Ingredion meets the demand for specialty ingredients

WESTCHESTER, ILL. — In the second quarter ended June 30, although Ingredion, Inc. continued to deal with higher corn costs and unfavorable exchange rates, a 16% increase in net sales was enthusiastically received by investors. On Aug. 9, shares of the Westchester-based ingredients maker traded as high as $95, up 4.5 percent from the previous day’s close of $90.86.

“Our teams delivered our strongest quarter since 2017,” said James P. Zally, president and chief executive officer, on a conference call with securities analysts to discuss second-quarter results. “Net sales growth of 16% reflected strong customer demand, which led to comparable volume growth; this, together with active price mix management, allowed us to fully offset higher input costs. As a result, our adjusted operating income increased from last year’s strong performance and was higher than our expectations.

“Regarding customer demand, I would like to note that on a comparable basis, our volumes shipped are now above pre-pandemic levels for the same quarter of 2019. This is an important milestone for us given the impact the pandemic has had for the industry and our business over the past two years. At the same time, net sales grew significantly and specialty ingredients increased as a percentage of both volume and net sales, reflecting a higher value mix.

“In response to continued strong demand for clean label texturizing starches, we have accelerated the commissioning of new capacity at our Indianapolis facility. In addition, our Sugar Reduction and Specialty Sweeteners platform had another excellent quarter, increasing net sales by more than 20%, led by double-digit top-line growth in PureCircle’s stevia franchise.”

Net income for the quarter ended June 30 was $142 million, or $2.14 per share of common stock, down 20% from the prior year’s second-quarter earnings of $178 million, or 2 $.65 per share.

Quarterly sales increased to $2.04 billion, up 16% from $1.76 billion a year earlier.

In North America, the company’s largest business unit, operating income for the second quarter was $161 million, up 8% from $149 million in the same period in 2021. Sales were $1.28 billion, an increase of 20% of $1.06 billion.

“Net sales in North America were up 20% compared to the same period in 2021,” James Derek Gray, executive vice president and chief financial officer, said on the conference call. “The increase was driven by a strong price/mix, primarily as a result of last fall’s contract season, as well as dynamic pricing throughout the year.”

Operating income in the South America segment was $39 million in the second quarter, up 18% from $33 million in the prior year period. Sales were $290 million, up 8% from $268 million a year ago.

“Also contributing to the performance in the second quarter, core ingredients drove net sales growth in the mid-teens,” Mr Zalli said. “Our volume growth is a result of strong customer demand in categories such as brewing and confectionery. In addition, improved contract terms have allowed us to more quickly address changing input costs in our largest markets. Higher net sales growth was driven by South America and Mexico as we continued to shift our focus to high-growth categories in these territories.”

For the six months ended June 30, Ingredion’s net income was $272 million, a sharp increase from a net loss of $68 million in the first six months of 2021.

Sales for the six-month period were $3.94 billion, up 17% from $3.38 billion.

For fiscal 2022, Ingredion offered guidance for adjusted earnings per share in the range of $6.90 to $7.45 per share.

“During the first half of the year, we paid $86 million in dividends to Ingredion shareholders and repurchased $83 million of outstanding common stock,” Mr. Gray said. “Ultimately, we acquired additional shares of PureCircle from minority shareholders for $27 million. We expect our full-year 2022 adjusted EPS to be in the range of $6.90 to $7.45. This excludes the impact of integration and restructuring costs related to the acquisition, as well as any potential impairment charges.”

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