Ilene Gordon, Ingredion
Ilene Gordon, chairman, c.e.o. and president of Ingredion, said the company generated a cash flow of $686 million last year.

WESTCHESTER, ILL. — Fiscal-year net income rose 13% for Ingredion, Inc. despite unfavorable exchange rates and economic challenges in South America.

Net income of $411.7 million, or $5.51 per share on the common stock, in the year ended Dec. 31, 2015, was up from $363.3 million, or $4.74 per share, in the previous fiscal year. Adjusted earnings per share were $5.88, up from $5.20. Fiscal-year net sales slipped 1% to $5,621 million from $5,668 million.

“Ingredion ended the year with record operating income and earnings per share while generating strong operating cash flow of $686 million,” said Ilene Gordon, chairman, chief executive officer and president of Westchester-based Ingredion, in a Jan. 28 earnings call. “Volumes grew 7% overall, driven by our acquisitions as well as organic volume growth in core and specialty ingredients. Our higher-value specialty ingredients sales mix grew 1 percentage point to account for 25% of our total sales.”

Ingredion on March 11, 2015, completed its acquisition of Penford Corp., a U.S.-based leader in specialty ingredients for food and non-food applications. Then on Aug. 3, 2015, Ingredion completed its acquisition of Kerr Concentrates, Inc., a producer of fruit and vegetable concentrates, purees and essences.

“Acquisitions of Penford and Kerr Concentrates have broadened our ingredient portfolio and have hit our expectations on earnings per share, accretion and exceeded our expectations on cost synergies,” Ms. Gordon said.

Unfavorable foreign exchange affected Ingredion across all four of its geographic regions, said Jack Fortnum, executive vice-president and chief financial officer. The situation affected net sales, which were down for the fiscal year.

“The majority of the (sales) decline is attributable to unfavorable foreign exchange along with the impact of lower-priced corn, which is passed through in our selling prices,” he said. “This decline was partially offset by acquisition-related and/or organic volume growth in corn and specialty ingredients as well as favorable price mix in South America.”

In North America in the fiscal year, operating income increased 28% to $479 million from $375 million in the previous fiscal year, and sales rose 8% to $3,345 million from $3,094 million.

In South America, fiscal-year operating income dropped 6% to $101 million from $108 million and fiscal-year net sales fell 16% to $1,012 million from $1,203 million.

“We continue to look in terms of how we can pull things forward and actually get our network optimization in place in Brazil,” Mr. Fortnum said. “I think at this point in time one of the things we are doing is we are consolidating some of the capacity that we are shutting down in Brazil into other facilities, which requires relocating certain equipment, and that also requires certain customer approvals once we start to run that equipment as well.”

In Asia Pacific, operating income rose 4% to $107 million from $103 million. Net sales dropped 8% to $733 million from $794 million. In Europe, Middle East and Africa, operating income fell 2% to $93 million from $95 million and net sales decreased 8% to $530 million from $578 million.

Companywide in the fourth quarter, Ingredion had net income of $107 million, or $1.42 per share, which was up 70% from $63 million, or 83c per share. Fourth-quarter net sales of $1,405 million were up 3% from $1,368 million.

In 2016 the company anticipates adjusted earnings per share of $6.20 to $6.60.

“We anticipate that unfavorable foreign exchange will have a negative impact of 30c to 40c per share in our 2016 earnings-per-share guidance,” Mr. Fortnum said. “We expect this to be partially offset by incremental pricing. As we have explained in our business model, these pricing actions typically require three to six months to take full effect.”

Operating income should increase in 2016 with improved product mix and margins, he said.

“Penford is poised to hit at least $20 million in synergies, and the Kerr integration continues on track,” Mr. Fortnum said.