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Corn Products International: Inventories will not return to pre-2008/9 levels

By Elaine Watson , 31-Oct-2011
Last updated the 31-Oct-2011 at 14:23 GMT

So much stock has now been taken out of the supply chain that customer orders should not “fall off the table” as they did in 2008/9 if commodity markets go back into a spin, according to Corn Products International (CPI).

Speaking to analysts during a conference call on Friday about its third quarter results, CPI chief executive Ilene Gordon said customers had not rebuilt stocks to their pre-2008/9 levels, and were not likely to.

“The customers I've met with and have talked with again reiterate that they don't see the current headwind like it was in 2009.

“So I think what's different is definitely that jolt that the system had, which had a couple of months of incremental inventory in 2008, 2009, that came out. It never was rebuilt, and so what we're seeing today is just a response to people being a little bit nervous.”

Chief financial officer Cheryl Beebe added: “I am relatively positive. I don't think we're back in the 2008 environment where we saw our… because of the US economic crisis… demand just fall off the table in the first and second quarters of 2009.

“I think there's less inventory in the consumer’s pantry and on the retail shelves.”

National Starch integration to be completed by end of 2012

Meanwhile, the integration of National Starch was due for completion by the end of 2012, and had helped CPI shift its product mix toward “higher-value, more functional ingredients largely for the food industry”, said Gordon.

“By implementing certain integration programs more quickly, we are in a position to achieve an incremental $30m of cost savings in 2012… The addition of National Starch's R&D capability enhances our go-to-market position. It gives us long-term opportunities to enhance our mix of products.”

She added: “While the strategic fit of the acquisition is outstanding, the financial implications are also compelling. During nine months of 2011, our adjusted earnings per share has increased by $1.38, roughly two-thirds of that amount came from National Starch net of financing costs.

“Manufacturing optimization is progressing well. This is the process of integrating the Corn Products and National Starch manufacturing footprints to maximize efficiencies and minimize costs. It should represent an important part of our integration cost savings in 2012.”

Q3 results

Of the $608m increase in net sales from a year ago in the third quarter of 2011, $337m came from new acquisition National Starch, $243m from price/mix and $26m from foreign exchange, said Beebe. “Organic volume was basically flat.”

Net income was up 138% to $87.7m on net sales up 58% to $1.712bn in the three months to September 30.