USA: Corn Products International, Inc. projects reduced third quarter earnings, lowers guidance for year 2000 results
Three unfavorable events, expected to moderate at the time of the previous earnings guidance, instead deepened substantially in the third quarter -- traditionally the strongest earnings period. First, the run up in global oil and natural gas costs continued to adversely affect the Company's business. Second, the world price of corn oil, a most important and normally high value co-product of corn refining, continued to fall to a new low of about half of the year-ago price. This is in reaction to a persistent oversupply in the market of soybean oil, the major vegetable oil. In the United States and Canada, until the Company is able to negotiate new annual contracts, these costs will continue to impact profits. In other parts of the world, there is better contracting flexibility, but full adjustments will nevertheless lag several months. Third, a wet and cool spring turned into an unusually wet and cool summer in much of the United States and Canada. The weather, as has now been well publicized, reduced summer consumption of cold beverages and, accordingly, demand for the Company's products from brewing and soft drink customers.
Konrad Schlatter, chairman and chief executive officer, said: "The weather-driven, lower-than-expected demand for our products in the United States and Canada is very disappointing, but clearly it is an unusual event. The simultaneous rise in natural gas cost and record low corn oil return did additional major damage to our North American results. Natural gas prices and corn oil returns are similarly impacting all our other operations around the world. Nevertheless, our South American and Asian business continue to perform above last year but the advances, while robust, are not expected to make up for the existing and anticipated North American shortfall. Accordingly, we have to lower our sights for 2000."
Schlatter added, "We do not believe that this year's setback has changed the strong fundamentals of our business. As we said before, we continue to grow and improve this business strategically year by year and month by month through our focus on costs and efficiency. For example, in Argentina, we believe that the integration of our recent strategic acquisition, while progressing a little slower than anticipated, is a most positive move that will prove clearly beneficial for our business in the southern cone of South America. In North America, the restructuring program, announced earlier this year, is on target to achieve its objective of annual savings of more than $10 million."
Corn Products International, Inc. is one of the world's largest corn refiners and a major supplier of high-quality food ingredients and industrial products derived from the wet milling and processing of corn and other starch-based materials. The Company is the No. 1 worldwide producer of dextrose and a leading regional producer of starch, high fructose corn syrup and glucose. In 1999, the Company recorded sales of $1.7 billion with operations in 22 countries at 43 plants, including wholly owned businesses, affiliates and alliances. Headquartered in Bedford Park, Ill., it was founded in 1906 and became an independent public company on December 31, 1997. The Company is listed on the New York Stock Exchange under the symbol CPO. Additional information can be found on the World Wide Web at www.cornproducts.com.
This press release contains or may contain certain forward-looking statements concerning the Company's financial position, business and future prospects, in addition to other statements using words such as "anticipate," "believe," "plan," "estimate," "expect," "intend" and other similar expressions. These statements contain certain inherent risks and uncertainties. Although we believe our expectations reflected in these forward-looking statements are based on reasonable assumptions, stockholders are cautioned that no assurance can be given that our expectations will prove correct. Actual results and developments may differ materially from the expectations conveyed in these statements, based on factors such as the following: fluctuations in worldwide commodities markets and the associated risks of hedging against such fluctuations; fluctuations in aggregate industry supply and market demand; general economic, business and market conditions in the various geographic regions and countries in which we manufacture and sell our products, including fluctuations in the value of local currencies and changes in regulatory controls regarding quotas, tariffs and biotechnology issues; and increased competitive and/or customer pressure in the corn refining industry. Our forward-looking statements speak only as of the date on which they are made and we do not undertake any obligation to update any forward-looking statement to reflect events or circumstances after the date of the statement. If we do update or correct one or more of these statements, investors and others should not conclude that we will make additional updates or corrections. For a further description of risk factors, see the Company's most recently filed Annual Report on Form 10-K and subsequent reports on Forms 10-Q or 8-K.
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