Westchester, Ill., Oct. 24 - Corn Products International, Inc., a leading global provider of agriculturally derived ingredients for diversified markets, today reported record quarterly diluted earnings per share of $1.15 for the third quarter ended September 30, 2008, a 74 percent increase compared with diluted earnings per share of $0.66 a year ago. The third quarter of 2007 included a 5-cent gain from the Company's holdings in CME Group Inc. Net income of $88 million in the third quarter of 2008 improved 72 percent versus $51 million in the prior year.
For the 11th consecutive quarter, net sales reached a record level. Net sales of $1.08 billion in the third quarter of 2008 increased 24 percent versus $877 million in the prior-year period. Continuing the trend from the first half of 2008, the higher net sales reflected stronger price/product mix.
Gross profit of $204 million in the third quarter of 2008 increased 44 percent compared with $142 million a year ago. The increase was the result of significantly higher North and South American results due predominantly to strong pricing actions. The gross margin of 18.8 percent compared favorably to 16.2 percent last year. Strong co-product pricing helped offset a significant increase in gross corn costs.
Operating expenses of $67 million in the third quarter of 2008 compared with $62 million a year ago. Operating expenses as a percentage of net sales in this year's third quarter declined to 6.2 percent versus 7.0 percent last year. Other income in the third quarter of 2008 was $11 million, which included a $4 million insurance settlement and a $3 million gain from a land sale.
Operating income of $148 million in the third quarter of 2008 grew 68 percent versus $88 million in 2007. The operating margin improved to 13.6 percent from 10.0 percent last year.
Net financing costs in the third quarter of 2008 declined 4 percent to $9.6 million versus the prior year. The 2008 third-quarter effective tax rate of 34.9 percent compared with 33.1 percent in 2007.
Regional Business Segment Performance
Regional results for the quarter ended September 30, 2008 were as follows:
North America
Net sales of $660 million increased 22 percent from $542 million in 2007 due to favorable price/product mix. Volumes were down slightly and the foreign currency impact was essentially neutral. Operating income of $105 million grew 80 percent versus $58 million last year. All three country businesses contributed to the increased profitability.
South America
Net sales of $305 million rose 33 percent compared with $230 million a year ago as a result of positive price/product mix and foreign currency translations. Volumes were slightly positive. Operating income of $44 million grew 68 percent from $26 million in the prior year due to a significant improvement in Brazil, as well as increases in the Southern Cone and Andean regions.
Asia/Africa
Net sales of $119 million increased 13 percent versus $105 million last year due to significantly improved price/product mix, partially offset by unfavorable foreign currency translation and lower volumes. Operating income of $10 million was relatively unchanged from a year ago, reflecting strong growth in Pakistan, Thailand and China offset by a decline in South Korea.
2008 Nine-Month Results
For the nine months of 2008, the Company reported net income of $221 million, or $2.90 per diluted share, compared with net income of $152 million, or $1.98 per diluted share, last year. Included in this year's nine months results was a 4-cent negative impact from costs related to the pending merger with Bunge Limited (NYSE: BG). Included in last year's nine months results was a 5-cent gain from the Company's holdings in CME Group Inc.
Gross profit and operating income increased 27 percent and 39 percent, respectively, versus the prior-year period.
Net sales of $3.04 billion grew 22 percent versus $2.50 billion in the prior year. Favorable price/product mix and, to a lesser degree, positive foreign currency translations drove the increase, which was partially offset by a slight decline in volumes.
The effective tax rate for the nine months of 2008 was 34.5 percent versus 33.3 percent in 2007.
Balance Sheet and Cash Flow
The Company's balance sheet remained solid as of September 30, 2008. Net debt (total debt less cash) was $612 million versus $474 million at December 31, 2007 and $463 million at September 30, 2007. Total debt to capitalization of 29.4 percent at September 30, 2008 compared with 26.6 percent at year-end 2007.
Cash provided by operations was $16 million for the nine months of 2008. Net income was $221 million, depreciation and amortization was $98 million and working capital increased $293 million. Cash paid on margin accounts relating to corn futures contracts was $186 million and represents the majority of the working capital increase.
2008 Outlook
Corn Products International has raised its diluted EPS expectations for full-year 2008 to $3.40 to $3.60, or a 31 to 39 percent increase versus a record $2.59 in 2007. The higher guidance reflects the better-than-expected third quarter results. Previous full-year 2008 EPS guidance was $3.15 to $3.35.
Merger Update
"Since the announcement of the merger, Corn Products and Bunge have been engaged in preparations for the integration of our two companies," said Sam Scott, chairman, president and chief executive officer of Corn Products International. "Bunge and Corn Products currently anticipate that the special shareholders' meetings of both companies will be held in mid-to-late December, rather than in November as previously anticipated. We are disappointed in the performance of the stock prices of our two companies and we will continue to monitor the situation closely."
Corn Products International, Inc.
Condensed Consolidated Statements of Income
(Unaudited)
(In millions, except per share amounts)
Three Months Nine Months
Ended Ended
September 30, Change % September 30, Change %
--------------- -------- ----------------- --------
2008 2007 2008 2007
--------------- -----------------
Net sales before
shipping and
handling costs $1,155.4 $938.7 23% $3,240.0 $2,672.4 21%
Less: shipping
and handling
costs 71.2 61.3 16% 196.4 176.1 12%
--------------- -----------------
Net sales $1,084.2 $877.4 24% $3,043.6 $2,496.3 22%
Cost of sales 880.4 735.7 20% 2,479.9 2,053.0 21%
--------------- -----------------
Gross profit $203.8 $141.7 44% $563.7 $443.3 27%
Operating
expenses 66.8 61.7 8% 207.8 184.1 13%
Other income, net 10.8 8.0 14.4 7.2
--------------- -----------------
Operating income $147.8 $88.0 68% $370.3 $266.4 39%
Financing costs,
net 9.6 10.0 -4% 23.9 32.8 -27%
--------------- -----------------
Income before
income taxes $138.2 $78.0 77% $346.4 $233.6 48%
Provision for
income taxes 48.2 25.8 119.5 77.8
--------------- -----------------
$90.0 $52.2 72% $226.9 $155.8 46%
Minority interest
in earnings 1.9 1.1 73% 6.1 4.1 49%
--------------- -----------------
Net income $88.1 $51.1 72% $220.8 $151.7 46%
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Weighted average
common shares
outstanding:
Basic 74.7 75.0 74.4 74.8
Diluted 76.3 77.0 76.0 76.7
Earnings per
common share:
Basic $1.18 $0.68 74% $2.97 $2.03 46%
Diluted $1.15 $0.66 74% $2.90 $1.98 46%
CORN PRODUCTS INTERNATIONAL, INC.
Condensed Consolidated Balance Sheets
(In millions, except share and per September 30, December 31,
share amounts) 2008 2007
------------- ------------
(Unaudited)
Assets
Current assets
Cash and cash equivalents $116 $175
Accounts receivable - net 575 460
Inventories 493 427
Prepaid expenses 18 14
Deferred income taxes 50 13
----------------------------------------------------------------------
Total current assets $1,252 $1,089
----------------------------------------------------------------------
Property, plant and equipment - net 1,501 1,500
Goodwill and other intangible assets 374 426
Deferred income taxes - 1
Investments 10 13
Other assets 71 74
----------------------------------------------------------------------
Total assets $3,208 $3,103
----------------------------------------------------------------------
Liabilities and equity
Current liabilities
Short-term borrowings and current
portion of long-term debt 223 130
Deferred income taxes 1 28
Accounts payable and accrued
liabilities 604 516
----------------------------------------------------------------------
Total current liabilities $828 $674
----------------------------------------------------------------------
Non-current liabilities 124 123
Long-term debt 505 519
Deferred income taxes 126 133
Minority interest in subsidiaries 20 21
Redeemable common stock (500,000
shares issued and outstanding
at September 30, 2008 and
December 31, 2007) stated at
redemption value 18 19
Share-based payments subject to
redemption 10 9
Stockholders' equity
Preferred stock - authorized
25,000,000 shares-
$0.01 par value, none issued - -
Common stock - authorized 200,000,000
shares-
$0.01 par value - 74,819,774
shares issued at September 30,
2008 and December 31, 2007 1 1
Additional paid in capital 1,081 1,082
Less: Treasury stock (common stock;
835,812 and 1,568,996 shares at
September 30, 2008 and December
31, 2007, respectively) at cost (31) (57)
Accumulated other comprehensive loss (359) (115)
Retained earnings 885 694
----------------------------------------------------------------------
Total stockholders' equity $1,577 $1,605
----------------------------------------------------------------------
Total liabilities and equity $3,208 $3,103
----------------------------------------------------------------------
CORN PRODUCTS INTERNATIONAL, INC.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
For the Nine Months Ended
September 30,
( In millions ) 2008 2007
---------- ----------
Cash provided by operating activities:
Net income $221 $152
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 98 93
Increase in trade working capital (293) (82)
Other (10) (14)
----------------------------------------------------------------------
Cash provided by operating activities 16 149
----------------------------------------------------------------------
Cash used for investing activities:
Capital expenditures, net of proceeds on
disposal (160) (105)
Payments for acquisition (net of cash
acquired of $7 in 2007) - (59)
Other 3 1
----------------------------------------------------------------------
Cash used for investing activities (157) (163)
----------------------------------------------------------------------
Cash used for financing activities:
Proceeds from (payments on) borrowings,
net 101 56
Issuances (repurchases) of common stock,
net 10 3
Dividends paid (including to minority
interest shareholders) (31) (24)
Excess tax benefit on share-based
compensation 3 4
Other - (1)
----------------------------------------------------------------------
Cash provided by financing activities 83 38
----------------------------------------------------------------------
Effect of foreign exchange rate changes on
cash (1) 2
----------------------------------------------------------------------
(Decrease) increase in cash and cash
equivalents (59) 26
Cash and cash equivalents, beginning of
period 175 131
----------------------------------------------------------------------
Cash and cash equivalents, end of period $116 $157
----------------------------------------------------------------------
Corn Products International, Inc.
Supplemental Financial Information
(Unaudited)
I. Geographic Information of Net Sales and Operating Income
(Dollars in Three Months Ended Nine Months Ended
millions) September 30, Change September 30, Change
2008 2007 % 2008 2007 %
--------- -------- ------ --------- --------- ------
Net Sales
North America $660.1 $542.2 22% $1,806.4 $1,543.7 17%
South America 304.8 229.9 33% 874.4 648.8 35%
Asia/Africa 119.3 105.3 13% 362.8 303.8 19%
--------- -------- ------ --------- --------- ------
Total $1,084.2 $877.4 24% $3,043.6 $2,496.3 22%
========= ======== ====== ========= ========= ======
Operating Income
North America $104.9 $58.3 80% $265.7 $187.8 41%
South America 44.1 26.2 68% 112.8 77.1 46%
Asia/Africa 10.0 9.9 1% 35.6 36.0 (1%)
Corporate (11.2) (6.4) 75% (43.8) (34.5) 27%
--------- -------- ------ --------- --------- ------
Total $147.8 $88.0 68% $370.3 $266.4 39%
========= ======== ====== ========= ========= ======
II. Capital expenditures
Capital expenditures, net of proceeds on disposals, for the quarters
ended September 30, 2008 and 2007, were $55 million and $36 million,
respectively. Capital expenditures for the full year 2008 are
estimated to be in the range of $200 million to $250 million.
III. Non-GAAP Information
The Company uses certain key metrics to better monitor our progress
towards achieving our strategic business objectives. Among these
metrics is the Total Debt to Capitalization Percentage, which is not
calculated in accordance with Generally Accepted Accounting
Principles ("GAAP"). Management believes that this non-GAAP
information provides investors with a meaningful presentation of
useful information on a basis consistent with the way in which
management monitors and evaluates the Company's operating
performance. The information presented should not be considered in
isolation and should not be used as a substitute for our financial
results calculated under GAAP. In addition, these non-GAAP amounts
are susceptible to varying interpretations and calculations, and the
amounts presented below may not be comparable to similarly titled
measures of other companies. Our calculations of the Total Debt to
Capitalization Percentage at September 30, 2008 and December 31, 2007
are as follows:
Total Debt to Capitalization Percentage
September 30, December 31,
(Dollars in millions) 2008 2007
------------- ------------
Short-term debt $223 $130
Long-term debt 505 519
------------- ------------
Total debt (a) $728 $649
------------- ------------
Deferred income tax liabilities 126 133
Minority interest in subsidiaries 20 21
Redeemable common stock 18 19
Share-based payments subject to redemption 10 9
Stockholders' equity 1,577 1,605
------------- ------------
Total capital $1,751 $1,787
------------- ------------
------------- ------------
Total debt and capital (b) $2,479 $2,436
------------- ------------
Debt to capitalization percentage (a/b) 29.4% 26.6%
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