Penford highlights ethanol sales in first quarter results

Penford Corp. has released financial results for the first quarter of fiscal 2015, reporting its industrial ingredients division reported sequential improvements for the past five quarters in gross margin and operating income. The division’s gross margin expanded to $7.2 million, up by $5.8 million from last year’s first quarter, on favorable ethanol market dynamics, the lower cost of physical corn, the growth in specialty bioproducts and the reduction in depreciation expense with the increase in estimated useful lives that occurred as of May 1, 2014. Penford owns a 45 MMgy ethanol plant located in Cedar Rapids, Iowa.

According to information released by the company, it will not host an investor call to discuss first quarter financial results due to the recent announcement of the definitive merger agreement with Ingredion Inc., which was announced in October. Under that agreement, Ingredion will acquire all the outstanding shares of Penford for $19 in cash per share. According to information released in October, the transaction is valued at approximately $340 million in the aggregate and has been approved by the boards of directors for both companies.

An 8-K form filed with the U.S. Securities and Exchange on Jan. 9 indicates Penford reported total sales of $103.64 million for the quarter, down slightly from $109.25 million during the same period of 2014. Ethanol accounted for $22.05 million of the first quarter 2015 sales, up slightly from $22.02 million reported for the same period of the prior year.

Penford reported to income of $4.41 million for the quarter, including $2.98 million from the industrial ingredients division. In comparison, the company reported $1.64 million in income during the first quarter of last year, including $2.04 million from the industrial ingredients division.

Within the SEC filing, Penford explained that while ethanol sales for the first quarters of 2015 and 2014 were comparable, a 10.5 percent increase in volume during the first quarter of this year was offset by a decrease of 9.5 percent in the average unit selling price per gallon.

The company also reported that the industrial ingredient division’s operating income of $3 million during the first quarter of this year grew $5 million over the previous year’s first quarter due primarily to an improvement in gross margin. Gross margin increased $5.8 million to $7.2 million from $1.4 million the previous year. The margin improvement is attributed to favorable ethanol market dynamics of $3.9 million, the lower cost of physical corn of $1.8 million, and several other factors.