Bellevue, WA, October 21, 1998 ó Penford Corporation (NASDAQ:PENX) today reported results for its fourth quarter and fiscal year ended August 31, 1998.

Jeffrey T. Cook, President and Chief Executive Officer, said, ěPenford Corporation completed a year of significant strategic progress, completing the spin-off of our pharmaceuticals business, while continuing to successfully execute the strategies that are building value at our specialty paper chemicals and food ingredients businesses despite challenging conditions in the paper industry.î

As previously announced, the Company completed a tax-free spin-off to its shareholders of its pharmaceuticals subsidiary, Penwest Pharmaceuticals Co. (PPCO), on August 31, 1998. As a result of the spin-off, Penfordís results include certain non-recurring charges and PPCOís results are recorded as discontinued operations.

For the fourth quarter, the Company reported earnings from its continuing specialty paper chemicals and food ingredients businesses of $2.6 million, or $0.34 per share assuming dilution (7,526,825 weighted average shares), versus earnings of $2.6 million, or $0.35 per share assuming dilution (7,463,210 weighted average shares), from these same businesses last year. Revenues in the current quarter were $40.2 million versus $42.1 million on a comparable basis last year.

Penford Corporation reported fourth quarter net earnings of $2.4 million, or $0.32 per share assuming dilution, including an additional loss from discontinued operations of $170,000 after-tax, or $0.02 per share assuming dilution, to adjust the previously recorded estimate of PPCO fourth quarter operating losses. Net earnings for the fourth quarter of fiscal 1997 were $2.2 million, or $0.29 per share assuming dilution.

Earnings from continuing operations for the year ended August 31, 1998 were $8.1 million, or $1.08 per share assuming dilution (7,530,640 weighted average shares), on revenues of $163.0 million. The current year includes a one-time restructuring charge of $1.9 million ($1.3 million after tax, or $0.17 per share assuming dilution), related to the spin-off of PPCO. Earnings from continuing operations for the prior year were $8.9 million, or $1.25 per share assuming dilution (7,131,725 weighted average shares), on revenues of $170.1 million. Results for 1997 included a one-time gain of $1.2 million ($800,000 after tax, or $0.11 per share assuming dilution) from the sale of air emission credits. Excluding one-time items in both fiscal years, the Company earned $1.25 per share assuming dilution from continuing operations in 1998, compared to $1.14 per share assuming dilution, on the same basis, last year. Losses from discontinued operations totaled $8.7 million, or $1.16 per share assuming dilution, in the current year, and $2.3 million, or $0.32 per share assuming dilution, last year.

Mr. Cook said, ěPenford Products Co. continued to have success expanding and enhancing its product mix and maintaining cost controls, even as it faced pressure on revenues and volumes related to the continuing impact of Asian economies on the operations of its North American paper customers.

ěPenford Food Ingredients Co. reported its second consecutive year of profitability on double digit sales and volume growth in starches from both its coatings and processed meats businesses.

ěOur outlook for fiscal 1999 continues to incorporate caution related to Asian and worldwide economic uncertainty, but we are also seeing indications that conditions in our markets could improve in the second half of the year,î Mr. Cook concluded.

The Company also announced that its Board of Directors has authorized the repurchase of up to 500,000 shares of its outstanding common stock, reflecting the Boardís confidence in the long-term strength and potential of Penford Corporation, and the Companyís current stock prices.

As of the end of the Companyís fiscal year there were approximately 7.3 million shares of Penford Corporation stock outstanding.

Penford Corporation develops, manufactures and markets specialty carbohydrate- based chemicals for papermaking and specialty food ingredients through its Penford Products Co. and Penford Food Ingredients Co. businesses.