Ingredion Inc SEC 10-K Report

Ingredion Inc, a leading global ingredient solutions provider, has released its 2024 Form 10-K report, detailing the company's financial and operational performance over the past year. The report highlights key financial metrics, business achievements, strategic initiatives, and the challenges and risks faced by the company.

Financial Highlights

Ingredion Inc reported net sales of $7,430 million, a 9% decrease from 2023, primarily due to an unfavorable price mix, reduced net sales from the sale of the South Korea business, and foreign exchange impacts. Despite the decline in net sales, the company achieved a gross profit of $1,791 million, up from $1,749 million in 2023, driven by favorable raw material and lower input costs, resulting in a gross profit margin increase to 24% from 21% in 2023.

Operating income decreased by 8% to $883 million from $957 million in 2023, primarily due to impairment charges related to the cessation of operations at certain manufacturing facilities. However, net income attributable to Ingredion increased by 1% to $647 million from $643 million in 2023, driven by reduced financing costs and a gain from the sale of the South Korea business, partially offset by restructuring and impairment charges. Diluted earnings per share rose to $9.71 from $9.60 in 2023, reflecting the increase in net income and reduced financing costs.

Business Highlights

Ingredion's business is divided into three main segments: Texture & Healthful Solutions (T&HS), Food & Industrial Ingredients - Latin America (F&II - LATAM), and Food & Industrial Ingredients - U.S./Canada (F&II - U.S./Canada). T&HS focuses on providing global customers with innovative ingredient solutions, while F&II segments cater to local markets with products like starches and sweeteners.

The company has a significant presence in Latin America, particularly in the brewing industry, which uses high maltose corn syrup and starches. In the U.S. and Canada, Ingredion has a strong foothold in the industrial market, with applications in food, beverages, and pharmaceuticals. Starch products accounted for approximately 49% of net sales in 2024, with sweeteners representing about 35%. The company also sells pulse-based protein ingredients and refined corn oil, contributing to its diverse product portfolio.

Ingredion continues to innovate with its Texture & Healthful Solutions segment, offering modified and native starches, clean-label texturizers, and hydrocolloids to meet consumer demand for healthful and sustainable products. The company operates 46 manufacturing facilities globally, with recent changes including the cessation of operations at facilities in Vanscoy, Canada; Goole, United Kingdom; and Alcantara, Brazil, as part of its strategic realignment.

Looking ahead, Ingredion aims to maintain its position as a leading global ingredient solutions provider by leveraging its Ingredion Performance System to drive consistent improvement across its operations. The company plans to invest approximately $66 million in environmental facilities and programs in 2025, reflecting its commitment to sustainability.

Strategic Initiatives

Ingredion Incorporated focused on strategic divestitures and restructuring to optimize its operations. The company completed the sale of its South Korea business, generating a net pre-tax gain of $90 million. Additionally, it announced plans to discontinue certain manufacturing operations in Vanscoy, Canada, Goole, United Kingdom, and Alcantara, Brazil, as part of its restructuring efforts. These initiatives are aimed at streamlining operations and reallocating resources to higher-return areas.

Ingredion managed its capital by reducing financing costs through the pay down of borrowings under its commercial paper program, resulting in a 66% decrease in financing costs to $39 million. The company maintained a strong liquidity position with $2.6 billion in total available liquidity, including $1.5 billion in domestic liquidity and $1.1 billion in international liquidity. It also repurchased 1.7 million shares of its common stock at a net cost of $216 million and increased dividends paid to $210 million, reflecting an 8% increase from the previous year. The company’s total debt outstanding was $1.8 billion, with a weighted average interest rate of 4.02%.

Looking forward, Ingredion plans to continue its focus on strategic divestitures and restructuring to enhance operational efficiency and profitability. The company expects to maintain sufficient liquidity to fund anticipated capital expenditures, dividends, and other activities for at least the next twelve months. It aims to achieve an Adjusted Return on Invested Capital in excess of 10% and target a Net Debt to Adjusted EBITDA ratio of 2.5 or less. The company is also exploring opportunities for capital investment in new markets and products to drive sustainable growth.

Challenges and Risks

Ingredion Incorporated operates in a highly competitive environment, with significant reliance on the food and beverage industries, which account for a large portion of its sales. The company faces challenges from fluctuating raw material costs, particularly corn, and the need to innovate continuously to meet consumer demands for healthier and more sustainable products.

The company identifies several key risks that could adversely affect its business:

• Consumer Preferences and Demand: Changes in consumer practices, preferences, and perceptions, especially regarding biotechnology and health concerns, could reduce demand for Ingredion's products.
• Geopolitical Conflicts: Ongoing conflicts, such as those between Russia and Ukraine, may disrupt supply chains and affect raw material availability and pricing.
• Economic Conditions: Volatile economic conditions could impact demand, access to credit, and investment returns, affecting Ingredion's financial health.
• Pandemics: Future pandemics could disrupt supply chains, alter consumer behavior, and impact Ingredion's operations and financial results.
• Climate Change: Global climate change and related regulatory measures could increase costs and disrupt operations, particularly if agricultural productivity is affected.
• Regulatory Compliance: New sustainability and climate-related reporting requirements could impose additional costs and operational challenges.
• Cybersecurity: Increasing cybersecurity threats pose risks to Ingredion's information technology systems, potentially disrupting operations and damaging reputation.

Management highlights the impact of unfavorable price mix and foreign exchange rates on net sales. The company is also dealing with restructuring and impairment charges due to the cessation of operations at certain facilities. Despite these challenges, Ingredion has managed to increase its net income through strategic cost management and favorable tax treatments.

Ingredion is exposed to market risks, including fluctuations in foreign currency exchange rates and interest rates, which could impact its financial results. The company uses hedging strategies to mitigate some of these risks but acknowledges that these measures may not fully protect against adverse impacts.

SEC Filing: Ingredion Inc [ INGR ] - 10-K - Feb. 20, 2025