Ingredion Incorporated — 2021 Form 10-K
Reporting period: Fiscal year ended December 31, 2021. The filing also reports fourth-quarter results. Ingredion makes starches, sweeteners, specialty ingredients, nutrition products and biomaterials from corn and other plant-based materials, operating across North America, South America, Asia-Pacific and EMEA.
Financial performance
| Metric | 2021 | 2020 | Change |
|---|---|---|---|
| Net sales | $6.894 billion | $5.987 billion | +15% |
| Gross profit | $1.331 billion | $1.272 billion | +5% |
| Gross margin | 19% | 21% | Down 2 percentage points |
| Operating income | $310 million | $582 million | Down 47% |
| Net income attributable to Ingredion | $117 million | $348 million | Down 66% |
| Diluted EPS | $1.73 | $5.15 | Down 66% |
| Cash from operations | $392 million | $829 million | Down $437 million |
Sales growth reflected higher volumes and stronger price mix, including the pass-through of higher input costs. Cost of sales rose 18%, faster than sales, primarily due to higher corn and other input costs. The operating-income decline was mainly driven by a $340 million impairment tied to assets contributed to the Arcor joint venture; excluding that charge, management said operating income increased, reflecting higher sales volumes.
Fourth quarter: Net sales were $1.755 billion versus $1.593 billion in Q4 2020; gross profit was $290 million versus $352 million. Net income attributable to Ingredion was $67 million versus $115 million, and diluted EPS was $0.99 versus $1.70.
Segments, 2021 versus 2020: North America sales were $4.137 billion (+13%) and operating income was $487 million (flat). South America sales were $1.057 billion (+15%) and operating income $138 million (+23%). Asia-Pacific sales were $997 million (+23%) and operating income $87 million (+9%). EMEA sales were $703 million (+19%) and operating income $106 million (+4%).
Liquidity, debt and capital allocation
- Cash and cash equivalents were $328 million at year-end, down from $665 million; total available liquidity was approximately $1.719 billion.
- Total debt was approximately $2.046 billion, including $308 million of short-term borrowings; net debt was $1.714 billion. The weighted-average interest rate on total debt was approximately 3.0% in 2021.
- Ingredion had $250 million of commercial paper outstanding at year-end, supported by a $1 billion, five-year revolving credit facility maturing in 2026. The company reported compliance with its facility covenants.
- Operating cash flow was $392 million; capital expenditures and mechanical-stores purchases were $300 million. Cash used in investing activities was $335 million and cash used in financing activities was $373 million, primarily reflecting repayment of a $380 million term loan.
- Dividends paid, including noncontrolling interests, totaled $184 million. The company repurchased 765,000 shares for a net $68 million.
- Net Debt to Adjusted EBITDA, a non-GAAP measure, was 1.9 times versus 1.7 times in 2020; the company’s stated long-term objective is below 2.25 times. Adjusted ROIC was 10.7% versus 10.8%, against a stated objective above 10%.
Material changes and unusual items
- The $340 million Arcor-related impairment comprised a $311 million write-off of cumulative currency translation losses and a $29 million write-down of contributed assets to fair value. No tax benefit was recorded for the impairment.
- The Arcor joint venture, established with Grupo Arcor in 2021, combines five manufacturing facilities in Argentina; Ingredion holds 49%. The contribution of Argentina, Chile and Uruguay operations reduced South American volumes.
- Ingredion acquired KaTech, a food-texture and stabilization-solutions provider, for $40 million net of cash acquired in April 2021. It also entered an Amyris stevia joint venture with a 31% interest and acquired exclusive commercialization and licensing rights.
- Reported effective income tax rate increased to 49.6% from 30.0%, primarily because the Arcor impairment received no tax benefit and the mix of earnings changed. Tax benefits from Brazil indirect-tax matters and reversal of an accrual for unremitted earnings partly offset these effects.
- Cash from operations fell substantially, principally due to working capital: receivables and prepaid expenses used $162 million and inventories used $312 million, partly offset by $226 million from accounts payable and accrued liabilities.
Outlook, management commentary and risks
- No specific 2022 revenue, earnings or EPS guidance is stated in the supplied filing text. Management expected available cash, operating cash flow, debt-market access and borrowing capacity to be sufficient for anticipated needs for at least the next 12 months.
- Capital investment commitments for 2022 were expected to be $300 million to $335 million; anticipated 2022 environmental spending was approximately $29 million.
- Management said facilities continued operating through 2021 without material supply-chain interruptions. The Cost Smart program is expected to deliver $170 million in total savings through the end of the program, exceeding its original $125 million target.
- Key risks include volatility in corn, other raw materials and energy; difficulty passing cost increases through to customers; competition and changing consumer preferences; foreign-exchange, political and economic risks; climate-related supply and operating disruptions; manufacturing reliability; COVID-19 effects; and integration or performance risks from acquisitions and joint ventures.
- The filing describes ongoing ordinary-course legal and regulatory matters, including an environmental matter involving the Indianapolis facility referred to the U.S. Department of Justice. The company did not believe currently known proceedings would be material, while noting outcomes are uncertain. It also disclosed $41 million of remaining Brazilian indirect-tax credits recorded in assets.
Most important facts for investors to verify
- How much of sales growth and margin pressure reflects pricing and volume versus pass-through costs, and whether pricing continues to recover input-cost inflation.
- The Arcor transaction’s ongoing earnings, cash-flow and tax effects, including the treatment of the impairment and currency translation losses.
- Whether working capital normalizes and operating cash flow recovers after the sharp 2021 decline.
- Current debt, commercial-paper usage, liquidity, covenant headroom and the effect of interest-rate changes.
- Progress and returns from KaTech, PureCircle, Verdient, the Amyris venture and plant-based protein investments, including the reported ramp-up costs.
- Developments in raw-material and energy costs, foreign exchange, COVID-19 demand, and the Indianapolis environmental matter.