Corn Products Reports Soar in Q1 Profits
First quarter net sales rose 56 percent from $937 million to $1.46 billion. The increase is attributable to higher volume of $351 million which was largely a result of the incremental $348 million of sales associated with the National Starch business.
5/3/2011 --- Corn Products International, Inc. has reported that first quarter diluted earnings per share (EPS) rose 246 percent to $1.97 compared to $0.57 last year. The first quarter of 2011 included a $0.75 per share gain as a result of a payment from the Government of Mexico pursuant to a settlement in the Company's favor regarding a North American Free Trade Agreement (NAFTA) dispute and $0.06 per share of acquisition integration charges. The first quarter of 2010 included $0.04 per share of restructuring charges related to the Chilean earthquake and $0.02 per share of acquisition costs. Excluding these items, adjusted EPS rose 103 percent from $0.63 to $1.28 in the quarter.
"Corn Products delivered a very strong first quarter as we benefited from good performance across the entire business including the recently acquired National Starch," said Ilene Gordon, Chairman, President and Chief Executive Officer. "These results reflect the strength of our business model which takes a regional approach with a global perspective combined with a prudent commodity risk management philosophy to deliver long-term performance. Looking ahead, we continue to expect another year of earnings growth. We also plan to continue to invest in our business for future growth through capital expansions in key markets like Brazil, cost savings programs, and new product development leveraging our acquired R&D capability."
First quarter net sales rose 56 percent from $937 million to $1.46 billion. The increase is attributable to higher volume of $351 million which was largely a result of the incremental $348 million of sales associated with the National Starch business. Higher selling prices contributed $149 million and $22 million was a result of favorable foreign exchange.
Gross profit increased by 109 percent in the first quarter from $143 million to $298 million, expanding the gross profit margin from 15.2 percent in the year ago period to 20.4 percent this year. The improvement was driven by the addition of the National Starch business and the growth in legacy Corn Products operations.
First quarter operating income was up 217 percent from $72 million to $227 million. The change was driven by the $58 million related to the NAFTA settlement, and the remaining change was almost evenly split between incremental operating income from the National Starch business and organic growth.
Adjusted operating income rose 127 percent from $78 million to $176 million in the first quarter 2011. The first quarter 2011 included $58 million related to the NAFTA settlement and $7 million of integration costs. The first quarter 2010 included $3 million of acquisition costs and $3 million of restructuring related to the Chilean earthquake.
The Company also realized $6 million of integration synergies generated by lower pension costs and procurement savings in the first quarter 2011.
• Cash provided by operations was $22 million in the first quarter 2011, compared with $57 million in the same period of 2010.
• Change in trade working capital was a use of $202 million in the first quarter 2011 primarily as inventories rose due to higher commodity costs and an increase in finished goods to meet anticipated customer demand. The use of cash also reflects higher accounts receivable as our sales have increased.
• In the first quarter of 2011, capital expenditures, net of disposals, were $33 million. The 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 first quarter were $27 million compared to $5 million in the year-ago quarter. The increase primarily relates to costs associated with financing the National Starch acquisition.
• The effective tax rate as reported was 22.6 percent for the quarter compared to 33.0 percent in the year-ago quarter. The effective tax rate for 2011 is estimated to be between 31 percent and 32 percent, absent the impact of the NAFTA settlement.
• At March 31, 2011, total debt and cash and cash equivalents were $1.76 billion and $267 million, respectively, versus $1.77 billion and $302 million, respectively, at December 31, 2010.
• The Company received $58 million, or $0.75 per share, in January 2011 from the Government of Mexico pursuant to a settlement in the Company's favor regarding a NAFTA award. There are no U.S. taxes associated with this payment.
As a result of the acquisition and integration of National Starch, the Company has changed its reporting regions. Pakistan, Kenya and Nigeria were historically reported as part of the Asia/Africa region (renamed Asia Pacific) and are now included in the Europe, Middle East and Africa (EMEA) region. For comparability purposes, amounts for 2010 have been reclassified to reflect the new regional reporting.
North American net sales rose 44 percent from $541 million to $780 million in the first quarter 2011. The increase came from stronger volumes of $166 million, a price/mix benefit of $67 million reflecting higher pricing and $6 million from favorable foreign exchange rates. The volume increase is attributable to the National Starch business.
Operating income was $101 million, up 162 percent compared to $38 million in the year-ago period, driven by positive price/mix in the U.S., Mexico and Canada and incremental operating income from the National Starch business.
South American sales in the first quarter 2011 were $368 million, an increase of 32 percent compared to $278 million in the prior-year quarter as sales increased throughout the region. The increase came from a $57 million improvement in price/mix, $20 million of incremental volume, including $19 million from National Starch, and $13 million of favorable foreign exchange rates. Sales to the brewing, confectionary and processed food industries all experienced growth compared to last year.
Operating income was $49 million, up 27 percent from $39 million in the year-ago period. The increase in operating income was driven by a combination of strong pricing and favorable product mix.
In the first quarter 2011, net sales rose 133 percent from $78 million to $182 million, as a result of $88 million of higher volumes, $12 million of improved price/mix, and $3 million of favorable currency translation. The volume increase is attributable to the acquisition of National Starch.
Operating income grew 185 percent in the quarter from $7 million to $19 million, due to incremental operating income from National Starch.
In the first quarter 2011, net sales in Europe, Middle East, Africa (EMEA) rose 219 percent from $41 million to $130 million, as a result of $77 million of higher volumes and $14 million of improved price/mix, partially offset by $1 million of unfavorable currency translation. The volume increase is largely attributable to the acquisition of National Starch.
Operating income grew 238 percent in the quarter from $6 million to $22 million, largely due to incremental operating income from National Starch. Organic volume growth and positive price/mix also contributed to the increase.
EPS for 2011 is expected to be in a range of $4.85 to $5.15. The guidance includes the $0.75 per share impact of the NAFTA settlement and approximately $20 million of acquisition-related benefits that are expected to be offset by about $30 million of integration costs. The Company expects the second quarter to be negatively impacted by the anticipated completion of a significant maintenance project in North America.
Net sales are expected to exceed $6 billion in 2011.
The effective tax rate for 2011 is estimated to be between 31 percent and 32 percent, absent the impact of the NAFTA settlement.
Capital expenditures in 2011 are anticipated to be between $280 and $300 million and will support growth investments across the organization, particularly in South America and Europe.
