Ingredion Inc. — FY2022 Form 10-K
Reporting period: Fiscal year ended December 31, 2022. The filing is an annual report, not a standalone Q4 filing; quarterly figures are included below. Ingredion produces starches, sweeteners, specialty ingredients and related products from corn and other plant-based materials, operating through four geographic segments.
Financial performance
| Metric | FY2022 | FY2021 |
|---|
| Net sales | $7.946 billion | $6.894 billion |
| Gross profit / gross margin | $1.494 billion / approximately 18.8% | $1.331 billion / approximately 19.3% |
| Operating income | $762 million | $310 million |
| Net income attributable to Ingredion | $492 million | $117 million |
| Diluted EPS | $7.34 | $1.73 |
| Cash from operating activities | $152 million | $392 million |
| Capital expenditures and mechanical stores purchases | $300 million | $300 million |
- Sales rose 15%, primarily from favorable pricing and product mix, partly offset by foreign-exchange effects and lower volumes overall. Higher pricing more than offset increased corn and other input costs; gross margin was roughly flat by management’s rounded presentation.
- Operating income and earnings improved substantially versus 2021, which included a $340 million impairment charge related to assets contributed to the Argentina joint venture. The 2022 effective tax rate was 24.9%, compared with 49.6% in 2021; the prior-year Argentina impairment had no corresponding tax benefit.
- Fourth-quarter 2022 sales were $1.987 billion versus $1.755 billion in Q4 2021. Net income attributable to Ingredion was $114 million versus $67 million, and diluted EPS was $1.71 versus $0.99.
- Operating cash flow declined to $152 million, chiefly because working capital used $664 million of cash, including increases in receivables and inventories associated in part with higher prices and input costs.
Segments
| Segment | FY2022 sales | FY2022 operating income | Sales change vs. FY2021 |
|---|
| North America | $4.934 billion | $565 million | +19% |
| South America | $1.124 billion | $169 million | +6% reported; +23% excluding operations contributed to the Argentina joint venture |
| Asia-Pacific | $1.107 billion | $93 million | +11% |
| EMEA | $781 million | $110 million | +11% |
Debt, liquidity and capital allocation
- Year-end debt was approximately $2.483 billion, including $543 million of short-term borrowings and $1.940 billion of long-term debt. Cash and cash equivalents were $236 million; net debt, as defined in the filing, was $2.244 billion.
- Available liquidity was approximately $1.626 billion, including $236 million of cash, $3 million of short-term investments and unused credit lines and borrowing capacity. The $1 billion revolving facility had no borrowings outstanding; $390 million of commercial paper was outstanding at a 4.75% weighted-average rate and seven-day weighted-average maturity.
- Ingredion entered a $200 million variable-rate term loan in December 2022, due December 2024. The weighted-average interest rate on total indebtedness was approximately 3.5% for 2022. The company reported compliance with its debt covenants at year-end.
- Management said available cash, operating cash flow and borrowing access were expected to fund anticipated capital expenditures, dividends and other needs for at least the next 12 months. Capital investment commitments for 2023 were anticipated to be approximately $300 million.
- Dividends paid, including to non-controlling interests, were $181 million. The company repurchased 1.283 million shares for a net cost of $112 million and authorized a new program for up to 6 million shares through December 31, 2025.
Outlook, risks and unusual items
- The filing provides no specific earnings or revenue guidance. Management highlighted continued exposure to corn and other raw-material costs, energy, freight, foreign exchange, interest rates and working-capital needs. Price adjustments and hedging are used to manage some commodity exposure but may not fully offset cost volatility.
- Other identified risks include the Russia-Ukraine conflict’s potential effects on commodity and energy markets, climate and weather impacts on crop supply, changing consumer preferences for sweeteners, competition, supply-chain disruptions, labor availability, cybersecurity and international political and regulatory risks.
- In September 2022, emissions testing at the Bedford Park, Illinois facility identified exceedances of permit limits; the Illinois EPA issued a Notice of Violation on February 8, 2023, and discussions were ongoing. A separate Indianapolis environmental matter had been referred to the Department of Justice; the company said known proceedings were not expected to be material, while acknowledging outcomes are uncertain.
- Brazilian tax matters provided a $27 million income-tax benefit in 2022. Ingredion also acquired Amishi for $7 million, acquired a 65% controlling interest in Mannitab for $22 million, and purchased $46 million of PureCircle minority shares, raising its ownership to approximately 87%.
- The company reported effective internal control over financial reporting, and the auditor issued unqualified opinions on the financial statements and internal controls. The audit identified pension benefit obligations, particularly discount-rate assumptions, as a critical audit matter.
Investor verification priorities
- Assess whether strong pricing and mix can be sustained as input costs, customer demand and volumes change, and whether margins recover from cost inflation.
- Track working-capital normalization, especially receivables and inventory, and its effect on operating cash flow and debt levels.
- Review short-term borrowing exposure, variable-rate debt costs, refinancing needs and covenant headroom as interest rates and commercial-paper balances fluctuate.
- Monitor resolution and potential penalties from the Bedford Park and Indianapolis environmental matters.
- Evaluate the 2022 tax benefit and the comparability of earnings given the prior-year Argentina impairment and tax effects.
- Verify 2023 capital spending, acquisition integration and the contribution of specialty ingredients to growth and profitability.
