Corn Products International net sales rise 58% in Q2

Corn Products International net sales rise 58% in Q2

Corn Products International, Inc. reported that second quarter diluted earnings per share (EPS) rose 110 percent to $1.01 compared to $0.48 last year.

 

·         Second quarter 2011 reported EPS rose 110 percent from $0.48 to $1.01

·         Second quarter 2011 adjusted EPS increased 47 percent from $0.75 to $1.10

·         Integration of National Starch acquisition continues on-plan

Corn Products International, Inc. (NYSE: CPO), a leading global provider of ingredient solutions to diversified industries, reported that second quarter diluted earnings per share (EPS) rose 110 percent to $1.01 compared to $0.48 last year. The second quarter of 2011 included $0.07 per share of acquisition integration charges and $0.02 per share of restructuring charges. The second quarter of 2010 included $0.23 per share of restructuring charges and $0.04 per share of acquisition costs. Excluding these items, adjusted EPS rose 47 percent from $0.75 to $1.10 in the quarter.

First half 2011 EPS rose 183 percent to $2.97 from $1.05 in the year-ago period. First half 2011 EPS included $0.13 per share of acquisition integration charges, $0.02 of restructuring charges, and 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. The first half of 2010 included $0.27 per share of restructuring charges and $0.06 per share of acquisition costs. Excluding these items, adjusted EPS rose 72 percent from $1.38 to $2.37 in the first half of 2011.

"Corn Products delivered a very good second quarter and first half of 2011," said Ilene Gordon, Chairman, President and Chief Executive Officer. "As expected volumes were relatively stable as customers and consumers continue to deal with economic challenges in various markets. Our pricing remains strong as we manage through rising input costs. We also successfully completed a sizable maintenance project at our largest facility and continue the integration of National Starch. We remain on-plan and are managing our business through a volatile marketplace while maintaining a sharp focus on executing our strategy."

Financial Review

Net Sales

Second quarter 2011 net sales rose 58 percent from $1.00 billion to $1.58 billion. The increase is primarily attributable to higher volume of $337 million driven by sales from the National Starch acquisition. Higher price/mix contributed $205 million, and $40 million of the increase was a result of favorable foreign exchange rates.

For the year to date, net sales increased 57 percent, or $1.10 billion, from $1.94 billion to $3.04 billion. Volume represented $688 million of the change, of which approximately $701 million came from the acquired National Starch business. The remainder of the change was $356 million of price/mix and $60 million of favorable foreign exchange.

Gross Profit

Gross profit increased by 66 percent, or $108 million, in the second quarter from $164 million to $272 million, expanding the gross profit margin from 16.3 percent in the year ago period to 17.2 percent this year. The improvement was largely driven by the addition of the National Starch business partially offset by $13 million related to the sizable maintenance project completed at the Company's largest facility. This quarter also included $3 million of accelerated depreciation related to the Company's North American manufacturing optimization initiative.

For the first six months, gross profit rose by 86 percent, or $263 million, from $307 million to $570 million. Gross margin increased from 15.8 percent to 18.7 percent. The improvement is attributable to both acquired and organic business growth.

Operating Income

Second quarter operating income was up 76 percent, or $58 million, from $77 million to $135 million. The change was primarily driven by income associated with the National Starch business as well as integration synergies and foreign exchange. These factors were partially offset by an estimated $13 million of cost related to the sizable maintenance project completed at the Company's largest facility.

Excluding $11 million of integration and restructuring charges in the second quarter 2011, and excluding $22 million of integration and restructuring charges in the second quarter 2010, adjusted operating income rose 48 percent from $99 million to $145 million in the second quarter 2011.

In the first six months, operating income rose 144% from $148 million to $362 million. Income from the National Starch acquisition was a key driver of the change along with organic business growth, integration synergies and foreign exchange.

Excluding $58.4 million from the NAFTA award and $18 million of integration and restructuring costs in the first half 2011, and excluding $28 million of integration and restructuring charges in the first half 2010, adjusted operating income for the first half increased 83 percent from $176 million to $321 million.

The Company realized $6 million of integration synergies generated by numerous procurement and employee-related initiatives in the second quarter 2011. For the first half of the year, the Company generated $12 million of savings from these items.

Financial and Business Highlights

· For the year-to-date, net financing costs were $46 million versus $12 million in the year-ago period. The increase primarily relates to costs associated with financing the National Starch acquisition.

· The effective tax rate as reported was 30.1 percent for the quarter compared to 44.3 percent in the year-ago quarter. For the first six months, the effective tax rate was 25.3 percent and 38.7 percent in the year-ago period. The effective rate for the first half of 2011 was favorably impacted by the tax-free (in the U.S.) award of $58.4 million from the Government of Mexico pursuant to a NAFTA settlement in the Company's favor.

· At June 30, 2011, total debt and cash and cash equivalents were $1.77 billion and $273 million, respectively, versus $1.77 billion and $302 million, respectively, at December 31, 2010.

· For the first six months, cash from operations was $102 million compared to $185 million in the year-ago period. The decrease primarily reflects higher trade working capital.

· For the first six months, change in trade working capital was a use of $266 million. The increase in working capital is primarily a result of higher inventories due to increasing commodity costs and accounts receivable as sales have grown.

· Capital expenditures, net of disposals, were $89 million in the first half of 2011.

Business Review

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 America

Second quarter 2011

North American net sales rose 46 percent from $583 million to $853 million in the second quarter 2011. The increase came from stronger volumes of $162 million, a price/mix benefit of $100 million, and $8 million from favorable foreign exchange rates. The volume increase is attributable to the National Starch business.

Operating income was $70 million, up 18 percent compared to $60 million in the year-ago period, driven by incremental operating income from the National Starch business, partially offset by an estimated $13 million of costs associated with the previously discussed maintenance project.

First six months 2011

During the first six months of 2011, net sales in North America rose 45% from $1.12 billion to $1.63 billion as a result of incremental volume of $328 million driven by the acquisition of National Starch, higher price/mix of $167 million and $14 million of favorable foreign exchange rates.

In the first half of 2011, operating income in North America increased 74% from $98 million to $171 million due to incremental income from the National Starch business, favorable price/mix, integration synergies and positive foreign exchange.

South America

Second quarter 2011

South American sales in the second quarter 2011 were $390 million, an increase of 36 percent compared to $287 million in the prior-year quarter. The increase came from a $77 million improvement in price/mix and $26 million of favorable foreign exchange rates. Volumes were flat as a result of difficult comparisons with the year-ago period that included strong volumes driven by the World Cup.

Operating income was $48 million, up 22 percent from $39 million in the year-ago period. The increase in operating income was driven by a combination of strong price/mix as well as positive foreign exchange.

First six months 2011

During the first six months of 2011, net sales in South America rose 34%, or $194 million, from $564 million to $758 million due to $135 million of improved price/mix, $39 million of favorable foreign exchange rates and $20 million of incremental volume attributable to the National Starch business.

In the first half of 2011, operating income in South America increased 25% from $78 million to $97 million due to positive price/mix and favorable foreign exchange rates.

Asia Pacific

Second quarter 2011

In the second quarter 2011, net sales rose 133 percent from $87 million to $201 million, as a result of $94 million of higher volumes, $14 million of improved price/mix, and $7 million of favorable currency translation. The volume increase is attributable to the acquisition of National Starch.

Operating income grew 623 percent in the second quarter from $3 million to $22 million due to incremental operating income from the National Starch acquisition as well as some organic growth.

First six months 2011

During the first six months of 2011, net sales in Asia Pacific rose 133% from $165 million to $383 million due to $182 million of increased volume primarily driven by the National Starch business, $26 million of improved price/mix and $10 million of favorable foreign exchange rates.

In the first half of 2011, operating income in Asia Pacific increased 319% from $10 million to $41 million due to incremental income from the National Starch business.

Europe, Middle East, Africa (EMEA)

Second quarter 2011

In the second quarter 2011, net sales rose 197 percent from $47 million to $140 million, as a result of $81 million of higher volumes and $13 million of improved price/mix. The volume increase is largely attributable to the acquisition of National Starch.

Operating income grew 121 percent in the quarter from $10 million to $22 million, largely due to incremental operating income from National Starch.

First six months 2011

During the first six months of 2011, net sales in EMEA rose 208%, or $182 million, from $88 million to $270 million due to $157 million of incremental volume associated with the National Starch business and $27 million of improved price/mix.

In the first half of 2011, operating income in EMEA increased 170% from $16 million to $44 million due to incremental income from the National Starch business, higher price/mix and organic volume growth.

2011 Guidance

EPS expectations for 2011 remain in a range of $4.85 to $5.15, up 120%-134% compared to 2010. 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.

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 should support growth investments across the organization, particularly in South America and Europe.

Webcast

Corn Products International’s webcast replay will be available at www.cornproducts.com.

About the Company

Corn Products International, Inc. is a leading global ingredient provider to the food, beverage, brewing and pharmaceutical industries as well as numerous industrial sectors. The Company produces ingredients that provide valuable solutions to customers in approximately 50 countries. For more information, visit www.cornproducts.com.

Hide comments

Comments

  • Allowed HTML tags: <em> <strong> <blockquote> <br> <p>

Plain text

  • No HTML tags allowed.
  • Web page addresses and e-mail addresses turn into links automatically.
  • Lines and paragraphs break automatically.
Publish