Price increases put Ingredion up 39 percent in Q2

Price increases put Ingredion up 39 percent in Q2

Volume improvement and manufacturing efficiencies as well as appropriate price increases to cover higher raw material costs and foreign exchange headwinds drove increases.

Ingredion Inc. (NYSE: INGR), a leading global provider of ingredient solutions to diversified industries, today reported results for the second quarter 2012.

"We delivered a strong second quarter in spite of some macroeconomic volatility and this should set us up to achieve our full year guidance," said Ilene Gordon, chairman, president and chief executive officer. "Our second quarter earnings per share was the highest adjusted quarterly result in our company's history. Underlying this performance are volume improvement and manufacturing efficiencies as well as appropriate price increases to cover higher raw material costs and foreign exchange headwinds. We continue to have a positive outlook for 2012 and expect sales and adjusted EPS improvement compared to 2011.

"Our business model has proven resilient and has mitigated some of the volatility we've faced while allowing us to still generate volume and EPS growth," Gordon added.

Earnings per share (EPS)

Second quarter diluted EPS rose 39 percent to $1.40 compared to $1.01 last year. The second quarter of 2012 included a $0.16 per share benefit from the release of a Korean deferred tax valuation allowance that was partially offset by $0.08 of restructuring and impairment charges and $0.01 of business integration costs. The second quarter of 2011 included $0.07 of integration costs and $0.02 of restructuring charges. Excluding these items, adjusted EPS increased 21 percent from $1.10 to $1.33 in the quarter. The estimated drivers of the increase in 2012 adjusted EPS were $0.25 from margin, $0.03 from higher volumes, and $0.03 of non-operational items partially offset by $0.08 from currency headwinds.

First half diluted EPS fell 12 percent to $2.61 compared to $2.97 last year. The first half of 2012 included a $0.16 per share benefit from the release of a Korean deferred tax valuation allowance that was largely offset by $0.11 of restructuring and impairment charges and $0.03 of business integration costs. The first half of 2011 included a $0.75 gain from a NAFTA settlement with the government of Mexico, partially offset by $0.13 of integration costs and $0.02 of restructuring charges. Excluding these items, adjusted EPS increased 9 percent from $2.37 to $2.59 in the first half.

Financial Highlights

  • During the second quarter of 2012, net financing costs were $17 million versus $19 million in the year-ago period. The decrease primarily reflects favorable foreign currency transactions.
  • At June 30, 2012, total debt and cash and cash equivalents were $1.84 billion and $440 million, respectively, versus $1.95 billion and $401 million, respectively, at December 31, 2011.
  • In the first half of 2012, cash flow from operations was $318 million compared to $102 million in the year-ago period.
  • Capital expenditures, net of disposals, were $128 million in the first half of 2012 compared to $89 million in the same period of 2011.
  • On July 23, the Company announced that it will restructure its operations in Kenya and close its plant in Eldoret. In the second quarter, the Company recorded an after-tax charge of $4 million, or $0.05 per share, related to this restructuring.

Business Review

North America

Second quarter

  • Volume up due to strong sales to the soft drink and brewing industries.
  • Strong price/mix included sufficient price increases to cover higher input costs.
  • Operating income was up 38 percent, or $27 million, from $70 million to $97 million.
  • Both volume and operating income growth reflect the absence of a significant maintenance project at the Company's largest facility in the year-ago quarter. The project had a $13 million unfavorable impact on second quarter 2011 operating income.

Year-to-date

  • Volume rose due to strong sales to the soft drink and brewing industries.
  • Strong price/mix included sufficient price increases to cover higher raw material costs.
  • Operating income rose 15 percent from $171 million to $197 million

South America

Second quarter

  • Volumes soft due to a combination of weaker economic activity in the region as well as a transportation strike and labor negotiations impacting our customers in Argentina.
  • Positive price/mix and lower corn costs helped offset higher energy costs and foreign exchange.
  • Operating income in the quarter was $47 million, down 1 percent from $48 million.

Year-to-date

  • Volumes soft due to a combination of weaker economic activity in the region as well as a transportation strike and labor negotiations impacting our customers in Argentina.
  • Positive price/mix and lower corn costs helped offset higher energy costs and foreign exchange.
  • Operating income was $93 million, down 4 percent from $97 million in the year-ago period.

Asia Pacific

Second quarter

  • Sales growth was driven by strong volumes in Thailand and improved price/mix in South Korea, which more than offset foreign exchange headwinds.
  • Operating income of $23 million was essentially flat in the second quarter as higher volume and pricing were offset by higher costs.

Year-to-date

  • Sales growth was driven by strong volumes in Thailand and improved price/mix in South Korea.
  • Operating income rose 5 percent from $41 million to $43 million. The trend of higher volume and pricing offsetting costs continued.

Europe, Middle East, Africa

Second quarter

  • Sales fell by $12 million due to currency devaluations and soft volume.
  • Operating income fell 13 percent, or $3 million, in the quarter from $22 million to $19 million due primarily to foreign exchange headwinds, softer volumes and higher costs partially offset by improved pricing.

Year-to-date

  • Sales fell by $16 million due to currency devaluations, Pakistan's on-going energy issues and continued economic weakness in Europe, which all impacted volumes.
  • Operating income fell 14 percent from $44 million to $38 million due primarily to volume softness, currency headwinds and higher energy costs.

2012 Guidance
Reported EPS expectations for 2012 are in a range of $4.87 to $5.12. The guidance includes an anticipated $0.29 per share of acquisition integration and restructuring charges for the full year offset by a $0.16 per share benefit from the reversal of a deferred tax valuation allowance. Excluding those anticipated charges and benefit, adjusted EPS for 2012 is expected to be in a range of $5.00 to $5.25, an increase of 7 percent to 12 percent compared to 2011 adjusted EPS. Adjusted EPS guidance is unchanged.

The effective tax rate for 2012 is estimated to be between 31 percent and 33 percent, which excludes discrete items.

Capital expenditures in 2012 are anticipated to be between $275 million and $325 million and should support growth investments across the organization, particularly in North America, South America and EMEA.

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