Penford Reports Sales Growth of 12.6%
In Food Ingredients, first quarter fiscal 2010 sales decreased entirely due to the sale of the dextrose business in the second quarter of fiscal 2009. The Company divested the dextrose business after determining that it was not part of the Company’s core strategic focus.
11 Jan 2010 --- Penford Corporation, a global leader in renewable, natural-based ingredient systems for industrial and food applications, has reported that consolidated sales for the quarter ended November 30, 2009 were $67.1 million compared with $59.6 million a year ago. Net income from continuing operations was $1.1 million, or $0.09 per diluted share, compared to net income of $0.6 million, or $0.05 per diluted share last year.
In Industrial Ingredients revenue grew 20% with industrial starch sales comparable to prior year and biofuels increasing from a year ago. Sales of Liquid Natural Additive applications grew as the business added new end-markets and customers.
Domestic industrial starch demand remains below pre-recession levels. Sales to the international markets improved, while sales to North American customers producing printing and writing papers were below prior year.
Positive margins from ethanol operations were reported on higher throughput rates contributed to the improvement in segment financial results for the first quarter. Ethanol volume represented 48% of the Industrial product mix for the quarter.
First quarter fiscal 2010 gross margin and operating income expanded on higher capacity utilization rates, revenue gains and a 25% decrease in unit manufacturing costs. Cost reduction programs addressing employee costs, raw materials and processing improvements contributed to lowering production expenditures by $3.6 million in the first quarter of fiscal 2010. Fiscal 2009 first quarter operating income included $4.2 million of net insurance recoveries. No additional insurance recoveries have been recorded since May 2009.
In Food Ingredients, first quarter fiscal 2010 sales decreased entirely due to the sale of the dextrose business in the second quarter of fiscal 2009. The Company divested the dextrose business after determining that it was not part of the Company’s core strategic focus.
Sales of coating applications, which contributed about 50% of revenues, declined 4% as potato processing customers adjusted inventories to historical levels. Sales of other food ingredients, excluding dextrose, offset the coatings decline, with protein, bakery and pet chews applications improving at double-digit rates from the prior year quarter. Gross margin and operating income improved as first quarter unit raw material costs fell 29% and unit production costs fell 12% from a year ago. Cost savings and efficiencies contributed $0.5 million to operating income in the first quarter.
Penford’s divestiture of the New Zealand business was completed during September 2009 with net proceeds totaling $4.8 million. The sale of the Australian operating assets was completed on November 27, 2009. The assets of the two Australian plants were sold to separate purchasers in two transactions. The Company realized approximately $12.0 million from these sales (after estimated costs of sale). An additional $2.0 million of proceeds has been placed in escrow and may be collected as post-closing conditions are fulfilled over approximately the next 30 months. Penford also retained the trade receivables and payables at the completion date and is currently settling the remaining financial assets and liabilities.
The net cash proceeds from these three transactions were used to reduce outstanding bank debt. A first quarter loss from discontinued operations before income taxes was $1.4 million. A U.S. tax benefit of $4.9 million, resulting from the partial write off of an intercompany loan to the Australian operations, was recorded in the first quarter and classified to discontinued operations.
