October 29, 2010

 

Corn Products' Q3 earnings drop on acquisition costs

Corn Products International Inc.'s (CPO) Q3 profit dropped 30% on acquisition costs, but the firm reported solid volume growth across all regions and said earnings are soaring at its new specialty starches business.

 

The Westchester, Illinois-based grain processor also raised its current-year earnings forecast to US$2.75-$2.85 a share from US$2.55-$2.75 a share, citing its strong performance to date.

 

The company's performance was driven by South America, where sales increased 14%, and by a 30% increase in sales in its Asia-Africa segment, which includes South Korea and Pakistan.

 

Sales in North America, its largest segment by revenue, fell 3% because of an unfavourable correlation between the cost of corn and the price of the company's products.

 

But sales of high fructose corn syrup, which have sagged in the US amid a consumer backlash, remains strong in Mexico, the company said. A small sugar crop and higher sugar prices in Mexico will encourage food companies' use of corn sweetener instead, officials said.

 

"I think it should continue to be a very positive environment for shipments of corn sweeteners to Mexico," Chief Executive Ilene Gordon said in a post-earnings conference call.

 

The company reported a profit of US$36.9 million, or US$0.48 a share, down from US$52.8 million, or US$0.70, a year earlier. The latest quarter had US$0.33 of acquisition and other charges.

 

Excluding those charges, the company reported earnings of US$0.81 a share. Revenue rose 5% to US$1.02 billion thanks to higher volume and a weaker dollar.

 

Analysts expected earnings of US$0.80 on revenue of US$1.03 billion.

 

The company also announced better-than-expected earnings for National Starch, its newly acquired specialty starches business. Gordon said the company, purchased for US$1.3 billion from Netherlands-based Akzo Nobel N.V., has been an "outstanding acquisition," as the company is seeing soaring volumes in a record 2010.

 

The company raised its 2010 earnings estimate for National Starch to US$205 million to US$215 million, up sharply from the estimate of US$135 million to US$150 million when the deal was announced in June. The deal was completed October 1.

 

National Starch produces specialty food ingredients used in products including soups, mayonnaise and yogurt. Its increased earnings are being driven by better-than-expected volumes around the world, Gordon said.

 

Corn Products, which supplies sweeteners and starches, has been looking to diversify and start selling ingredients with higher profit margins. The company was recently trading up 1% to US$41.52 a share, up 42% on-year.