Corn Products' CEO Discusses Q4 2011 Results - Earnings Call Transcript

Corn Products International, Inc. ( CPO)

Q4 2011 Earnings Conference Call

February 9, 2012 9:00 AM ET


Aaron Hoffman – Vice President, Investor Relations & Corporate Communications

Ilene Gordon – Chairman, President and Chief Executive Officer

Cheryl Beebe – Executive Vice President and Chief Financial Officer


Ken Zaslow – Bank of Montreal

Christina McGlone – Deutsche Bank

David Driscoll – Citi

Heather Jones – BB&T Capital Markets

Farha Aslam – Stephens Inc.

Lindsay Drucker Mann – Goldman Sachs

Greg Van Winkle – Morgan Stanley

Christine McCracken – Cleveland Research

Ann Gurkin – Davenport



Good morning, everyone. Welcome to the Corn Products International 2011 fourth quarter earnings conference call. Today’s conference is being recorded. At this time, for opening remarks and introductions, I’d like to turn the conference over to Mr. Aaron Hoffman, Vice President of Investor Relations and Corporate Communications for Corn Products International. Please go ahead, sir.

Aaron Hoffman

Thank you very much. And good morning to everyone. Welcome to our fourth quarter 2011 earnings call. Joining me 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, 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 all that out of the way, I’m happy to turn the call over to Ilene.

Ilene Gordon

Thanks, Aaron, and let me add my welcome to everyone joining us today. I do have a cold, so please bear with me. We appreciate your time and interest.

As I reflect on 2011, one of the overarching conclusions that we can draw is that our business model is working quite well. In order to deliver organic growth across the organization and in all regions for the year, we had to effectively execute our plans while also overcoming some significant headwinds.

We experienced a range of challenges from economic malaise in the US to recession-like conditions in Europe. Fortunately, many of our markets remained strong like Mexico, most of South America and Pakistan. We shut down our largest manufacturing facility for over a week to perform significant maintenance and we brought it successfully back up. We also experienced flooding in Thailand and a tsunami in Japan while Brazil was hit with inclement weather in the fourth quarter leading to some volume softness.

In Pakistan, the energy infrastructure remains problematic, but we were able to overcome the challenge to show a year-over-year increase in profitability. We’ve installed equipment to help mitigate this issue as we enter 2012. And as we wrapped up the year, numerous foreign currencies devalued against the dollar.

We expect that our regional operations will pass through appropriate pricing in the short-term to cover the impact. We have a long history of having done this successfully and we don’t expect 2012 to be different. So let me go back to my opening remark that the business model worked well in spite of these factors.

Our model is actually very simple and it’s worth taking a moment to consider it as we reflect on the year. Fundamentally, we purchase raw materials, largely corn, process them to add value and sell those starch and sweetener ingredients primarily to food, beverage and brewing customers around the world.

With that said, it’s worth noting that we don’t speculate on commodities. We don’t operate a commodities trading business. We don’t have a logistics business. And we don’t take physical ownership of raw materials beyond what we need to properly run our operations. Put another way, we are not an agri-business company but rather an ingredient company. Our business model and our results bear that out.

Taken together, these facts paint the picture of a relatively stable, growing company that manages risk effectively. We saw that in 2011 in spite of the obstacles I outlined earlier. Building on that, during the year, we largely integrated the $1.3 billion National Starch acquisition, putting in place IT systems, human resource programs, and re-aligning manufacturing, to name some of the larger projects.

The acquisition clearly builds on our ingredient strategy by enhancing and expanding our portfolio of products, our R&D capability, and our geographic scope. At the same time, the acquisition delivered significant value to our shareholders not only in immediate EPS but also in longer term growth prospects. To sum up the year then, I’d say that you saw our ingredient strategy in action and that led to strong performance in the face of a tough environment.

Let’s turn now to the fourth quarter, which came in very much as we expected when we began the year. At that time, we indicated that 2011 would be front-end loaded. Looking back, the adjusted EPS for the first quarter was $1.28. That was followed by $1.10 in the second quarter, though that included the sizable Argo maintenance project. In the third quarter, we reported $1.20 of adjusted EPS and $1.11 for the fourth quarter, as you saw today. The primary reason for the sequential decline in EPS is the layout of our corn costs, with the cheapest corn coming early in the year and rising as we moved through 2011.

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