Penford helping drive growth at Ingredion

by Josh Sosland
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Ilene Gordon, chairman, president and c.e.o. of Ingredion, said the company is pleased with its second-quarter results.

WESTCHESTER, ILL. — Buoyed in part by the strong underlying results of the company’s newly acquired Penford specialty ingredients business, Ingredion Inc. announced higher second-quarter income in 2015 than the year before.

Net income of Ingredion in the second quarter was $108.9 million, equal to $1.49 per share on the common stock, up 4% from $104.6 million, or $1.37 per share, in the second quarter last year. Net sales were $1,535.6 million, down 2.1% from $1,568.2 million.

Adjusted for integration costs, net income in the second quarter was up approximately 9%.

“We are pleased with the second-quarter results, which were highlighted by higher specialty volumes, good operating efficiency, and strong earnings per share growth,” said Ilene Gordon, chairman, president and chief executive officer. “Although we experienced foreign-exchange headwinds across all four regions, our business model continues to work. In fact, operating income improved in North America, South America, and Asia Pacific.

“As we continue to execute our strategic blueprint, we are well positioned for further growth, especially in our higher-value ingredients that address key consumer trends. Our pending acquisition of Kerr Concentrates, Inc., a producer of natural fruit and vegetable concentrates, purees and essences, is another step to broaden our portfolio of wholesome, clean label ingredient solutions, which consumers are increasingly demanding. The Penford integration remains on track for at least $20 million in annualized cost synergies and the underlying business is performing well.”

In March, Ingredion acquired Penford, a supplier of specialty ingredients, including potato starch, for $340 million. The acquisition is part of Ingredion’s strategic shift in its business mix toward specialty ingredients. Earlier this month Penford said it would acquire Kerr Concentrates, a privately held producer of natural fruit and vegetable concentrates, purees and essences.

For the full year, Ingredion is forecasting earnings per share of $5.60 to $5.90 per share, versus $5.50 to $6, as its most recent forecast and compared with actual earnings of $5.20 per share in 2014.

Sales of higher-value specialty ingredients are expected to continue to contribute to margin expansion.

“The guidance assumes overall improvement in North America, modest improvement in Asia Pacific, South America in line, and EMEA (Europe, Middle East and Africa) down slightly given anticipated unfavorable changes in currency rates; an effective tax rate of 29% to 31%; and earnings per share accretion attributable to the 2014 accelerated share repurchase program,” Ingredion said. 

The company said improved margins, lifted by sales of higher-value specialty ingredients, will help underpin the profit gains from last year.

“We remain confident in our 2015 outlook,” Ms. Gordon said. “Strong specialty volumes, improved product mix, disciplined cost management, and the impacts of the first-quarter acquisition of Penford Corp. are expected to drive bottom-line growth.”

Operating income of the North America business of Ingredion totaled $127.2 million in the second quarter, up 15% from $110.4 million in the second quarter of 2015. Sales were $869.1 million, up 1%.

In the six months ended June 30, Ingredion net income was $194.5 million, or $2.66 per share, up 8% from $179.8 million, up 8%. Because average shares outstanding in the second quarter and year to date were down about 4% from a year earlier, earnings per share were up even more on a percentage bases than net income, with e.p.s gains of 9% in the quarter and 14% in the year.

Net sales in the first six months of the year were $2,945.5 million, down 1.9%, from $3,003 million.
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