Ingredion Inc (INGR) 2008 Q4 法說會逐字稿

Good morning, everyone, and welcome to the Corn Products International 2008 fourth-quarter and full-year earnings call. This call is being recorded.

At this time, I would like to turn the call over to Director of Investor Relations, Mr. David Prichard. Please go ahead, Sir.

Thank you, Operator, and good morning to everyone. Welcome to Corn Products International's conference call to discuss our 2008 fourth-quarter and full-year financial results and our 2009 earnings guidance and outlook, both of which were announced in press releases issued earlier today.

I am Dave Prichard, Vice President of Investor Relations for Corn Products International. Joining me today to lead the call are Sam Scott, our Chairman, President and Chief Executive Officer, and Cheryl Beebe, our Vice President and Chief Financial Officer.

Now this is an open conference call that simultaneously broadcasts on our Web site at www.cornproducts.com. The charts for our presentation this morning can be viewed and downloaded from our Web site and they are always available about 60 minutes ahead of our conference call. Those of you using the Web site broadcast mode for this conference call are in listen-only mode.

Sam Scott and Cheryl Beebe will deliver this morning's presentations and they will indicate as they move from chart to chart, so those of you who are using our slides from the Web site can easily follow along through the two presentations.

Now I have just shifted to chart two, which is our agenda. Cheryl Beebe will present the financials for the fourth quarter and full year 2008 with appropriate analysis and flavor. Following that, Sam Scott will review our 2009 outlook and guidance before we move to your questions.

I have now shifted to chart 3, which is our forward-looking statement. Our comments within this presentation may contain forward-looking statements. Actual results could differ materially from those predicted in those forward-looking statements and Corn Products International is under no obligation to update them in the future as or if circumstances change. Additional information concerning factors that could cause actual results to differ materially from those discussed during today's conference call are in this morning's earnings and guidance press releases can be found in the Company's most recently filed annual report on Form 10-K and reports on Forms 10-Q and 8-K.

Finally, statistical and financial information and reconciliations of non-GAAP numbers from this presentation are also available on our Web site at www.cornproducts.com. And as you will see later, they are included as an appendix to this morning's slide presentation.

With that I am now pleased to turn the conference call over to our Vice President and Chief Financial Officer, Cheryl Beebe. Cheryl.

Thank you, Dave. Good morning, everyone, and thanks for joining us.

Starting with the fourth quarter, earnings per share at $0.61 is even with last year. This quarter includes approximately $0.09 earnings per share for the termination fees paid to Bunge. As I discussed on the third-quarter call, we expected the fourth quarter numbers to reflect higher gross corn costs, lower co-product values and volatile currencies, and that the fourth quarter would not be a repeat of the outstanding third-quarter earnings per share of $1.15.

Looking at the currency movement in the quarter, the US dollar strengthened fourth-quarter '08 versus fourth-quarter '07 considerably against the various currencies used in our global business, i.e., the Brazilian reais devalued 28%; the Canadian dollar, 24%; the Pakistani rupee, down 31%; and the Korean won, at 48%, to highlight a few.

On the co-product front, corn oil market pricing declined by almost $0.30 per pound versus the third quarter of 2008 and last year's fourth quarter. Feed and meal prices also dropped, but not as dramatically. Gross corn costs were higher than last year, reflecting our normal hedging practices.

With that as the background, let's move onto the charts. I am starting with the summary income statements for the quarter ended December 31st, 2008. Net sales are up slightly from last year, $900 million, versus $895 million or 1%. Gross profit decreased 1%, $141 million versus $143 million last year. The gross profit margin was 15.7%, 30 basis points lower than a year ago.

Gross corn costs were up on a dollar basis by about 4%. Total energy costs declined for the first time in several years, 6%. Operating expenses were up 3% to $2 million.

As a percentage of net sales, operating expenses were slightly lower than last year. Net financing costs at $5 million are down 41% versus last year, or about $4 million. We had an FX gain in the quarter versus last year of almost $6 million.

Excluding the FX gain, net financing costs would have been about $12 million versus last year's $9 million. The increase in growth interest expense is due to higher debt levels and lower interest income. The effective tax rate for the quarter was 17.2% versus 34.1% last year and reflects the changes in operating mix and discrete items in the quarter, which reduced the estimated annual effective tax rate from 34.5% used in the nine-month results to the full year 32%.

Net income remained unchanged at $46 million from last year. Weighted average shares outstanding in the quarter were 75.6 million shares, down from 76.1 million last year. Diluted earnings per share at $0.61 is unchanged from a year ago.

Turning to chart 6, Net Sales by Geographic Segment, we see the regional breakout of the net sales. North America's net sales increased 11%, reflecting the stronger year-over-year pricing. South America and Asia/Africa's net sales declined 11% and 18%, respectively, reflecting the fourth-quarter currency devaluation and the weaker demand impact on volumes.

Turning to chart 7, we can see the impact on net sales from volume, -5.3% or $47 million. Volume was negative in all three regions. Price and product mix held very well at 16.4% or $147 million and the FX impact, a -10.5% or $95 million.

The business model continued to reflect the pricing power we have had in the international markets over the last several quarters as all three regions posted improvement in the price mix line. On a dollar basis, we [recaptured] in pricing mix about 70% or $32 million out of the $46 million devaluation impact on net sales in South America. In Asia/Africa, we were able to recapture the FX devaluation on the net sales.

Traditionally, we have been able to recapture the devaluation and volume impact through pricing in three to six months. With the uncertainty surrounding the global economy, we are forecasting this will take longer in 2009.

Chart 8, Operating Income by Region. We see North America's operating income increased 3% or $2 million. South America was up 1%. Asia/Africa declined 70% or about $6 million. South Korea continued to weaken during the fourth quarter on higher corn costs and weak demand. Approximately 80% of the region's operating income decline is attributable to the South Korean business.

We continue to work through the issues. Corporate expenses were up $13 million or $2 million.

The next chart, 9, is the estimated source of diluted earnings per share for the quarter. Changes from operations were a -$0.15, $0.13 from foreign currency devaluations and $0.02 from lower margins. Nonoperating changes reflect $0.13 for the lower effective tax rate $0.03 from lower net financing cost offset by the negative $0.01 from higher minority interest.

Moving on to the full year, it was quite a year. Looking back a year ago, we were cautious about the business's ability to pass on unprecedented corn costs. The discussion was focused on the price of corn and would there be sufficient corn supply.

Wow, what difference a year makes. The business performed exceptionally well and we are delivering a record year at $3.52 per share.

Looking at chart 11, net sales hit $3.9 billion up 16% from last year or $553 million. With the fourth-quarter currency devaluations, we did not quite make the $4 billion net sales mark.

Gross profit increased 20% to $705 million, up $119 million from last year. Margins as a percent of net sales increased 60 basis points to 17.9%. Operating expenses were up 10% or $26 million. The fees associated with the merger, including the $10 million termination fee, are estimated at about $16 million.

Net financing costs were down 30% or $13 million. Net interest expense was basically unchanged at $38 million. The net change in foreign exchange gains and losses from last year was almost $13 million. The annual effective tax rate is 32% versus 33.5% last year, and reflects the operating mix and discrete items in the fourth quarter. Net income at $267 million is up 35% from last year or $69 million.

Chart 12 is the Net Sales by Geographic Segment. North America's net sales grew by 15% to $2.370 billion. South America's net sales grew 21% exceeding $1 billion for the first time and Asia/Africa's net sales grew 10%.

As we will see from the next chart, the sales driver was strong pricing and mix. The impact of pricing mix on the total Company's net sales was $678 million. The full-year impact on net sales for the total Company from higher corn oil, feed and meal prices were $235 million. The positive co-products impact was derived in the first three quarters of 2008. The impact of weaker volume was a -$117 million and foreign currency was a -$8 million.

Chart 13 is the Net Sales Variance Analysis. Total Company net sales increase of 16.3% was attributable to a 20% increase in price product mix or, again, the $678 million. Volume was down across all three regions for a total decline of 3.5% or approximately $116 million and the impact from foreign exchange was a -0.2 or $9 million.

The North American sales increase of $318 million was attributable to strong pricing and mix of roughly $373 million. Volume contributed a -$57 million and the FX impact was negligible.

South America's net sales increase of $195 million was also led by strong pricing and mix, which contributed $178 million. Stronger local currencies contributed $47 million and the decline in volume contributed a -$30 million. The Asia/Africa's net sales increase of $40 million followed the same pattern on strong pricing, $127 million. But the impact of the currency devaluations, especially the won and the rupee, was a -$58 million and volume decline was $29 million.

Chart 14 is the Operating Income by Geographic Segment. The improvement in year-over-year operating income was led by the North American businesses, which increased 34% or $79 million. South America followed with a 32% increase in operating income or $36 million. Asia/Africa declined 15% as the South Korean business continued to struggle with higher corn and freight costs, currency devaluations, and soft volume from the slowing South Korean economy.

The corporate expenses rose 12% or $5 million. And we have broken out the costs for the mergers of $16 million.

Turning to chart 15, the Estimated Sources of Diluted Earnings Per Share for the Year, again, we see the impact on pricing and mix on the margins -- $0.75 out of the $0.93 for the year or 81%. Within the margin number, we estimate about $0.40 came from the impact of co-products on the Company's net corn costs. Based on current market pricing this will not be repeatable in 2009.

Below the line, we had $0.11 from lower net financing costs, $0.08 from the lower effective tax rate, $0.03 from lower outstanding shares offset by a -$0.04 in higher minority interest.

Chart 16 highlights the cash flow for the 12 months ended December 31st. Cash provided by operating activities was a -$79 million and reflects the change in working capital of $458 million. The working capital increase reflects the increase or change in the margin account of approximately $295 million, as well as higher receivables, inventory values and lower accounts payable and accrued liabilities.

The change in the receivables reflects the increase in sales while the inventory reflects the impact of higher cost versus 2007. Our futures positions are reflective of our book business for 2009, and in some cases, 2010. The change in the margin account is reflective of the dramatic drop in corn market prices versus the time in which our customers chose to book their business and we hedged those positions.

As the contracts are fulfilled in 2009, the margin account should decrease and would generate a positive impact on the working capital cash flow.

Capital expenditures for fixed assets are within the range we spoke of on the third-quarter call at $219 million. Dividends paid equaled $42 million. Issuance/repurchase of common stock netted to $10 million and net debt increased $257 million.

Chart 17 shows the key metrics for the period ended December 31. Debt to capitalization remains good at 36.1%. The change from 2007 is due to the increase in debt. Debt to EBITDA on a trailing 12-month basis remains strong at 1.5 times. Operating working capital is $439 million or 11.1% of net sales, and reflects the change in margin accounts receivables and inventories and is slightly lower than last year's 11.4%.

Return on capital employed is 13.1% versus last year's 11.4, reflecting the increase in operating income.

Net debt at $759 million reflects the increase in debt to fund working capital. Total debt at December 31 was $866 million and cash was $107 million versus $649 million in debt and $175 million in cash a year ago.

I will end the presentation with a few comments on the 2009 liquidity outlook. We have a bond maturing in August of this year for about $180 million. We have more than sufficient liquidity to pay off the bond, if we choose. We are an investment-grade company with access to the bond market.

While no promises are being made, I can assure you that this team has managed through challenging times before. We are prepared to deal with 2009 and whatever it may bring.

With that, I will turn the call over to Sam.

Thanks, Cheryl, and good morning to all. We are pleased to have reported our third consecutive record year in 2008 the net sales, operating earnings, earnings per share, and return on capital employed. In early 2004, we laid out to the street our new five-step pathway strategy along with five key financial metrics that we wanted to reach or exceed by the end of the five-year period in 2008.

I am pleased to note that we have met or exceeded the financial targets. And 2008 truly was an exceptional year as our Company continued to demonstrate that we can perform well in a climate of unprecedented volatility as the year progressed, deepening recessionary and credit pressures that ultimately spread across the world.

We have been able to navigate this change and challenging global marketplace with discipline and much success to date. As our results indicated, our long-term outlook remains bright.

Turning now to chart 18, our 2009 Outlook, we announced this morning our expectations for diluted earnings per share this year in the range of $2.10 to $2.60 versus $3.52 in 2008. At the same time, we are forecasting to reach cash flow from operations this year between $450 million and $550 million.

One of the reasons for our lower earnings per share outlook in 2009 -- first, we expect a rather major reduction in co-product credits year-over-year, mostly for corn oil, which would in turn significantly increase our net corn costs versus 2008. Other factors include the anticipated effect of foreign currency devaluations, especially in South America, and our general uncertainty and lack of visibility over volume levels and pricing strength in our international businesses in this unprecedented global economic climate.

For 2009, our US and Canadian businesses once again achieved higher contract pricing across the entire starch and sweetener book of businesses. Combined with our granulated or fee-based business and multiyear contracts, overall pricing in 2009 for our book of business has increased about 10% in the US and Canada, but we do not expect this improvement to fully offset higher corn costs.

Internationally through the worldwide economic environment we find ourselves in, we believe we are being prudent and appropriately cautious in predicting that it may take longer than normal to improve pricing and volumes in our international businesses to offset currency devaluation. In addition, we see another tough year for our Asia/Africa region because of continuing difficulties in our South Korean business, which we expect to again have lower results in 2009.

While our 2009 guidance is not as strong as our 2008 performance, it nonetheless represents our second or third best year for earnings ever. It also is very important to emphasize a major strength in strategic advantage we continue to have in 2009 and that, of course, is our very healthy balance sheet and continuing excellent liquidity, which is not the case for so many companies in this global recessionary climate and credit crunch.

We feel good about the strong balance sheet and collect cash flow position at this time. We expect strong cash flow from operations of $450 million to $550 million this year. The key point here is that we should have and it should give us substantial flexibility in choices. Corn products will be operating from strength in 2009 and we will remain focused on deploying our cash to maximize long-term returns for our shareholders.

We are adjusting appropriately for today's business climate. We plan to hold our 2009 capital expenditures to between $125 million and $150 million compared with $219 million in 2008. It is important to note that much of the 2009 capital spending represents projects continued from 2008 and our maintenance CapEx is about $50 million per year. So we are being prudent at this time and will continue to monitor international growth rates carefully to see when we can and should accelerate our growth initiatives in a number of our countries.

In closing, looking at chart 19, 2009 will obviously be a challenging year. Our management employees know this and are working to meet the challenges head on. We are proud of what our Company has accomplished and remain excited about our long-term prospects. We have a strong weapon in our arsenal that is our excellent balance sheet and substantial cash flow.

We believe we can continue to execute well with our proven business models and that we have the right strategy, market and products to perform well and deliver long-term value.

And with that, I would be happy to take your questions.

(Operator Instructions). Heather Jones with BB&T Capital Markets.

Good morning. Had a few questions. Was wondering what the impact from volume or earnings impact from the volume declines was for the quarter? I don't know if you said that. I missed it, but -- I did miss it.

Yes actually we did, Heather, on a -- we didn't do it on the EPS that's blended in the margin, but it's on the Net Sales Variance. It was negative across all three regions, 5.3% down for the quarter with the big drop being in Asia/Africa reflecting the decline in the South Korean business. That was 17.7%.

South America was 5.7%. And North America was 2.3%.

Okay. Now as far as the foreign currency impact, I believe you had said that normally it's three to six months but expect it to take longer this time. Was wondering what's your expectation as far as timing and do you anticipate over the next one to two years being able to fully recoup the hit from the currency?

I think over the next couple of years for sure, and perhaps sooner than that, our uncertainty right now -- normally as we said we recouped the foreign exchange devaluation through a combination of two issues. One is pricing, obviously, and the second one is, as currencies devalue in our countries, both we and our customers can export product out of those countries.

When the world economy is what it is today and we have so many devaluations, really no place for us or our customers to export to, and as a result of that, we have to work our way through that. So we believe it is going to take some time, No. 1, to price higher. And we also believe it will take some time for those volumes to come back, but as they do, then we will be able to recoup those currency devaluations. We expect we will.

So your guidance, does that reflect what you've already been able to recoup through pricing? I mean I guess just to get an idea of what level of recovery are you anticipating in your guidance?

The guidance has obviously some price in it but not a lot, because in this economic environment, raising prices in the international market is not going to be that easy. Obviously if things turn a little faster, we will be able to do more, but right now we are forecasting a pretty bleak picture right now in the rest of the world.

Okay. And then your cash from operations, you mentioned the $180 million on maturity coming due, but it works out to roughly $4.80, almost $5.00 a share in free cash flow. What would be -- I mean, what do you intend to do with that?

Well, I hope we find some nice acquisitions. We have, as you see in the press release, allocated $150 million, $125 million to $150 million in the capital expenditures. If volumes are slowing down on a global basis, then we are going to slow down the capital investment for the base business.

But I would very much as would the rest of the team, given the opportunities that we expect to see out there, have investments in acquisitions.

I think we will manage it the way we've managed it for the last many years with the balancing acquisitions, capital spend, debt paydown and share buyback in the appropriate manner.

That was where I was going. Given where your shares are today, would there be any consideration of expediting the share repurchase? I think you have roughly 4.5 million shares outstanding on your authorization?

Yes, we do. And we will monitor that and look at it as I said with respect to that, as well as the other three or four options we have for the cash.

Okay. Thank you very much.

Thank you.

Christine McCracken with Cleveland Research.

Good morning. Just a quick question on what impact the disappointment in the corn harvest in South America might have on your South American business? Obviously there's an ongoing drought there. It looks like obviously reduced its yield expected. Just what -- how do you look at that as you look into next year?

I don't think it will have much impact on the South American business. I think it could have an impact on the global corn market over time and over the next six to eight months, which could certainly impact prices of corn throughout the world. And in our numbers, we have taken that into consideration.

Okay and just in terms of the North American crop now, with prices being pretty low, there's a pretty low incentive, I think, for farmers to plant corn. Just curious what you guys are expecting in terms of planted acreage for the coming year in terms of your guidance?

We are pretty close to what the general forecast is out there. Probably a reduction of anywhere between four and six million acres and then your guest is as good as mine as to yield. I think there will be, perhaps, a little less fertilizer used.

So right now, we see the demand side off because of ethanol and the supply side off because of reduced acreage here and the problems you mentioned in South America. So the actual number is up in the air. But any hiccups of any sort could certainly cause another spike in corn prices as we go forward.

And if you look at that, you guys obviously have (inaudible) your corn. So that would actually be in that benefit if co-products traded on higher corn?

Yes if in fact we were to see corn prices move up right now, one would expect the co-products would respond the same way. And that would be beneficial to the business.

Then just a last question, in terms of the co-products you've seen kind of a 30% rebound or so in the last month or so. I'm having a hard time coming up with a rationale as to why the stronger-than-expected move relative to some of their competing (inaudible) grains when. Especially when we like (inaudible) industry is being relatively weak at this point?

You said you saw a 30% rebound in co-products prices?

Just on -- in terms of current cash market, yes.

Certainly we've not seen that in oil.

No, I'm sorry, just on corn gluten feed and meal.

Oh. Corn gluten feed and meal. Well I can't say that we've seen a 30% bounce back in those numbers. The actual, the published numbers may be there, but the actual numbers are not. So we are not feeling that right now and unless something changes in the short term, we aren't forecasting it either.

Okay, great. I'll leave it there. Thanks.

Vincent Andrews with Morgan Stanley.

Good morning, everybody. Can you tell me what foreign exchange rates you've assumed in your guidance?

No.

We don't generally give that, but --

What I will say is that we look at what the top money center banks and the local banks are forecasting for the currencies. And so, the current market level plus or minus a few percentage points is probably spot-on.

That's actually quite helpful. And you described the North American pricing process this year. What was different about it year over year if anything from a negotiations perspective?

The thing that was different this year was that the pricing started much earlier and as a result of the run-up the people were seeing in corn, some of our customers wanted to book as early as July or August. So we have some prices that were up based on $6.00, $7.00 corn. And as the corn market continued to fall, we have some prices based on mid $3.00 corn.

So it has been a wide open market that exists and we had to navigate our way through that. And we have.

And as you got into the tail end of the negotiations or at the end of calendar '08, did the (technical difficulties) become more tenuous, based on the economic environment? Or were you still able to maintain a capacity utilization argument?

Well, the capacity utilization market argument is there. I think certainly our customers are a little concerned as to what their volumes will be. This is pretty much unprecedented in my time with this business where with so many people being laid off, folks are not comfortable with their volumes right now. So I think they may have reduced their commitment to some extent, but as we went through the negotiations, the negotiations went as would be expected.

They were pretty much completed with the exception of those that have to be done early first quarter, which is always the case. But they were completed by pretty much year-end first week of January.

Okay. I will pass it along. Thanks so much.

(Operator Instructions) Christina McGlone with Deutsche Bank.

Thank you. Good morning. My question is, Sam, in terms of the guidance, is the top end attainable today with strong execution? Or does something have to happen like volumes have to pick up or co-product prices have to increase?

I would say that, with very strong execution and some of that, the top end of the guidance is there. Strong execution will certainly help and we are working on that right now. We are looking at cost across the board. We are looking at new product introductions faster, which will help us.

So we see a number of things that we can do to execute and get to the upper end of the range. I won't say the top end of it, but certainly we are also believing as we talked earlier that there is the possibility that co-products could strengthen. Obviously, it could weaken as well, but we are pretty low right now, and that would give us a little further boost.

And if in fact the economy turns around faster, not only from the volume perspective, but the international markets we will be able to pull -- be able to pass through and get greater volumes to help that business. But right now we don't see that as being something so that is why the guidance.

Okay. Then I wanted to talk about South America. I remember last time we had -- a few years ago there was the issue where meat demand was down and so the co-products going into the meat market were down and you had competing tapioca going into your markets. And I'm wondering, are we -- are you seeing the same situation happen now because of lower meat production?

And then back to Christine's issue on the higher costs in terms of corn because of the Argentine crop. Is that occurring again or is it not so much of an issue this time?

The last time when we saw that, there were a couple of things impacting it. One was we had some diseases both in the bird flu and the mad cow situation. So both of those had reduced -- not reduced, almost stopped production of certain meat products in South America.

In addition to that we had had, that was a time that we had a more than record tapioca crop in South America. Neither one of those two things exists right now. So we are not seeing a major reduction at all.

In fact, that's one of the areas as we look at the currencies being favorable, the reduction in currency, the devaluation if anything with the developing world still eating meat and some of those countries being the major exporting markets, we are seeing reasonable business there. Certainly as corn prices increase, if in fact they do in South America, then it will be -- it could be favorable to us because that's going to be what is normally fed to those animals anyhow.

So the up competing raw material would be higher priced than what it is we are feeding in. So it is not a problem from that perspective and the issues specific to which you were talking about was something unique to that time.

Okay. Thank you for that. In terms of capacity utilization in the US, I mean (inaudible), obviously, and you had mentioned before lower demand for industrial starches, and fructose is down. Is there -- I guess where is this, the extra grind going to?

The most recent data would reflect that the utilization numbers are still in the mid 80s for fructose-finishing capacity which is what we said before. The incremental grind right now is -- some of it is still going to ethanol. While the ethanol market is off, the facilities that have been shut down are dry mills, not the wet mills.

So the grind balance is still relatively solid. And I don't know that that is going to change as we go forward.

Okay. And, Cheryl, can you just update us? What do you think for interest expense in the tax rate for '09?

I think the tax rate, let's see, again it's the ultimate forward-looking statement, but I would expect the tax rate to be around the 34% -- 33, 34%. And it is driven by the operating income mix as well as if there's any statutory tax rate changes which is what we saw in the fourth quarter. Korea actually dropped their statutory tax rate. So I would expect the 33, 34%.

With regards to interest expense, I'm not seeing a big difference in the gross interest because I expect that the cash flow will pay down the incremental debt that we have for the working capital. The question becomes, do we go into the market and refinance?

Current indications would be around [750 to 850] which would basically replace the [8 and 1/4] that we have. So I would say that the interest expense is still running around $11 million, $12 million per quarter. I would not expect to see the FX gain which was derived from our Mexican and Canadian businesses, relative to their debt and corn positions.

Thank you very much.

David Driscoll with Citi Investment.

Good morning, everyone. Sam, I missed the first few moments of the conference call. Did you talk about the search for the CEO for your successor?

No, I did not.

Can you please?

The search is on. The Board is looking. They are being very diligent in their process. And as I think I've mentioned to most of our shareholders we have inside candidates and outside candidates; and the Board is working through it.

What's the timeline?

There's no specific one. I told them I would stick around as long as they wanted me to.

Okay. Fair enough. And can you, Cheryl -- I think I heard this, but can you just tell me, what was the EPS impact of the unusual co-products in 2008?

2008 versus 2007 is estimated at $0.40. It's the first three quarters.

All right. So if we've got $3.52 in earnings for the year -- and I know that's a GAAP number and there might be some adjustments, but give or take -- you've got the midpoint of the range at $2.35. That puts us at $1.17 differential between these numbers.

co-products then is, I would just want to back off that $0.40 and now we've got $0.70 left -- $0.77 left over.

I would just make one comment. I think the impact on the co-products 2009 versus 2008 is going to be more than that $0.40. And that is what is reflected in this guidance.

Help me out there. I don't understand.

If I look at the way that corn oil prices ran up through 2008, feed and meal, and then the way they have come down is that year-over-year comparison. If corn oil stays at $0.22 per pound versus the 2008, you are going to get a much bigger hit than the $0.40.

Okay. So if we were just to ballpark this thing would double that number something like $0.80? Is that just in the vicinity of what you guys are thinking in the guidance?

I would say it's at a minimum the $0.80.

It is closer than the $0.40 is, yes.

All right. On the foreign exchange side, when I look at the quarter I think the quarter had a -10% impact of sales.

That's correct and it was primarily the Korean. We started to see the South American currency drop as well.

So then, is it fair to say that that's probably a reasonable run rate to use for the next three quarters?

I think it's going to get worse again. Because if you look at the comparison quarter by quarter, all right, the fourth quarter of '08 versus the fourth quarter of '07 is that range of, I'm going to call it, 20 to 30 some odd percent.

But if you go quarter by quarter and look at the current exchange rates versus, say, the first quarter last year, it is more dramatic.

Well then, when I was just kind of ballparking numbers here, I was trying to again put some type of EPS number on this foreign exchange (technical difficulty) -- the delta and foreign exchange -$0.30 was kind of the ballpark that I was coming out with. Are you about in that area or it sounds like maybe you would be perhaps more, a little bit more negative than -$0.30 year on year (multiple speakers)?

I would say a tad bit more negative than your $0.30. If you look at it, if you are trying to reconcile the EPS, its top 1 is the co-product change. Second one is the currency and the third is volume.

The volume seems to be a distant third than the first two.

That's correct. Absolutely.

All right. So then, Sam, going back to this, when we think about kind of on a go-forward basis, I mean EPS is all over the map, but thinking about this over the course of time, again, maybe you don't know right now today and it's very reasonable to say that you wouldn't know how fast you can recover pricing. But over some course of time the experience in the past is that you will.

So then this foreign exchange number, how strongly do you feel that at some point we can just sort of add this back to the estimate? So if it's something like $0.30 to $0.40 impact in 2009, I am tempted here to want to say that the 2010 number -- just to pick a year, it could be later, who knows? -- but you would add that number back to start to formulate the basis for an '010 expectation.

I think that is a fair assessment of where we are. We've said continually for the last, since I've been in this job for eight years now, we've said we have been able to get back devaluations in a reasonable length of time. And as I said earlier, the way we do it is through pricing and the combination of our volume and our customers' volumes ticking up.

That has not changed. And certainly I believe that we will get it in a time frame. We just don't know what it is right now. And when we thought about giving guidance, we thought about not giving guidance at first. And then we thought it was better to be able to share with you and give you more clarity around what we thought the year would look like so that we could talk to these issues.

And I think certainly that the currency issue whether it's six months or 18 months and I believe it will be somewhere in that time frame, we believe we can get it back.

All right. So then one more questions I think that's crucial is that when you talk about the North American price increase, you of course indicated that it did not cover the change in year-over-year net corn costs.

One concern that we hear a lot is, how long can the business model continue to sustain significant increases in pricing? Can you give us a sense here -- do you see a limiting factor on why you would be unable to continue to achieve further price increases in successive years? Is there anything such as, the customers are at a point where they would substitute a [wait] of sugar or something like that? Would love to hear your perspective.

I think we said earlier that we thought we could pass through the price increase even of $6.00 or $7.00 corn in the environment that we existed in midyear and we did that. Certainly the cap on where we are would be sugar prices. And the world sugar price has been going up over the last couple of weeks, months. And certainly the US sugar [support] has numbers in the US that were at reasonably decent levels on sugar.

So I think we can -- as an industry can probably have prices move, as long as we are not capped out by sugar pricing at that point in time. So looking forward I don't see anything that stops it. Utilizations have not deteriorated substantially. Although as I said volumes could be off this year a little bit which would obviously take it down a little, but I think that will bounce back as the economy comes back.

So the net of the business has not changed dramatically from where we were. If you go back into the beginning to the first half of 2008, other than the fact there's an awful lot of uncertainty around and we've had a corn market or a commodities market that has pretty much collapsed, but as far as pricing goes, utilizations go, I think this business can come back. And it's not going to take forever to do it.

The bottom line if you sum this all up, we've got a company that has a superclean balance sheet, significant cash flows coming in 2009. You still have the belief that you have pricing power in your US business and this foreign exchange hit is massive in the year $0.30, $0.40, something like that per share and that will eventually be recovered over the course of time given previous experience. You would agree with all that?

I would agree with that and I kind of tried to say some of that in my prepared remarks. But that is pretty much what we see right now.

Very good. Thank you very much.

(Operator Instructions). Ken Zaslow with BMO Capital Markets.

Good morning, everyone. Couple of questions. Sam, first, what is your workday now like now versus a year ago?

About the same, to be honest with you. When one puts on a hat that starts moving through a time when you start thinking about it and then when you get slapped in the face and you're told, you are back in the seat, you do exactly what you did before.

So nothing changed. You are still doing exactly what you have been doing?

I am doing exactly what I was doing before for the last six or seven years. And so the credit, with respect to my staff, even though they know I'm a lame duck, they are still treating the the same way as they did last year which was beating the living daylights out of me constantly.

Okay. In terms --

And it's fun.

Good to hear that. Even in today's market I'm glad to say that you can say it's fun.

Well, not as much fun as it was, but it's fun.

I think everybody feels that way. In terms of the currency impact, I know you kind of danced around it and I think how you kind of phrased it is very good. Of the impact that you're getting, are you expecting any recovery this year? It depends on which question you answered. It depends on how I kind of interpret it.

Like last question you sound like you weren't expecting any recovery. The first question, it sounds like you expected some recovery this year. How does it work out?

I think we've given the guidance that would reflect what we think waking get this year. I think David's question was, do I see it coming back at some point in time and the answer is definitely. I just can't predict right now when.

And I mean I sat -- not sat, I was walking by the screen one day and the real moved almost 5% while I was watching it. I stood there for an extra 10 minutes just to see what was going to happen. And those kind of things, I've never seen it happen like that before except when you had a massive devaluation.

So we have taken our best guess, both as Cheryl said through the experts we use here and the local knowledge we have in our countries, to put together what we think it will be. And that has been included in our guidance.

Okay. And of that, how much do you expect to be recovered this year? X%, 10%, 20%?

Of what?

Foreign exchange negative.

I can't comment on that one other than the guidance we've given. That's why we put a range on it.

Okay. In terms of, Cheryl, you said nice acquisitions. What is a nice acquisition?

A nice acquisition is one that actually is at a reasonable price, No. 1. Hopefully there are some assets out there that are off the highs that we were seeing in 2007 and in 2008 that actually complements the business. And as Sam has said consistently, we are looking to grow that Asian division, and so that's what I was referring to.

And things that help push forward the strategy that we have for moving more to an ingredient philosophy, health and wellness area.

And right now, Ken, there are a number of things out there, certainly in Asia. We are talking to a number of people right now. We are not looking at any major investments. We've talked historically about our strategy would be more bolt-on acquisition types and that is what we're looking for.

And in terms of Asia, what -- particularly South Korea, what is it going to take for that business to ever generate good returns on a consistent basis that you can sleep well at night on that business? Because it seems like every year we have some new problem with that is -- and then obviously this year is unique in its own situation, but is it even worth keeping?

Yes. It is worth keeping. The issue has been, last year we got whacked with much higher corn costs and we know that. And we've shared that with you, the fact that it was running up and we have to buy corn well in advance in South Korea because you have to get it there and you have to sit on it to make sure it's there.

So we are sitting with a relatively high corn cost inventory in South Korea right now. Utilizations we've talked to right along and they have to come back. And this economy is not helping it at all. So we are living with those kinds of things right now and the currency.

I mean, the currency situation, all of it went against us. We were working to get the business back in shape and as we've said to you on a considerable number of calls, we've made changes over there. We've done what we needed to do, but everything keeps driving it further down. We are looking at further opportunities to strengthen the business. And we will continue to do that.

I mean do you really want to hold the business that you have to worry about? Like the nice thing about your South American business is, again, as bad as currency is, as bad as (inaudible) is, eventually you know it comes back.

This South Korean business doesn't seem to be coming back any time soon. And it seems to the more of a macro play than your market share and your ability to execute.

I guess that's what -- and maybe it's more of a comment than a question.

Well it's a comment that has validity to it. We have to look at where we go with respect to what has to happen in that business and we have to see where it goes.

But just like any other business, we will evaluate it on the merit and see where it goes. We believe we can turn it around. It has taken longer because it's a different market environment, but there are a number of things that are going right and when the world collapsed around us, we had some problems in that business. So we will keep working it to get it back on track and we believe we can do that.

MY last question is, and that you talked about acquisitions, what about being acquired by, say, Bunge again. It seems like a -- have talks started to come back again? It seems like your stock is -- call it 50% -- of theirs.

It seems like one plus one and each of you guys are having your own difficulty, maybe some cost savings and other logistical benefits that came out during the process would be beneficial. Any thoughts there?

Ken, you know I'm not going to comment on that so I will just pass on it.

Okay. Thanks a lot.

Ann Gurkin with Davenport.

Good morning. Just want to ask about, in the fourth quarter you targeted, you highlighted softer volumes. Can you just comment a little more detail on that? Is there any one area that was weaker than expected or any other detail you can give us?

It was pretty much across the board. We saw -- by region, we saw pretty much the same kind of numbers. And I think it was just an overall slowdown.

Okay. And then can you talk about prospects for your sweetener derived from stevia? Any update there?

Moving forward, the engineering continues forward. We know where it is going to go in and we expect it will still be on schedule which we originally said was going to be about 18 months. So we are probably 16 months away.

Right. And then --.

But we are selling some product right now. We have small samples and we are selling some. We've gotten as much as we can from the person that we've licensed the product from. And we are in the market to a very small extent at the moment.

And then, long term, Sam, do you still see the trend globally for many economies moving up in the value chain? Consumers moving up the value chain? Is that trend long term still viable?

As far as we can tell, nothing has changed on that. I mean I just don't believe when a developing world really starts to develop with a hiccup that it is going to go back. People who have tasted protein, tasted food and it is going to continue to go that way.

We are just in the middle of something right now that is going to slow it down. But even that, we believe people will find a way to do something. They eat less of it, but they are going to be going after it still.

That's great. Thank you.

Heather Jones.

I have two follow-up questions. Just wondering, two follow-ups. The volume weakness you saw in Q4, was there a significant further deterioration in volumes going into Q1 in any of your regions?

You mean where we are now?

Yes. Like say, I think you were down 2, 2.5% in North America for Q4. I believe that was the number I remembered. Did that weaken substantially from where you are so far in Q1?

Well, it's a little early right now so that we are monitoring where we are. Things are okay.

The one thing that is unusual about Q1 is the weather conditions in the North American business. I mean we have never seen weather like this in a long time with it as cold as it is. So you do have the combination of the recessionary impact on the industrial side of the business which obviously we've talked about for the last four or five months.

We've also said normally we are recession-proof on the food side of the business and although we saw volume reduction, we didn't see as much volume reduction perhaps as some other industries have seen, depending upon where they are. But right now we are trying to get our arms around what impact the weather is having on our business, as compared to what impact the recession is having on the business.

Okay. Going back to the delta year on year and earnings guidance, talking about the impact from lower byproduct values being closer to $0.80 than $0.40 on a year-on-year basis. I presume you are talking about on a gross basis and -- so on a net basis, given the pricing you took in North America, would byproducts and foreign exchange be in the same ballpark? Or would on a net basis byproduct still dwarf the other two?

On a net basis, it dwarfs it. We were talking on a net basis with respect to the co-products.

Oh you were? Okay. Thank you.

Operator we have time for one more short Q&A if we have one.

Ian Horowitz with Soleil Securities.

Okay. Hello? Sounds like Ian is not with us then, right?

Looks like no. No.

Okay. I think with that we are at the bottom of the hour and, therefore, with no further questions we will go ahead and conclude our conference call and our Webcast this morning.

I do want to remind you there is a replay of this Webcast and that's at www.cornproducts.com; and there is also a replay of the audio conference call. And that is available through Friday, February 13th. The phone number is 719-457-0820 and you'll need the pass code of 613-0549 for that audio conference call replay.

With that, on behalf of Sam and Cheryl, thank you very much for participating in our call this morning. Have a good day.

That does conclude today's conference. Thank you for participating and have a wonderful day.