Ingredion continues to bounce back in third quarter

by Jeff Gelski
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WESTCHESTER, ILL. — A 45% increase in earnings per share in the third quarter has Ingredion, Inc. continuing to recover from a poor first quarter. The Westchester-based company recorded e.p.s. of $1.60 in the third quarter, which compared with $1.10 in the previous year’s third quarter. Third-quarter net sales of $1,612 million were down 9% from $1,460 million.

“Although sales were down $152 million, it was largely the result of passing through lower-priced corn in our selling prices,” said Jack Fortnum, executive vice-president and chief financial officer of Ingredion, in an Oct. 30 earnings call.

Third-quarter operating income increased 30% to $178 million from $137 million.

“Every region delivered double-digit growth (in operating income) for the first time since we acquired National Starch four years ago,” said Ilene Gordon, chairman, president and chief executive officer of Ingredion, in the earnings call.

Year to date, the company’s e.p.s. of $3.89 is up 5% from $3.71 in the same time period of the previous year. Net sales of $4,300 million over the first three quarters were down 11% from $4,829 million.

For the full year Ingredion expects e.p.s. in the range of $5.35 to $5.50 compared with $5.05 in 2013. Previous guidance for this year was $5.35 to $5.75.

“Simply put, our second and third quarters and our forecast for the fourth quarter are in line with the expectations we set forth in the original guidance at the beginning of the year, but as a result of weaker results earlier in the year, we have adjusted our full-year earnings per share guidance accordingly,” Mr.  Fortnum said.

A pending acquisition of Penford Corp., Centennial, Colo., for about $340 million should  contribute to e.p.s. going forward as should Ingredion’s accelerated share repurchase program of about $300 million.

Momentum in North America in the second and third quarters will not compensate for the year’s slow start, and Ingredion expects North America operating income to be down for the full year.

In North America in the third quarter, operating income was $113 million, up 17% from $97 million in the previous year’s third quarter. Volumes rose 3% in North America behind good demand in the United States and Canada. Modest volume declines happened in Mexico where government-imposed taxes targeted items associated with obesity.

“We remain enthusiastic about our long-term prospects in Mexico, our second-largest market behind the U.S.,” Ms. Gordon said. “We have a strong manufacturing and distribution presence in the country, and the long-term outlook for economic development in Mexico is excellent.”

Year to date, North America had operating income of $289 million down 6% from $308 million.

In South America in the third quarter, operating income grew 46% to $27 million from $19 million. Volume fell 2% as the economic softness in Brazil more than offset growth in the rest of the region. Year to date, operating income in South America was $74 million, a 7% drop from $80 million in the same time period of the previous year.

“In North America, we are very clearly on track after a difficult first quarter, and in South America, we continue to manage through an extremely difficult business environment in Argentina and low economic growth in Brazil,” Ms. Gordon said.

In Asia Pacific, third-quarter operating income increased 14% to $27 million from $24 million. In Europe, Middle East and Africa in the third quarter, strong demand for specialty products resulted in a 3% volume gain and a 28% operating income gain to $22 million from $17 million, Ms. Gordon said.
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