in 2008 to $29 million from $42 million in 2007 was principally attributable to foreign exchange gains. The effective 2008 tax rate of 32.0 percent compared favorably with 33.5 percent in 2007.
“We are pleased to deliver our third consecutive year of record performance in 2008 in net sales, operating income and earnings per share, which again illustrated that our business model performed effectively in a period of higher and more volatile commodity prices and currencies,” said Sam Scott , chairman, president and chief executive officer of Corn Products International. “2008 was marked by a significant favorable impact from higher co-product prices.
“Our return on capital employed of 13.1 percent in 2008, versus 11.4 percent in 2007, once again exceeded our cost of capital and our stated ROCE target of 8.5 to 10 percent,” Scott said.
Regional Business Segment Performance
Regional results for the year ended December 31, 2008 were as follows:
North America
Net sales of $2.37 billion increased 15 percent versus $2.05 billion in 2007 due to improved price/product mix of $373 million, despite a volume decrease of $58 million. Operating income of $313 million increased 34 percent from $234 million last year from strong pricing actions throughout the region.
South America
Net sales of $1.12 billion increased 21 percent compared with $925 million a year ago. The increase was driven by stronger price/product mix of $179 million and favorable currency translations of $47 million, while volumes declined $31 million. Operating income of $151 million in 2008 improved 32 percent from $115 million in 2007 predominantly due to significant increases in Brazil and the Southern Cone.
Asia/Africa
Net sales of $454 million grew 10 percent versus $414 million last year as a result of improved price/product mix of $125 million, partially offset by unfavorable currency translations of $56 million and lower volumes of $29 million. Operating income of $38 million declined 15 percent versus $45 million due to lower results in South Korea. Pakistan, Thailand and China reported improved results.
Balance Sheet and Cash Flow
At year-end 2008, total debt and cash and cash equivalents were $866 million and $107 million, respectively, versus $649 million and $175 million at the end of 2007. Total debt to capitalization of 36.1 percent at year-end 2008 compared with 26.6 percent a year earlier.
Cash used for operations in 2008 was $79 million compared with cash provided from operations of $258 million in 2007. Net income was $267 million, depreciation and amortization was $128 million, and the working capital increase of $458 million included the change in the margin accounts of $295 million related to corn futures contracts associated with firm-price business. Other working capital increased by $163 million, primarily due to higher trade working capital to support net sales growth of $553 million. Capital expenditures, net were $219 million in 2008.
