November 7, 2011 - Corn Products International, Inc., (CPO-NYSE) together with its subsidiaries, manufactures and sells various ingredients to food and industrial customers in North America, South America, Asia, Africa, and Europe. It makes food ingredients and industrial products derived from wet milling, as well as the processing of corn and other starch-based materials.

It also manufactures refined corn oil to packers of cooking oil and to producers of margarine, salad dressings, shortening, mayonnaise, and other foods. In addition, the company provides corn gluten feed that is used as protein feed for chickens, pet food, and aquaculture; and steepwater, which is used as an additive for animal feed. It operates 37 plants in 15 countries.

Corn Products International sells to various industries, including food, beverage, brewing, pharmaceutical, paper and corrugated products, textile, and personal care industries, as well as animal feed and corn oil markets. The company was founded in 1906 and is headquartered in Westchester, Illinois.

Good, solid midwest company, this Corn Products. While sales were hurt in 2009, dipping to $3.672 billion from $3.944 billion, they're set to take a significant jump this year. In 2010, they were $4.37 billion. According to 8 analysts' consensus estimate, final revenues for 2011 should be $6.22 bilion, up 42.5%. Next year, consensus is for $6.59 billion, a 5.8% increase. Over the last 5 years, sales grew, on average, 11.5% annually. The U.S. accounted for 27% of revenues in 2011.

Earnings followed the same pattern, with a major drop in '09 to $2.02 a share from $3.52 in '08. Last year, they recovered nicely to $3.24. This year, 10 analysts have a consensus of $4.57 (up 41%), then see 2012 at $4.98, another 9% improvement. For the third quarter (ended September 30), look for $1.10, up from 81 cents last year in the third. For the final period, expect $1.09 compared to $1.05 last year in the fourth. For the last 5 years, on average, earnings improved by 13.76% annually. For the next 5, analysts estimate growth, on average, of 10% a year.

A major reason for the big jump in sales and profits is the recent acquisition of National Starch which added more than $1 billion in revenues. CPO paid $1.3 billion in cash in June of last year. The combined entities should show annual savings of $50 million when fully integrated. The new purchase opens markets in Europe and Asia-Pacific as well as broadens the number of products CPO offers. Other reasons for better earnings results: higher selling prices and favorable foreign currency rates (a weaker dollar increases sales and foreign revenues translate into more dollars).

Still, all is not optimal. The U.S. economy continues to suffer from high unemployment and a stagnant housing market. Europe is battling bad debts from sovereign countries causing economic uncertainty. Further, buying corn is getting more expensive, the main ingredient in almost everything CPO does. And energy prices to deliver corn has risen. Together they put pressure on profit margins.

The stock hit an all-time high this past summer, peaking at $59.50 a share, more than triple its price in early 2009 when it traded for $17.80. While profit margins may feel the squeeze this year and demand may slow a little, analysts still see earnings moving ahead by 41%. Most likely the current pull back in the stock (to $51 level) is from the general market turmoil rather than specific to the company.

Essential numbers:
- Market Cap: $3.92 billion
- Price to book: 1.74
- Forward P/E: 10.12
- Operating margin: 10.41%
- Profit margin: 5.88%
- Return on assets: 8.45%
- Total cash: $273 million
- Total cash per share: $3.56
- Total debt: $1.77 billion
- Current ratio: 2.33
- Book value per share: $29.73
- Beta: 1.18
- 52 week change: 21.52%
- Total Shares Outstanding: 76.73 million
- Float: 76.33 million
- Held by insiders: 5.7%
- Held by institutions: 79.6%
- Annual Dividend: 64 cents
- Yield: 1.3%

Corn Products is a solid company with management that's looking to expand markets and revenues and profits. While the use of its main ingredient becomes more important in many different ways (food and fuel) and thereby increases demand and cost, the company has been able to raise prices and make them stick to offset it. Furthermore, it has a presence globally that doesn't require a healthy U.S. economy for profits to grow.

- Company Web site: www.cornproducts.com

    Ted Allrich