Ingredion Inc. — Q1 2024 Form 10-Q
Reporting period: Three months ended March 31, 2024. Unaudited results; dollars in millions except per-share data. Ingredion produces plant-based ingredient solutions. Effective January 1, 2024, it reorganized reporting into Texture & Healthful Solutions (T&HS), Food & Industrial Ingredients—Latin America (F&II–LATAM), and F&II—U.S./Canada.
Financial results and position
| Metric | Q1 2024 | Q1 2023 / comparison |
|---|
| Net sales | $1,882 | $2,137; down 12% |
| Gross profit / margin | $417 / 22% | $487 / 23% |
| Operating income | $213 | $291 |
| Net income attributable to Ingredion | $216 | $191 |
| Diluted EPS | $3.23 | $2.85 |
| Operating cash flow | $209 | $(51) |
| Capital expenditures and mechanical stores | $65 | $76 |
| Cash and cash equivalents at period end | $438 | $401 at December 31, 2023 |
| Total debt at period end | $1,881 | $2,188 at December 31, 2023 |
- Revenue fell primarily on unfavorable price mix, lower volumes, and the South Korea divestiture, partly offset by favorable foreign exchange. Cost of sales declined 11% to $1,465, mainly on lower volumes, but carryover of higher-cost inventory contributed to lower gross margin.
- Net income increased despite lower operating income, mainly because of an $82 pretax gain on the South Korea business sale and $13 lower financing costs. The sale also contributed to the effective tax rate declining to 21.0% from 25.1%.
- Operating cash flow improved by $260 year over year, with management citing working-capital changes and current-period earnings. Inventory fell $106 from year-end; cash provided by working-capital changes improved by $285 versus Q1 2023. Investing cash flow was $181, including $247 in net sale proceeds; financing cash outflow was $347, including a $312 net reduction in commercial paper borrowings.
- Current assets were $3,125 and current liabilities $1,283 at March 31. Total available liquidity was $2.0 billion: $996 million domestic and $1.0 billion international. Long-term debt was $1,740; total debt includes $141 of short-term borrowings.
Segment performance
| Segment | Net sales | Operating income | Year-over-year drivers |
|---|
| T&HS | $597, down 10% | $74, down 42% | Unfavorable price mix and higher-cost inventory carryover; sales also affected by foreign exchange. |
| F&II–LATAM | $616, down 8% | $101, down 17% | Unfavorable price mix and lower volume; peso devaluation affected joint-venture earnings. |
| F&II–U.S./Canada | $541, down 11% | $87, down 5% | Unfavorable price mix and lower volume; cold-weather downtime partly offset by stronger industrial demand. |
| All Other | $128, down 35% | $(4), versus $(8) | Lower volumes, including the South Korea sale, unfavorable price mix, and foreign exchange. |
Outlook, risks, and unusual items
- Outlook: The filing does not provide specific full-year earnings or sales guidance. Management anticipates approximately $340 million of capital investment in 2024 and expects available cash, operating cash flow, debt-market access, and borrowing capacity to fund planned needs for at least the next 12 months and foreseeable future.
- South Korea divestiture: Completed February 1, 2024, for total consideration of approximately $294 million. Ingredion received $247 million net of transaction costs at closing; the remaining consideration is payable in equal annual installments through February 2027. The transaction generated an $82 million pretax gain.
- Notable operating and market risks: Management identifies exposure to raw-material and energy prices, supply-chain disruption, foreign-exchange and interest-rate volatility, changing customer demand, facility disruptions, competition, climate-related impacts, and geopolitical and economic conditions. It reported no material change in market-risk disclosures during the quarter.
- Contingencies: A $32 million Brazilian tax-incentive asset remains recorded while Ingredion pursues recovery. The company says known legal proceedings and inquiries are not expected to be material, while noting outcomes are uncertain and future matters could adversely affect results.
- Other: The Argentine peso’s December 2023 devaluation affected Q1 2024 results through the company’s one-month-lagged recognition of joint-venture earnings. The company recorded $3 million of restructuring charges related to segment changes. Disclosure controls were judged effective as of March 31, 2024.
Important facts for investors to verify
- Whether lower price mix and volumes stabilize, and whether segment profitability recovers from Q1 declines.
- How much the South Korea gain and related tax treatment contributed to reported earnings; reported net income growth contrasts with lower operating income.
- Whether working-capital cash-flow benefits are sustained, and whether planned 2024 capital investment remains near $340 million.
- Collection timing and amounts for the deferred South Korea sale proceeds, and developments in the Brazilian tax-incentive recovery.
- Debt, commercial-paper usage, liquidity availability, and exposure to commodity, currency, and interest-rate movements.
