Ingredion Q3 Profit Increases, Cuts 2014 Forecast
31 Oct 2014 --- Ingredion Incorporated, a leading global provider of ingredient solutions to diversified industries, today reported results for the third quarter 2014. “We delivered a strong third quarter that reflects continued momentum in our business,” said Ilene Gordon, chairman, president and chief executive officer. “All four regions delivered double-digit operating income growth, largely driven by solid volume growth, and expanded dollar margins through effective pricing and cost management.
“In addition, we have been actively executing against our strategic blueprint, as evidenced by our recently announced acquisition of Penford Corporation, for approximately $340 million, to enhance our specialty ingredient portfolio. We also announced our intention to invest approximately $100 million in capital to drive further organic growth by expanding our manufacturing capacity for specialty ingredients. A critical part of our strategy is effective deployment of cash. In addition to the pending Penford acquisition, our current accelerated share repurchase program, for approximately $300 million, will contribute to diluted earnings per share accretion going forward.”
“Overall, we expect our current business momentum to carry into the fourth quarter. We have been progressively overcoming a slow start in 2014. While we do not believe we will make up for all the challenges we faced earlier this year, our performance trajectory and recent strategic actions position us well for the future.”
Third quarter 2014 operating income increased 30 percent to $178 million compared to $137 million in the third quarter of 2013. Operating income grew in every region for the quarter. Year-to-date 2014 operating income increased 2 percent from $452 million in 2013 to $463 million this year. Strong performance in APAC and EMEA was offset by a challenging operating environment in South America and a weaker-than-expected first quarter in North America. In addition, corporate expenses included $7 million of income relating to a tax indemnification payment, which was completely offset by higher income tax expense.
In North America, third quarter 2014 operating income increased 17 percent to $113 million compared to $97 million in the third quarter of 2013. The increase was driven by volume growth in the US and Canada, and strong operating results in Mexico. Year-to-date 2014 operating income fell 6 percent from $308 million in 2013 to $289 million this year. The decline reflects the impact of a weak first quarter which more than offset growth in the second and third quarters.
In South America, third quarter 2014 operating income grew 46 percent to $27 million compared to $19 million in the third quarter of 2013 as the business adjusted to a challenging environment. Year-to-date 2014 operating income fell 7 percent from $80 million in 2013 to $74 million this year as a weak first half in Argentina, driven by rapidly escalating input costs and a severe currency devaluation, more than offset improved results for the South American region in the third quarter.
Ingredion has reported that third quarter 2014 operating income increased 14 percent to $27 million compared to $24 million in the third quarter of 2013, driven by volume growth and cost management. Year-to-date 2014 operating income also rose 14 percent from $70 million in 2013 to $80 million this year behind solid operating results throughout the region.
Third quarter 2014 operating income increased 28 percent to $22 million compared to $17 million in the third quarter of 2013. Results were particularly strong in Europe as the volume growth and cost benefits of our recent capacity investments continued to generate good returns. Year-to-date 2014 operating income rose 28 percent from $54 million in 2013 to $69 million this year largely as a result of continued momentum in Europe and solid results in Pakistan.
2014 EPS is expected to be in a range of $5.35 to $5.50 compared to $5.05 in 2013. The guidance anticipates North America operating income will be down for the full year. Our momentum has been good in the second and third quarters in North America, but we do not expect to compensate for the slow start to the year. In line with previous guidance, we expect continued cost pressures in Argentina and softness in the Brazilian economy to result in South America being down slightly for the year. Also in line with previous guidance, operating income in Asia Pacific and EMEA is expected to be up. The guidance also reflects slightly lower anticipated financing costs compared to last year and an estimated effective tax rate of 27 - 28 percent.
Cash generated by operations is expected to be $700 - $750 million in 2014.
Capital expenditures in 2014 are now anticipated to be slightly below $300 million. These investments will support growth and cost reduction actions across the organization.
