Tuesday, Corn Products International, Inc. (CPO), a provider of agriculturally derived ingredients, reported a sharp fall in profit for the first quarter, negatively impacted by lower volumes, lower co-product prices, and unfavorable foreign currency translations. Citing lower-than-expected first quarter results, and change in North and South American businesses forecast, the company slashed its fiscal 2009 earnings forecast to a range below analysts' estimates.
The Westchester, Illinois-based company's net income for the quarter fell to $18.4 million from $66.1 million in the prior year period. First-quarter net income attributable to CPI shareholders plunged 74% to $16.8 million or $0.22 per share from $64.3 million or $0.85 per share in the same period last year.
On average, six analysts polled by Thomson Reuters expected the company to report earnings of $0.49 per share for the quarter. Analysts' estimates typically exclude special items.
The company, with operations in 15 countries at 34 plants, noted that its 2009 first-quarter results were negatively impacted by higher net corn costs, unfavorable foreign currency translations and softer volumes. According to the company, the estimated negative earnings per share impact from lower co-product prices was $0.28, price/margin was $0.14, foreign currency values were $0.10, volume changes were $0.07, and higher net financing costs were $0.04.
Net sales before shipping and handling costs were $880.8 million, down 11% from $991.0 million a year ago.
Adjusting shipping and handling costs, quarterly net sales fell 11% to $831.1 million from $930.9 million in the prior-year period, and missed Wall Street analysts' estimate of $843.17 million.
Corn Products attributed the decline in net sales to a negative $103 million from foreign currency translations and a negative $65 million from lower volumes partly offset by improved price/product mix of $68 million.
In the preceding fourth quarter, Corn Products reported a profit of $46.4 million or $0.61 per share, while net sales before shipping and handling costs were $957.1 million, and quarterly net sales were $900.0 million.
Geographically, North American net sales in the first quarter edged down 1% to $531.3 million from $536.9 million in 2008, as improved price/product mix of $46 million was more than offset by unfavorable volumes of $31 million and foreign currency translations of $21 million.
In South America, the company recorded a 21% decline in net sales to $214.4 million from $272.1 million a year ago, primarily due to the impact of unfavorable foreign currency translations, and lower volumes, despite favorable price/product mix.
Quarterly net sales from Asia/Africa fell 30% to $85.4 million from $121.9 million last year.
In the quarter, gross profit declined 46% to $93 million from $173.2 million a year ago. Gross margin was 11.2%, compared with 18.6% last year. Operating income of $39.1 million decreased 63% from $106.7 million a year earlier.
The company noted that gross corn costs per ton increased 12%, while net corn costs per ton grew 38% resulting primarily from lower corn oil prices.
Sam Scott, chairman, president and chief executive officer, stated, "The issues we outlined during our 2008 year-end call in early February were clearly present in our first quarter results, and had a greater impact than we had estimated."
Among peers, agribusiness and food company Bunge Ltd. (BG), which once terminated the deal to acquire Corn Products, last week reported a loss for the first quarter of $176 million, compared with a net income of $322 million last year, hurt primarily by high cost fertilizer inventories and aggressive pricing by competitors, together with lower demand for soybean-based products. First-quarter net sales dropped 26% to $9.2 billion from $12.47 billion a year ago, while volumes increased 2% to 32,251 metric tons.
Archer Daniels Midland Co. (ADM) is slated to release its third-quarter earnings on May 5. Analysts project earnings of $0.49 per share on net sales of $16.94 billion.
Looking ahead, Corn Products said it is lowering its 2009 diluted earnings per share guidance to a range of $1.70 to $2.10 from the previous range of $2.10 to $2.60, based upon the lower-than-expected first quarter results and a change in outlook for North and South American businesses.
Analysts estimate the company to earn $2.40 per share for 2009, with expectations ranging between $2.25 and $2.51 per share. In the previous year, the company had recorded earnings of $3.59 per share.
The company said it currently anticipates 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.
Full-year results are projected to be negatively impacted by reduced co-product credits, primarily in North America and largely from corn oil, together with major currency devaluations in virtually all of its international businesses, and generally lower demand due to the global economic conditions.
Scott added, "We expect the second half to be stronger than the first half primarily due to lower net corn costs. Additionally, we have taken steps to control operating and administrative expenses across the entire Company. While the global economy is adversely affecting our earnings this year, we continue to have a major strategic advantage in this difficult environment, which is our very healthy balance sheet and solid liquidity."
Corn Products expects to hold capital expenditures to between $125 million and $150 million for full-year 2009, with much of the capital spending this year representing projects continued from 2008.
CPO closed Monday's regular trading session at $20.62, down $0.51, on a volume of 870 thousand shares. In the past 52 weeks, shares have been trading between $17.51 and $54.96.
For comments and feedback: editorial@rttnews.com