February 3, 2009

Corn Products International Inc. (CPO) warned Monday (February 2) that 2009 profits may be up to a third less than analysts' expectations as it digests falling volumes and currency devaluations.

 

The US company is one of the world's largest corn refiners and after a two-year boom is being hit by what its top executive called a "collapsed" corn market.

 

Sam Scott, chairman and chief executive, said on an earnings conference call that the immediate outlook for pricing power was "bleak" but expressed confidence that the market would rebound, allowing it to recoup foreign exchange losses within two years.

 

Its shares were down 8.2 percent at US$21.20 in recent trading.

 

Corn Products boosted its 2008 profit guidance three times last year as it raised prices to pass on soaring corn costs.

 

The slide in global commodity prices and economic slowdown has crimped demand and created what Scott described as "uncertainty over volumes and pricing."

 

"We've had a corn market, or a commodity market, that's pretty much collapsed," said Scott.

 

The company has been hit by reduced demand from soft drinks companies for its corn-based fructose syrup, as well as the difficulties in a US ethanol sector that had pushed farmers to boost corn supply.

 

Net income in the fourth quarter to December 31 rose to US$46.4 million, or 61 cents a share, from US$46.1 million, or 61 cents a share, a year earlier. Analysts surveyed by Thomson Reuters had expected earnings of 63 cents a share.

 

Fourth-quarter sales were up 1 percent at US$900 million.

 

The final-quarter performance lifted full-year earnings to US$3.52 a share and the company said earnings per share for 2009 were expected to be in the range of US$2.10 to US$2.60, versus a US$3.14 mean estimate by analysts, according to Thomson Reuters.

 

The fall in commodity prices has seen share prices across the agribusiness sector tumble since last summer, pressuring some of the mergers and acquisitions agreed on earlier in the year.

 

Corn Products broke off its merger with Bunge Ltd. last November. The total cost of the move, including breakup fees, was US$16 million.

 

Scott also confirmed that the search for his successor was ongoing, with both internal and external candidates under review.

 

He said there was no specific time scale for the search, adding that he would "stick around" for as long as was necessary.

 

Bunge reports earnings Thursday, preceded by Archer Daniels Midland Co. on Tuesday.