Ingredion reported lower third-quarter earnings as a slower-than-expected recovery in its U.S. and Canadian food and industrial ingredients business, higher input costs and softer demand weighed on results. The company cut its full-year earnings outlook, even as its Texture and Healthful Solutions business posted another quarter of sales-volume growth.
For the quarter ended Sept. 30, reported and adjusted operating income each fell 19% from a year earlier. Reported diluted earnings per share were $2.23, down from $2.61; adjusted diluted EPS was $2.28, compared with $2.75.
Key details
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Lower full-year outlook: Ingredion now expects reported diluted EPS of $8.04 to $8.49 and adjusted diluted EPS of $9.25 to $9.70. The company attributed the reduced outlook mainly to a slower earnings recovery in its U.S. and Canadian business, higher input costs and softer demand.
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U.S. and Canada recovery is taking longer: Production at Argo was stable for a second consecutive quarter, and inventories were largely rebuilt. But high manufacturing costs and weaker food and beverage demand hurt profitable volume growth. With plant reliability improving, management said its focus has shifted to reducing operating costs and improving volume growth.
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Texture and Healthful Solutions continued to grow volume: The segment recorded its 10th consecutive quarter of net sales-volume growth, with gains in strategic categories and continued global demand for clean-label products. Higher tapioca prices and manufacturing-cost inflation, however, restrained profit growth.
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Latin America had mixed results: Stronger volume from brewing and beverage customers in Mexico and Brazil was offset by foreign-exchange effects from a stronger Mexican peso and disruption to Andean operations following an August earthquake in Colombia.
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Management plans cost discipline while continuing specialty investment: Ingredion said it is working to control operating costs and spending while continuing to invest in specialty growth platforms. It is also progressing integration planning for its pending acquisition of Tate & Lyle; no transaction terms or closing timing were included in the results announcement.
The results show a split between volume momentum in Texture and Healthful Solutions and earnings pressure elsewhere. In particular, the slower Argo recovery, higher costs and softer demand are driving the lower outlook.