Corn Products International Inc. (CPO) filed Quarterly Report for the period ended 2009-09-30.
Corn Products International Inc. headquartered in Bedford Park Illinois is one of the world's leading corn refiners. Dating back almost a century Corn Products International is a leading supplier of products from the corn refining process -- sweeteners and starches. Corn Products International Inc. has a market cap of $2.07 billion; its shares were traded at around $27.68 with a P/E ratio of 14.1 and P/S ratio of 0.5. The dividend yield of Corn Products International Inc. stocks is 2%. Corn Products International Inc. had an annual average earning growth of 10.4% over the past 10 years. GuruFocus rated Corn Products International Inc. the business predictability rank of 4-star.
Highlight of Business Operations:
Net Income. Net income for the quarter ended September 30, 2009 decreased to $52.8 million, or $0.70 per diluted share, from $88.1 million, or $1.15 per diluted share, in the third quarter of 2008. The decrease in net income primarily reflects a significant decline in operating income across all of our regions principally driven by reduced co-product selling prices, foreign currency devaluations and lower sales volumes. For the nine months ended September 30, 2009 we incurred a net loss of $15.2 million, or a net loss of $0.20 per diluted common share, as compared to net income of $220.8 million, or $2.90 per diluted common share, in the prior year period. The results for the nine months ended September 30, 2009 include a $125 million charge ($110 million after-tax, or $1.47 per diluted common share) for impaired assets and restructuring costs that was recorded in the second quarter of 2009. The charge consists of a $119 million write-off of goodwill pertaining to our operations in South Korea, a $5 million write-off of impaired assets in North America and a $1 million charge for employee severance and related benefit costs primarily attributable to the termination of employees in our Asia/Africa region. See also Note 3 of the notes to the condensed consolidated financial statements. Results for the nine months ended September 30, 2008 included $4 million of expenses, or $0.05 per diluted common share, related to the terminated merger with Bunge Limited (“Bunge”). While the decrease in net income includes the impact of the impairment and restructuring charges, it also reflects a significant decline in operating income across all of our regions principally driven by reduced co-product selling prices, foreign currency devaluations and lower sales volumes. Increased financing costs also contributed to the decline.
Net Sales. Third quarter net sales totaled $971 million, down 10 percent from third quarter 2008 net sales of $1.08 billion. The decrease reflects an unfavorable currency translation impact of 5 percent due to weaker foreign currencies, a price/product mix decline of approximately 3 percent and a 2 percent volume decline driven by reduced demand attributable to the global economic recession. Co-product sales of $177 million for third quarter 2009 decreased 27 percent from $242 million in the prior year period, reflecting lower pricing and reduced volume. North American net sales for third quarter 2009 decreased 9 percent to $598 million from $660 million a year ago. The decrease reflects a volume reduction of approximately 5 percent, a price/product mix decline of 3 percent and an unfavorable currency translation impact of 1 percent. In South America, third quarter 2009 net sales decreased 11 percent to $271 million from $305 million in the prior year period. This decrease reflects unfavorable currency translation of 11 percent and a 4 percent price/product mix decline, which more than offset a 4 percent volume improvement. In Asia/Africa, third quarter 2009 net sales fell 15 percent to $101 million from $119 million a year ago. The decrease reflects a 10 percent decline attributable to currency translation and a 5 percent price/product mix decline. Volume in the region was flat.
Operating Income. Third quarter 2009 operating income decreased 41 percent to $87.8 million, from $147.8 million a year ago, as earnings declined across all of our regions. Currency translation attributable to weaker foreign currencies caused operating income to decline by approximately $7 million from the prior year period. North America operating income for third quarter 2009 decreased 42 percent to $61.1 million from $104.9 million a year ago, as earnings declined throughout the region. This decline primarily reflects lower co-product pricing, higher corn costs and reduced sales volumes attributable to the weak economy. Currency translation attributable to the weaker Canadian dollar caused operating income to decline by approximately $1 million in the region. South America operating income for third quarter 2009 decreased 15 percent to $37.3 million from $44.1 million a year ago, as earnings declined throughout the region. This decline reflects the unfavorable translation impact of weaker foreign currencies and reduced product pricing, which more than offset lower corn costs and improved
Operating income for the nine months ended September 30, 2009 decreased to $53.7 million from $370.3 million a year ago. This decrease partially reflects the impact of the $125 million impairment and restructuring charge that we recorded in the second quarter of 2009. Without the impairment and restructuring charge, operating income would have been $178.7 million for the first nine months of 2009, down 52 percent from a year ago, as earnings declined across all of our regions. Currency translation attributable to weaker foreign currencies caused operating income to decline by approximately $31 million from the prior year period. North America operating income decreased 57 percent to $114.8 million from $265.7 million a year ago, as earnings declined throughout the region. The decline primarily reflects lower co-product pricing, higher corn costs and reduced sales volumes attributable to the weak economy. Currency translation attributable to the weaker Canadian dollar caused operating income to decline by approximately $8 million in the region. South America operating income decreased 19 percent to $91.4 million from $112.8 million a year ago, as lower earnings in Brazil and in the Andean region of South America more than offset earnings growth in the Southern Cone of South America. Lower corn costs partially offset the unfavorable translation impact of weaker foreign currencies and slightly reduced sales volume in the region. Translation effects associated with weaker South American currencies caused operating income to decline by approximately $20 million in the region. Asia/Africa operating income decreased 69 percent to $11.2 million from $35.6 million a year ago, as earnings declined throughout the region. This earnings decline primarily reflects lower operating results in South Korea where a weaker Korean won, high corn costs and reduced sales volume attributable to a difficult economy drove an operating loss for the first nine months. Lower earnings in Pakistan, principally driven by reduced demand and a weaker local currency, also contributed substantially to the earnings decline in the region. Currency translation attributable to weaker Asian currencies reduced operating income by approximately $3 million in the region.
Cash provided by operating activities for the first nine months of 2009 was $368 million as compared to $16 million a year ago. The increase in operating cash flow primarily reflects an improvement in cash flow from working capital activities, which more than offset our reduction in earnings. The increase in cash flow from working capital activities was driven principally by a $307 million year over year change in our margin accounts related to corn futures and option contracts. To manage price risk related to corn purchases in North America, we use corn futures and options contracts to lock in our corn costs associated with firm-priced customer sales contracts. We are unable to hedge price risk related to co-product sales. As the market price of corn fluctuates, our derivative instruments change in value and we fund any unrealized losses or receive cash for any unrealized gains related to outstanding corn futures and option contracts. We plan to continue to use corn futures and option contracts to hedge the price risk associated with firm-priced customer sales contracts in our North American business and accordingly, we will be required to make or be entitled to receive, cash deposits for margin calls depending on the movement in the market price for corn. Our cash flow from working capital activities for 2009 also reflects a significant reduction in inventories driven by reduced volume and lower corn prices. Capital expenditures of $98 million for the first nine months 2009 are in line with our capital spending plan for the year. We anticipate that our capital expenditures for full year 2009 will approximate $150 million. In the third quarter of 2009, we increased our ownership interest in GTC Nutrition from 75 percent to 100 percent by acquiring the shares from the holders of the non-controlling interest for $3 million in cash. We recorded a charge of approximately $2 million to additional paid-in capital as a result of the transaction.
We have a $500 million senior, unsecured revolving credit facility consisting of a $470 million US revolving credit facility and a $30 million Canadian revolving credit facility (together, the “Revolving Credit Agreement”) that matures in April 2012. At September 30, 2009, there were $234 million of borrowings outstanding under the US revolving credit facility. We had no borrowings outstanding under the Canadian revolving credit facility at September 30, 2009. In addition to borrowing availability under our Revolving Credit Agreement, we also have approximately $276 million of unused operating lines of credit in the various foreign countries in which we operate. At September 30, 2009, we had total debt outstanding of $695 million, compared to $866 million at December 31, 2008. In addition to the borrowings under the Revolving Credit Agreement, the debt includes $200 million of 6.0 percent senior notes due
CPO is in the portfolios of David Dreman of Dreman Value Management, Kenneth Fisher of Fisher Asset Management, LLC.
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