Corn Products International Reports 2010 Fourth Quarter and Full Year Results

“We’re pleased to report strong results for the full year, primarily driven by organic volume growth, lower input costs, higher utilization rates and the impact of owning National Starch for the entire fourth quarter,” said Ilene Gordon, Chairman, President and Chief Executive Officer.

2/18/2011 --- Corn Products International, a leading global provider of ingredient solutions to diversified industries, reported that fourth quarter diluted earnings per share (EPS) declined 9 percent to $0.67 compared to $0.74. The fourth quarter of 2010 included $0.38 of charges resulting from acquisition, integration and other costs related to National Starch. Excluding these items, adjusted EPS rose 42 percent from $0.74 to $1.05 in the quarter.

For the full year, reported EPS was up 307 percent to $2.20 from $0.54 in 2009. Full year 2009 EPS included $1.47 of impairment and restructuring charges while full year 2010 included $1.04 of charges related to impairment and restructuring expenses as well as acquisition, integration and other costs related to National Starch. Excluding these items from both periods, full year adjusted EPS was up 61 percent from $2.01 to $3.24 for the year. For both the quarter and full year, National Starch operations had an estimated positive EPS impact of $0.23.

“We’re pleased to report strong results for the full year, primarily driven by organic volume growth, lower input costs, higher utilization rates and the impact of owning National Starch for the entire fourth quarter,” said Ilene Gordon, Chairman, President and Chief Executive Officer. “Our performance reflects the ongoing benefits of executing against our Strategic Blueprint and achieving meaningful cost reductions. Looking ahead, we see substantial opportunities to generate further growth from an improving portfolio particularly in specialty products from National Starch as well as ongoing geographic expansion.”

Net Sales

Fourth quarter net sales rose 47 percent from $959 million to $1.41 billion. The increase is attributable to higher volumes of $416 million which were largely a result of an incremental $351 million of sales associated with the National Starch business, $20 million of improved pricing and $12 million from favorable foreign exchange rates. The company managed through higher input costs while also delivering incremental volumes in all regions.

Net sales for the full year rose 19 percent from $3.67 billion to $4.37 billion, driven by $772 million of incremental volume of which $351 million relates to National Starch, and a $161 million benefit from foreign exchange. These amounts were partially offset by a $238 million decline in price/mix, reflecting the normal relationship between lower corn costs and the corresponding decline in selling prices.

Gross Profit

Gross profit increased by 51 percent in the fourth quarter from $163 million to $246 million, expanding the gross profit margin from 17.0 percent in the year ago period to 17.5 percent this year. The improvement in gross profit and gross profit margin was primarily driven by the National Starch business and the improvement in North America, South America and Asia.

For the full year, gross profit rose 39 percent from $520 million to $724 million and gross profit margin increased to 16.6 percent compared to 14.2 percent in 2009. This was largely a result of organic volume growth, better utilization rates, lower input costs and the National Starch business.

Operating Income

Fourth quarter operating income was up 4 percent from $99 million to $103 million. On an adjusted basis, excluding acquisition costs of $18 million and charges of $28 million largely related to the fair value mark-up of acquired inventory, non-GAAP operating income for the fourth quarter was $148 million, up 49 percent from $99 million in the same period last year. The primary driver of the increase was $42 million of incremental operating income from the National Starch business. Organic volume growth, improved price/mix and favorable foreign exchange rates also contributed to the increase.

Operating income for the full year increased 122 percent from $153 million to $339 million. Non-GAAP operating income, adjusted to exclude restructuring and acquisition-related costs, rose 53 percent from $278 million to $426 million.

Financial and Business Highlights

* Cash provided by operations was $394 million in 2010, compared with $586 million in 2009. The decrease in operating cash flow primarily reflects a reduction in cash from working capital. The decline in cash from working capital was the result of a $224 million year-over-year change in margin accounts related to corn futures and option contracts.
* For the full year, capital expenditures, net of disposals, rose $15 million to $156 million from $141 million in 2009. The higher spending was focused on the North and South American businesses to add capacity for growth initiatives and to reduce costs.
* Net financing costs in the fourth quarter were $22 million compared to $6 million last year. For the full year, net financing costs were $64 million compared to $38 million in 2009. The increase in both periods primarily relates to costs associated with financing of the National Starch acquisition.
* The effective tax rate as reported was 33.4 percent for the quarter compared to 38.2 percent in the year-ago quarter and 36.1 percent for the full year compared to 59.5 percent for 2009.
* At December 31, 2010, total debt and cash and cash equivalents were $1.77 billion and $302 million, respectively, versus $544 million and $175 million, respectively, at year-end 2009. The increase in debt relates to the acquisition of National Starch.

Business Review

As a result of the acquisition of National Starch, the Company has added a new region called Europe.

North America

Fourth Quarter 2010

North American net sales rose 33 percent from $554 million to $738 million. The increase came from stronger volumes of $203 million, including $168 million from National Starch, along with slightly favorable foreign exchange rates offset by a $24 million reduction in price/mix. The price/mix reduction reflects the normal relationship between lower corn costs and the corresponding decline in selling prices.

Operating income was $84 million, up 36 percent compared to $62 million in the year-ago period, driven by the incremental operating income from the National Starch business. Operating margin increased from 11.2 percent to 11.4 percent as result of the addition of higher-margin products sold by National Starch.

Full year 2010

Net sales increased 8 percent from $2.27 billion to $2.44 billion for the full year. This increase was driven by stronger volumes resulting from the inclusion of the National Starch business, organic growth particularly in Canada and Mexico and favorable exchange rates. This was partially offset by lower price/mix.

Full year operating income was $249 million, an increase of 41 percent compared to $177 million in 2009. About a third of the increase relates to the National Starch business. The remaining change is primarily a result of organic volume growth, lower input costs and improved utilization rates.

South America

Fourth Quarter 2010

South American sales in the quarter were $367 million, an increase of 23 percent compared to $298 million in the prior-year quarter as sales increased throughout the region. The increase came from $36 million of higher volumes, including $21 million from National Starch, $26 million of stronger price/mix, and $6 million of favorable foreign exchange rates. Sales to the brewing, confectionary, processed food and paper industries all experienced growth.

Operating income was $50 million, up 7 percent from $47 million in the year-ago period. The increase in operating income primarily resulted from improved price/mix and organic volume growth.

Full year 2010

Sales in South America were $1.24 billion, up 23 percent compared to $1.01 billion in 2009, as a result of $101 million of favorable foreign exchange rates and $137 million of higher volumes including $21 million of incremental sales related to National Starch, partially offset by lower price/mix of $9 million. Volume growth was especially strong in the brewing, confectionary, food and industrial businesses.

South American operating income was $163 million, an increase of 18 percent over $138 million in 2009, primarily reflecting strong volumes and the positive impact of foreign exchange rates. National Starch had minimal impact on the region’s results.

Asia Africa

Fourth Quarter 2010

In the fourth quarter, net sales rose 119 percent from $106 million to $232 million, as a result of $106 million of higher volumes, including $92 million from National Starch, $17 million of improved price/mix across most major markets, and $3 million of positive currency translation. Volumes were particularly strong in South Korea as the liquid sweetener market recovered.

Operating income grew 316 percent in the quarter from $6 million to $24 million, largely due to incremental operating income from National Starch. Improved price/mix and organic volume growth also contributed to the increased operating income.

Full year 2010

Sales for the full year in the Asia Africa region were $617 million, an increase of 58 percent compared to $392 million, driven by stronger volumes in nearly every country and the addition of the National Starch business, higher price/mix in most markets and favorable foreign exchange.

Operating income was up 268 percent from $17 million to $62 million, primarily reflecting the earnings of National Starch, improved volume in South Korea and higher price/mix in Pakistan and Southeast Asia.

Europe

Fourth Quarter 2010

Sales and earnings for this new region solely represent the fourth quarter results of the National Starch business. Net sales for the fourth quarter were $70 million and operating income was $3 million.