Overall sales volumes increased by 2%, driven largely by the acquisition of TIC Gums completed in January as well as organic growth in specialty ingredients, said Ilene S. Gordon, chairman, chief executive officer and president of Ingredion, in an Aug. 1 earnings call.
“The TIC Gums integration continues as planned, further enhancing our texture capabilities and enabling us to deliver custom solutions faster to small- and medium-sized customers,” she said.
Companywide net income of $133 million, or $1.81 per share on the common stock, was up from $120 million, or $1.62 per share, in the second quarter of the previous year. Adjusted EPS of $1.89 was up from $1.73. Ingredion continues to expect adjusted EPS in the range of $7.50 to $7.80 for the full fiscal year.
Net sales of $1.457 billion were up slightly from $1.455 billion. Less favorable price/mix due to the pass through of lower raw material cost offset acquisition and specialty volume growth. Volumes grew by 1% driven by acquisition-related and specialty volumes, Gordon said.
In North America in the second quarter, operating income of $181 million was up from $160 million and net sales of $905 million were up 1% from $895 million. Margin expansion driven by operational efficiencies and lapping plant maintenance drove the increase as did volume growth from TIC Gums and specialty ingredients.
Gordon also mentioned the acquisition of Kerr Concentrates, Inc., a producer of fruit and vegetable concentrates, purees and essences, that originally was announced in July 2015.
“It is pretty early, but between Kerr and TIC Gums, we really are excited about the opportunity to deliver solutions to the small- and medium-sized customers where we see more of the growth coming and a faster to market with some of the new products, and so we become more important to customers like this with our product development capabilities,” she said.
She said Ingredion may offer blending systems such as fruits and berries for smoothies to small- and medium-sized customers, and also may offer non-bioengineered/non-GMO sweetener systems.
In South America, Ingredion reported operating income of $4 million, which was down 71% from $14 million in the previous year’s second quarter. Net sales in South America dropped 5% to $228 million from $240 million. A strike in Argentina resulted in temporary higher costs.
“The macroeconomic conditions continue to be challenging in the Southern Cone, especially in Argentina,” Gordon said. “Pricing actions, good cost discipline and continuous improvement projects partially offset the temporary higher cost from the interruption of manufacturing activities in Argentina.
“The new labor agreement reached on June 1, 2017, was an important organizational restructuring action to become more cost competitive. In 2017, we expect South America to maintain a tight focus on cost and network optimization in addition to our ongoing focus on specialty growth.”
In Asia Pacific, second-quarter operating income of $29 million was down 3% from $30 million. Less favorable price/mix due to core customer mix diversification more than offset volume growth. Net sales rose 4% to $187 million from $180 million.
“Our Shandong Huanong and Sun Flour rice business integrations are going well,” Gordon said. “Our Shandong cost synergies are on track for 2018, and the demand for our rice-based ingredients is strong.”
Ingredion completed its acquisition of Shandong Huanong Specialty Corn Development Co., Ltd. in China in November 2016. The acquisition of the rice starch and rice flour business from Sun Flour Industry Co., Ltd. in Banglen, Thailand, was completed in March of this year.
In Europe, Middle East and Africa, Ingredion’s operating income of $29 million was even with operating income in the previous year’s second quarter. Margin expansion offset foreign exchange and volume impacts due to Ramadan timing. Net sales slipped 2% to $137 million from $140 million.
Ingredion companywide in the six months ended June 30 had net income of $260 million, or $3.53 per share, which was up 2% from $254 million, or $3.44 per share. Six-month net sales of $2.910 billion were up 3% from $2.815 billion.