Corn Products to close refining plants
two of its corn refining facilities, one in North America and one
in South America.
The company said that it plans to close one of its starch plants in Guadalajara, Mexico (Cisne), the smallest of its four plants in Mexico, and one of its facilities in the Andean region in South America.
Corn Products added that production from the Cisne plant will be transferred to the company's remaining corn refining plants in Mexico, while production from the Andean region facility will move to its recently expanded corn refining facility in Cali, Colombia.
The closings, which are expected to become effective during the fourth quarter, will result in a one-time charge of approximately $20.5 million ($13.7 million after tax), or $0.37 on a diluted earnings per share basis. The charge includes a write-off of fixed assets of $18 million and $2.5 million for employee termination costs.
Sam Scott, the company CEO, said that he expected this decision to bring about greater production efficiency.
Last month, Corn Products announced improved sales and improved earning for the first nine months of 2004, though as the company had previously forecast, the second half of the year is proving more challenging than the first six months.
The starch and sweetners firm reported an increase in net sales of 16 percent in the third quarter of 2004, compared to the same period last year, up from $541 million to $587 million. Net income also grew from $20 million to $24 million.
"Our forecast of accelerated earnings growth during the first half of 2004, followed by a good but less robust second half, is proving to be correct, as projected higher raw material and energy costs affected results in the third quarter," said Scott.
As for results in North America, Scott offered some muted praise, concluding that: "we know we have more work to do."
In this region, volume grew by 4 percent and net sales were $371 million, up from $344 million in 2003.
"Higher volumes in the North American region, favorable pricing and a stronger exchange rate on the Canadian dollar helped to offset expected higher raw material and energy costs experienced during the quarter," said the company.
In June, the company took the decision to try and defend its market position by taking root in China and linking up with Shandong Juneng Electric Power Group Golden Corn Development company to manufacture modifed corn starch.
"Establishing what we expect will be our initial manufacturing presence in China is aligned with our company's strategy of growing businesses in new, high-growth regions," said Scott at the time.
China is drawing in more ingredients players as their international food maker clients move into this fast growing region to gain a slice of the $275 billion spent annually by the 1.3 billion Chinese consumers.