Ingredion Enjoys Higher Specialty Volumes in Q2, Boosted by Penford
03 Aug 2015 --- Ingredion has reported results for the second quarter 2015. Net sales were down in the second quarter as a result of changes in foreign currency-exchange rates and the pass through of lower corn costs, partially offset by pricing in South America and acquisition-related volume growth.
Year-to-date net sales were down as a result of changes in foreign currency-exchange rates and the pass through of lower corn costs, partially offset by pricing in South America to compensate for currency headwinds and volume growth, both organic and acquisition-related.
Second quarter reported and adjusted operating income were $173 million and $180 million, respectively. These were six percent and 11 percent increases, respectively, compared to $163 million of reported operating income in the second quarter of 2014. The increases in operating income were primarily due to: Penford-related and strong specialty volumes; margin expansion in North America; and pricing actions in South America. These positives were partially offset by the negative effect of foreign exchange.
Year-to-date 2015 reported and adjusted operating income were $312 million and $336 million, respectively. These were 10 percent and 18 percent increases, respectively, compared to $285 million of year-to-date 2014 reported operating income. The increases in operating income were primarily due to Penford-related and strong specialty volumes and margin expansion in North America.
"We are pleased with the second quarter results which were highlighted by higher specialty volumes, good operating efficiency, and strong earnings per share growth," said Ilene Gordon, chairman, president and chief executive officer. "Although we experienced foreign-exchange headwinds across all four regions, our business model continues to work. In fact, operating income improved in North America, South America, and Asia Pacific.
"We remain confident in our 2015 outlook. Strong specialty volumes, improved product mix, disciplined cost management, and the impacts of the first quarter acquisition of Penford Corporation are expected to drive bottom-line growth.
"As we continue to execute our strategic blueprint, we are well positioned for further growth, especially in our higher-value ingredients that address key consumer trends. Our pending acquisition of Kerr Concentrates, Inc., a producer of natural fruit and vegetable concentrates, purees and essences, is another step to broaden our portfolio of wholesome, clean-label ingredient solutions, which consumers are increasingly demanding. The Penford integration remains on track for at least $20 million in annualized cost synergies and the underlying business is performing well," Gordon added.
In terms of Guidance, 2015 adjusted EPS, including anticipated $0.08-$0.12 per share accretion resulting from the Penford and Kerr acquisitions but excluding acquisition-related costs, is expected to be in the range of $5.60 to $5.90 compared to adjusted EPS of $5.20 in 2014. The guidance assumes: overall improvement in North America, modest improvement in Asia Pacific, South America in line, and EMEA down slightly given anticipated unfavorable changes in currency rates; an effective tax rate of 29 - 31 percent; and earnings per share accretion attributable to the 2014 accelerated share repurchase program. Sales of higher-value specialty ingredients are expected to continue to contribute to margin expansion.
In 2015, cash generated by operations and capital expenditures are expected to be approximately $650-$700 million and $300 million, respectively.
