USA — American multinational ingredient supplier Ingredion has recorded a 15% rise in sales for the third quarter that ended Sept. 30, mainly benefiting from strong price action and a rise in sale volumes.
Total sales for the quarter amounted to US$2.02 billion, up from US$1.76 billion in the previous year, the statement from Ingredion showed.
North America, the company’s largest business unit, benefitted from a favorable price mix that more than offset higher corn and input costs to record US$1.26 billion in sales, an increase of 17% from US$1.08 billion.
Unlike global operations, North America’s third-quarter operating income increased 5% to US$126 million, up 5% from $120 million in the same period of 2021.
“We achieved a strong price mix of US$335 million, including the pass-through of higher corn and input costs,” said James Gray, chief financial officer.
“The sales volume increase of US$14 million was driven by volume increases in each of the regions and offset by $18 million decrease due to the presentation change related to the Argentina joint venture.”
The rise in sales however did not translate into profits as the business had to absorb some of higher production rising from runaway inflation that is currently affecting economies globally.
Net income of Ingredion for the quarter dropped 8% to US$109 million, equal to $1.61 per share on the common stock, a decrease of 8% from third-quarter income the previous year of $119 million, or $1.76 per share.
“Our business model, when measured by gross margin percentage, is impacted by rising and falling corn prices,” explained gray. “In rising corn price cycles, historically, our pricing has lagged the change in the cost of corn, and consequently, our gross margin percentage has been impacted.”
Gray however noted that the company is working to shield its operations from the rising production costs.
“What was (happening) in this quarter. We have been working pricing and our hedging strategies to flatten the impacts of changing corn values on the quarterly layout of our costs.”
Greater emphasis on product diversification
Meanwhile, James Zallie, president and chief executive officer, said the company continues to work to diversify its product portfolio to maintain its position as a leader in texturizing, sugar reduction, and plant-based protein.
For plant based protein, Zallie revealed that the company is building build a broad portfolio across protein flowers, concentrates and isolates across four types of pulse-based proteins to avoid reliance on just on pea protein isolate which is chiefly used in meat alternatives.
“And some of our wins right now that we’re seeing are in alternative snacks, for example, or protein-fortified snacks in bakery and alternative dairy as opposed to, say, dependent upon alternative meats.”
During the quarter, Ingredion began production at a new facility in Shandong, China which Zallie says enables the company “to support our European customers who are concerned about anticipated industry shortages for some starch products due to the severe summer drought.
For full-year fiscal 2022, Ingredion said its adjusted EPS is now expected to be in the range of $7 to $7.45, compared to adjusted EPS of $6.67 in 2021 and versus the previous outlook of $6.90 to $7.45.
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