Ingredion Inc. (NYSE: INGR) has reported stronger-than-expected earnings in the third quarter of 2024, with adjusted earnings per share (EPS) reaching $3.05, exceeding analyst estimates by $0.45.
However, revenue came in at $1.87 billion, slightly below the $1.94 billion consensus estimate, which is a 3.8% miss. Despite the revenue shortfall, the quarter saw a 29% increase in operating income, marking the highest Q3 operating income in the company’s history.
Growth attributed to volume gains and cost controls
In the earnings call, CEO and president James (Jim) Zallie attributed the earnings boost to various factors, including robust volume growth across all segments, effective cost control, and renewed customer contracts, which helped offset inflationary impacts.
“All three of our segments delivered double-digit operating income growth in the quarter,” notes Zallie. He further credited “contract management” and “volume recovery” for the income gains, noting that these measures also facilitated the company’s “cost to compete” program, which targets $50 million in run-rate savings by the end of 2025.
Ingredion’s Texture and Healthful Solutions segment performed particularly well, reporting a double-digit sales volume increase driven by strong demand in savory and packaged meals, particularly in the United States and Europe.
This segment’s growth aligns with shifting consumer habits toward convenience foods, with Zallie commenting, “We believe we’re seeing more worker mobility as professionals return to the workplace and the demand for the products that we’re selling into for convenience and takeaway items pick up. And right now, we anticipate that this strength in demand will continue through the end of the year.”
New product innovations bolster growth strategy
In terms of product innovation, Ingredion has introduced several new ingredients within Q3, including a pea protein for cold-pressed bars, a corn starch texturizer for stretchy vegan cheese, and an upcycled citrus fiber ingredient for enhanced gelling and texture.
Zallie noted Ingredion’s commitment to addressing consumer needs, such as sugar reduction and plant-based fortification, as key drivers of the company’s growth strategy, stating, “We are investing in our solutions capabilities, specifically in texture solutions, sugar reduction, and protein and fiber fortification.”
In Latin America, demand showed mixed results, with notable gains in brewing ingredients in Brazil, although this was offset by some market volatility. Sales of nutritional meal supplements in Colombia also contributed to positive growth in the region. In North America, demand for industrial starches from paper and packaging clients remained strong, despite weaker sweetener sales in the food service sector.
Operational initiatives
Ingredion’s operational initiatives were also highlighted as significant contributors to Q3 performance. Zallie confirmed that the company’s new Cost2Compete program is currently ahead of target, with captured savings in general and administrative expenses supporting improved margins. Inventory management enhancements and production increases further strengthened the company’s working capital and cash flow positions.
“The strong performance […] enabled us to deliver our highest-ever third quarter operating income”
Ingredion plans to continue with strategic capital investments and share buybacks. By the end of 2024, the company expects to exceed its goal of $100 million in share repurchases and sees opportunities for further capital deployment in potential acquisitions.
Zallie concludes, “The strong performance across all segments enabled us to deliver our highest-ever third quarter operating income performance along with strong cash flow. We anticipate this momentum carrying through quarter four and into 2025.”
Find the full earnings presentation here.
