WESTCHESTER, ILL. — Third-quarter financial numbers for Ingredion Inc. came in better than second-quarter numbers, but they were still down compared to the previous year’s third quarter. The influence of COVID-19 on away-from-home activities lessened somewhat. Still, company executives spoke cautiously about fourth-quarter prospects.
Net income attributable to Ingredion of $92 million, or $1.37 per share on the common stock, for the quarter ended Sept. 30 was down 7% from $99 million, or $1.48 per share, in the previous year’s third quarter. Net sales of $1.5 billion were down 5% from $1.57 billion. Foreign exchange impacts in South America and sales volume declines in North America drove the decrease.
“Quarter-three results were sequentially better than the second quarter's 13% year-over-year decline in net sales,” said James P. Zallie, president and chief executive officer, in a Nov. 2 earnings call. “Adjusted operating income for the quarter was down 7% year-over-year and down 4% absent foreign exchange translation impacts versus the second quarter's 29% decline in operating income. Quarter-three results demonstrated improved volume demand and better fixed cost absorption.”
Ingredion in the fourth quarter expects continued adverse impacts from COVID-19 on net sales across its operating segments, said James D. Gray, executive vice president and chief financial officer. Recovery in sales generally will be correlated with easing of restrictions and increased consumer activity out-of-home.
In North America, operating income slipped 9% to $132 million from $145 million in the previous year’s third quarter. COVID-19 continued to impact away-from-home consumption negatively, and Ingredion reported unfavorable mix in the United States and Canada. Sales declined 6% to $928 million from $984 million.
Volume demand continued to be weaker than the prior year, Zallie said, but it improved versus the second quarter as away-from-home consumption increased quarter-on-quarter.
“For North America, we are assuming slow resumption of consumer activity in both the US and Mexico and are watchful of potential COVID resurgence, which could lead to greater restrictions and new stay-at-home orders,” Gray said “We anticipate North America net sales to be down slightly and (operating) income to be flat to slightly up versus prior year as the business overlaps unfavorable corn costs.”
In South America in the third quarter, operating income increased 7% to $29 million from $27 million while sales fell 9% to $224 million from $245 million. A strong price mix was offset partially by unfavorable foreign currency impacts. Sales of brewing ingredients recovered, Zallie said, and sweetener sales improved.
In Asia-Pacific in the third quarter, operating income dropped 18% to $18 million from $22 million while sales increased 1% to $207 million from $205 million. PureCircle accounted for an operating loss of $5 million. Ingredion completed its acquisition of PureCircle, a supplier of stevia-based sweeteners, in July.
In Europe, Middle East and Africa in the third quarter, operating income increased 4% to $25 million from $24 million while sales rose 2% to $143 million from $140 million. The increase in operating income largely was attributable to favorable price mix in Pakistan and lower operating expenses in Europe.
Ingredion in the fourth quarter anticipates EMEA operating income will be down mid-single digits to high single digits, driven by higher expected corn costs in Pakistan, Gray said.
“The effects of a hard exit of Britain from the EU trading block and very recent country stay-at-home restrictions are additional uncertainties potentially impacting volume demand,” he said.
Through the first nine months of the fiscal year, Ingredion reported net income attributable to the company of $233 million, or $3.47 per share on the common stock, which was down 23% from $304 million, or $4.54 per share, in the same time of the previous year. Nine-month net sales of $4.39 billion were down 6% from $4.66 billion.
In other news, Ingredion has entered into an agreement with its joint venture partners to acquire 100% of Verdient Foods Inc., a manufacturer of plant-based protein based in Vanscoy, Saskatchewan. Terms of the agreement were not disclosed.
“Acquiring 100% ownership in Verdient Foods enables Ingredion to accelerate net sales growth, further expand our manufacturing capability and co-create with our customers to serve the increasing consumer demand for plant-based foods,” Zallie said. “Over the last two years, we have strategically invested over $200 million to build a leadership position in consumer-preferred plant-based proteins, which is central to Ingredion’s strategy and accelerating our driving growth roadmap.”
Ingredion formed the joint venture in 2018 with film director James Cameron and his wife Suzy Amis Cameron. As a result of the acquisition, Ingredion will operate two facilities that can produce a range of specialty pulse-based concentrates and flours from peas, lentils and fava beans. The facilities are located in Vanscoy and serve as a prime location for the manufacturing and distribution of pulse-based ingredients to global markets, according to the company.