CPI in great shape pending Bunge merger

By Sarah Hills

- Last updated on GMT

Related tags Bunge Starch Corn syrup High-fructose corn syrup

Corn Products International and Bunge have demonstrated their potential as a combined force ahead of their merger as both report strong financial results for the second quarter of this year.

CPI boasted of record net sales of $1.03 billion in the second quarter of 2008, which was an increase of 20 percent on $857 million in the same period last year.

It also showed record quarterly diluted earnings per share of $0.90, a 36 percent increase compared with $0.66 a year ago. This was despite a four cent negative impact from costs related to the merger with Bunge being included in the results.

Gross profit was $187 million in the second quarter of 2008, which was an increase of 20 percent compared with $156 million a year ago.

Meanwhile Bunge’s net income shot up from $168m in the second quarter of 2007 to $751m in 2008.

Net sales were $14,365m, which was a 73 percent increase on the previous year when it was $8,298m.

Bunge deal with CPI

The results follow the announcement last month that Bunge had signed a definitive agreement to acquire CPI for around $4.8bn.

CPI is one of the world's major suppliers of dextrose, and a big regional player in starch, high fructose corn syrup, and glucose.

In April it also added a stevia-derive sweetener to its line, when it signed an exclusive license agreement with Japan's Morita Kagaku Kogyo Company Ltd for its patented stevia strain, sold under the brand Enliten.

Corn Products will keep on trading under the same name out of its headquarters in Westchester, Illinois.

Mark Lindley, spokesman for CPI, said that the merger provides CPI with a wider product portfolio and gives the business access to regions and geographies it is not in now, predominantly Europe.

Referring to the second quarter results, he added: “It is a demonstration that the business strategy that we have been following is sound and we are doing well.”

Bunge’s portfolio

Bunge currently has activities in edible oils, milling products, fertilizer and other agribusiness. By buying Corn Products, it will extend its portfolio of ingredients to higher value sweeteners and starches, at a time when the global market for these kinds of products is growing by around five per cent per year.

Alberto Weisser, Bunge's chairman and Chief Executive Officer described Bunge's performance as “outstanding”.

He said the CPI transaction, which is expected to close in the fourth quarter, will expand Bunge’s operations into the highly complementary corn wet milling value chain.

Weisser added: “It will provide new opportunities for growth and a more diverse revenue stream by broadening Bunge's product portfolio and by providing access to new geographic markets.”

Both companies are already strong in the US, Brazil and Argentina; by bringing their networks together they have identified big opportunities for growth in China, Mexico.

By combining activities in procurement and logistics, and taking out duplicate costs, it is expected that the combination of Bunge and Corn Products will result in annual savings of between $100m and $120m.

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