July 29, 2011

 

 

Corn Products International Inc's second-quarter earnings soared as sales were boosted by its newly-acquired National Starch business, but higher corn costs could eat into profits in the second half of the year, the company said.

 

Adjusted profit fell short of analysts' expectations, and the company's shares tumbled. Shares were recently down 9.82% to US$50.87 a share.

 

The supplier of sweeteners and starches to food processors and industrial customers has been able to pass rising corn costs onto its customers in recent quarters, but those costs will take a bigger toll on profits as the year progresses, the suburban-Chicago company said.

 

Gross corn costs are double what they were a year ago, said Chief Financial Officer Cheryl Beebe said. Net corn costs jumped 13% from the first quarter to the second quarter, and similar increases are likely through the end of the year, officials said.

 

While prices for the company's products are climbing, "It's not enough to offset the increased corn costs on a global basis," Beebe said.

 

The market of high fructose corn syrup has been putting an increasing emphasis on other value-added food ingredients, a strategy marked by its US$1.3-billion purchase of specialty-food ingredient maker National Starch last year. The company produces higher-margin products, such as ingredients that provide texture for yogurt, soups and sauces.

 

Corn Product's volumes have remained stable and pricing strong through the first half of the year, Chairman and Chief Executive Ilene Gordon said.

 

He added that the company continues to see "robust" demand for high fructose corn syrup in Mexico, a major consumer of soda, which has helped boost the company's capacity utilisation.

 

Corn Products reported a second-quarter profit of US$79.3 million, or US$1.01 a share, up from US$36.8 million, or 48 cents a share, a year earlier. Excluding acquisition and restructuring-related costs, earnings were up at US$1.10 from 75 cents.

 

Net sales surged 58% to US$1.58 billion on higher volume driven by sales from the National Starch acquisition.

 

Gordon said second-quarter results were hurt by a maintenance project that shut down its biggest facility for nearly two weeks in May. The project reduced earnings by 12 cents a share, the company said.

 

Sales in North America, the biggest contributor to the top line, soared 46%, while South American sales climbed 36% with a boost from exchange rates. Sales in the company's Asia Pacific and Europe, Middle East, Africa segments more than doubled on higher volumes and currency impacts.