July 27/Westchester, Ill. /Business Wire -- Corn Products International Inc. reported 2010 second-quarter net income of $37 million, or $0.48 per diluted share ("EPS"), compared to a net loss of $85 million, or $1.13 EPS, in the same period last year. The second-quarter 2010 results include an $18 million charge, or $0.23 EPS, from the impairment of the company's plant in Llay-Llay, Chile, and an after-tax charge of $3 million, or $0.04 EPS, related to the pending National Starch acquisition. The second-quarter 2009 results include after-tax impairment and restructuring charges of $110 million, with a negative EPS impact of $1.47.
Excluding National Starch acquisition costs and impairment and restructuring charges, second-quarter 2010 adjusted EPS was $0.75, a 121% improvement over the second-quarter 2009 adjusted EPS of $0.34. Diluted weighted average shares outstanding in the second quarter of 2010 were 76.6 million, up from 74.8 million in the same quarter last year.
"I am pleased to report that we had another very good quarter," said Ilene Gordon, chairman, president and chief executive officer. "We saw strong volume recovery across all our regions. In North America, we continued to see strong demand from the beverage industry in Mexico. In South America, volume growth was led by our customers in the brewing, confectionary, processed foods and packaging industries. Volume improvement in Asia/Africa was led by customer demand for sweeteners and starches in South Korea and the confectionary and textile industries in Pakistan."
Net sales of $1 billion in the second quarter of 2010 increased 10% versus $912 million in the prior-year period. The primary contributors to growth in net sales were a positive $143 million from higher volumes and a positive $44 million from stronger foreign currencies, partially offset by a negative $96 million from lower price/mix. The price/mix decline was largely attributable to North America and reflected the normal correlation between lower corn costs and the corresponding decline in selling prices.
Second-quarter 2010 gross profit of $164 million improved 47% versus $112 million a year ago. The gross margin of 16.3% compared favorably to 12.2% last year. The improvement in gross profit was attributable to cost improvement due to higher utilization rates, lower unit corn costs, cost-reduction programs and stronger foreign currencies.
Operating expenses in the second quarter were $73 million, including $4 million of cost related to the pending acquisition of National Starch. Excluding the National Starch acquisition costs, operating expenses were $69 million, or 6.9% of net sales, versus $61 million, or 6.7% of net sales, last year. The increase in operating expenses reflects a return to more historical run rates, the impact of stronger currencies, and higher costs.
Operating income for the second quarter of 2010 was $77 million, versus an operating loss of $73 million last year. Second-quarter 2010 results include an asset impairment charge for the company's plant in Chile. The Llay-Llay plant suffered damage during a major earthquake that occurred in Chile on February 27, 2010. After receiving a completed engineering report in the second quarter, the company recorded an impairment charge of $18 million. Excluding this impairment charge and $4 million of costs related to the pending National Starch acquisition, second-quarter 2010 adjusted operating income was $99 million, a 90% improvement compared to $52 million last year, excluding $125 million in impairment and restructuring charges.
Net financing costs in the second quarter of 2010 were $7 million versus $11 million last year, down $4 million on a combination of lower debt, higher cash balances and a positive $2.5 million swing in foreign exchange. The second-quarter 2010 tax rate was 44.3% versus 1.1% last year, reflecting the impact of the impairment charge in 2010, the 2009 impairment and restructuring charges and National Starch acquisition-related costs along with changes in earnings mix and discrete items.
Regional Business Segment Performance
Regional results for the quarter ended June 30, 2010 were as follows:
Net sales of $583 million were flat against last year, as higher volumes of $83 million and a $12 million positive impact from a stronger Canadian dollar were offset by lower price/mix of $97 million. The decline in price/mix reflected the normal correlation between finished product pricing and a 23% decline in corn costs versus last year. Operating income of $60 million increased 78% from $33 million last year, primarily due to volume growth, improved plant utilization rates, and cost-reduction programs. The operating income margin increased to 10.2% from 5.7% last year.
Net sales of $287 million increased 26% compared with $228 million a year ago, primarily due to improved volumes of $36 million and the impact of favorable foreign currency translation of $27 million, partially offset by unfavorable price/mix of $4 million due to lower co-product prices. Gross corn cost per ton on a dollar basis increased 2% versus last year. Operating income increased 48% to $39 million, compared with $26 million in the prior year. The operating income margin was 13.6%, up from 11.6 % in the same period last year.
Net sales of $134 million increased 35% versus $99 million last year, primarily due to the higher volumes of $25 million and improved price/mix and favorable foreign currency translation of $5 million each. Gross corn cost per ton declined 5% versus last year. Operating income of $13 million was up from $6 million last year, reflecting the improved business performance in South Korea and Pakistan. The operating income margin was 9.6%, up from 5.7% in the second quarter of 2009.
Balance Sheet and Cash Flow
As of June 30, 2010, total debt and cash and cash equivalents were $599 million and $326 million respectively, versus $544 million and $175 million respectively at year-end 2009.
Cash provided from operations in the first half of 2010 was $185 million. Capital expenditures, net of proceeds on disposals, were $56 million. Cash provided by financing activities was $24 million. The change in cash and cash equivalents for the six months ended June 30, 2010, was $151 million.
"On a comparable basis to the company's prior 2010 earnings per share outlook, which was $2.25 to $2.60, we are revising the range to incorporate the strong first half performance. The revised comparable range is $2.55 to $2.75, which would put the second half of 2010 in a range of $1.17 to $1.37. This range excludes the impact associated with the impending National Starch transaction and the impairment of the company's Chilean plant and assumes a more normalized tax rate.
National Starch Transaction
"I am pleased to report that we are making good progress with respect to the National Starch acquisition," said Gordon. "Our integration work is underway, and we are progressing with our regulatory filings. We expect the transaction to close near the end of September or early October of 2010."
From the July 28, 2010, Prepared Foods' Daily News
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