WESTCHESTER, ILL. — Ingredion, Inc. in 2021 dealt with higher corn costs, a slower ramping up of plant protein production facilities than expected and, in the fourth quarter, higher transportation costs. A 15% increase in net sales still allowed the Westchester-based company to turn a profit in the fiscal year ended Dec. 31, 2021.
Net income attributable to Ingredion was $117 million, or $1.74 per share on the common stock, which was down 66% from $348 million, or $5.18 per share, in the previous fiscal year. Operating income of $310 million was down 47% from $582 million. A net asset impairment charge related to the contribution of Ingredion’s Argentine assets to the Arcor joint venture was a primary reason for the operating income decrease.
Net sales of $6.89 billion were up from $5.99 billion. Net sales of specialty ingredients grew in each of Ingredion’s four geographic regions and now represent 33% of global net sales, said James P. Zallie, president and chief executive officer, in a Feb. 3 earnings call.
“Asia Pacific led our specialties growth driven by our sugar reduction growth platform with PureCircle performing exceptionally well,” he said. “Tapioca and rice-based starch texturizers also contributed to the strong performance in the region.”
Ingredion’s stock on the New York Stock Exchange at midday on Feb. 3 was trading at $89.59 per share, which was down nearly 7% from a close of $96.23 on Feb. 2.
In North America, operating income of $487 million was flat when compared to the previous year. Favorable price mix and higher volumes were fully offset by higher corn and input costs and ramp-up costs related to plant-based protein operations in South Sioux City, Neb., and Vanscoy, Sask., facilities. Net sales increased 13% to $4.14 billion.
Mr. Zallie said labor shortages related to COVID-19 and equipment delays negatively impacted production in Vanscoy. The Vanscoy delays, the slower ramping up of production in South Sioux City and higher pea costs resulted in an operating loss of about $40 million in 2021, he said.
“Going forward, we remain optimistic in the long-term growth prospects for this exciting product category and expect year-over-year operating losses to decrease by approximately $10 million in 2022, and we expect to reach breakeven by late 2023,” Mr. Zallie said. “We are actively managing yellow pea costs and are confident we secure our yellow pea requirements for 2022.”
In South America, operating income rose 23% to $138 million as favorable price mix more than offset higher corn and input costs. Net sales jumped 15% to $1.06 billion. In Asia Pacific, operating income increased 9% to $87 million. Favorable price mix and year-over-year improvement in PureCircle results more than offset higher raw material and input costs. Net sales increased 23% to $997 million. In Europe, Middle East and Africa, operating income increased 4% to $106 million, largely attributable to favorable price mix in Pakistan and higher volumes in Europe. Net sales increased 19% to $703 million.
Companywide in the fourth quarter, net income attributable to Ingredion was $67 million, or $1 per share, which was down 42% from $115 million, or $1.71 per share, in the same time of the previous year. Net sales of $1.76 billion were up 10% from $1.59 billion. Ingredion experienced higher costs to move products in the fourth quarter, said James D. Gray, chief financial officer. The company had about $20 million of unexpected costs in the fourth quarter with half of it related to transportation, he said.
“Some of these were expected and passed through to customers, but a portion was unexpected due to disruptions and outages in our preferred transportation lanes,” Mr. Gray said. “In response, our team assessed the best way to serve our customers and purposefully opted for a higher cost and more expedient delivery solution when appropriate.”
Reduced ocean container availability, rail congestion and truck driver shortages intensified in the fourth quarter, Mr. Zallie said.
Ingredion in 2022 expects adjusted EPS to be in the range of $6.85 to $7.45, which would compare to adjusted EPS of $6.67 in 2022. Ingredion forecasts North American net sales to be up 10% to 15%.“The second year of the pandemic was every bit as challenging as the first year, but in different ways,” Mr. Zallie said of 2021. “What remained constant, though, was the way our teams continue to persevere and display agility to meet strong customer demand and deliver another year of significant growth. We overcame nearly $900 million of input cost inflation, successfully integrated two acquisitions, entered into two strategic joint ventures and continue to invest almost $100 million of capital in organic specialty growth.”