Ingredion Inc (INGR) 2002 Q2 法說會逐字稿

Good morning everyone and welcome to the Corn Products second quarter 2002 earnings release conference call. This call is being recorded. At this time I will turn the call over to vice President and Strategic Business Development and Investor Relations Mr. Dick . Please go ahead sir.

Thank you good morning and welcome to our conference call. This is an open conference call simultaneously broadcast on our web site www.cornproducts.com.

Today's chart can be viewed on our web site and downloaded for printing as well. Sam Scott our Chairman, President and Chief Executive Officer, Jim Ripley our Chief financial officer and I will conduct the call.

Just a note about the time during our live conference call I mentioned we would conduct a survey regarding the start time for our call. With about 35 percent of the people who attended our last call responding, it became clear that now, the earlier of the times ahead of the market opening was preferable, and thanks to all those who participated.

I shifted to chart two the forward looking statement chart, our comments within this presentation may contain forward looking statements, actual results could differ materially from those projected in these forward looking statements.

Additional information concerning factors that cause actual results to differ materially from those discussed today during the conference call are in today's press release, can be found in the companies recently filed annual report on form 10K and subsequent reports on forms 10Q or AK.

On chart three of the financial results lead in chart and Jim Ripley will now discuss the financials relative to our second quarter. Jim.

Thank you Dick. Dick will be reviewing the fundamentals of our business in a few moments. I hope you have seen our financial statements, which were attached to our press release. I will briefly review those financial statements with you.

I am now on chart number four - net sales of 486 million increased one percent, excluding the sale of our business which occurred when the first quarter of this year - sales would have increased two percent and the of sales of in Mexico impacted sales by an additional two percent.

Our gross margins declined three tens of one percent to 14.6 percent, but we're up from a low of 13.7 percent in the first quarter as we began to recover some of our loss business in Mexico.

However, the Mexican sales were not fully recovered as we have met customer resistance since the tax was only suspended and not refueled. Our operating income at 40 million dollars is off two million dollars but up substantially from the 27 million we reported in the first quarter with special income recorded in that quarter.

This reflects improvements not only in Mexico but significant improvement in Argentina in the southern of South America, following the significant devaluation that occurred in the first quarter our businesses in the United States and Asia are also showing good improvement over last year.

Our financing cost is down eight million dollars or 55 percent from last year and three million dollars lower than it was in the first quarter. This is associated with reduced borrowings about one million dollars and seven million dollars is due to lower interest rates. We have paid down our debts substantially over the last 15 months which was our high point following the strategic investments we had made over the past three years.

Looking at our improvements over the last 15 months - debt has been reduced by 124 million dollars since that high point or 76 million dollars since the end of last year and we reduced it an additional 41 million dollars since the first quarter.

Since March of last year we have reduced our capital expenditures, reduced our working capital by about 64 million dollars and have accumulated and additional 14 million dollars in tax, we have also refocused our strategic gross spending from accusations to strategic alliances that do not require invested capital.

In July of this year we refinanced two million dollars of our revolving credit loan into a longer five-year bonds - 200 million, excuse me. Our tax rate increased from 35 percent last year to 36 percent this year this reflects higher U.S. rates primarily from the impact of U.S. State and local taxes on the improved earnings that is coming from our domestic operations.

Earnings per share is up nine cents per share to 52 cents per share - this improvement comes from the lower financing costs, lower amortization of intangibles and this was all benefited from a substantial cash flow that was used to pay down debts.

I am now on chart five - which is the geographic analysis of our sales. North American sales increased one percent to 318 million dollars - this was impacted by the - again the have been buying in Mexico and the sale of our U.S. business, other product lines were very strong in this area. South American sales were down one percent - weak economic conditions in Brazil and Argentina as well as the devaluation of and could not be fully off set with our price improvements.

Business in the Indian region remains strong. Asia and African sales were up six percent on higher volumes throughout the region, as this region continues to be our engine for growth.

I am now on chart six. This is the net sales . The half of one percent improvement in sales in North America comes from a two percent price improvement while net volumes were flat, once again as gains in most product lines were offset by the sales in Mexico. Currency reductions is due to the weakening of the Mexican in the second quarter of this year from very high rates that we have seen over the proceeding nine months.

In South America, this regions 1.4 percent decrease in sales from last year, followed a much larger 16 percent decrease in sales in the first quarter. The improvement this quarter comes from the fact that our price mix improvement of 32 percent is now catching up with the 35 percent devaluation impact. We have significantly closed the local currency dollar price gap.

Volume improved by two percent and export business in Argentina and improvements in the rest of the region-offset weakness in a domestic hard economy. In Asia and Africa, this regained six percent increase in sales is coming from a four and a half percent volume growth and 3.4 percent currency gain. I am now on chart seven, which is the geographic operating income analysis.

Overall, operating income is off five percent. North American operating income is off seven percent. This is a significant improvement from the first quarter when we were over 50 percent. As improvements in the US and Canadian operation, coupled with a gradual improvement in the Mexican sales situation, negotiated the negative impact of the uncertainty of the vat tax in Mexico.

South American operating income decreased three percent. This again is a significant improvement from what we saw in the first quarter. Improvements in the domestic business climate in Argentina coupled with our significant export business produced a profit rebound in that country. Good volume in Brazil, in the region offset margin weakness in Brazil where it was difficult to offset higher costs in a difficult economic environment.

In Asia, Africa, operating income increased seven percent. This came both from the higher volume and some margin improvement. I'm now moving on to chart eight which is the earnings per share analysis. Last year we earned 43 cents for the quarter, this year we're at 52 cents for a nine- percent improvement.

Net changes from operation resulting in a four percent four cent per share decline. This was primarily from the foreign currency impact. In a non-operating area we reduced financing costs which improved our earnings per share by 15 cents. The higher tax rate cost us one cent and higher minority interests cost us another one cent.

The final financial started, excuse me this is nothing. The next chart is the statement of cash flows. We generated $82 million of positive cash flow from operations during the quarter, verses $22 million last year. This improvement came from our working capital program where we are showing a $56 million net improvement over last year. Higher earnings were offset by lower depreciation and amortization offset some of this improvement.

Our uses of cash flow was also reduced substantially. Capital expenditures were down seven million dollars. Our targets for the year has also been reduced and it will now be less than $80 million for the full year.

Debt was reduced by $48 million from cash flow and $7 million in exchanges. The net cash was increased by $10 million in the quarter.

Now for the final financial chart which is the key ratio. Return on sales is 3.6 percent versus 3.5 percent last year or only 2.8 percent at the end of last year. Our return on capital employed improved from 5.8 to 6.1 percent. Our target is still to get in the eight to 10 percent range. Our debt to capitalization ratio is 38.1 percent, we are still targeting 35 percent as an optimal ratio in this area.

Working capital through sales is at 15.5 percent versus 17 percent last year, we are working to drive our working capital down to a rate closer to 15 percent. Our net debt, which is debt less cash is at $629 million and we believe we can get down to the $600 million range by the end of the year.

With that I will turn the presentation back to Dick .

Thank you Jim, I'll review our second quarter from a (commentators) stand point and then provide some comments about our outlook for 2002. I am now switching from chart 11 to chart 12.

Chart 12 is the currency update. At first they're just brief description of the chart after the first Country column I have listed the average currency values for the second quarter of 2002. The third column shows how this years average compares to the same quarter of 2001, and because currencies are a moving target, in the fourth column I've listed the average for last Fridays trading versus the average for last years second quarter, which, while not exactly a fair comparison statistically isn't too far off versus today's reality.

It's been a volatile quarter in South America for the two large countries in which our two major South American businesses operate. This can be clearly seen when comparing Brazils quarterly average drop in value versus what's happened since that time, as indicated by last Friday's trade. Brazils has been caught up in concerns about its upcoming elections primarily, as well as its dead load and finally worried about an economic downdraft from Argentina.

Argentina has been muddling through hope and the lack of it for assistance and somehow getting their economy restarted.

On the positive side the Asian currencies are doing well, as the US dollar sags.

Chart 13 second quarter business review. With the advantage of the non-cash gain from the change in good will accounting this year we have also made considerable progress throughout much of our world. In Asia our region for strategic growth, we had another good quarter marked by the fundamentals working in tandems, volumes, pricing and the dividend of strengthening currencies, and we were damned glad that the World Cup was held in Korea and Japan and that the right team won - Brazil. As those of you who know us realize, World Cups are great events for our very large brewing edge on businesses. When teams win, their country celebrates and drinks beer. When they lose, their country mourns and they drink beer. Our only wish is that all of our producing countries, that's the raw material for beer, will always have semi-finalists. It would be great for our business.

But now back to geography.

Our new tapioca processing plant in Thailand, which we believe will be the largest of its type, is water-testing some of its systems now, as we get close to start-up.

In South America, though troubles are aplenty, our business team in the southern cone of South America doing a fine job with their earnings, actually helping offset the problems caused by Brazils falling economy. In fact, exports , which we have discussed in numbers of earlier conference calls, have grown again, during the quarter. The balance of our real estate in South America is doing very well, as usual.

Chart 14; geographic progress continued. In North America we had a good volume quarter, which while unable to offset the Mexican impact on margins, did offset it in terms of product movement. The key element was the continuation of profit improvement in the U.S.. Operating costs were down and margins improved.

As we have said since our first quarter conference call this year, the improvement in the U.S. is real and significant. We certainly aren't there yet, but dealing with the issues over which we have control, has served us well in the second quarter again.

Mexico, while down for the quarter, did have the good news of a temporary suspension of the tax on soft drinks, sweetened with . While the resumption was slow at first, we did gain volume throughout the quarter. And our other products in Mexico did well, throughout the quarter.

From our standpoint the quarter had some genuine high points, especially the U.S. However, if we had been operating our business in Mexico, at last years rate, we would have had an even stronger quarter. And as we'll discuss, we continue to believe that this problem will be resolved, and more about that momentarily.

Chart 13; cash flow performance. Our business, like any other, is all about cash. For five quarters, we have talked about our corporate-wide, management compensation based program, to improve generation. We are very pleased to report another excellent quarter, as Jim mentioned. This effort was initiated in February 2001, while we already were generating what would be considered, cash flow, we wanted to strengthen our balance sheet and move to the next level with cash flow.

This quarter, cash generation increased to $82 million, from last years $22 million. Last years second quarter debt was well over $750 million and we have dropped that to 680 million, this quarter.

Finally, as many of you know that standard in advised during the second quarter that is - debt is investment free.

Chart 16; 2002 outlook for Mexico. After the Mexican Supreme Court sided with the Mexican Congress, regarding soft drinks sweetened with , we stopped production immediately. Our other Mexican plant continued to make other products with no interruption. We are, as we have been, since the tax was imposed, working with both the U.S. and Mexican ministrations; their respective congresses; the trade negotiators; our industry associations and our customers to finally resolve this issue. As we said in our press release, we were encouraged that published reports indicate that there has been at least some forward movement.

While we believe that should be higher than what has been reported, the direction appears to be right. We have also initiated our Mexican corn for Mexican fructose effort to enlist the support of the vast number of Mexican corn farmers. We feel this will also be helpful and move us toward forward as part of the local solution. In any case, we continue to work toward and believe that an equitable solution is doable.

Chart 17, outlook and 2002 earnings per share. As we stated in our press release as dated July 15th 2002 and in this press release we expect to deliver fully diluted earnings per share at or near 2001 levels, including the change in visible accounting. We project better results in the US than we have seen in years, better the right direction but with the clear requirement for more.

Our Asian business is expected to continue to deliver earnings gains. We believe the Southern corn business is on the right track despite the macro issues playing up in Argentina. And finally of course, we expect our test generation's efforts will continue to bear fruit as we pay down additional debt. With that, we open this conference call up for questions and answers. Helen?

Thank you. The question and answer session will be conducted electronically. To pose your questions, please press the star key followed by the digit one on your touch-tone phone. We will take your questions in the order that you signal us. We will take as many questions as time permits. Once again, to ask a question press stars one now.

We'll take our first question from Mid-West Research.

Morning

Morning .

Wondering if you could, obviously there's a lot of news around the crop this year. It's a little early obviously but I was wondering you know, given the concerns that have been voiced in the press, wondering if you could give us, you know, your snap shot view of the corn crop this year? And if you have any concerns, there are a few, you know, locked in prices for contracts this year in the US if you could give us guidance on that?

Sure. Couple of thoughts. On, there's going to be one inch of rain per day on Monday, Tuesday and Wednesday of next week, all in the evening, bright sun in the daytime so. Moving along from that ridiculous comment, we have booked the corn for this year so, there is not a corn future's risk in our position for the US and Canada where we do have a corn future's market that's operating.

So, that's pretty much, not much of a factor. As we look to the rest of the world, obviously we price as the timing requires and as costs are changing, so as much as we can we make up for what's going on in local markets or as a result of the world changes in corn costs. The flip side of course is BI-products, which are sold day-to-day. There is no future's market for corn gluttony, corn gluten meal at Corn Royal and those tend to get carried with the big crops, the Soya beans and corn.

So we're seeing a fairly steady improvement in the last several weeks for those, which has tended to offset what's happening in corn, which as I said for this year, is not much as effective, so we actually get some help.

OK. I'm wondering on Brazil, obviously it was a bit of an issue, or it will be a bit of an issue here as in through the year. Have you been able to adjust pricing there yet, and if so, has that, or is that expected to offset any kind of, any of the weakness that you're expecting there?

Christine, we always. This is Sam. Good morning and thank you for getting up so early this morning to join our call.

Obviously we're always looking to adjust prices. We generally don't talk about when we're doing it, but certainly as we've seen opportunities we have, as Dick mentioned in his prepared remarks, the environment and the economy in Brazil right now are tough, so it's more difficult at the moment to do it than normally is the case, but we're always looking to do that, and we have to do is offset our cost increase.

So pricing has stuck to some extent, I mean we've saw I think some benefits from that in Argentina this quarter going forward, going forward than you'd expect the same type of benefit in Argentina.

History has proven that we can do it, so we decided we're going to keep on working on the direction we've run our business in the past. Yes.

Thank you very much. Congratulations.

Thank you.

Just one other comment about the corn costs, this obviously would set today if the corn costs stay high, it would set an inflationary tone, which we wouldn't find to be a bad thing, and as we head towards 2003, so obviously it's premature at this point, but inflationary tone would not be a bad thing for us.

Thank you.

And moving on, we'll hear from John , Prudential Securities.

Good morning everybody.

Good morning John.

A little too early for beer yet. You'd see that jokes that would be in the afternoon, if you can have the calls in the morning.

We'll talk about or something.

You know, obviously is in the news lately, and if the deal with were to go through Sam, what impact would it have on you business looking to next year?

John, we expect that, well we understand that the definitive agreement has been reached, the vote has not been taken by the farmers as we understand it, and obviously have to go through justice. If in fact, it does go through, we have negotiations on the wind-down that we believe will keep us in pretty good stead going forward. We've mentioned before, I think, that the senior commercial marketing sales people, are Corn Products people in the venture.

The majority of the sales force are Corn Products people as well. So we believe that we will be able to function well in the marketplace. Going forward, we maintain contact with our customers. I have, in fact, spent a fair amount of my time over the last year and a half with our U.S. customers, so we haven't lost anything there. It'll just be a different situation we go forward with and the marketplace will basically be the same market we've seen in the past, just the shifting around of market positions.

So you do not think it'll have much of an impact at all on your business?

As long as we can hold to the negotiations on the wind-down, we will be all right. We're in a process now of planning that the venture will be broken up. Obviously we have to do that just in case. We don't know that it will for sure because as I said, the votes have not been taken, but we're planning as if it goes forward, that goes to , and we believe that through the wind-down process, the negotiations therein will be OK.

Great thank you.

Thank you.

Thanks John.

Our next question comes from David Driscoll, Salomon Smith Barney.

Hi. Good morning everyone.

Hey David.

Good morning David.

Pretty good. I wanted to talk a little bit about, well first up could you give us your, you know, revised guidance for capital expenditures for the year?

Jim said it would be something under $80 million, and that's obviously lower than even we said last quarter. Last quarter you said would be down about 10 percent from last year, which would be put in the mid 80s, we're saying it'll be under 80 now.

Now if I recall correctly on prior calls, you had indicated that your sustaining is something like 50 million?

Yes.

So then the question comes to Sam and Jim. When you see your stock price doing what it's done, and you've got that you're spending over and above your maintenance , do you think about changing your strategy here and instead of investing capital in building a new plant, instead the return on that capital by buying share stock, you know, might offer an attractive opportunity. I recognize that your primary goal is to pay down debt, but really here, what we're talking about to do, you know, what to do with the capital that's being spent over and above your maintenance capital, so I'm just kind of curious as to your thoughts on the viability of that option, and if you don't think it's a good one, why not?

Well, let me take that one David. Obviously we always think about it. It's thought about every quarter, every month when we review it. In a market place where the market is as fast as this one, I don't know that anyone's out there buying back stock right now, because it doesn't do anyone any good. Certainly, as we've said before, we are looking to grow our business, and the new plant that we're looking at is one in Thailand, which is our area for growth, and we're setting up the business for the long-term. We will continue to re-evaluate all of the options that you have mentioned. We obviously have cut back on capital expenditure as we've said in an environment, most of all we're all aware you don't need the growth right now because the demand is not there pushing the capacity of our products, we don't feel it's appropriate to do. But we do evaluate growth, debt pay down and stock buy back on a regular basis.

Alright, and switching over to South America. You know, there was a very significant price mix scheme in the quarter, can you explain kind of where that number can go forward and sort of how much is left out there that you need to recover in order to get back to where you were prior to January 1st, when Argentina, you know broke it's tag?

That's a good pun. Obviously I can't answer how much more we can get, we're going to get what we can out of the market place. We continue to move in Argentina and in Brazil. We've made goo headway in Argentina as Dick mentioned and Jim mentioned in their comments, both through prices domestically as well as the export market, and the fact that we've been able to improve the export market. We've moved some people around the world to strengthen our capability for export out of South America, so that we can do more of that. The Brazilian market is going to take a little bit of time. The currency de-valuations have just taken place, and some, and not just, but they've been taking place over a while, but the dramatic it has been recently, and some of the cost factors down there are increasing over the last quarter, so we have to push numbers through down in Brazil. But we do have a weak economy, and a rough political situation down there, so it'll be a little bit more delicate doing it right now. We will continue to push as quickly as we can, and get back to an , we can get back anywhere from three to six months, and we believe we will be there again.

When you said costs are increasing in South America, did you mean local costs or dollar costs?

Actually both, we have obviously some corn issues in Latin America. The corn crop in Brazil, the short crop is not that great, so we have some hits on corn right now, however their being for the most offset by co products, so we are raising the prices on the co product side as we speak.

We have some energy costs down there that are escalating a little bit in today's market, so that we are looking at passing those through as well as the currency issues as we move forward.

Right, and the last question, such in North America, seems that in your comments that you said that United States and Canada volumes were pretty good. I was wondering if you could provide a little color under that market as so, you know, wider volumes are good and then what the trends might be, going forward?

Well last year, we gave you a number of issues and reasons that related to lousy weather and cold summer, I don't think any of us experience that this year, we have seen some of the warmest weather and the driest weather in a long time and that's typically goes well for soft drinks and any kind of beverage at all and our business does supply most of those industry, so that, I think we have seen a strengthening, I think you have seen some of a what, bounce back from last year with a lot of people staying local.

You've seen the tourism come back into this country that was missing from the first quarter and certainly in and around Chicago, it's difficult to walk the streets, cause we have so many visitors coming in. So that combination has certainly helped the business and you have also seen the beverage people start marketing again, marketing very heavily, pushing products and introducing new products.

So we have seen that volume pick up, how long will it go? I can't answer that but the soft drink companies are forecasting growth, not what it has been historically but certainly reasonable growth going forward and we expect to be part of that.

Any industrial sign of our business has also been quite strong, as there been some boost state of the economy which obviously has not been registered in the stock market these days, but there have been some help there too.

. Are the new products out there like vanilla coke, are those products doing anything for your, for your sales?

Any new product that captures someone's taste buds, does something for our sales.

And there is also a selling period, where they have to built up inventories to get it on the shelves, so that also helps.

So anything that comes out right now David, obviously the beverage people are looking to expand their portfolio and in so doing, they are looking to grow volume as they do that, that what helps us.

OK. Great, thanks.

Thank you.

And once again if you would like to ask a question, press the star key followed by the digit one on your touch-tone phone.

We will now move to David Nelson, Credit Suisse First Boston.

Good morning.

Hi David.

Hi David.

Janet talked the ADMCP trends, I just went back with the envelop calculation and in terms of evaluation, came up with a little more then a thousand dollars per Bushel of David Grimes capacity. I think what I recall from talking to you couple, three years ago was that on that basis, the value of CPO would be, you know, well into the $50 per share. Is that correct?

We did the back of the envelope calculation also David and we came up with a number close to that yeah.

OK.

I mean certainly, we didn't use it based on Grime, we just took the EBITDA calculation and ran it through and we came out with a number that was more then 45.

All right. Tell me, the capital efficiency story that you it. Did you mention a maintenance cap, cap backs type number?

Yes. We had historically set our maintenance cat , it change, we've added plants, but the most recent number we've said is between 40 and 50 and with that we do all of the maintenance caps safety environmental things that we need to do in the little bit, what we call the bottle necking in that range and anything above that typically is it going to be growth of us we have major project that would be you know to stay in business?

OK, on the judges ruling that reopened the flucto's price fixing who are all the parties named in that case?

There are four flyers in that one ATM, and I don't know what's going on with the issues and is now part of

Right.

We were obviously not in any we settled that about seven year's ago.

Great, Thank you very much.

Thank you.

We do have a follow up question from Mid West Research.

Wondering on the MTP deal if there is any likely hood for your contract to roll over for another year say if ATM wasn't able to let's say get approval prior to the anniversary date let's say of your deal with MTP is there any chance that you could roll your contract over for another year?

If the deal is not approved within a certain length of time there is the possibility of doing it and that would be a decision on our part is it appropriate to do but obviously ATM is aware of that and I'm sure there working to try and finalize this thing if in fact it's going to go through before that fine point would occur.

and in terms that dead line is it fair to say that according to the I think that's given us September 30th date or something is that a good date to you in terms of the cut off?

I think that would be a reasonable date.

OK and in terms of wither or not you think that would be reasonable or sorry appropriate, I think were your words would you walk away then a let's say not renew that contract given the likely hood that MTP would join ATM forward?

Kristine, I respect the question I don't think it appropriate for me to give our strategic positioning away on a conference call as what we would do on the circumstances that I can't predict right now so as much as I'd like to answer that for you I don't think I'm going to.

Right, in terms of your competitive position going forward obviously there has been a lot of consolidation in this three year now a smaller player relative to these larger groups and assuming MTP and ATM get together going forward you would obviously be a much smaller player, how do you position Corn products going forward in this new environment are you expecting to say take advantage of the negotiating power of these larger players and kind of get that same pricing increase do you position yourself as more of specialty player and maybe go after that market more aggressively going forward, as there been any change than in your strategic position given the solicitation?

Let me address that differently, let me try to address it anyhow any way. I believe that going forward the base business we will be a player as we have been right along. Our customers know us well we have good position and are close, very close to our customers and I believe we will continue with that, certainly as we look at, at the U.S. and people tend to focus on the U.S. market, our Canadian business or our Mexican business were not apart of that venture so they were operating separately but bringing it all back together we will operate as one in North American our position as a result of that is much stronger then most people is giving us credit for by been the 10 or 11 percent factor in the U.S. so that positioning it with the major customers and the regional customers we believe that through customer service and through being close to customers that we will benefit in those areas by moving forward in that direction.

We've done it in the past, we were working on doing that through the venture, we will bring it back into house within Corn Products and market our products on a North American basis.

Great, thanks.

We do have a follow up question from Salomon Smith Barney.

Yeah hi, as no one else seems to have asked this question, so let's go over Mexico and this high fructose tax, you mentioned

if no one had asked that, I was going to happily answer that one myself, I mean, it begs to be answered.

It sure does, so I'm surprised but pleased that I'm asking it too. The question really revolves around your confidence levels and the timing of the event - you know it certainly presents significant challenges for those of us you there who are putting out estimates in '03 - you there's - I know your statement here is that it won't last but is there any kind of - you know - why are you confident that it won't last and you know what type of steps do you take going into '03 is the tax is still in affect?

Well David as much as I agree with the struggle that you folks had with putting numbers together and I will tell you we have the same kind of struggles running the business - not knowing the answer to that question and it's a difficult one to answer.

We do believe through compensation and obviously I've said this before - that this thing will be resolved as to when I don't know there are a number of dates out there that could be meaningful, September 30th was one that was put in place by the Mexican Government so as to make sure negotiations were completed by that time and the was that at that point in time something would be resolved - be it a border issue - opening of a border or closing of a border that does not seem to be as critical a date as it was before but I don't know what's happening in the political environment in Mexico and whether this was still put in place to push towards that date.

The Tax expires at the end of the year, there would be at that point in time the opportunity for the Congress to - if in fact the border is open - to back off of it and decide what they're gonna do going forward. I don't know if that's gonna happen or not either.

The third thing is and talked about it, that certainly from a domestic point of view - we are looking at how we can produce the product in Mexico using domestic to fly in customers with Mexican produced corn and Mexican produced fructose and we spoke about this a lot before.

But, we're starting in list the corn farmers in Mexico and there's starting to be a ground swell in that area - so that would be a completely different timing issue and it would be when ever they decided to do something about it.

So I can't give you a date but I do know the negotiations between Mexico and U.S. are on. The first series of meetings has taken place. The second series is being scheduled as we speak - there was some progress made - nobody came out of it saying it was wonderful, but both parties seemed to feel that progress was made in the negotiations and the believe is that if in fact they reach some sort of an agreement that the executive to go back to Congress in Mexico, with what Congress has been asking for.

So, that doesn't give you a date but that gives you as much as I know about the situation. We are doing everything in our power in every venue to be able to work on fixing this problem.

Has the United States threatened Mexico with counter valuing duties?

Not to my knowledge, I know that, that is something that is available to the U.S. if they want to - but to my knowledge it has not been a threat or a comment made in that direction.

That does not mean it won't happen because I know certainly some people in congress of the U.S. have been very vocal in suggesting that it be done. But, I don't know that the Trade Office has said anything about it at all.

And were you surprised at all at the timing of the Supreme Court ruling in Mexico? It was my understanding that those cases took substantially longer than this one, in fact, did.

Not only was I surprised by it, I was shocked. I was in Mexico, in the U.S. Ambassadors office when I found out about it. And he was shocked, I was shocked. It generally takes, and I think we've said to this group, that it takes anywhere from eight months to a year.

It was pushed through by Congress, it could have been pushed through in support of the negotiations, I don't know. I don't know if it was just a random time frame, but no one was aware, well somebody was aware, but certainly I nor anyone that I spoke to was aware of this coming through at all, at this point in time.

As I understood it, the local bottlers were suing the government, because of the tax thing, it was unconstitutional to begin with. Can you update us on where that suit is and if there's any type of expectation of a resolution?

David, I am not aware of the bottlers suing the government. I have not heard that.

I know that the bottlers, at first, were upset with the government, if in fact the tax had been put in, period. And that might have been what you were thinking about. Because I do know that there was noise that if the tax had gone on at a 20 percent level, period, they were going to come back and challenge it. When they got the freedom to use sugar and not fructose, I don't know of any suit that's going on.

OK. Thanks a lot.

Thank you.

And at this time, gentlemen, we have no further questions. I'll turn the conference back over to you for any additional or closing remarks.

Very good. Thank you so much.

Just a personal note for those who sent me the nice notes after my surgery, I do appreciate them. I'll be here today if you've got any further questions, I'll look forward to the calls.

Thank you. Goodbye.

Take care.

That does conclude today's conference. Thank you all for your participation.

Today's Corn Products International conference call has concluded. At this time all lines will be disconnected.

Thank you again for your participation.