Ingredion Inc Q1 FY2025 earnings call

Management Statement and Operational Highlights

• Business Growth: Texture and Healthful Solutions demonstrated robust performance with strong sales volume growth and expanding operating income margins; Food and Industrial Ingredients U.S./Canada announced a $50 million investment in its Cedar Rapids, Iowa, facility; Food and Industrial Ingredients LATAM debottlenecking and optimizing assets for new product lines.
• Cost Competitiveness: On track to meet or exceed $50 million run rate savings from cost to compete program; value-creating network optimization projects ongoing; ceased operations at 2 smaller plants; engineering and construction upgrades at two large plants.
• People-Centric Culture: Named to Fortune’s World’s Most Admired Companies, Ethisphere’s World’s Most Ethical Companies, and Barron’s 100 Most Sustainable Companies lists for multiple years.

Segment Performance

• Texture and Healthful Solutions: Net sales up 1% compared to prior year. Operating income up 34% with a margin of 16.4%, up 400 basis points from the prior year’s quarter. Driven primarily by lower input costs, lower carry-in of inventory value, and greater volumes, partially offset by unfavorable price/mix.
• Food and Industrial Ingredients LATAM: Net sales down 7% versus last year and down 2% on a constant currency basis. Operating income improved to $127 million, resulting in 26% year-over-year growth. Op income margin increase benefited from lapping of Argentina JV’s results, with segment operating income increasing due to lower raw material costs, partially offset by lower volumes.
• Food and Industrial Ingredients U.S./Canada: Net sales down 4%. Operating income was $92 million, up 6%; operating income margin improved to 17.7%, driven mainly by lower raw material costs and improved mix.

Guidance

• Full Year 2025: Anticipates sales volume growth and operating income improvement. Adjusted EPS range $10.90-$11.60; financing costs $40M-$60M; diluted weighted average shares 65M-66M; share repurchase objective $100M; cash from operations $825M-$950M.
• Q2 2025: Expect net sales flat to low single digits for the company; operating income flat to low single digits, lapping a strong Q2 2024 performance.

Risks

• Tariffs: Current tariffs have minimal impact, but uncertain future changes in tariffs could materially affect financial performance; need to monitor evolving trade environment and potential supply chain disruptions.

Question and Answer

Q: About updated guidance and segment strength/weakness in Q2 A: Jim Gray explained Q2 guidance lapping strong 2024 Q2 performance, LATAM seasonally weaker, Texture and Healthful with solid volume growth Q: On un-hedged foreign costs and corn prices A: Jim Gray discussed hedging, un-hedged corn costs may affect co-products, but hedging over 80-85% of needs Q: On sales mix in consumer uncertainty A: Jim Zallie stated no impact on product mix as ingredients go into private label and branded products, clean label solutions strong Q: On LATAM portfolio shifts and Pakistan affiliate A: Jim Gray mentioned LATAM margin uplift from portfolio shifts, Pakistan affiliate similar size to SK business, early in sale process Q: On price mix in THS and reformulation A: Jim Gray and Jim Zallie discussed price mix dampening, robust volume growth, and ongoing customer reformulation engagements Q: On LATAM Argentina and full year guidance upside/downside A: Jim Zallie and Jim Gray discussed upside from tariff resolution, consumer sentiment, corn crop, dollar weakness; downside from tariff uncertainties, shallow recession