Ingredion Results Boosted by North American Volumes and Margins
01 May 2015 --- Ingredion has reported a 15.29 percent rise in profit for the first quarter ended Mar. 31, 2015. The company has earned $83.70 million, or $1.15 a share in the quarter, compared with $72.60 million, or $0.96 a share for the same period last year. On an adjusted basis, net profit for the quarter was $94.80 million, when compared with $72.60 million in the last year period.
Revenue during the quarter went down marginally by 2 percent to $1,330.10 million from $1,357.20 million in the previous year period. Gross margin for the quarter expanded 270 basis points over the previous year period to 21.10 percent. Total expenses were 89.51 percent of quarterly revenues, down from 90.99 percent for the same period last year. This has led to an improvement of 148 basis points in operating margin to 10.49 percent.
"We are pleased with the first quarter results which were highlighted by higher volumes and operating income, and earnings per share growth," said Ilene Gordon, chairman, president and chief executive officer. "As expected, operating income in North America was up significantly as last year's results reflected adverse weather effects, and in the first quarter of 2015 we had strong volumes in core and specialty ingredients and good cost control. Asia Pacific and EMEA achieved solid operating income for the quarter, in line with our expectations despite foreign exchange headwinds. These positives were slightly offset by softer demand and foreign exchange headwinds in South America, most predominantly in Brazil.
"We continue to have confidence in our business model. North America is expected to continue to drive bottom-line growth with stronger volumes and improved product mix. Asia Pacific and EMEA are anticipated to improve modestly and be in line with last year, respectively, despite continuing foreign exchange headwinds. South America is expected to be generally in line with last year with strong Andean performance expected to offset weakness in Southern Cone and Brazil.
"Despite economic challenges and slowing economies, our underlying business is doing well. Our geographic footprint, broad product portfolio, and focus on higher-value specialty products are expected to drive growth and shareholder value.
"Additionally, we are pleased that the Penford Corporation acquisition closed in March. The acquisition is still expected to be $0.08-$0.12 per share accretive in 2015 and will enhance our high-value specialty ingredient portfolio. As such, our expectation for adjusted EPS for the year, including accretion resulting from the transaction, is $5.50-$6.00, excluding the associated acquisition and integration costs," Gordon added.
Overall net sales were down in the first quarter as a result of currency devaluations and the pass through of lower net corn costs, partially offset by volume growth, both organic and acquisition related. First quarter reported operating income and adjusted operating income were $139 million and $157 million, respectively. This was a 14 percent and 28 percent increase, respectively, compared to $122 million of reported operating income in the first quarter of 2014. The increase in adjusted operating income was primarily due to stronger volumes and margins in North America. This was slightly offset by global foreign exchange headwinds and stagnant economies in South America, primarily Brazil.
In North America, first quarter operating income increased from $65 million to $102 million. Approximately $20 million of the increase is attributable to the lapping of the adverse weather effects in the first quarter of last year. Higher volumes, lower net corn costs, and lower manufacturing expenses accounted for the remainder of the increase. The impact of Penford's earnings was immaterial given its mid-March close.
In South America, operating income in the quarter was $25 million, down 18 percent, or $5 million, largely as a result of weaker demand in Brazil. Increased pricing mitigated the impact of foreign exchange throughout the region and higher input costs from inflationary effects in Argentina.
Asia Pacific first quarter operating income was $26 million, flat from a year ago. Weaker foreign exchange rates were offset by higher volumes.
Europe, Middle East, Africa (EMEA) first quarter operating income increased five percent to $22 million, up from $21 million a year ago. Weaker foreign exchange rates were offset by good cost management.
2015 adjusted EPS, including the anticipated $0.08-$0.12 per share accretion resulting from the Penford acquisition but excluding integration and acquisition costs, is expected to be in the range of $5.50 to $6.00 compared to adjusted EPS of $5.20 in 2014. The guidance assumes: overall improvement in North America, modest improvement in Asia Pacific, EMEA in line with last year, and South America in line to slightly up versus last year; an effective tax rate of 29-31 percent; and earnings per share accretion attributable to the 2014 accelerated share repurchase program. Sales of specialty ingredients are expected to continue to grow faster than our core portfolio of products.
