Growth in North America keys gains at Ingredion

by Eric Schroeder
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Ingredion has benefited from its recent acquisitions of Penford and Kerr.
  

WESTCHESTER, ILL. — The North American business of Ingredion, Inc. turned in a strong first quarter, and indications are more growth maybe in store for the unit, company executives said.

“(North America) is in fairly good balance in terms of supply/demand,” Jack Fortnum, executive vice-president and chief financial officer, said in an April 28 conference call with analysts. “I think the demand is moving fairly well, and I think there’s a lot of growth opportunities even in the core ingredients area and the utilizations in the industry are quite high. Corn being below $4 means that a substitute type of product, whether it be soy or anything else, or wheat types of starches, are very competitive with our corn refined type of products. …

“I’m always worried about the meteorite that could hit someplace in the business, but fundamentally I would say that the industry itself is in a fairly good balanced position.”

Ilene Gordon, chairman, president and chief executive officer, added that Ingredion’s footprint is such that the company is able to redirect its capacity to specialty products.

“Our strategy is really to grow the specialty (business), and so our goal is really to satisfy the customers’ needs with a portfolio of products, and growing specialty continues to be the primary importance, and we have the footprint and manufacturing capability to do that,” Ms. Gordon said.

She said the Penford portfolio has been “terrific” in terms of providing Ingredion with potato starch, while the addition of the Kerr portfolio has opened the door to the berry side.

Westchester-based Ingredion in the first quarter ended March 31 had net income of $127.2 million, equal to $1.77 per share on the common stock, up 52% from $83.7 million, or $1.17 per share, in the same period a year ago. Net sales of $1,360 million were up 2% from $1,330.1 million in the previous year’s first quarter, driven by improved price/mix in North America and South America, a more favorable product mix in both specialty and core ingredients, as well as acquisition-related growth.

Ms. Gordon said volumes grew by 4%, driven by the addition of Penford and Kerr, but organic volumes were down 2% behind the sale of the company’s Port Colborne facility in Ontario.

In the first quarter in North America, operating income was $149.4 million, up 46% from $102.1 million in the previous year’s first quarter, and net sales were $840.4 million, up 11% from $754 million.

“Price/product mix was up, driven by specialty sales and margin expansion in our core ingredients,” Ms. Gordon said. “Continuous improvement programs, network optimization and lower input costs continued to drive good operational efficiencies throughout the region.”

Ingredion’s South America region in the first quarter posted operating income of $18 million, down 27% from $24.6 million, and sales of $215.1 million, down 17% from $258.1 million. The Asia Pacific region had operating income of $27.9 million, up 9% from $25.6 million, and net sales of $169.1 million, down 10% from $186.9 million. The Europe, Middle East and Africa region had operating income of $26.2 million, up 19% from $22.1 million, and net sales of $135.4 million, up from $131.1 million.

Ingredion, in providing guidance for the year, said adjusted earnings per share should be in the range of $6.45 to $6.75 for fiscal 2016, which would be up from $5.88 in fiscal 2015.
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