Ingredion Reports Solid Q1, Boosted by North American Sales

3 May 2013 --- Ingredion Incorporated has reported its first quarter 2013 results. Sales grew 1 percent on price/mix improvements partially offset by volume declines and currency devaluations. Operating income was $175 million. This is a 9 percent increase compared to reported operating income in the first quarter of 2012 and a 5 percent increase compared to the $167 million of adjusted operating income in the year-ago quarter.

The change was primarily due to improved pricing and cost savings.

"We are pleased with the first quarter results which were highlighted by operating income and earnings per share growth. Contributing to the growth was good performance in the North America, Asia Pacific and Europe/Middle East/Africa regions," said Ilene Gordon, chairman, president and chief executive officer. "Our South American region continues to effectively manage through the ongoing difficult environment, which includes lower economic growth, inflation and currency devaluations. In spite of these factors, South America operating income was down only $2 million."

“We continue to have confidence in our 2013 outlook supported by our on-going ability to cope with macroeconomic headwinds and manage risk while still capitalizing on long-term growth opportunities," Gordon added.

First quarter diluted EPS rose 17 percent to $1.41 compared to $1.21 last year. The first quarter of 2012 included $0.03 of restructuring charges and $0.02 of business integration costs. Excluding these items, reported 2013 EPS increased 12 percent to $1.41 in the quarter compared to $1.26 of adjusted EPS in the year-ago quarter. The estimated drivers of the increase in the first quarter 2013 EPS versus the 2012 adjusted EPS were $0.15 from margin, partially offset by $0.05 of foreign currency devaluation and $0.03 due to lower volumes. A lower tax rate provided a $0.07 benefit and lower net financing costs contributed $0.02, partially offset by an increase in share count, which resulted in a negative impact of $0.01.

During the first quarter of 2013, net financing costs were $17 million versus $20 million in the year-ago period. The decrease primarily reflects a combination of reduced borrowings and lower interest rates.

The first quarter effective tax rate was 29.2 percent compared to 32.4 percent in the year-ago period. The year-ago period included a number of discrete items, which negatively impacted the rate by 140 basis points.

At March 31, 2013, total debt and cash and cash equivalents were $1.8 billion and $526 million, respectively, versus $1.8 billion and $609 million, respectively, at December 31, 2012.

In the first quarter of 2013, cash flow used in operations was $30 million compared to $29 million of cash generated from operations in the prior year period. The impact of higher raw material costs was reflected in a short-term investment in inventories. Cash used was also impacted by an increase in accounts receivable due to the timing of collections.

Capital expenditures, net of disposals, were $66 million in the first quarter of 2013 compared to $59 million in the year-ago period.

Sales grew 1 percent on price/mix improvements partially offset by volume declines and currency devaluations.

Operating income was $175 million. This is a 9 percent increase compared to reported operating income in the first quarter of 2012 and a 5 percent increase compared to the $167 million of adjusted operating income in the year-ago quarter. The change was primarily due to improved pricing and cost savings.

North America sales growth was driven by positive price/mix partially offset by negative volume and slight currency headwinds. The benefits of the North American manufacturing network optimization, particularly the decision to shed some low margin business, resulted in higher price/mix. Operating income was up 8 percent, or $8 million, from $100 million to $108 million primarily due to favorable price/mix and continued focus on cost savings initiatives from manufacturing efficiencies.

South America sales were down largely due to currency devaluations in Brazil and Argentina along with volume declines resulting from continued weak economic conditions and the impact of price increases. Operating income in the quarter was $43 million, down 5 percent, or about $2 million. Favorable price/mix was offset by currency devaluations, lower volumes and higher expenses.

Asia Pacific sales growth was driven by positive price/mix and favorable foreign exchange rates. The fourth quarter 2012 sale of an investment in a non-wholly owned consolidated subsidiary in China had a negative $5 million impact on volume. Operating income increased 13 percent from $20 million to $23 million largely due to favorable price/mix.

Europe, Middle East, Africa (EMEA) sales rose by $4 million due to price/mix improvement and volume growth partially offset by currency devaluations. Volume was negatively impacted by $5 million due to the 2012 closure of the Company's plant in Kenya and a change to a distribution model in that country. Operating income was $19 million, an increase of 2 percent mainly due to price/mix improvement and volume growth.

2013 EPS guidance remains in a range of $5.60 to $6.00 compared to adjusted EPS in 2012 of $5.57. The guidance anticipates weakness in the global economy; currency headwinds largely in Brazil, Argentina and Pakistan; continued inflationary pressures, primarily in South America; and, an effective tax rate of approximately 28 to 30 percent. The second quarter 2013 EPS is likely to be relatively flat with the year-ago adjusted EPS. Growth is expected to accelerate in the second half of 2013.

Capital expenditures in 2013 are anticipated to be in the range of $350-400 million and should support growth and cost reduction investments across the organization.