With profits off sharply, Corn Products cuts guidance

by Josh Sosland
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WESTCHESTER, ILL. — Net income of Corn Products International, Inc., in the first quarter ended March 31 was $18.4 million, equal to 22c per share on the common stock, down 72% from $66.1 million in the first quarter of 2008. Net sales were $880.8 million, down 11%.

In announcing first-quarter results, Corn Products lowered its earnings per share guidance for 2009 to $1.70 to $2.10 from $2.10 to $2.60. In trading on the New York Stock Exchange April 28, Corn Products shares fell 13% shortly after the open, but rallied and were down only about 3% at mid-day.

In the company’s North American business, operating income was $20 million in the first quarter, down 73% from $75 million in the first quarter last year. Higher net costs and lower volumes accounted for the drop. Gross corn costs per ton were up 39% and net corn costs were up 100% because of lower co-products prices. As an example, the company said the spot price of corn oil declined 62% over the past year.

Net sales in North America were $531 million, down 1% from $537 million in 2008.

While setbacks in earnings had been anticipated, conditions were more severe than expected, said Sam Scott, chairman, president and chief executive officer.

"We expect the second half to be stronger than the first half primarily due to lower net corn costs," Mr. Scott said. "Additionally, we have taken steps to control operating and administrative expenses across the entire company."

He said the earnings guidance cut reflected the lower-than-expected first-quarter results and a change in outlook for the company’s North and South American businesses.

"We now anticipate lower volumes in North America due to the economic environment and a slightly longer-than-anticipated rebound in pricing in Brazil to offset the currency and volume impact. We expect the second half of 2009 to be stronger than the first half.

"For full-year 2009, we expect year-over-year results to be negatively impacted by reduced co-product credits, primarily in North America and largely from corn oil; major currency devaluations in virtually all of our international businesses; and generally lower demand due to the global economic conditions."

Mr. Scott said capital expenditures would hold between $125 million and $150 million for 2009, with much of the capital spending representing projects continued from 2008.

"Four areas, in particular, are key to our performance level this year," Mr. Scott said. "They are staying close to our customers, keeping a watchful eye on our cost structure, maintaining our strong balance sheet and solid liquidity and executing flawlessly."

In South America, first-quarter operating profits were $28 million, down 14% from $32 million in 2008. Sales were $215 million down 21%.

Asia/Africa operating income was $2 million, versus $13 million a year ago. Sales were $85 million down 30%.

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