Corn Products International (CPO)
Q2 2011 Earnings Call
July 28, 2011 9:00 am ET
Ilene Gordon - Chairman, Chief Executive Officer and President
Aaron Hoffman - Vice President of Investor Relations & Corporate Communications
Cheryl Beebe - Chief Financial Officer and Executive Vice President
Vincent Andrews - Morgan Stanley
Christina McGlone - Deutsche Bank AG
Adam Josephson - KeyBanc Capital Markets Inc.
Heather Jones - BB&T Capital Markets
Christine McCracken - Cleveland Research Company
Kenneth Zaslow - BMO Capital Markets U.S.
David Driscoll - Citigroup Inc
Previous Statements by CPO
» Corn Products International, Inc. Q4 2009 Earnings Call Transcript
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» Corn Products International Inc. F4Q08 Earnings Call Transcript
Good morning, everyone, and welcome to the Corn Products International 2011 Second Quarter Earnings Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Aaron Hoffman. Please go ahead.
Thanks, Corinne. Good morning, and welcome to Corn Products Second Quarter 2011 Earnings Call. Joining on the call this morning are Ilene Gordon, our Chairman and CEO; and Cheryl Beebe, our Chief Financial Officer.
Our results were issued this morning in a press release that can be found on our website, cornproducts.com. The slides accompanying this presentation can also be found on the website and were posted about an hour ago for your convenience. As a reminder, our comments within this presentation may contain forward-looking statements. These statements are subject to various risks and uncertainties. Actual results could differ materially from those -- predicted in those forward-looking statements, and Corn Products International is under no obligation to update them in the future as or if circumstances change.
Additional information concerning factors that could cause actual results to differ materially from those discussed during today's conference call or in this morning's press release can be found in the company's most recently filed annual report on Form 10-K and subsequent reports on Form 10-Q and 8-K.
With that out of the way, I'll turn the call over to Ilene.
Thanks, Aaron, and let me add my welcome to everyone joining us today. We appreciate your time and interest.
We continue to see strong performance across the entire business, driven by a number of factors. First, we are able to pass through pricing at a sufficient level to cover rising input costs. Second, our mix improved behind a focus on selling more value-added ingredients. With the National Starch acquisition, we continue to move toward higher margin, more functional ingredients that help our customers improve their products and at times reduce costs.
We also benefited from continued cost savings. We saw manufacturing optimization savings flow through in the first half, and expect that to continue throughout the year. Beyond that, we realized $12 million of acquisition integration benefits in the first half, primarily from procurement and employee-related initiatives. All of these items contributed to top and bottom line growth in each of our 4 regions and reflect the overall strength of the business model we developed.
We continue to manage on a local basis with a global perspective. And underpinning our business model is adherence to a prudent but appropriate risk management practice. With a strong second quarter and first 6 months, we are well-positioned to achieve our guidance.
As we discussed on our last earnings call, we expect the first half of the year to be stronger than the second half, particularly in North America. This is largely a result of the upward movement in corn prices. With a good 2011 in view, we continue to invest for the long term as well. We expect incremental capital spending in South America, as we continue to participate in those growing economies. At the same time, we are investing in Europe to better deliver against key food trends like convenience and healthier items.
Let's now shift from a broad view of the first half to some thoughts about how the business performed in the quarter. I'll take this from a fairly high-level, and Cheryl will fill in the financial results.
Let's start with North America. As we discussed last quarter, in May, we shut down our largest facility for a large maintenance project. The work was done essentially on plan, and the facility was back online in 12 days. We estimate that this initiative had a $0.12 per share impact on the quarter. It also limited our ability to increase sales, as we had less capacity available than normal.
During the quarter, we also negotiated a new labor agreement at this location, and the largest facility acquired with National Starch. We are grateful for the constructive and positive interactions with our union employees that led to new agreements with no downtime.
We continue to make progress integrating National Starch. In the U.S., our plans for network optimization are going well. Network optimization entails moving production to the most appropriate facility to reduce cost and improve quality.
Finally, we are experiencing an early start to contracting for 2012. As most of you know, in North America, the vast majority of contracts are done on an annual basis, and traditionally, are signed in the fourth quarter for the upcoming year. Some customers have reached out to us to begin this process a bit early, in order to gain visibility to their input costs next year. We won't comment about specific customers or volumes of business at this time.
Moving to South America. We continue to see strong results in spite of difficult comparisons to last year, which included the World Cup. In particular, we are doing well in the brewing and soft drink markets. We also completed the integration of National Starch's Brazilian operations during the quarter.