• Net Sales: Approximately $1.9 billion, down 8% versus prior year.
• Gross Profit: Grew 14% with margins up 490 basis points to 25.6%.
• Adjusted Operating Income: $282 million, up 29% versus the prior year.
• Net Sales Volume Growth: 4% year-over-year increase, adjusted for the sale of South Korea business.
• Texture and Healthful Solutions Operating Income: $96 million, up 12% from the prior year.
• Food and Industrial Ingredients LatAm Operating Income: $131 million, 26% year-over-year growth.
• Food and Industrial Ingredients US/Can Operating Income: $99 million, with an OI margin of approximately 18%.
• Cash from Operations: $1 billion for the first nine months.
• Adjusted EPS Outlook for 2024: Increased to a range of $10.35 to $10.65.
• Cash Flow from Operations Estimate for 2024: $1.1 billion to $1.25 billion.
• Capital Expenditure Investment for 2024: Between $310 million and $330 million.

• Warning! GuruFocus has detected 7 Warning Signs with INGR.

Release Date: November 05, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Ingredion Inc (NYSE:INGR) achieved a 29% increase in adjusted operating income, marking the best third quarter performance in the company's history.
• All three segments delivered double-digit operating income growth, showcasing strong operational excellence and contract management.
• The company reported a 4% net sales volume growth year-over-year, driven by strong performance in texture and healthful solutions.
• Ingredion Inc (NYSE:INGR) successfully renegotiated long-term contracts, offsetting inflationary input cost increases and improving profitability.
• The Cost2Compete program is ahead of its savings target, contributing to improved operational efficiencies and cost savings.

Negative Points

• Net sales for the third quarter were down 8% compared to the prior year, impacted by lower price mix and foreign exchange effects.
• The exit from the South Korea business negatively impacted sales volume by $79 million.
• The protein fortification business remains loss-making, although improvements are expected over the next few years.
• The company faces challenges with input and wage cost inflation, which continue to pressure margins.
• Contracting for 2025 is moving slower than expected, with uncertainty around pricing and volume trade-offs.

Q & A Highlights

Q: Can you explain the strong volume growth in the texture and healthful solutions segment despite a negative price mix? A: James Zallie, President and CEO, explained that the company has strategically positioned itself in growth categories by leveraging consumer and customer insights. This has allowed Ingredion to capitalize on consumer buying behavior changes, particularly in categories like savory, prepared meals, bakery, snacks, and dairy. James Gray, CFO, added that while some ingredients are high-value and clean-label, the pass-through of lower corn costs affects the price mix, but the profit pool remains strong.

Q: With the increased free cash flow guidance and lower CapEx, how will Ingredion utilize the excess cash? A: James Gray, CFO, stated that the company prioritizes organic investments, maintaining a disciplined dividend policy, and share repurchases. Ingredion is committed to meeting or exceeding its share repurchase goal and is also exploring M&A opportunities. The timing of capital investments can vary due to project phasing and external factors like equipment supplier delays.

Q: What is driving the improved consumer behavior in Europe, and are there signs of restocking in the channel? A: James Zallie, President and CEO, noted that European consumers are more mobile and spending more on convenience offerings, contributing to volume growth. James Gray, CFO, added that there is no significant restocking; rather, steady demand is driving growth, with inventories being managed at typical levels.

Q: How is Ingredion managing the balance of pricing and volume growth for 2025, especially in the sweetener contracting? A: James Zallie, President and CEO, mentioned that contracting is progressing slower than last year, partly due to modest changes in corn value. The company anticipates some pass-through of lower corn costs but is prepared to manage pricing and volume trade-offs through its experienced commercial teams and pricing centers of excellence.

Q: Regarding the protein fortification business, can you provide an update on reducing losses and future expectations? A: James Zallie, President and CEO, confirmed that the company aims to reduce losses by a similar magnitude as this year, with improvements driven by the pea protein isolate business. The protein fortification segment is expected to continue improving its operating income over the next one to three years.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.