WESTCHESTER, ILL. — The significant decline in demand for away-from-home consumption has put a damper on global interest in ingredients, leading to softer results at Ingredion, Inc.
Net income in the second quarter ended June 30 totaled $66 million, equal to 98¢ per share on the common stock, down 37% from $105 million, or $1.57 per share, in the same period a year ago. Net sales decreased 13%, falling to $1.35 billion from $1.55 billion.
In the six months ended June 30 net income was $141 million, or $2.10 per share, down 31% from $205 million, or $3.06 per share, in the same period a year ago. Net sales decreased 6% to $2.89 billion from $3.09 billion.
“We operated in an extremely challenging global environment,” James P. Zallie, president and chief executive officer, said during an Aug. 4 conference call with analysts. “As COVID-19 cases increased, government responses and consumer behavior shifts significantly reduced food consumption away from home which, in turn, impacted our results.”
Despite the challenges, Mr. Zallie said Ingredion continues to execute against its strategic priorities. During the quarter the company expanded its shared services in Mexico, progressed the structuring of global business services, consolidated its potato starch network in North America and closed on its acquisition of PureCircle. He said the company also is making solid progress on the startup of its South Sioux City, Neb., pea protein isolate facility as it has begun commissioning and certification.
“We continue to execute against our Cost Smart savings program and are increasing our savings run rate target to $170 million by 2021,” he added. “This $20 million increase is a direct result of our teams identifying even more effective and efficient ways to operate our business without compromising quality or service to customers.”
Operating income in North America in the second quarter of fiscal 2020 totaled $101 million, down 27% from $139 million a year ago. Sales in the division decreased 13% to $848 million from $977 million.
“We experienced a decline in US and Canada sweetener sales versus prior year, which was primarily driven by declines in high fructose sales mainly into foodservice beverages,” Mr. Zallie said. “While we saw a rebound as we exited the quarter, our total North America net sales reflects the sweetener decline in US and Canada. It also reflects a decline in sales of brewing ingredients throughout the second quarter in Mexico.”
Also sustaining a decline in the quarter was Ingredion’s Asia Pacific division, where operating income fell 4% to $22 million. Sales in Asia Pacific also were lower, falling 8% to $187 million from $203 million.
Operating income in the company’s South America business fell 19% to $13 million from $16 million. Sales decreased 19% to $182 million.
“Our sweetener sales were consistently pressured compared to prior year, and our brewing ingredient sales were volatile, with a very weak April followed by a strong bounce back in May and June,” Mr. Zallie said. “Carrying through to July, we are seeing healthy brewing ingredient sales. Sweetener sales still lag well below prior year as impulse buying of confectionery through informal channels is constrained by workers not commuting into businesses and children not attending school.”
In EMEA, operating income was $21 million, down 9% from $23 million in the same period a year ago. Net sales decreased 8% to $132 million.
James D. Gray, chief financial officer, noted during the call that Ingredion incurred $7 million in charges related to incremental COVID-19 expense for personal protective equipment, sanitization and health screening as well as an interim appreciation pay program at US manufacturing facilities.
Mr. Gray said Ingredion is “confident” in its ability to deliver on its 2020 run rate savings target of $90 million to $100 million, which is part of the company’s now increased savings target of $170 million by 2021.