WESTCHESTER, ILL. — In a Nov. 3 conference call with analysts to discuss third-quarter financial performance, executives of Ingredion, Inc. said the company is sharpening its focus on becoming a leader in texturizing, sugar reduction and plant-based proteins. During the quarter, the specialty ingredient supplier faced higher corn and other input costs.
“We achieved strong price mix of $335 million, including the pass-through of higher corn and input costs,” said James Gray, chief financial officer. “The sales volume increase of $14 million was driven by volume increases in each of the regions and offset by $18 million decrease due to the presentation change related to the Argentina joint venture.
“As I have mentioned previously, our business model, when measured by gross margin percentage, is impacted by rising and falling corn prices. In rising corn price cycles, historically, our pricing has lagged the change in the cost of corn, and consequently, our gross margin percentage has been impacted.
“What was [happening] in this quarter. We have been working pricing and our hedging strategies to flatten the impacts of changing corn values on the quarterly layout of our costs.”
Net income of Ingredion for the third quarter ended Sept. 30 was $109 million, equal to $1.61 per share on the common stock, a decrease of 8% from third-quarter income the previous year of $119 million, or $1.76 per share. Adjusted EPS was $1.73 compared with $1.67 in the third quarter of 2021.
Quarterly sales increased to $2.02 billion, up 15% from $1.76 billion the previous year.
James Zallie, president and chief executive officer, said the company continues to work to improve production of plant-based proteins each quarter.
“As it relates just to the entire plant-based protein category, I would say that I would remind everybody that the approach that we've taken is to build a broad portfolio across protein flowers, concentrates and isolates across four types of pulse-based proteins,” Mr. Zallie said. “So we're not dependent, for example, just on pea protein isolate that goes into alternative meats.
“So we're in it for the long haul, and we're still optimistic. And it does make us a more complete supplier. When you think about us being a leader in texturizing, a leader in sugar reduction and a leader in plant-based proteins, they all support one another from a standpoint 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-fortified snacks in bakery and alternative dairy as opposed to, say, dependent upon alternative meats.”
In North America, the company’s largest business unit, third-quarter operating income was $126 million, up 5% from $120 million in the same period of 2021. Sales totaled $1.26 billion, an increase of 17% from $1.08 billion. The increase was driven by favorable price mix that more than offset higher corn and input costs.
Third quarter operating income in the South America segment was $48 million, up 37% from $35 million the previous year. Sales were $293 million, up 13% from $260 million a year ago. Excluding foreign exchange impacts, segment operating income was up 43% for the third quarter.
During the quarter, Ingredion began production at a new facility in Shandong, China.
“This plant has come online at a perfect time as it enables us to leverage and flex our new network capacity to support our European customers who are concerned about anticipated industry shortages for some starch products due to the severe summer drought,” Mr. Zallie said. “Of particular relevance as it applies to the largest component of our specialty sales, the global market for texturants is growing 3% to 5%, and generally experiences consistent demand through different economic cycles. This is due to their versatility, their functionality and their affordability.
“Therefore, to ensure we have capacity where we anticipate it will be most needed ahead of growing demand, we are investing $160 million over three years to support our texturizer growth. I'm pleased to say that we have already invested about one-third of that amount supporting the growth of our clean label franchise, and we are localizing more production in all four regions.”For full-year fiscal 2022, Ingredion said its 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 versus the previous outlook of $6.90 to $7.45.