Fitch Ratings has affirmed the following ratings of Corn
Products International, Inc.'s (Corn Products):
-- Issuer Default Rating (IDR) at 'BBB';
-- Senior unsecured notes at 'BBB';
-- Senior unsecured credit facility at 'BBB'.
The company had $525 million of debt at June 30, 2006. 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 also are reflected in the ratings. However, the ratings are constrained by the company's smaller size and less diversification versus other global agribusiness companies.
Corn Products' credit metrics are very strong for the rating level and allow room for occasional earnings volatility due to uncontrollable factors related to supply or demand for its products. For the latest 12 months ended June 30, 2006, total debt-to-operating EBITDA was 1.8 times (x), operating EBITDA-to- gross interest expense was 7.3x and cash flow from operations to total debt was 35%.
Revenues continue to grow and operating EBITDA is relatively stable. Operating EBITDA has averaged approximately $270 million annually over the past four years, despite the sweetener tax in Mexico restricting sales there during the bulk of that period and periodic margin volatility in certain geographic regions.
Fitch expects cash flow to strengthen after the new boiler project is completed at the end of the current quarter. Capital expenditures are expected to return to more normal levels after heightened levels during the past two years. Earnings and cash flow are expected to benefit from strong results in North America this year due to a double digit increase in sweeteners pricing in the U.S. and Canada and the resumption of strong earnings from Mexico. This should more than offset the recent weakness in Brazil and South Korea.
Free cash flow should be sufficient to finance small acquisitions and moderate share repurchases and dividend increases. Future growth is expected to be in the Asia/Africa and South America regions, where Corn Products' larger competitors do not focus their resources. This allows Corn Products to earn significantly higher margins than in the mature U.S. market. However, there also may be more earnings volatility due to currency or political issues in some of those regions.
Corn Products is the number one worldwide producer of dextrose and a leading regional producer of starch, high fructose corn syrup, and glucose. Net sales in 2005 were $2.4 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, South America, and Asia/Africa.
Fitch's rating definitions and the terms of use of such ratings are available on the agency's public site, www.fitchratings.com. Published ratings, criteria and methodologies are available from this site, at all times. Fitch's code of conduct, confidentiality, conflicts of interest, affiliate firewall, compliance and other relevant policies and procedures are also available from the 'Code of Conduct' section of this site.
-- Issuer Default Rating (IDR) at 'BBB';
-- Senior unsecured notes at 'BBB';
-- Senior unsecured credit facility at 'BBB'.
The company had $525 million of debt at June 30, 2006. 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 also are reflected in the ratings. However, the ratings are constrained by the company's smaller size and less diversification versus other global agribusiness companies.
Corn Products' credit metrics are very strong for the rating level and allow room for occasional earnings volatility due to uncontrollable factors related to supply or demand for its products. For the latest 12 months ended June 30, 2006, total debt-to-operating EBITDA was 1.8 times (x), operating EBITDA-to- gross interest expense was 7.3x and cash flow from operations to total debt was 35%.
Revenues continue to grow and operating EBITDA is relatively stable. Operating EBITDA has averaged approximately $270 million annually over the past four years, despite the sweetener tax in Mexico restricting sales there during the bulk of that period and periodic margin volatility in certain geographic regions.
Fitch expects cash flow to strengthen after the new boiler project is completed at the end of the current quarter. Capital expenditures are expected to return to more normal levels after heightened levels during the past two years. Earnings and cash flow are expected to benefit from strong results in North America this year due to a double digit increase in sweeteners pricing in the U.S. and Canada and the resumption of strong earnings from Mexico. This should more than offset the recent weakness in Brazil and South Korea.
Free cash flow should be sufficient to finance small acquisitions and moderate share repurchases and dividend increases. Future growth is expected to be in the Asia/Africa and South America regions, where Corn Products' larger competitors do not focus their resources. This allows Corn Products to earn significantly higher margins than in the mature U.S. market. However, there also may be more earnings volatility due to currency or political issues in some of those regions.
Corn Products is the number one worldwide producer of dextrose and a leading regional producer of starch, high fructose corn syrup, and glucose. Net sales in 2005 were $2.4 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, South America, and Asia/Africa.
Fitch's rating definitions and the terms of use of such ratings are available on the agency's public site, www.fitchratings.com. Published ratings, criteria and methodologies are available from this site, at all times. Fitch's code of conduct, confidentiality, conflicts of interest, affiliate firewall, compliance and other relevant policies and procedures are also available from the 'Code of Conduct' section of this site.