Englewood, Colorado, Dec. 19, 2002

Penford Corporation Reports Strong First Quarter Results

Penford Corporation (Nasdaq: PENX) today reported that consolidated sales increased 17% to $66.0 million for the quarter ended November 30, 2002 compared to $56.3 million for the quarter ended November 30, 2001. Net income, including the National Starch transaction discussed below, increased to $3.3 million, or $0.42 per diluted share, from $1.2 million, or $0.16 per diluted share last year. Net income for the first fiscal quarter, excluding the National Starch transaction, was $1.7 million, or $0.21 per diluted share, an increase of 35% in net income over the first quarter of fiscal 2002.

Segment Results
Penford's industrial ingredients business unit increased its sales by 21% in the first quarter compared to the year-ago quarter, due to higher volumes and improved product mix as paper industry customers reconfigured manufacturing processes and replenished inventories. Higher revenues and lower manufacturing costs resulted in operating income increasing to $2.8 million from $1.3 million in fiscal 2002.

Sales at Penford's Australia/New Zealand operations rose 23% in the first quarter of fiscal 2003 compared to the same quarter of fiscal 2002. The gain is due to higher volumes, improved product mix, and stronger currency rate comparisons. However, higher raw material grain costs caused by the continuing drought in Australia more than offset the revenue increase and operating income declined to $1.4 million from $1.6 million a year ago.

Sales at the North American food ingredients business were comparable to last year's first quarter. Operating income decreased to $1.7 million from $1.9 million a year ago as Penford incurred costs to support several new product initiatives and customer trials that are currently underway.

Thomas Malkoski, Chief Executive Officer of Penford Corporation said, "Our industrial ingredients business had an outstanding quarter and Penford Australia increased revenue at double-digit rates despite the challenge of the worst drought in Australia in a century. Growth in these two units comprises a healthy mix between core business and new products. The Food Ingredients group has a good pipeline of new projects that should be a foundation for future growth."

On November 26, 2002, Penford sold certain assets of its resistant starch Hi-maize^® business and granted a royalty bearing license to its resistant starch intellectual property patent portfolio for applications serving human nutrition to National Starch and Chemical Company, a member of the ICI Group. Penford has retained the rights to commercialize its intellectual property for all non-human nutrition applications.

Penford recorded a $1.9 million pre-tax gain, or $0.21 per diluted share after tax, on the sale of its Hi-maize^® business. In addition, Penford will amortize the net $1.6 million upfront fee received in consideration for the license grant over the life of the royalty agreement. Penford is also entitled to royalty payments under the terms of the license agreement. The transaction also includes an agreement to manufacture and supply resistant starch products for National Starch for an initial period of seven years.

"We successfully monetized the opportunities in human application of the Hi-maize^® product for our shareholders," added Malkoski. "The cash proceeds from the National Starch transaction were used to reduce our debt balance. We will now redeploy our development resources towards commercializing select targeted growth platforms. Our strong focus on executing our business strategy is beginning to take hold."

Penford Corporation will host a conference call to discuss first quarter financial and operational results today, December 19, 2002 at 9:00 a.m. Mountain Time (11:00 a.m. Eastern Time). The Web-cast and replay of the call will be available at www.penx.com until January 20, 2003.

About Penford Corporation
Penford Corporation develops, manufactures and markets specialty natural-based ingredient systems for various applications, including papermaking and food products.

For automated shareholder information, please call 1-888-317-2013.

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This press release contains forward-looking statements concerning the Company's future performance and the prospects for the continuation of current performance trends in fiscal 2003. 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 or delays in customer demand or orders, increased competition, decreases in market share, unfavorable changes in product mix, disappointments in product development and commercialization efforts, interest rate and energy cost volatility, foreign exchange rate fluctuations and those listed in the Company's SEC reports, including the report on Form 10-K for the year ended August 31, 2002.

Penford Corporation Financial Highlights (Unaudited)
(In thousands, except per share data)
	First Quarter Ended November 30
	2002	2001
Consolidated Results
Sales	$66,041	$56,305
Net income	$3,298	$1,240
Earnings per share, diluted	$ 0.42	$ 0.16
Results by Segment
Industrial Ingredients:
Sales	$35,688	$29,472
Gross margin	16.7%	13.9%
Operating income	$2,811	$1,315
Food Ingredients - North America:
Sales	$11,511	$11,506
Gross margin	29.6%	30.8%
Operating income	$1,700	$1,870
Australia/New Zealand:
Sales	$18,903	$15,327
Gross margin	13.3%	16.6%
Operating income	$1,400	$1,573

Consolidated Condensed Balance Sheets
	November 30
	2002	2001
Current Assets	$69,168	$55,398
Property, plant and equipment (net)	$129,940	$136,095
Other assets	$44,798	$45,733
Total assets	$243,906	$237,226
Current portion of debt *	$67,261	$17,012
Other current liabilities	$29,740	$22,908
Long-term debt	$27,744	$89,874
Other liabilities	$46,047	$41,934
Shareholders equity	$73,114	$65,498
	$243,906	$237,226
* Includes $47.7 million in revolving loans, representing the scheduled October 31, 2003 expiration of Penford's revolving credit agreements dated November 2000.

Penford Corporation Consolidated Statements of Income (Unaudited)
(In thousands, except per share data)
	Three Months Ended November 30
	2002	2001
Sales	$66,041	$56,305
Cost of sales	54,156	46,106
Gross margin	11,885	10,199
Operating expenses	6,368	4,714
Research and development expenses	1,411	1,571
Income from operations	4,106	3,914
Non-operating income, net	1,895	--
Interest expense, net	1,564	2,067
Income before income taxes	4,437	1,847
Income taxes	1,139	607
Net income	$3,298	$1,240
Weighted average shares outstanding, diluted	7,884	7,602
Earnings per common share, diluted	$0.42	$0.16
Dividends declared	$0.06	$0.06