Penford Reports First Quarter Fiscal 2011 Financial Results

Food Ingredients first quarter sales expanded 9% from the prior year on volume gains and product mix improvements. Sales of non-coating applications, which contributed over 50% of first quarter revenues, expanded by 20% from last year.

1/7/2011 --- Penford Corporation, a leader in renewable ingredient systems for industrial and food applications, reported that  consolidated sales for the quarter ended November 30, 2010 were $72.3 million compared with $67.1 million a year ago. Net income from continuing operations was $0.3 million, or $0.03 per diluted share, for the quarter ended November 30, 2010 compared to net income from continuing operations of $1.1 million, or $0.09 per diluted share last year.

Food Ingredients Results
* Food Ingredients first quarter sales expanded 9% from the prior year on volume gains and product mix improvements. Sales of non-coating applications, which contributed over 50% of first quarter revenues, expanded by 20% from last year.
* New business in dairy, pet and gluten-free bakery products contributed the majority of revenue growth.
* Gross margin improved from last year as unit raw material costs fell more than 10% and higher plant throughput reduced manufacturing costs. Operating income increased by 34% from a year ago.

Industrial Ingredients Results
* Industrial Ingredient first quarter revenue of $53.9 million increased 7% from a year ago despite lower prices for paper starches. Sales of the Company’s specialty Liquid Natural Additive applications grew by over 10% in the quarter.
* Sales of ethanol in the first quarter of fiscal 2011 increased 37% to $24.6 million from $18.0 million a year ago on ouble-digit growth in both volume and average unit pricing. Ethanol sales represent 46% of the total industrial segment.
* Penford continues to introduce new applications that offer sustainable alternatives for petroleum-derived materials. The Company recently announced that is conducting trials with major producers of food packaging materials for a novel technology to replace fluorochemicals used in food wraps and other packaging applications.
* Gross margin and operating income were $2.0 million below the prior year. Depressed paper starch prices and higher costs for raw materials outpaced sales gains as well as improvements in manufacturing costs and plant efficiencies.
* Segment operating income increased $5.2 million sequentially from the fourth quarter of fiscal 2010 on improved results from ethanol operations and stronger sales of industrial starches.

Consolidated Financial Results
* Consolidated operating income of $3.0 million for the first quarter fiscal 2011 rose $5.8 million over the fourth quarter of fiscal 2010 and $7.1 million over the third quarter of fiscal 2010. Consolidated first quarter 2011 sales grew 8% and operating expenses decreased $1.3 million compared with the first quarter of fiscal 2010.
* Interest expense, which includes dividends on preferred stock, was $2.3 million compared with $1.8 million last year.
* The effective tax rate for the first quarter was 57%. Dividends on the Company’s preferred stock, which are recorded as interest expense, are not deductible for federal income tax purposes.