WESTCHESTER, ILL. — Ingredion, Inc. on Oct. 31 again lowered its earnings guidance for the fiscal year even while reporting net sales growth for specialty ingredients in the third quarter ended Sept. 30.
“Due to the expected impacts of trade disputes weakening the economy of our northern Asian businesses, political uncertainty in Argentina and the postponement of Brexit, we have lowered our expectations for the fourth quarter,” said James D. Gray, executive vice-president and chief financial officer, in an Oct. 31 earnings call.
The Westchester-based company revised its full-year guidance for adjusted earnings per share to a range of $6.45 to $6.65. The original guidance for adjusted e.p.s. in the fiscal year was a range of $6.80 to $7.50 per share. Then it was changed to a range of $6.80 to $7.20 after the first quarter and a range of $6.60 to $6.90 after the second quarter.
Net income attributable to Ingredion was $99 million, or $1.48 per share on the common stock, in the third quarter, which was up 4% from $95 million, or $1.33 per share, in the previous year’s third quarter. Net sales improved slightly to $1,457 million from $1,450 million in the previous year’s third quarter. Improved price/mix and volume growth partially were offset by negative foreign currency impacts.
“Absent $52 million of negative foreign exchange impacts, net sales were up 4% versus the prior year,” said James P. Zallie, president and chief executive officer, in the Oct. 31 earnings call. “Our pricing actions delivered $50 million of favorability in the quarter, nearly offsetting all of the foreign exchange impacts versus the year-ago period.”
Specialty ingredients delivered net sales growth across all geographic regions, he said. Consumer demand continues to grow for non-bioengineered/non-G.M.O. sweeteners and reduced-calorie sweeteners, Mr. Zallie added, while starch-based texturizers delivered solid growth led by specialty potato starches.
“We are formulating systems, which include specialty starches, plant-based proteins and hydrocolloids, for consumer-preferred, clean labeled textural solutions,” he said. “For example, we’re working closely with customers, both large and small, to innovate and co-create by combining potato starch, pea protein, gums and (curd) extracts to formulate texturized meat alternatives. Capitalizing on this collaboration, we are actively filling our customer pipeline for plant-based protein ingredients.”
In North America, operating income of $145 million was up 5% from $138 million in the previous year’s third quarter. Improved price/mix and benefits from a Cost Smart savings program were offset partially by higher net corn costs. Sales rose to $892 million from $889 million.
Mr. Zallie said three main factors are affecting net corn costs: the uncertainty of the crop size, co-product values at a structurally lower level than they have been historically, and a higher cost to move corn.
“We are carefully looking at all of our customers and analyzing our pricing requirements as we go into contracting for next year and where we need to make adjustments with how those pricing contracts are structured,” he said.
Ingredion executives expect North American operating income to be down for the full year, assuming the current market for corn and co-products continues. Late crop plantings and delayed harvest in the United States have had negative impacts as have continued crop inventory imbalances arising from the U.S./China trade dispute.
In South America, operating income of $27 million was up 23% from $22 million in the previous year’s third quarter. Favorable pricing actions, volume and the benefits of the Cost Smart program more than offset negative foreign exchange impacts. Sales rose 3% to $234 million from $228 million.
“The South American team, in light of incredible (foreign exchange) headwinds, have put through significant pricing to offset and to mitigate that (foreign exchange) impact, specifically in Argentina and in Brazil,” Mr. Zallie said.
In Asia-Pacific, net income slipped 12% to $22 million from $25 million in the previous year’s third quarter. Increased operating costs in Australia and the impact of trade disputes drove the decrease. Sales dropped 1% to $196 million from $197 million.
In Europe, Middle East and Africa, operating income dropped 8% to $24 million from $26 million. Strong pricing actions partially offset higher corn costs and unfavorable foreign exchange impacts. Sales dropped 1% to $135 million from $136 million.
Over the first nine months of the fiscal year, Ingredion companywide reported net income attributable to the company of $304 million, or $4.54 per share on the common stock, which was down 13% from $349 million, or $4.86 per share, in the same time of the previous year. Nine-month sales slipped 2% to $4,311 million from $4,414 million.