Penford Reports Strong Rise in Q1 Profit Ahead of Takeover by Ingredion
12 Jan 2015 --- Penford Corporation, a leader in ingredient systems for food and industrial markets, has reported first quarter fiscal 2015 results. First quarter 2015 net income was $2.1 million, up by $1.6 million over first quarter 2014. Diluted EPS for the first quarter ended November 30, 2014, as reported, increased to $0.16 from $0.04 a year ago.
Adjusted diluted earnings per share, excluding nonrecurring items related to the merger, equaled $0.26. Reported operating income rose to $4.4 million in the first quarter, an increase of $2.8 million from last year’s comparable quarter. Reported operating income includes merger-related costs, as well as increased overhead expenses for the internal controls program that were partially offset by the accrual freeze of a Company pension plan. Adjusted operating income, excluding merger-related costs, increased to $6.4 million.
First quarter 2015 consolidated sales declined to $103.6 million compared with $109.3 million in last year’s first quarter, reflecting lower corn prices that were passed through to customers, which reduced industrial starch and by-product revenues. Penford Corporation entered into a definitive merger agreement with Ingredion Incorporated on October 14, 2014. A special shareholders meeting to approve the proposed merger has been scheduled for January 29, 2015. Under the merger agreement, Ingredion will acquire all of the outstanding shares of Penford for $19.00 in cash per share. The merger is subject to Penford shareholder and regulatory approvals, as well as other customary closing conditions.
Food Ingredients revenue increased 19% to $34.2 million for the quarter on strong growth in several product segments and the acquisition of Gum Technology. Gross margin improved by 18% to $11.0 million with the addition of gum sales and increases in specialty starch segments.
Industrial Ingredients reported sequential improvement for the last five quarters in gross margin and operating income. Gross margin expanded to $7.2 million, up by $5.8 million from last year’s first quarter on favorable ethanol market dynamics, the lower cost of physical corn, the growth in specialty bio-products and the reduction in depreciation expense with the increase in estimated useful lives that occurred as of May 1, 2014. Operating income increased to $3.0 million from a loss in the prior year’s first quarter. Quarterly revenue fell to $69.5 million, reflecting the decline in the market price of corn, which reduced pass-through revenues.
