WESTCHESTER, ILL. — Income and sales increased for Ingredion in the fiscal year ended Dec. 31, 2023, despite volume declines, especially in the fourth quarter.

Net income of $643 million, equal to $9.74 per share on the common stock, was up 31% from $492 million, or $7.43 per share, in the previous fiscal year. Net sales increased 3% to $8.16 billion from $7.95 billion. The sales increase was driven by $943 million of price/mix, partially offset by lower sales volumes of $648 million and a negative foreign exchange impact of $81 million, said James D. Gray, chief financial officer, in a Feb. 6 earnings call.

“For the full year, we increased our net sales 3% and our adjusted operating income by 23% as we managed raw material volatility and took pricing actions and proactive cost-saving measures,” said James P. Zallie, president and chief executive officer, in the Feb. 6 call.

Westchester-based Ingredion improved gross profit margins by 260 basis points to 21.4% in 2023, which demonstrated pricing actions and cost-savings initiatives absorbed inflation over the past three years, Zallie said.

“The gross profit margin improvement was achieved despite declining customer demand and necessary actions by our operations teams to slow production, resulting in higher fixed costs,” he said.

In the Specialty Ingredients segment, fiscal-year net sales increased by 4% despite volume headwinds as customers destocked and managed inventories lower, Zallie said. Volumes began recovering in the second half of the year. The segment represented 34% of total net sales.

“On the healthful solutions side, our focus is very clear,” Zallie said. “It is on sugar reduction, which has a large total addressable market, protein and fiber fortification.”

In North America, operating income of $718 million was up 27%. Favorable price mix, partially offset by lower volumes and higher fixed costs, drove the increase. Net sales increased 5% to $5.19 billion.

In South America, operating income of $142 million was down 16%, driven by lower volumes and higher energy costs, primarily from a transition to biomass boilers in Brazil. The devaluation of the peso in Argentina will impact the first quarter of 2024, Gray said. In Asia Pacific, operating income increased 35% to $126 million. Lower input costs and a $7 million customer benefit in the fourth quarter drove the increase. In Europe, Middle East and Africa, operating income, driven by favorable price mix, increased 42% to $156 million.

In the fourth quarter companywide, net income of $131 million, or $2 per share on the common stock, was up 15% from $114 million, or $1.73 per share, in the same time of the previous year. Net sales decreased 3% to $1.92 billion from $1.99 billion due to $148 million in lower volumes, partially offset by price/mix of $63 million and a positive foreign exchange impact of $19 million, Gray said.

“In the middle quarters of 2023, we experienced a drop in orders as customers drew down inventories, primarily in our texture products,” Gray said. “We have seen a gradual increase in order volumes through November. In December, order volumes slowed, representing two-thirds of the fourth quarter’s sales volume decline as customers anticipated lower prices in their contracts beginning in January. We anticipate a gradual improvement in volumes this year and have already seen strong demand in January deliveries.”

Zallie added, “We believe that the customer inventory correction that started back in the first quarter of 2023 has largely run its course, and we are well-positioned to capture incremental volume opportunities as they arise in 2024.”

In its fiscal-year 2024 outlook, Ingredion expects earnings per share in a range of $10.20 to $11.15, which includes the impact of an expected gain on the divestiture of the South Korean business to an affiliate of the Sajo Group for about $294 million that was completed Feb. 1, 2024. Excluding the effects of the divestiture, Ingredion expects full-year net sales to be flat to up low single-digit percentages.

“As we absorbed greater fixed costs in 2023, we feel that we are well-positioned in 2024 as volumes recover to obtain leverage from our operations and lower manufacturing costs,” Zallie said.

Gray said Ingredion in the first quarter of 2024 expects net sales to be down by mid-single-digit percentages from the first quarter of 2023. The decrease reflects lower pricing as corn costs are passed through and a challenging comparison to the 2023 first quarter in Europe, Middle East and Africa.

“For adjusted operating income, we anticipate a double-digit decline of minus 25% to minus 35%, driven by three factors,” Gray said. “First, we are running with less volume and production than first quarter last year. We expect volume demand to improve in Q2 and beyond.