Ingredion Reports Volumes Growth in All Regions, Tightens FY14 View

31 Jul 2014 --- Ingredion has reported that volumes increased in every region in both the second quarter and the first half of 2014 "We are pleased to deliver a good second quarter that reflects the overall positive trajectory of our business," said Ilene Gordon, chairman, president and chief executive officer. "Volumes were up in all four regions. North America, Asia Pacific and EMEA delivered strong operating income results. In South America, operating income improved in Brazil and Colombia but was offset by anticipated year-over-year declines in Argentina."

"Today, we have also entered into an accelerated share repurchase agreement. This serves two purposes. First, we believe it is appropriate to return additional cash to shareholders even as we continue to look for strategic acquisitions. These actions support our strategy to deploy cash in shareholder friendly ways. Second, we will benefit from the EPS accretion this year and next," Gordon added.

Second quarter 2014 operating income increased 16 percent to $163 million compared to $140 million in the second quarter of 2013. Strength in EMEA and APAC and improved results in North America were slightly offset by a small decline in South America.

Year-to-date 2014 operating income fell 10 percent from $315 million to $285 million largely as a result of on-going weakness in South America and a weaker-than-expected first quarter in North America.

North America second quarter 2014 operating income increased 6 percent to $110 million compared to $104 million in the second quarter of 2013. The increase was driven primarily by strength in Mexico and Canada. Year-to-date 2014 operating income fell 17 percent from $212 million to $176 million as strength in Mexico was offset by the impact of severe weather in the first quarter of 2014.

In South America, second quarter 2014 operating income fell 5 percent to $16 million compared to $17 million in the second quarter of 2013. Improved results in Brazil and Colombia were more than offset by continuing challenges in Argentina. Year-to-date 2014 operating income fell 24 percent from $61 million to $46 million as recovery in Brazil was more than offset by continued adverse conditions in Argentina.

In Asia Pacific, second quarter 2014 operating income increased 17 percent to $28 million compared to $24 million in the second quarter of 2013. Operating income grew in almost every country served in the region. Year-to-date 2014 operating income rose 14 percent from $47 million to $53 million behind strong results in South Korea, China and Thailand.

In Europe, Middle East, Africa (EMEA), second quarter 2014 operating income increased 50 percent to $25 million compared to $17 million in the second quarter of 2013. Operating income was strong in both Europe and Pakistan. Year-to-date 2014 operating income rose 28 percent from $36 million to $47 million largely as a result of strength in both Europe and Pakistan.

The Company has entered into an Accelerated Share Repurchase (ASR) agreement with JPMorgan Chase Bank, National Association (JPMorgan). Under the terms of the ASR, Ingredion has agreed to repurchase $300 million of its common stock from JPMorgan, in total, with an initial delivery of approximately 3.1 million shares, representing 80% of the shares anticipated to be repurchased based on current market prices. The final number of shares to be repurchased will be based on the volume-weighted average price, less a discount, of our common stock during the term of the transaction, which is expected to be completed no later than the end of the fourth quarter of 2014. The ASR is part of our existing share repurchase program, which had 4.0 million shares available for purchase as of July 30, 2014, and the maximum number of shares to be repurchased under the ASR is limited to 4.0 million shares.

2014 EPS is expected to be in a range of $5.40 to $5.70 compared to $5.05 in 2013. The guidance anticipates continued cost pressures in Argentina and softness in the Brazilian economy; ongoing strong performance in Mexico; and, an effective tax rate of 27 - 28 percent. In-line with previous guidance, operating income in Asia Pacific and EMEA is expected to be up, while North American operating income is expected to be flat to slightly up. South America is now expected to be slightly down. As a result of lower input costs, sales are expected to drop significantly for the total Company.

Cash generated by operations is expected to be approximately $700-750 million in 2014.

Capital expenditures in 2014 are anticipated to be approximately $300 million. These investments will support growth and cost reduction actions across the organization.