Ingredion Inc Q4 FY2024 earnings call

Management Statement and Operational Highlights

• Business Growth: Texture & Healthful Solutions showed robust performance with sales volume growth. Food & Industrial Ingredients U.S./Can segment had significant operating income growth from renewal of multiyear customer contracts.
• Cost Competitiveness through Operational Excellence: Exceeded first year Cost2Compete run rate cost savings target by over 30%. Announced $100 million investment to expand texture innovation capabilities and upgrade Indianapolis plant to enhance efficiency and sustainability.
• People-Centric Performance Growth Culture: Recognized as one of the 250 Best-Managed Companies by WSJ; Ingredion Brazil designated Great Place to Work; named Top Employer in multiple countries. Completed global reorganization, re-segmentation, and Cost2Compete program, with strategic investments for growth in Texture & Healthful Solutions capacity expansions.

Segment Performance

• Texture & Healthful Solutions: In 2024, net sales were down 4% compared to prior year and down 3% on a constant currency basis. Operating income was down 11% from prior year but showed sequential profit improvement. For 2025, net sales are expected to be up mid-single-digits, and operating income is projected to be up mid-single-digits to high-single-digits, driven by sales volume growth.
• Food & Industrial Ingredients LATAM: Net sales were down 7% versus 2023 and down 6% on a constant currency basis. Operating income improved to $483 million, a 7% year-over-year growth. For 2025, net sales are expected to be flat, and operating income is expected to be up mid-single-digits.
• Food & Industrial Ingredients U.S./Canada: Full year 2024 net sales were down 8%. Operating income was $373 million, up 25%, with an operating income margin of 17.3%. For 2025, net sales are expected to be down low-single digits, and operating income is expected to be flat to down low-single digits.
• All Other: Net sales decrease was driven by the overlap of South Korea's net sales. For 2025, net sales combined for these businesses are expected to be up high-single-digits, and operating income is anticipated to approach breakeven profitability.

Guidance

• Full Year 2025: Net sales expected to be up low-single digits, adjusted operating income up mid-single digits. Reported and adjusted EPS expected in the range of $10.75 to $11.55. Texture & Healthful Solutions: net sales up mid-single digits, operating income up mid-single-digits to high-single digits. Food & Industrial LATAM: net sales flat, operating income up mid-single digits. Food & Industrial U.S./Canada: net sales down low-single digits, operating income flat to down low-single digits. All Other: net sales combined up high-single digits, operating income approaching breakeven.
• First Quarter 2025: Total company net sales expected down low-single digits, operating income up high-single digits.

Risks

• Foreign Exchange: Fluctuations in currencies such as BRL and Mexican peso can impact financial results, with potential headwinds or tailwinds depending on currency movements.
• Tariffs and Trade Regulations: Monitoring potential impacts of tariffs and trade regulations, especially on U.S.-Mexico-Canada trade, and conducting scenario planning for alternative sourcing paths.
• Commodity Price Volatility: Unhedged corn costs and co-product values can be affected by factors like droughts in South America, impacting net corn costs.

Question and Answer

Q: Kristen Owen of Oppenheimer on 2025 EPS guidance range A: Jim Gray and Jim Zallie discussed that the range is due to factors like foreign exchange, corn costs, and volume growth expectations, with upsides from greater-than-expected volume and customer reformulations.

Q: Josh Spector of UBS on guidance framework and multiyear contracts A: Jim Gray and Jim Zallie explained that sales volume expectations for segments, with less price/mix headwind in 2025; multiyear contracts mostly completed, with margin expansion expected.

Q: Andrew Strelzik of BMO Capital Markets on Texture & Healthful Solutions guidance and risks A: Jim Gray and Jim Zallie mentioned cautiousness on dollar strength and currency impacts, with optimism for reacceleration beyond 2025 from business strength.

Q: Pooran Sharma of Stephens on Cost2Compete and net corn costs A: Jim Zallie and Jim Gray discussed Cost2Compete savings from network optimization and plant closures, with net corn costs impacted by hedging and global corn market dynamics.

Q: Ben Theurer of Barclays on LATAM risks and capital allocation A: Jim Gray and Jim Zallie talked about FX impacts on LATAM, with upside in Mexico from weaker peso and headwind in Brazil; capital allocation focused on organic growth and reliability investments.

Q: Heather Jones of Heather Jones Research on All Other business and LATAM outlook A: Jim Zallie and Jim Gray explained improvements in All Other from various businesses and growth in LATAM from network optimization and mix upgrade