Corn Products Reports 5% Rise in Net Sales

The third-quarter 2010 financing costs include $20 million in bridge loan costs related to the National Starch acquisition, as well as the interest and fees on bonds issued to finance the National Starch acquisition.

Oct 29 2010 --- Corn Products International, Inc., a leading global provider of agriculturally derived ingredients for diversified markets, reported 2010 third-quarter diluted earnings per common share ("EPS") of $0.48. Excluding certain items related to the previously announced acquisition of National Starch and the shutdown of the Company's Chilean plant, EPS was $0.81, a 16 percent improvement over the same period last year. Net income for the period was $37 million. The third-quarter 2010 results include after tax charges of $23.9 million, or $0.31 on an EPS basis, related to the National Starch acquisition; and an after tax charge of $1.4 million, or $0.02 on an EPS basis, for restructuring costs resulting from the shutdown of the Company's Chilean plant. The third quarter 2010 net income, excluding the after-tax impact of impairment and restructuring charges, was $62 million, an 18 percent improvement compared to $53 million in the same period last year.

Diluted weighted average shares outstanding in the third quarter of 2010 were 76.7 million, up from 75.7 million in the same quarter last year.

"I am pleased to report a very good quarter," said Ilene Gordon, Chairman, President and Chief Executive Officer. "We saw strong volume growth across all our regions. In North America, we continued to see strong demand from the beverage industry in Mexico, as well as regional volume improvements in processed foods, corrugating and bakery. In South America, volume growth resulted from broad customer demand across multiple segments. In Asia/Africa, volume growth continued to be led by customer demand for sweeteners and starches in South Korea and Pakistan."

Net sales of $1.02 billion in the third quarter of 2010 increased 5 percent versus $971 million in the prior-year period. The contributors to growth in net sales were a positive $91 million from higher volumes and a positive $23 million from stronger foreign currencies, partially offset by a negative $65 million from lower price/mix. The price/mix decline was largely attributable to North America and reflected the normal correlation between lower corn costs and the corresponding decline in selling prices.

Third-quarter 2010 gross profit of $172 million improved 12 percent versus $153 million a year ago. The gross margin of 16.8 percent compared favorably to 15.8 percent last year. The improvement in gross profit was attributable to cost improvement due to higher utilization rates, lower unit corn costs, cost reduction programs, and stronger foreign currencies.

Operating expenses in the third quarter were $82 million, including $11 million of costs related to the acquisition of National Starch. Excluding these costs, operating expenses were 7.0 percent of net sales versus 6.8 percent of net sales last year. The increase in operating expenses reflects the impact of higher compensation costs and stronger currencies.

Operating income for the third quarter of 2010, excluding $14 million in non-recurring items, was $102 million, a 17 percent improvement compared to the same period last year. Including the non-recurring items, $11 million of National Starch acquisition-related costs and $3 million of restructuring costs related to the shutdown of the Chilean plant, operating income was $89 million, versus $88 million last year.

Net financing costs in the second quarter of 2010 were $30 million, versus $9 million last year. The third-quarter 2010 financing costs include $20 million in bridge loan costs related to the National Starch acquisition, as well as the interest and fees on bonds issued to finance the National Starch acquisition. Including the acquisition and restructuring costs, the estimated annual effective tax rate ("ETR") for 2010 is 37.5 percent. The estimated annual ETR for 2010, excluding the acquisition and restructuring costs, would be 32.0 percent.

Regional Business Segment Performance

Regional results for the quarter ended September 30, 2010 were as follows:

North America

Net sales of $578 million were down 3 percent against last year, as higher volumes of $46 million and a $6 million positive impact from a stronger Canadian dollar were offset by lower price/mix of $72 million. The decline in price/mix reflected the normal correlation between finished product pricing and an 18 percent decline in corn costs per ton versus last year. Corn costs per ton declined against last year on a gross and net corn basis. Operating income of $67 million increased 9 percent from $61 million last year, primarily due to volume growth and improved plant utilization rates. The operating income margin increased to 11.5 percent from 10.2 percent last year.

South America

Net sales of $310 million increased 14 percent, compared with $271 million a year ago, primarily due to improved volumes of $27 million and the impact of favorable foreign currency translation of $16 million, partially offset by unfavorable price/mix of $4 million. Gross corn cost per ton on a dollar basis increased 7 percent versus last year, largely due to currency revaluations, while net corn costs increased 21 percent versus last year, reflecting a decline in co-product pricing. Operating income declined 4 percent to $36 million, compared with $37 million in the prior year. The operating income margin was 11.5 percent, down from 13.8 percent in the same period last year.

Asia/Africa

Net sales of $132 million increased 30 percent versus $101 million last year, primarily due to the higher volumes of $17 million, improved price/mix of $11 million and favorable foreign currency translation of $2 million. Gross corn cost per ton declined 3 percent versus last year. Operating income of $13 million was up from $4 million last year, reflecting the improved business performance in South Korea and Pakistan. The operating income margin was 9.5 percent, up from 3.7 percent in the third quarter of 2009.

Balance Sheet and Cash Flow

At September 30, 2010, total debt and cash and cash equivalents were $1.8 billion and $1.6 billion, respectively, versus $544 million and $175 million respectively at year-end 2009. The increase in debt and cash at September 30, 2010 reflects the proceeds from the issuance of $900 million principal amount senior notes issued on September 17, 2010, and $250 million in borrowings under the revolving credit facility. These proceeds and borrowings, together with $200 million in cash, were used to fund the acquisition of National Starch, which closed on October 1, 2010.

Cash provided from operations in the first nine months of 2010 was $325 million. Capital expenditures, net of proceeds on disposals, were $90 million. Cash provided by financing activities was $1.2 billion. The change in cash and cash equivalents for the nine months ended September 30, 2010 was $1.4 billion.

2010 Outlook

"Given the strong performance of the business to date, we are increasing our 2010 EPS outlook to a range of $2.75 to $2.85, from our prior 2010 EPS outlook of $2.55 to $2.75," said Ilene Gordon. "This range excludes the impact associated with the National Starch acquisition and the shutdown of the Company's Chilean plant."

National Starch Transaction

"Our acquisition of National Starch closed on October 1, 2010, and we expect that this will be an outstanding acquisition for Corn Products International. This is an exceptional transformational opportunity for our Company and a significant step forward toward achieving our strategic goals," Gordon said. "The acquisition aligns with our strategic priorities to grow our ingredient portfolio, increase our presence in priority food processing segments, enter new markets, and develop innovative solutions that better serve our customers.

"The National Starch business has rebounded very nicely from the challenges experienced in 2009. While we are in the early planning stages for 2011, we expect that the acquisition will have a positive impact on earnings in 2011. We are making good progress with respect to our integration work, and expect to have the two businesses fully integrated over the next 18 to 24 months. James Zallie, National Starch's former President and CEO, has joined my executive leadership team as Executive Vice President and President, Global Ingredient Solutions."