Englewood, Co., June 19, 2003

Penford Corporation Announces Third Quarter and Nine Month Results

Penford Corporation (NASDAQ: PENX) today reported financial results for the third quarter and first nine months of fiscal year 2003. For the quarter ended May 31, 2003, consolidated sales increased 12% to $66.0 million from $59.1 million for the same quarter last year. Net income for the third quarter of fiscal 2003 increased 24% to $1.8 million, or $0.21 per diluted share, from $1.4 million, or $0.18 per diluted share for the prior year quarter.

Sales for the nine months ended May 31, 2003 increased 14% to $193.8 million from $170.3 million in fiscal 2002. Net income rose to $6.6 million from $2.8 million a year ago. Diluted earnings per share for the first nine months of fiscal 2003 were $0.82 compared with $0.36 last year. The results for the nine months ended May 31, 2003 included a previously discussed $1.9 million pre-tax gain on the sale of the Company's Hi-maize^® business. The results for the first nine months of fiscal 2002 included a $1.4 million pre-tax restructuring charge related to the Company's relocation of its headquarters to Denver, Colorado.

Business Results
Third quarter sales increased for the fifth consecutive quarter on higher volumes at all three business units and stronger currency exchange rates at Penford Australia Ltd. The Australian dollar has appreciated by approximately 15% compared with the third quarter of fiscal 2002. Gross margins for the period declined by 10% from a year ago reflecting additional costs to acquire grain for our Australian operations and higher energy costs to dry our products throughout North America. Grain prices in Australia are approximately 25% higher than last year and average "spot" natural gas prices in the U.S. have increased 75% from the third quarter of fiscal 2002. Total operating expenses were held constant with the prior year. Despite these efforts, income from operations declined by 21% from the same period a year ago.

Interest expense for the third quarter fell to $1.3 million from $1.6 million a year ago on lower interest rates in the U.S. and reduced debt levels. Income before taxes in the quarter increased 7% to $2.5 million reflecting lower interest charges and royalty income related to the licensing of certain intellectual property rights for the Hi-Maize business. The effective tax rate for the third quarter decreased from the prior year primarily due to changes in Australian tax regulations. Cash from operations in the third quarter increased to $5.3 million from $3.4 million last year and rose to $18.0 million in fiscal 2003 from $16.2 million for the first nine months of fiscal 2002.

Sales at Penford's industrial ingredients business unit rose 7% for the third quarter and 13% year-to-date as volume increases continue in its primary product line. Gross margin as a percent of sales in the third quarter declined to 14.5% from 17.7% last year primarily due to rising energy costs. Cost containment programs reduced the impact from higher natural gas costs but operating income for the third quarter decreased to $2.2 million from $2.9 million a year ago.

The North American food ingredients business reported that sales for the third quarter and first nine months of fiscal 2003 increased 2%. Continued soft demand for our customers' products has reduced volumes in our potato coatings product line and gross margin as a percent of sales in the quarter declined to 25.8% from 31.6% last year from unfavorable product mix changes and reduced plant utilization. Total operating expenses remain below the prior year. Operating income for the third quarter declined to $1.1 million from $1.6 million in fiscal 2002, reflecting the impact of the lower proportional sales of potato coatings products.

Sales at Penford's Australia/New Zealand operations increased 28% in the third quarter and 26% year-to-date. Higher grain input costs reduced gross margin as a percent of sales in the third quarter to 11.4% from 13.3% last year. Income from operations for the quarter rose to $1.2 million from $1.1 million as higher volumes, improved pricing and favorable foreign currency exchange rates more than offset increased grain raw material costs caused by the on-going drought in the region.

"Each of our business units had to react to a difficult operating environment this quarter. We are encouraged that both volumes and pricing have improved, reducing the impact of sharply higher natural gas and grain costs. These costs have decreased our gross margins as a percent of sales by about 3% in the third quarter and we expect this impact to continue" said Thomas Malkoski, Chief Executive Officer of Penford Corporation. "We are responding to this challenge by controlling expenses while continuing to provide superior service and value to our customers."

Penford Corporation will host a conference call to discuss third quarter financial and operational results today, June 19, 2003 at 9:00 a.m. Mountain Time (11:00 a.m. Eastern Time). Access information for the call and web-cast can be found at www.penx.com. A replay will be available at www.penx.com until June 24, 2003.

About Penford Corporation
Penford Corporation develops, manufactures and markets specialty natural-based ingredient systems for various applications, including papermaking and food products. Penford has nine locations in the United States, Australia and New Zealand.

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

TABLES TO FOLLOW
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		Three months ended May 31,				Nine months ended May 31,
(In thousands except per share data)		2003		2002		2003		2002
Consolidated Results
Sales		$66,035		$59,137		$193,769		$170,280
Net income		$1,755		$1,420		$6,639		$2,804
Earnings per share, diluted		$0.21		$0.18		$0.82		$0.36
Results by Segment
Industrial Ingredients:
Sales		$34,912		$32,546		$104,272		$92,416
Gross margin		14.5%		17.7%		15.6%		16.1%
Operating income		2,190		2,917		7,390		6,487
Food Ingredients – North America:
Sales		$10,954		$10,729		$33,418		$32,845
Gross margin		25.8%		31.6%		28.3%		30.9%
Operating income		1,113		1,581		4,499		4,989
Australia/New Zealand:
Sales		$20,304		$15,863		$56,551		$45,019
Gross margin		11.4%		13.3%		12.2%		14.5%
Operating income		1,217		1,094		3,682		3,604

 

		May 31,			August 31,
		2003			2002
Current assets		$73,052			$62,871
Property, plant and equipment, net		130,844			132,042
Other assets		47,382			44,292
Total assets		251,278			239,205
Current portion of debt*		72,052			18,779
Other current liabilities		33,093			29,022
Long-term debt		10,446			77,632
Other liabilities		46,508			44,808
Shareholders’ equity		89,179			68,964
Total liabilities and equity		$251,278			$239,205

* Includes $51 million inrevolving loans, representing the scheduled October 31, 2003 expiration ofPenford’s revolving credit agreements dated November 2000.
Penford Corporation  Consolidated Statements of Income (unaudited)		Three months endedMay 31,				Nine months ended May 31,
(In thousands except share and per share data)		2003		2002		2003		2002
Sales		$66,035		$59,137		$193,769		$170,280
Cost of sales		55,839		47,870		161,141		138,750
Gross margin		10,196		11,267		32,628		31,530
Operating expenses		5,786		5,795		17,969		15,854
Research and development expenses		1,290		1,526		4,036		4,550
Restructure costs, net		-		-		(117)		1,383
Income from operations		3,120		3,946		10,740		9,743
Non-operating income, net		627		5		2,809		50
Interest expense		1,265		1,633		4,249		5,455
Income before income taxes		2,482		2,318		9,300		4,338
Income taxes		727		898		2,661		1,534
Net income		$1,755		$1,420		$6,639		$2,804
Weighted average common shares and equivalents
outstanding, diluted		8,489,320		7,907,213		8,098,943		7,748,022
Earnings per share, diluted		$0.21		$0.18		$0.82		$0.36
Dividends declared per common share		$0.06		$0.06		$0.18		$0.18