Bellevue, WA, October 26, 1999 — Penford Corporation (NASDAQ:PENX) today reported results for its fourth quarter and fiscal year ended August 31, 1999.

For the fourth quarter, Penford reported net income of $1.9 million, or $0.25 per share, (7,696,000 weighted average shares), versus net income of $2.4 million, or $0.32 per share (7,527,000 weighted average shares), in the fourth quarter last year. Last year’s fourth quarter results included a $170,000 loss from discontinued operations, or $0.02 per share, related to Penwest Pharmaceuticals Co. (PPCO), spun-off to shareholders on August 31, 1998. Fourth quarter sales from continuing operations were $39.9 million versus $40.2 million on a comparable basis last year. All per share amounts in this release assume dilution.

For the fiscal year, the Company reported net income of $6.2 million, or $ 0.80 per share (7,750,000 weighted average shares), versus a net loss of $632,000, or ($0.08) per share (7,531,000 weighted average shares), last year. Included in current year results is a $1.6 million restructuring charge ($1.0 million after-tax, or $0.13 per share) taken in the third quarter relating to the Company’s previously announced workforce reduction program. Last year’s fiscal results included a $8.7 million after-tax loss from the discontinued operations of PPCO, or ($1.16) per share. Also included in last year's results was a $1.9 million restructuring charge ($1.3 million after-tax, or $0.17 per share), related to the spin-off of PPCO. Fiscal year sales from continuing operations were $155.1 million versus $163.0 million on a comparable basis last year.

Excluding discontinued operations, the Company reported quarterly income from continuing operations of $1.9 million, or $0.25 per share, versus $2.6 million, or $0.34 per share, last year. For the fiscal year, the Company reported income from continuing operations of $6.2 million, or $0.80 per share, versus $8.1 million, or $1.08 per share, last year.

Jeffrey T. Cook, Penford President and Chief Executive Officer, said, "We are pleased with the recent, improving performance of all our operations as we move into fiscal 2000. Both our industrial and food ingredients businesses contributed to current results, while also building future revenue opportunities by developing new, innovative products that provide superior value to our customers. We are steadily establishing ourselves as a premier global provider of specialty carbohydrate-based ingredient systems for a wide variety of industrial and food applications."

Penford reported continued strong earnings and volume growth in its food ingredients business in the fourth quarter. Earnings for the year in food ingredients more than doubled over last year’s results, reflecting increased penetration of value-added opportunities for the Company's specialty food-grade potato starches. Specialty food-grade starch volumes rose nearly 30% in the quarter and over 40% for the year. "Looking ahead, we are progressing in our efforts to develop a third platform which combines food-grade potato and corn specialty starches with other natural ingredients to take advantage of the growing food industry trends of convenience, nutrition and cost effectiveness," said Mr. Cook.

Segments of the North American paper market served by Penford continue to show improvement. After several quarters of decline, paper volumes rose modestly and prices stabilized. "We are seeing some improvement in our operating rates and, importantly, a further shifting of product mix towards higher margin, value-added products. We also added a major new customer during the quarter that will positively impact our results in calendar 2000. Leveraging our expertise to develop new value-added products remains among our highest priorities. For example, during the quarter, we introduced Liquisize™ emulsifier, a specialty potato-based liquid sizing agent for paper applications providing performance benefits for our customers as well as replacing high cost synthetic-based materials.

"As experts in carbohydrate-based ingredient systems, we see many diverse opportunities in product applications across our company. We look forward to working internally and with our alliance partners to capitalize on these many growth opportunities," Mr. Cook said.

Penford Corporation develops, manufactures and markets specialty carbohydrate- based ingredient systems for industrial and food applications.

This press release contains forward-looking statements concerning anticipated performance of Penford Corporation. There are a variety of factors which could cause actual events to differ materially from those projected in the forward-looking statements such as decreases in customer demand, unfavorable changes in product mix, a delay in the ramp-up of a new, major customer, disappointments in product development efforts, unforeseen costs and expenses associated with the previously announced workforce reduction, and those listed in the Company’s SEC reports, including the reports on Form 10-K for the year ended August 31, 1998.