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Executives

Aaron Hoffman – Vice President, Investor Relations & Corporate Communications

Ilene Gordon – Chairman, President and Chief Executive Officer

Cheryl Beebe – Executive Vice President and Chief Financial Officer

Analysts

Ken Zaslow – Bank of Montreal

Christina McGlone – Deutsche Bank

David Driscoll – Citi

Heather Jones – BB&T Capital Markets

Farha Aslam – Stephens Inc.

Lindsay Drucker Mann – Goldman Sachs

Greg Van Winkle – Morgan Stanley

Christine McCracken – Cleveland Research

Ann Gurkin – Davenport

Corn Products International, Inc. (CPO) Q4 2011 Earnings Conference Call February 9, 2012 9:00 AM ET

Operator

Good morning, everyone. Welcome to the Corn Products International 2011 fourth quarter earnings conference call. Today’s conference is being recorded. At this time, for opening remarks and introductions, I’d like to turn the conference over to Mr. Aaron Hoffman, Vice President of Investor Relations and Corporate Communications for Corn Products International. Please go ahead, sir.

Aaron Hoffman

Thank you very much. And good morning to everyone. Welcome to our fourth quarter 2011 earnings call. Joining me on the call this morning are Ilene Gordon, our Chairman and CEO, and Cheryl Beebe, our Chief Financial Officer. Our results were issued this morning in a press release that can be found on our website, cornproducts.com. The slides accompanying this presentation can also be found on the website and were posted about an hour ago for your convenience.

As a reminder, our comments within this presentation may contain forward-looking statements. These statements are subject to various risks and uncertainties. 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 or in this morning’s press release can be found in the company’s most recently filed annual report on Form 10-K and subsequent reports on Form 10-Q and 8-K.

With all that out of the way, I’m happy to turn the call over to Ilene.

Ilene Gordon

Thanks, Aaron, and let me add my welcome to everyone joining us today. I do have a cold, so please bear with me. We appreciate your time and interest.

As I reflect on 2011, one of the overarching conclusions that we can draw is that our business model is working quite well. In order to deliver organic growth across the organization and in all regions for the year, we had to effectively execute our plans while also overcoming some significant headwinds.

We experienced a range of challenges from economic malaise in the US to recession-like conditions in Europe. Fortunately, many of our markets remained strong like Mexico, most of South America and Pakistan. We shut down our largest manufacturing facility for over a week to perform significant maintenance and we brought it successfully back up. We also experienced flooding in Thailand and a tsunami in Japan while Brazil was hit with inclement weather in the fourth quarter leading to some volume softness.

In Pakistan, the energy infrastructure remains problematic, but we were able to overcome the challenge to show a year-over-year increase in profitability. We’ve installed equipment to help mitigate this issue as we enter 2012. And as we wrapped up the year, numerous foreign currencies devalued against the dollar.

We expect that our regional operations will pass through appropriate pricing in the short-term to cover the impact. We have a long history of having done this successfully and we don’t expect 2012 to be different. So let me go back to my opening remark that the business model worked well in spite of these factors.

Our model is actually very simple and it’s worth taking a moment to consider it as we reflect on the year. Fundamentally, we purchase raw materials, largely corn, process them to add value and sell those starch and sweetener ingredients primarily to food, beverage and brewing customers around the world.

With that said, it’s worth noting that we don’t speculate on commodities. We don’t operate a commodities trading business. We don’t have a logistics business. And we don’t take physical ownership of raw materials beyond what we need to properly run our operations. Put another way, we are not an agri-business company but rather an ingredient company. Our business model and our results bear that out.

Taken together, these facts paint the picture of a relatively stable, growing company that manages risk effectively. We saw that in 2011 in spite of the obstacles I outlined earlier. Building on that, during the year, we largely integrated the $1.3 billion National Starch acquisition, putting in place IT systems, human resource programs, and re-aligning manufacturing, to name some of the larger projects.

The acquisition clearly builds on our ingredient strategy by enhancing and expanding our portfolio of products, our R&D capability, and our geographic scope. At the same time, the acquisition delivered significant value to our shareholders not only in immediate EPS but also in longer term growth prospects. To sum up the year then, I’d say that you saw our ingredient strategy in action and that led to strong performance in the face of a tough environment.

Let’s turn now to the fourth quarter, which came in very much as we expected when we began the year. At that time, we indicated that 2011 would be front-end loaded. Looking back, the adjusted EPS for the first quarter was $1.28. That was followed by $1.10 in the second quarter, though that included the sizable Argo maintenance project. In the third quarter, we reported $1.20 of adjusted EPS and $1.11 for the fourth quarter, as you saw today. The primary reason for the sequential decline in EPS is the layout of our corn costs, with the cheapest corn coming early in the year and rising as we moved through 2011.

The good news is that the fourth quarter still showed year-over-year bottom-line improvement again in spite of the headwinds I delineated earlier. In fact, operating income was up in three of our four regions, with only North America declining as a result of higher corn costs versus last year. While pricing continued to be robust as we pass through the higher input costs, volumes softened in each region.

That’s a good segue to spend a few minutes looking at how each region performed in the quarter. Volume was down slightly in North America, as general trends remained stable, but we were comparing against a very strong year-ago period when organic volumes were up 6%.

We also saw continued significant price increases take hold to offset rising raw material costs.

As expected, operating income fell as we faced higher net corn costs compared to the fourth quarter of 2010. You’ll recall my comments earlier about how the year was forecast based on our hedged positions. That’s reflected in North America’s very strong first quarter and first half and a down fourth quarter.

Turning to South America, we’ve taken significant pricing actions in South America to offset higher input costs and devaluing currencies. However, the fourth quarter saw slower economic activity and some inclement weather. I want to be definitive about our bullish long-term view of South America and encourage you not to draw conclusions from one quarter. We continue

to make significant capital investments and are setting ourselves up to benefit from growth in the region as well as from the upcoming World Cup and Olympic games.

Turning to Asia Pacific, demand remains mixed across the region. As I mentioned earlier, we did a good job of managing through flooding in Thailand with minimal impact. Demand is also mixed overall in our EMEA region, with softness in Europe from the ongoing economic sluggishness somewhat offset by continued solid demand in Pakistan. Positively, we continue to experience margin recovery in Europe after some input cost challenges in 2010. In Pakistan, as I mentioned earlier, the energy infrastructure is an ongoing challenge that we are managing reasonably well.

In summary, we are pleased with our performance in 2011. Now, I’ll turn the time over to Cheryl to take you through some of our financial results. Cheryl?

Cheryl Beebe

Thank you, Ilene. As usual, let me add context and color around the quarterly performance. As we expected and discussed on previous calls, volumes were down slightly in the quarter. This is also the first quarter with no incremental results from the National Starch acquisition. The significant price increases that we saw throughout the year continued in the fourth quarter. Both gross and net corn costs were up. The higher gross corn costs were partially offset by some favorable co-product prices.

Finally, foreign exchange rates turned into a headwind in the fourth quarter and are expected to continue to be negative in 2012. As Ilene discussed, we believe this is likely to be manageable based upon our track record of taking pricing to cover the valuations.

Net sales grew $141 million, contributing $34 million in gross profit growth compared to last year. Reported operating income grew $63 million and the difference is primarily related to a one-time post retirement benefit of $29 million. Excluding this one-time benefit and adding back integration and restructuring costs of $14 million, adjusted operating income grew $3 million.

$203 million of price/mix was the main contributor to sales growth of $141 million and more than offset the negative foreign exchange impact of $26 million and softer volumes of $36 million. Again, price/mix is the story here, as we saw, all four regions increase prices compared to last year. We also saw volumes soften a bit as we raised prices and faced strong comparisons to last year.

Three out of the four regions showed positive operating income growth. North America’s operating income was down $10 million versus last year primarily on higher corn costs. Corporate expenses were up $5 million, reflecting increased spending in human resources, legal and other corporate areas to support the growing business. The $15 million is the net positive impact from the post-retirement, integration and restructuring costs.

Looking at the adjusted EPS bridge and the increase from $1.05 to $1.11, the estimated impact from stronger margins contributed $0.11 and was able to offset the negative volume and foreign exchange impact of $0.06 and $0.03 respectively to add $0.02 from operations. Lower financing costs and a slightly better tax rate contributed $0.04. On a reported basis, last year had $0.38 in acquisition-related charges compared to a positive $0.23 from the post-retirement charge offset by $0.12 in integration and restructuring costs.

Moving on to the full year, net sales rose $1.9 billion, with about $1 billion coming from the acquisition of National Starch. Gross profit dollars rose $402 million and gross margins expanded by 150 basis points. Reported operating income increased $332 million and includes $58 million from the NAFTA settlement, $29 million from the post-retirement charges, and $41 million in integration and restructuring charges.

Looking at the full year net sales, foreign exchange was slightly positive while organic volume was down just slightly, in-line with our expectations. Sales growth came from the volumes acquired with National Starch and the significant pricing increases that reflected higher year-over-year input costs. The 1% decline in South American volume reflected the trade-off between volume and pricing of $310 million.

Staying with the full year, each region made significant contributions to our growth in operating income. We also benefited from the NAFTA settlement and the post-retirement benefit, which were partially offset by the integration and restructuring charges I just mentioned.

The increase in reported earnings per share of $3.12, or 142%, includes $1.71 from operations. Volume contributed $1.20, margin improvement was $0.49, and $0.03 from foreign exchange, while other income was a negative $0.01. Non-operational items contributed a negative $0.27, including a negative $0.31 from higher financing costs, which reflect the financing of the acquisition, the higher share count for a negative $0.08 and the lower effective tax rate contributed a positive $0.12. Last year’s reported numbers include $1.04 of restructuring and acquisition-related costs and 2011 contained the NAFTA settlement, $0.75; post retirement benefit, $0.23; and integration and restructuring costs of $0.34.

The business continues to generate strong cash flow from operations. This year’s cash flow from operations amounted to approximately $300 million. Net income, depreciation/amortization contributions were more than adequate to fund the increase in inventory and receivables. We invested about $260 million back into the business for growth and stay-in-business capital projects. And we increased our dividend twice and paid out $50 million in dividends to our shareholders. We also repurchased about 1 million shares.

Now turning to 2012, we expect to generate adjusted earnings per share between $5.00 and $5.25 for an increase of 7% to 12%. This guidance excludes $0.16 per share of anticipated integration and restructuring costs related to the National Starch acquisition. Keep in mind, on a reported basis, the NAFTA settlement occurred in the first quarter of last year. So, as you think about our EPS for the quarter, don’t expect a recurrence in 2012.

The guidance incorporates a number of assumptions, which we will talk about in a minute as we get to the regional outlook slides. From the top level, we expect continued growth in net sales and expect to reach just about $7 billion on a combination of anticipated pricing and mix and volume growth. This revenue guidance incorporates an anticipated weaker foreign exchange environment. The tax rate is estimated to be between 31% and 33% and of course is dependent on a number of factors, including local rates and mix of income.

We expect to continue to invest for future organic growth and anticipate spending around $300 million in capital. The investment program would include completion of our third facility in Pakistan as well as various other manufacturing initiatives, continued investment in specialty starch capability in North America and Europe, and last but not least, projects to support growth in South America.

While we have made tremendous progress in 2011, we will complete the acquisition integration in 2012 with the US/Canadian business integration scheduled for the first quarter followed by Europe in the second quarter. We are very pleased with how the integration has gone and remain confident that we will deliver $50 million in synergies. Again, significant progress was made in 2011 and we will continue this into 2012. The expected synergies are incorporated into our guidance.

Contracting season in North America went well and is essentially concluded. As a reminder, contracting includes our three NAFTA countries; US, Mexico and Canada. Pricing actions were in line to support the higher cost environment. High capacity utilization rates are expected in 2012 along with strong export demand into Mexico. Volumes on a North American basis are expected to remain stable and operating income is expected to grow. We expect to realize increased spreads as a result of the pricing actions.

The net sales and operating income growth in South America is anticipated to come from strong volume, more in line with historical norms, solid pricing to cover costs, and foreign exchange devaluations. One note about the volume. We expect it to accelerate over the course of the year as weather and economic activity improve.

In Asia Pacific, similar to South America, we expect to see strong volume growth, which will contribute to increases in operating income. While foreign exchange is a headwind, we expect the businesses to manage through it. Unlike South America and Asia Pacific, currencies are expected to be problematic, as the European business model is a combination of local and imported production. Movements in the euro and pound are more difficult to recapture because of this.

We are anticipating volume growth based on the more specialty nature of this business. The guidance range incorporates both of these factors. While Pakistan’s energy crisis is a challenge, we made an investment in liquid natural gas to help ease the impact. The guidance incorporates our expected ability to manage this situation.

All in all, while every year has it challenges, we expect the combination of our local execution and risk management philosophy to help us to deliver on our shareholder promise.

With that, I will pass the call back to Ilene for closing comments.

Ilene Gordon

Thanks, Cheryl. As I’ve done on previous calls, I’ll wrap up with our Strategic Blueprint, which continues to guide our decision-making and strategic choices with an emphasis on value-added ingredients for our customers. Looking at the Blueprint, we’ve seen real operational excellence this year in generating savings from various initiatives while integrating a sizable acquisition.

As I mentioned earlier, we’ve seen growth across our business. We have delivered this strong performance in spite of difficult economic situations around the world. This is a testament to our prudent, thoughtful approach to managing risk, building our business, and the talent of our dedicated employees.

As Cheryl just detailed, we believe that 2012 will be another year of top and bottom line growth, the completion of the integration of National Starch, and further growth-oriented capital investment around the world. I’m confident that we are well positioned to deliver another good year while setting ourselves up for the future.

And now we’re glad to take your questions.

Question-and-Answer Session

Operator

(Operator instructions) We’ll have our first question from Ken Zaslow, Bank of Montreal.

Ilene Gordon

Good morning, Ken.

Aaron Hoffman

Hi, Ken.

Ken Zaslow – Bank of Montreal

Hello? Ilene?

Ilene Gordon

You broke up. Try again.

Ken Zaslow – Bank of Montreal

How is that? Better? (inaudible) just a general question. What ((inaudible)) target growth rate? Is it 10%, 11% or 12%? Just trying to figure that out. It’s a minor one but I’m just curious.

Ilene Gordon

Well, our target EPS growth rate, we’ve always said low-double digits. So, over the long-term, our target would be 10% to 12% per year.

Ken Zaslow – Bank of Montreal

Okay. And then within North America, can you talk about how much pricing you got across your starch portfolio, including high fructose corn syrup? And I think you did actually say that you are actually going to be able to generate margin expansion. Is that a fair point?

Cheryl Beebe

That’s a fair point. Ken, what – we didn’t actually come out and say what the price increase was, but we did capture our costs, the higher corn costs year-over-year plus a slight improvement in the spread, which translates to margin improvement.

Ken Zaslow – Bank of Montreal

And then –

Aaron Hoffman

Yes, go ahead.

Ken Zaslow – Bank of Montreal

And then my last question is, can you talk about the volume trends in South America? What are you actually seeing that’s actually positive? And are you seeing a greater move to some of your food products there? Can you just talk a little bit more specifically about the volume trends in South America and how they will progress throughout the year?

Ilene Gordon

Well, I think the big issue has been because of the wetter weather in parts of Brazil. The beer industry hasn’t been as robust as one might have expected. But we do expect that to come back this year and as the weather clears up and then of course all the different sporting events. Demand for the food products seems okay. I mean, certainly with the minimum wage increasing, that of course affects both beer and food consumption. So we expect that to continue. The headwind, as we mentioned before, during 2011 was the confectionary industry, and that demand was slower than we expected. Some of those companies export, and with the exchange rate, they weren’t able to export as much during 2011. But we think both food and the beer consumption will be stronger in 2012.

Ken Zaslow – Bank of Montreal

And just to be clear, when you say volume growth back to normal levels or historical levels, is that mid-single digits?

Cheryl Beebe

Yes, it is. If you think about it on a full year basis, Ken, we were down 1%. When we came into 2012, we were actually looking for South America to be up a couple of percentages – percentage points. But when you take into account the rising corn cost environment and the pricing action we took, we wound up with a negative 1%.

Ken Zaslow – Bank of Montreal

Great. Thank you very much.

Operator

And we’ll have our next question from Christina McGlone, Deutsche Bank.

Ilene Gordon

Good morning, Christina.

Aaron Hoffman

Hi, Christina.

Christina McGlone – Deutsche Bank

Hi, thank you. I guess first question, when you talk about in North American volumes and you talk about the tough year-ago comp, if I look back, you had tough comps all year. So what am I missing? What changed in the fourth quarter? Was it just the absence of the National Starch wrap? Is that what it is?

Cheryl Beebe

That’s exactly what it is.

Christina McGlone – Deutsche Bank

Okay. Okay. And then if I think about in rest of world, so outside of North America, it looks like the need for pricing in terms of corn is less onerous although now you have the FX need to price. But I’m just wondering, is it – will it be a more moderate pricing environment so that volumes have the ability to increase in ’12?

Cheryl Beebe

Yes. The volume is expected to recover and be more robust. That’s what we incorporated into our guidance and again back towards that historical norm, mid-single digits. The corn cost movements are mostly North America and South America, but there is some increased corn costs in Korea, which is part of the Asia Pacific, but we’re not expecting to see the same type of pricing movement that we did in 2011.

And Christina, if you remember, we came out and said we thought we’d be up about $1.7 billion in revenues. About $1 billion of that would come from National Starch and the rest would come from the legacy CPO, where we priced at least $100 million to $150 million more than what we had anticipated in that original guidance. I would not expect to see that again this year. And obviously that’s based upon corn remaining stable and not taking another 20% to 30% increase. That’s where we are.

Ilene Gordon

And I would add though in Europe also – I mean, I think that the volume issues are certainly related more to the sluggish in the economy there and the corn costs are a little bit lower there. So again, it’s not onerous to overcome the corn costs in Europe at the same time. There’s a little bit of sluggishness in volume there.

Christina McGlone – Deutsche Bank

Okay. And then, Ilene, on Europe, in terms of the mismatch on FX that you pointed out, as you bring on your specialty starch expansion in Europe in ’12, should that mismatch disappear and then when does that happen?

Ilene Gordon

Well, certainly as we bring some of that capacity on now, the sluggishness in volume will certainly be a factor, but we expect because it’s really targeted at the high end – higher end of the specialty products. And we see that segment continuing to grow. So some of the more staple food products are slowing down. The more specialty added part of the business is continuing to grow in different parts of Europe. So we expect to be able to start to deliver that volume now and as we add other capacity over the year.

Christina McGlone – Deutsche Bank

But in terms of the mismatch on the foreign exchange as that capacity comes on, doesn’t that mismatch disappear?

Ilene Gordon

Yes, it does. The other way of saying that, Christina, for us would be how long is it going to take us to rebalance how much is produced or supplied locally versus how much is imported. And so with our investments in the specialty starch business in Europe, I would anticipate that to take 18 to 24 months. But strategically, that’s why we made the investments to make this look more like our, I’m going to call, legacy business model, which is being a local producer selling into local markets.

Christina McGlone – Deutsche Bank

Okay. Thanks for that. And just last question, I’m modeling about an $0.08 hit in FX in ’12. Is that in the range?

Cheryl Beebe

I think you are close. It may be a couple pennies more than that. But I think you’re directionally sound.

Christina McGlone – Deutsche Bank

Okay. Thank you.

Cheryl Beebe

You’re welcome.

Operator

We’ll go next to David Driscoll, Citi.

David Driscoll – Citi

Great. Thank you.

Cheryl Beebe

Good morning, Dave.

Ilene Gordon

Good morning, Dave.

David Driscoll – Citi

Hi, good morning, Dave. So, I want to go back to the revenue guidance. You mentioned that sales would reach $7 billion. That’s about a 12.5% increase. And I think you mentioned in your prepared script that the volumes would be much more towards normal. I think to Ken’s question you were specifically talking about South American volumes being mid-single digit, but total company volumes we should think low-single digit. Wouldn’t that be in line with the historical norms?

Cheryl Beebe

That’s correct. In my prepared test, I said that North American volumes would be stable. So traditionally we look to the minus one to plus one. We’re not looking for a lot of why on a total North American basis. We’re not looking for the volume growth. We expect it to be stable. But the rest of the world, which would be South America, Asia Pacific and EMEA, we’re looking for that mid-single digit. And so –

David Driscoll – Citi

Okay.

Cheryl Beebe

When you combine the weight of North America, Dave, you’re spot on. That’s brings us back to our historical norm of 2% to 3%.

David Driscoll – Citi

And then if I think that foreign exchange headwind is – it's actually – I think it should be something similar to the top-line on an aggregated basis, something like minus 3 percentage points. That would say that the full 12.5% growth really all comes from price and mix. Would you agree with that?

Cheryl Beebe

There’s some from volume. So the volume offsets the FX. And yes, we still have strong pricing.

David Driscoll – Citi

Right. So pricing is in – by definition, it’s still (inaudible) left. It’s up about 12.5%?

Cheryl Beebe

And mix, as you said.

David Driscoll – Citi

Yes, pricing mix.

Cheryl Beebe

As you took capacity, yes, with the higher mix items.

David Driscoll – Citi

And then just going to North America, you might want to be somewhat protective of your comments on exactly how much pricing you got, but I generally always think, because how large the unit is, if the total aggregate company is going to see pricing up 12.5%, pricing and mix of 12.5%, North America can never be very far from those numbers either side. Otherwise you can’t get to the full company average. So, unless I’m missing something there, it sounds to be like the US operations, really North American operations, fully demonstrated the strong capacity utilization balances. Would you guys agree with my characterization?

Cheryl Beebe

Yes, we would.

David Driscoll – Citi

Okay. And then kind of building on this, one of your competitors remarked that they expected to see increasing exports of high fructose corn syrup to Mexico in 2012. So year-on-year growth. Do you guys concur with that assessment and how strong of a rate of growth do you expect in the exports? And that – really I’m trying to get to the heart of capacity utilization and ongoing improvements there. How much more can we really expect North American utilization rates to improve because of this rather positive dynamic between the United States and Mexico?

Ilene Gordon

I would say that – I don’t have a number per se, but I do concur that exports will continue to increase. I mean, of course it’s all being generated by the Mexico demand. And of course, you read some of the reports with Coca-Cola making further investments in Mexico, large commitments of $1 billion in that area that our industry, because it is a North American industry, is focused on supplying the product for that. So I would say, yes, there will be increases, but I don’t have a number in mind per se. But I think that we’ll continue to provide for a tight capacity utilization environment.

David Driscoll – Citi

And then in terms of new capacity within North America, do you know of anything that’s significant that’s coming on line?

Ilene Gordon

No, we don’t know of anything and we read the same reports as you, but we don’t know of anything.

David Driscoll – Citi

I mean, I generally think that it doesn’t make logical sense for anyone to engage in those kinds of capital expenditures because there is just not the volume there. So we have for some period of time benefits from Mexico. That will taper off. And then essentially you get the North American market in aggregate. That’s a relatively slow growth environment such that there shouldn’t be any real strong desire for anyone to put in huge capital dollars. Would you guys also agree with that statement?

Ilene Gordon

Yes. We see the environment like you do, and I think certainly – I do see the Mexico demand continuing to grow. You have a population there that is growing and more disposable income. So, putting aside any kind of short-term recession that I would expect Mexico to continue to grow and that again the North America environment should be able to supply that, the current capacity.

Cheryl Beebe

And Dave, I would just add one additional color comment – Ilene's comment. And that is, as we have talked about, the North American market and our North American business is that the ideal state is to be steady-state, high capacity utilizations and the cash flow that it generates. And that layout allows the corporation to continue to expand its product portfolio and its geographic footprint. So it’s an integral part of building on that strategic growth platform.

David Driscoll – Citi

I think it’s all very clear you guys are running a very nice business. Congratulations on a good ’11 and a nice outlook for ’12. Thank you.

Ilene Gordon

Thank you.

Cheryl Beebe

Thank you.

Aaron Hoffman

Thank you.

Operator

We’ll go next to Heather Jones, BB&T Capital Markets.

Ilene Gordon

Good morning, Heather.

Heather Jones – BB&T Capital Markets

Good morning.

Aaron Hoffman

Good morning.

Heather Jones – BB&T Capital Markets

Can you hear me?

Ilene Gordon

Yes.

Aaron Hoffman

Yes.

Heather Jones – BB&T Capital Markets

Okay. I’ve been having issues with my connection and so – anyway, I apologize.

Aaron Hoffman

I understand. Sorry, Heather, I understand that everybody listening that there is some sort of delay for some of the folks asking questions. So I apologize about that. It sounds like there’s some little technical glitch that we’ll be patient with you and you be patient with us on that. We apologize.

Heather Jones – BB&T Capital Markets

Okay. Thanks. First going to your guidance and how you’re talking about second half comparisons being better than first half. And you may have mentioned this and I just missed it, but are you still anticipating growth in the first half or will all the growth be back-end loaded?

Cheryl Beebe

No, there is some growth in the first half, but there is more of it occurring in the second half. And that goes to as we expect that our volumes, especially in South America, will pick up as the year goes on.

Heather Jones – BB&T Capital Markets

Okay. And last Q1, I mean, even excluding the settlement with Mexico, was a very strong Q1. Is it – do you anticipate being able to comp up against that or how should we be thinking about Q1 because I believe you had unusually low corn costs in Q1 of last year.

Cheryl Beebe

That’s correct, Heather. I would expect us once you take out the $0.75 for the NAFTA settlement and taking into account the fact that the corn costs were the lowest in the year is that we would expect to get close that number. We would not expect to be exceeding that number. And the thing that would change that is that volume is stronger than what we’re forecasting in the first quarter. Then I would expect that we could come on top of that number or exceed it slightly, but we have to have more robust volume than what we’re currently forecasting.

Heather Jones – BB&T Capital Markets

Okay. And in Q2, not only do you not have a repeat of Argo, but you also don’t have a difficult corn price comp. So, should – is it fair to assume that you should have pretty good growth in Q2?

Ilene Gordon

Yes.

Heather Jones – BB&T Capital Markets

Okay. And just a real detail question. Interest expenses, what should we – that came in a little higher than we were looking for for the quarter. I mean, what should we be looking for on a full year basis for 2012?

Cheryl Beebe

I think you’re looking at around $80 million. That would be –

Heather Jones – BB&T Capital Markets

And that’s net?

Cheryl Beebe

That’s net. That would be my best estimate at this point in time.

Heather Jones – BB&T Capital Markets

Okay. And as far as your assumptions, I guess what’s underlying your assumptions is – what are you thinking in terms of basis? I mean, I know everyone that bothers talking about how high basis costs are. I mean, I would assume you have that built into your model, but if you could just give us some color as to what you are assuming on that part of the corn cost?

Cheryl Beebe

We’ve built in some increases in the basis. If it really jumps wildly, then that would have an impact on us. But again, I think we need to put this in context. It’s not something that I would expect based upon where we sit today to knock us off this guidance.

Heather Jones – BB&T Capital Markets

Okay. And then finally, nat gas has come down considerably, and if I remember correctly, you started locking that in like middle of the year. And so my guess is you are not going to benefit this year from the prices we see now. And if that’s the case, should we consider this to be a nice tailwind even going into 2013?

Cheryl Beebe

If natural gas prices remain where they are today, then it would be a benefit for us in 2013. But that’s what – we have a long way to go between today and 2013. I would expect that we would have somewhat favorable energy costs in North America, but the rest of world, you’re seeing increases in Korea, you’re seeing increases in Pakistan. And with the current movement on a US dollar reported basis, I would expect to see increases in South America.

Heather Jones – BB&T Capital Markets

And you are talking about 2012?

Cheryl Beebe

2012.

Heather Jones – BB&T Capital Markets

Right. Okay. All right. Well, thank you very much.

Cheryl Beebe

You’re welcome.

Operator

We’ll go next to Farha Aslam, Stephens Inc.

Farha Aslam – Stephens Inc.

Hi, good morning.

Ilene Gordon

Good morning.

Cheryl Beebe

Good morning .

Aaron Hoffman

Hi, Farha.

Farha Aslam – Stephens Inc.

Just some increased color on Asia, that tends to be a region that has had a mixed performance in the past, which is sounding very confident about volume growth in 2012. Could you just share with us what’s driving that confidence about volume growth in the various countries?

Ilene Gordon

Yes. I mean, first of all, if I look at a couple of the countries where we have a major position, I take something like Thailand. We had floods during 2011. So the demand for the food products is coming back there. So certainly when you look year-over-year, I would see the demand up there for some of the food products, and of course the population is growing and certainly disposable income is growing in Thailand. Similarly in Korea, I mean, it’s still – it is a slow growth economy, but then again there is demand for healthy food in Korea. And so we participate in a number of different products there. So I would continue to see that.

And then if I went to China where we do have a position, of course, China is still growing and maybe not what it was, but certainly people see a positive outlook there. And again, the demand for our modified starches and the food products continues to be a good factor in China. So with the growth of the population and again improvement in disposable income, I would also see the demand growing there.

Farha Aslam – Stephens Inc.

And if you have to look at Asia again, in terms of the key drivers, would it be more sweeteners or starches in Asia for 2012? Well, I would tell you –

Ilene Gordon

Yes. It’s very balanced. And we only produce high fructose corn syrup in Korea. So we participate in Korea in both sweeteners and starches, and the same thing is – certainly in Thailand we participate in both sweeteners and starches. And for the most part, in China, it’s really only starches for both the food and industrial markets.

Farha Aslam – Stephens Inc.

Okay. And then just switching over to South America, could you give us an update about the new facility you are building in Brazil and kind of when that’s expected to come on?

Ilene Gordon

When we talked about our investment in Brazil a year ago of $75 million to $100 million, we talked a little bit about an expansion in the Northeast, particularly to serve the beer industry. And we’re just seeing that first expansion on line now and it’s going well. So, as that demand for that product comes on with our customers, we expect to continue to be able to serve them. And there are other expansions. We have five facilities in Brazil that we continue to optimize. But that first piece is coming on line now.

We also have, as we’ve talked about before, our small expansion investment in the Stevia business and our product called Enliten, and that’s in one of our facilities in South America that we mentioned came on actually last May until as we continue to test products and consumers’ acceptance of the sweetener of Stevia for our Enliten continues to grow, we’re continuing to bring to product with our customers. So that’s another piece that we’re starting to see some growth in.

Farha Aslam – Stephens Inc.

And just my final question on South America, similar to Asia, if you have to say what’s driving your growth in 2012 in South America, would it be more starches or more – it’s all starches, but is it beer or more food?

Ilene Gordon

For beer, we call that high maltose corn syrup. And so, is it a sweetener? Is it a starch? It’s both. So I would say that in South America, we expect the demand for the products for the beer industry as well as, you’re right, the modified starches for the food industry will continue to grow in South America. And of course, we have the high fructose corn syrup in Argentina that also has strong growth.

Farha Aslam – Stephens Inc.

Great. Thank you for the additional color.

Ilene Gordon

You’re welcome.

Operator

We’ll go next to Lindsay Drucker Mann with Goldman Sachs.

Lindsay Drucker Mann – Goldman Sachs

Thanks. Good morning, everyone. I just was curious if you could give a little bit more detail – Cheryl, you’ve talked about having achieved better pricing than you had initially anticipated starting the year. And I was curious if that was a function of better capacity utilization, key products or greater demand from the customers, if it was regionally bias or if it was a function of corn prices perhaps being higher? Maybe just shed a little bit of light on why the business from a price/mix perspective was stronger than you had thought.

Cheryl Beebe

It really had to do with the rise in the corn costs and the ability to price that through. And it was more reflective in our South American business, Lindsay.

Lindsay Drucker Mann – Goldman Sachs

Okay. And then maybe if you could just give a little bit more detail on the – what's going to happen with your integration in Canada and Europe in coming quarters.

Cheryl Beebe

What we’re doing is we are bringing the US/Canadian businesses, the legacy Corn Products and legacy National Starch on to our SAP platform. And both companies currently run SAP. Our integration plan was to bring all the legacy National Starch on to the CPO platform. We run a global/regional SAP environment. So we went live February 1 on the integration of US/Canada. And obviously when you do the systems integration, then you have to integrate the businesses. So we have actually merged the two entities together.

So there is only Corn Products International, and we are running the business that way. And the same thing exists in Europe. Europe is not the integration of two businesses because we did not have a European business. So it’s just a question of bringing them up on the global SAP footprint. We have done this. We have marched through the world. Last year we did Brazil, we did Mexico, we did Thailand, we did Japan, we did Singapore. And so we have an excellent track record of managing our systems conversions and also integrating two businesses into one.

Lindsay Drucker Mann – Goldman Sachs

Okay. And then just on your growth rates, you gave us some nice sort of split by region. As far as the US is concerned, I understand high fructose corn syrup market is one which is arguably in secular, no growth or decline. But to what extent do you expect some expansion in higher value-added starches in ingredients to offset some of the sluggishness in corn syrup?

Ilene Gordon

First of all, we talk about North America. And as you heard comments earlier, there is of course what I consider a pretty balanced scenario in North America for high fructose corn syrup between US, Canada and Mexico. So that has strengthened the supply/demand side of it. Certainly in the modified starch area, there are – the demand continues to grow especially in Mexico. So we see some opportunities there. But of course that won’t grow as a sizable unit to offset any pressure there may be on some of the sweeteners. So I think it’s a very balanced environment at the moment.

Lindsay Drucker Mann – Goldman Sachs

Got you. And then just lastly, are you guys seeing any impact from new corn oil supplies with some of the dry mills implementing corn oil extraction technology?

Ilene Gordon

No, we haven’t seen any.

Lindsay Drucker Mann – Goldman Sachs

Okay. Thank you.

Ilene Gordon

You’re welcome.

Cheryl Beebe

You’re welcome.

Operator

We’ll go next to Vincent Andrews, Morgan Stanley.

Cheryl Beebe

Good morning, Vince.

Aaron Hoffman

Good morning.

Greg Van Winkle – Morgan Stanley

Hi, I think Vincent just dropped off. This is Greg Van Winkle. We’re just hoping to get some color on industrial demand in the US. I know it’s a smaller part of your portfolio, but if you could just tell you what you see in there, it would be great.

Ilene Gordon

Yes. I mean, I think that it’s – it's been a pretty flat environment. Certainly when you look at the corrugated numbers, for the fourth quarter, they were actually up, their industry, 0.9%. For the year, it’s 0.6%. So certainly this growth – because I think the year before it was pretty low. But again, this consolidation in that industry. And so our business – we certainly supply industrial. We also supply the pharmaceutical side and personal care. So we’re always looking for opportunities to create value-added products. But it’s the corrugated side and paper have not had a lot of growth.

Greg Van Winkle – Morgan Stanley

Okay. Thanks.

Ilene Gordon

You’re welcome.

Operator

And we’ll go next to Christine McCracken, Cleveland Research.

Christine McCracken – Cleveland Research

Good morning.

Ilene Gordon

Good morning.

Christine McCracken – Cleveland Research

Good morning. Just on Mexico, I wanted to confirm that you source your corn into those facilities from the US and/or – would you have any impact from the ongoing drought in that region?

Ilene Gordon

We basically do a combination of sourcing from the US and also local grown. We tend to have very specific IP, identity program for one or two of our customers. And so, Christine, we’re not seeing anything relative to having an impact on the corn positions of what’s coming from the local versus the US.

Christine McCracken – Cleveland Research

Okay. And just in terms of Mexico and that facility, as you look at your utilization rates in the US being fairly (inaudible), I’m just wondering if you’re seeing the same kind of usage rates down there in infrastructure.

Ilene Gordon

Yes. And you know that we have three facilities in Mexico. So we continue to have lots of options in terms of optimizing facilities, but we’re pretty busy. So again, as I said earlier, the demand for products in Mexico continues to be there with the growth of the population and disposable income. So we’re utilizing our three facilities.

Christine McCracken – Cleveland Research

All right. And then just as a follow-up in terms of your energy project in Pakistan, I’m just curious if you could give us some idea on the timing of that and the potential financial benefit.

Cheryl Beebe

The benefit is coming from our ability to keep the plant running. So we take less downtime, which is what creates the financial benefit. The timing on it is latter part of the year. And then the pace that I want to comment on is that even though we can keep our facility running until Pakistan fixes the country issue around the energy infrastructure, it still has the potential to impact our customers. We just don’t take the type of maintenance downtime that these unscheduled hits cause it.

Christine McCracken – Cleveland Research

All right. But with the issues tied to the disruption at the customer level, technically you could still have that choppy kind of stuff?

Cheryl Beebe

That’s correct.

Christine McCracken – Cleveland Research

Okay. Thanks.

Aaron Hoffman

Good. And I think we’ll just take one more question and then we’ll have to wrap up.

Operator

We’ll have our final question from Ann Gurkin, Davenport.

Aaron Hoffman

Hi.

Ann Gurkin – Davenport

Great. Thank you. Good morning.

Aaron Hoffman

Good morning.

Ilene Gordon

Good morning.

Ann Gurkin – Davenport

Hi. I just wanted to have a little discussion on how consumer demand for your products came through by year-end versus expectations as you went into the fourth quarter and have you changed any kind of demand expectations in different markets in your guidance in ’12.

Ilene Gordon

Demand came in as we expected. And of course, as we said, we knew there would be a little bit of slowness in Europe. The weather in Brazil certainly was a little bit of a surprise because that’s what I call real-time. But otherwise, everything was exactly as we thought. And as we go into this year, again, I think it’s all incorporated into our forecast. And it’s been a wet month in January in Brazil, but it’s – we think it’s coming back now. And again, Europe, we continue to supply our products there, but there’s a little bit of a sluggishness there. But I think all of that’s incorporated into our forecast and we expect the demand to come back.

Ann Gurkin – Davenport

That’s correct. That helps. And then in South America, operating margin is still the target of mid-single digit range. Is that still a reasonable target?

Ilene Gordon

That’s correct.

Cheryl Beebe

Yes, we haven’t come off our historical norms.

Ann Gurkin – Davenport

Okay, perfect. Thank you very much.

Cheryl Beebe

You’re very welcome.

Ilene Gordon

Okay. Before we sign off, just let me make a few final comments. I know we’re short on time here. The Corn Products business model is performing very well and delivering strong results, as you just saw. In fact, the strength of the model becomes more obvious in difficult times when many other companies struggle to weather various headwinds. And I think we’ve done well.

We are actually built to do just that, making us a fairly defensive stock to own in challenging times. Although I’d argue that we are a defensive stock with a significant growth capability. And you’ve seen the evidence of this in our historical double-digit EPS growth rate and our commitment to continuing at that pace over the long-term. So we look forward to posting you on our growth and success in the coming year.

So that brings our fourth quarter 2011 earnings call to a close. We’d like to thank you again for your time today and look forward to talking with you again. Thank you.

Operator

That concludes today’s conference. Thank you for your participation.

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