Ingredient to focus on vegetable proteins, texturants

WESTCHESTER, ILL. — In a Nov. 3 conference call with analysts to discuss third-quarter financial results, executives at Ingredion, Inc. said the company is sharpening its focus on becoming a leader in texturing, sugar reduction and plant-based proteins. The specialty ingredients supplier faced higher costs for corn and other raw materials during the quarter.

“We achieved a strong price mix of $335 million, including the pass-through of higher corn and feedstock costs,” said James Gray, chief financial officer. “The increase in sales volume of US$14 million was driven by volume increases in each of the regions and was offset by a decrease of US$18 million due to the change in performance related to the joint venture in Argentina.

“As I mentioned earlier, our business model, as measured by gross margin percentage, is affected by rising and falling corn prices. In rising corn price cycles, historically, our pricing has lagged behind the change in the price of corn and therefore our gross margin percentage has been impacted.

“What was [happening] in this quarter. We have worked on pricing and our hedging strategies to mitigate the impact of changing corn values ​​on our quarterly cost layout.”

Ingredion’s net income for the third quarter ended Sept. 30 was $109 million, or $1.61 per common share, an 8% decrease from the prior year’s third-quarter revenue of $119 million, or 1. $76 per share. Adjusted EPS was $1.73 compared to $1.67 in Q3 2021.

Quarterly sales increased to $2.02 billion, up 15% from $1.76 billion a year earlier.

James Zally, president and CEO, said the company continues to work to improve plant protein production every quarter.

“As it relates to just the whole plant-based protein category, I would say I would remind everyone that the approach we’ve taken

is to build a broad portfolio of protein flowers, concentrates and isolates across four types of pulse-based proteins,” said Mr Zallie. “So we’re not dependent, for example, on just pea protein isolate that goes into alternative meats.

“So we’re in it for the long haul, and we’re still optimistic. And that makes us a more complete supplier. When you think of us as a leader in texturing, a leader in sugar reduction, and a leader in plant proteins, they all support each other in terms of innovative, new product development opportunities for customers.

“And some of our wins right now that we’re seeing are in alternative snacks, for example, or protein-enriched snacks in bakeries and alternative dairy products, as opposed to, say, reliance on alternative meats.”

In North America, the company’s largest business unit, operating income for the third quarter was $126 million, up 5% from $120 million in the same period in 2021. Sales were $1.26 billion, an increase up 17% from $1.08 billion. The increase was driven by a favorable price mix that more than offset higher corn and input costs.

Operating income for the third quarter in the South America segment was $48 million, up 37% from $35 million in the prior year. Sales were $293 million, up 13% from $260 million a year ago. Excluding the impact of foreign exchange rates, the segment’s operating income rose 43% for the third quarter.

In the quarter, Ingredion started production at a new facility in Shandong, China.

“This facility comes at an ideal time as it allows us to leverage and expand our new network capacity to support our European customers who are concerned about the expected shortage of some starch products in the industry due to the severe summer drought “said Mr. Zali. “Of particular importance, as it relates to the largest component of our specialty sales, the global texturizer market is growing at 3% to 5% and generally has consistent demand across economic cycles. This is due to their versatility, functionality and affordable price.

“Therefore, to ensure we have capacity where we expect it will be most needed ahead of increased demand, we are investing $160 million over three years to support our texturizer growth. I am pleased to say that we have already invested about a third of this amount to support the growth of our clean label franchise and are locating more production in all four regions.”

For the full fiscal year 2022, Ingredion said adjusted EPS is now expected to be in the range of $7.00 to $7.45, compared to adjusted EPS of $6.67 in 2021 and the previous outlook of $6.90 to $7.45.

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