Fitch Ratings has affirmed the following ratings of Corn Products International, Inc. (Corn Products):
--Long-term Issuer Default Rating (IDR) at 'BBB';
--Senior unsecured notes at 'BBB';
--Senior unsecured credit facility at 'BBB'.
The company had $620 million of debt at Sept. 30, 2007. The Rating Outlook is Stable.
The ratings are supported by the company's competitive market position, geographic diversification and comprehensive product mix within the wet-corn milling industry. Corn Products' conservative financial policies and financial flexibility are also reflected in the ratings. The price of corn, the company's main raw material cost, may fluctuate based on factors such as changes in weather conditions and plantings, consumption growth and government agricultural policies. However, Corn Products' balanced geographic presence reduces operating earnings volatility in any one region. While the company does not participate in ethanol production, Corn Products benefits from the tightening of capacity utilization for the entire corn complex. The ratings are constrained by the company's smaller size and less diversification than its global agri-business competitors.
Corn Products' credit metrics are very strong for the rating level which allows room for occasional operating earnings volatility due to uncontrollable factors related to supply or demand for its products. For the latest twelve months ended Sept. 30, 2007, total debt-to-operating EBITDA was 1.4 times (x), funds from operations (FFO) adjusted leverage was 2.2x operating, EBITDA-to-gross interest expense was 8.2x.
Corn Products operating and financial performance continues to improve. Net sales for nine months ended Sept. 30, 2007 grew 29% to $2.5 billion from $1.9 billion a year ago and operating income increased 59% to $266.4 million from $167.8 million in the same period of 2006. The company benefited from higher pricing across its portfolio, as well as volume growth in South America. Corn Products is still experiencing some difficulties in South Korea where soft volumes along with, high corn and freight costs are pressuring earnings.
Corn Products plans to expand its product portfolio through geographic alliances, as well as acquisitions. Free cash flow should be sufficient to fund smaller acquisitions, heightened capital expenditure spending, moderate share repurchases and dividend increases. Future growth is expected to be in regions of Asia/Africa and South America, where Corn Products' larger competitors do not focus their resources. However, there also may be more earnings volatility generated in those regions due to greater currency, economic and political risk.
Corn Products is the number one worldwide producer of dextrose and a leading regional producer of starch, high fructose corn syrup, glucose and other ingredients. Net sales in 2006 were $2.6 billion (60% in North America, 26% in South America, and 14% in Asia/Africa). It is the fourth-largest corn refiner in the United States and maintains leading market share positions in all of its other markets, which include Canada, Mexico, and certain regions in South America, and Asia/Africa.
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