Net income attributable to Ingredion was $72.6 million for the quarter, down from $110.8 million in the first quarter of 2013. Net sales were also down to $1.36 billion from $1.6 billion in the same period a year ago, as a result of currency devaluations and negative price/mix which was a result of lower raw material costs.
Operating income was $122 million, a 30% decrease compared to $175 million in the first quarter of 2013. The decline was primarily due to soft results in North America caused by costs associated with extreme weather and the layout of fixed price contract corn hedges and continued weakness in Argentina. Strength in Asia Pacific and EMEA helped partially offset the decline.
“As we expected and communicated in our outlook, the first quarter was down sharply compared to the year ago period,” said Ilene Gordon, chairman, president and chief executive officer. “As expected, Argentina was down significantly as we begin to lap the economic and political issues that have led to a severe cost squeeze. In North America, the impact of extreme winter weather conditions on operating, energy and transportation costs persisted throughout the quarter and resulted in worse-than-anticipated operating income. Also as forecast, the layout of our corn costs for our fixed price contracts resulted in year-over-year unfavorability.
“Also in-line with our expectations for the quarter, volumes were positive in South America, Asia Pacific and EMEA. At the same time, operating income was up in Asia Pacific and EMEA while South America showed continued year-over-year sequential improvement.
“Our operating plan anticipated this slow start to the year and we expect year-over-year results to improve in each quarter as the year unfolds. As such, we are maintaining our full year EPS and operating income guidance,” Gordon added.
Ingredion said 2014 EPS is expected to be in a range of $5.35 to $5.75 compared to $5.05 in 2013. The guidance anticipates ongoing cost pressures in Argentina; a challenging environment as sugar prices remain low; an increase in expected negative impact from foreign exchange rates from 20¢ to 25¢ to 30¢ to 35¢; and, an effective tax rate of 27% to 28%.
All four regions are expected to deliver increased operating income. However, as a result of lower input costs, sales are expected to drop significantly for the total company.
Capital expenditures in 2014 are anticipated to be approximately $300 million. These investments will support growth and cost reduction actions across the organization, Ingredion said.