Penford Posts Q4 Profit Ahead of Acquisition by Ingredion
14 Nov 2014 --- Penford Corporation, a leader in ingredient systems for food and industrial markets, today reported fourth quarter and fiscal year 2014 results. Fiscal 2014 net income improved 94% over 2013 to $7.8 million. Diluted earnings per share for the fiscal year ended August 31, 2014, increased to $0.60 from $0.32 a year ago.
Gross margin expanded by over 20% to $54.3 million for the year, benefiting from higher profitability in both divisions. Consolidated sales for the year were $443.9 million compared with $467.3 million in the last fiscal year, primarily reflecting lower corn prices that were passed through to customers and reduced industrial starch and by-product revenues.
Fourth quarter net income increased to $3.0 million, or $0.23 per diluted share, from a loss in last year’s comparable quarter. Gross margin in the fourth quarter rose to $16.6 million, more than double last year’s result. Quarterly consolidated sales were $109.1 million compared to $117.4 million in fourth quarter 2013.
Food Ingredients revenue increased 14% to a record $126.6 million for the year on strong growth in several specialty starch segments and the acquisition of Gum Technology.
Fourth quarter revenue also rose by 14% to $32.3 million, and gross margin improved 10% on double-digit increases in several product segments. Operating expenses increased by 50% in the quarter, primarily due to the Gum Technology acquisition, additional commercial resources and some one-time costs associated with expanded R&D facilities.
Industrial Ingredients Division Fiscal year revenue declined by 11% to $317.3 million largely due to the declining market price of corn which reduced industrial starch pass-through by 33% and by-product revenues by 24%. Full year gross margin expanded 56% to $16.7 million on improved ethanol market dynamics, growth of our specialty bio-products, and lower cost of physical corn. In the 2014 third quarter, the Company announced an adjustment to the estimated useful lives of certain assets. This change reduced depreciation expenses by $1.4 million for the year.
In the fourth quarter, gross margin improved by $8.1 million to $6.6 million from a loss in last year’s quarter. Revenue from specialty bio-products grew by double-digits on multiple new customer gains.
The Company entered into a merger agreement with Ingredion Incorporated on October 14, 2014. When the transaction closes, Ingredion will acquire all outstanding shares of Penford for $19.00 in cash per share. The transaction is subject to Penford shareholder and regulatory approvals as well as other customary closing conditions.
