Ingredion Incorporated — FY2023 Form 10-K
Reporting period: Fiscal year ended December 31, 2023. The filing also reports unaudited fourth-quarter results. Ingredion makes starches, sweeteners, specialty ingredients and related products for food, beverage, brewing, animal nutrition and industrial customers.
Financial performance
| Metric | FY2023 | FY2022 | Change |
|---|---|---|---|
| Net sales | $8.160 billion | $7.946 billion | +3% |
| Gross profit | $1.749 billion | $1.494 billion | +17% |
| Operating income | $957 million | $762 million | +26% |
| Net income attributable to Ingredion | $643 million | $492 million | +31% |
| Diluted EPS | $9.60 | $7.34 | +31% |
| Cash from operating activities | $1.057 billion | $152 million | Increased |
Gross margin increased to approximately 21% from 19%; operating margin was approximately 11.7% versus 9.6%. Management attributed improved sales and operating income mainly to pricing and customer mix, partly offset by lower volumes and unfavorable foreign exchange. Lower cost of sales also supported gross-margin expansion. Net income benefited additionally from a lower effective tax rate: 22.4% versus 24.9%.
Fourth quarter: Net sales were $1.921 billion versus $1.987 billion in Q4 2022; gross profit was $400 million versus $351 million; net income attributable to Ingredion was $131 million versus $114 million; diluted EPS was $1.97 versus $1.71.
Cash, debt and capital allocation
- Cash from operations was $1.057 billion, compared with $152 million in 2022. Working capital provided $77 million of cash versus using $664 million in 2022, principally reflecting lower inventory and receivables.
- Capital expenditures and mechanical-stores purchases were $316 million; management anticipated approximately $340 million of capital investment commitments for 2024.
- Total debt was $2.188 billion, down from $2.483 billion; cash and short-term investments totaled $409 million. Net debt was $1.779 billion, and net debt to adjusted EBITDA was 1.5x versus 2.2x.
- Available liquidity was approximately $1.7 billion. The company reported compliance with its revolving-credit covenants and expected available liquidity and cash generation to meet needs for at least the next 12 months.
- Ingredion repurchased 1.0 million shares for $101 million and paid $194 million in dividends, including dividends to non-controlling interests. No shares were repurchased in Q4.
Segments and changes
- North America sales rose 5% to $5.188 billion and operating income rose 27% to $718 million.
- South America sales fell 6% to $1.062 billion and operating income fell 16% to $142 million, reflecting lower volumes and higher energy costs.
- Asia-Pacific sales fell 2% to $1.089 billion while operating income rose 35% to $126 million, mainly on lower input costs.
- EMEA sales rose 5% to $821 million and operating income rose 42% to $156 million, mainly on favorable price mix.
- In November 2023, the company announced a planned 2024 reorganization toward global Texture and Healthful Solutions and local Food and Industrial Ingredients businesses. Until the new structure is operational, reporting remains on the existing regional segments.
Outlook, risks and unusual items
- The filing does not provide a clear numerical earnings or sales forecast for 2024. It does anticipate about $340 million in 2024 capital investment commitments and about $36 million for environmental facilities and programs.
- The South Korea business sale closed February 1, 2024, after year-end. Consideration was approximately $294 million; the company received $247 million net of certain transaction costs at closing, with the balance payable in equal annual installments through February 2027. Ingredion expected to recognize a gain based on the imputed fair value of $283 million in Q1 2024. The business generated $30 million of operating profit in 2023.
- Reported 2023 restructuring/impairment charges were $11 million, primarily reflecting other-than-temporary impairments of equity-method investments. Higher financing costs, up 15% to $114 million, reflected increased interest rates.
- Key exposures include corn and other raw-material prices, energy and freight costs, weather and climate impacts on crops and water, foreign exchange and interest rates, competition, shifting consumer preferences, geopolitical and supply-chain disruption, and manufacturing, product-safety and cybersecurity risks.
- Environmental matters include a Bedford Park, Illinois air-permit notice of violation under discussion with the state. A separate Indianapolis Clean Air Act matter was resolved in November 2023 through a consent decree requiring a $1.1 million civil penalty, a $0.6 million payment to Indiana, and facility projects. Management said known proceedings were not expected to be material, while noting outcomes remain uncertain.
- Management reported effective disclosure controls and internal control over financial reporting; KPMG issued unqualified audit opinions on the financial statements and internal controls. The audit identified pension obligations, particularly discount-rate assumptions, as a critical audit matter.
Important facts for investors to verify
- Whether lower volumes persist and pricing continues to offset input-cost and competitive pressures.
- The timing, final accounting gain and cash collection schedule for the South Korea divestiture.
- Execution and costs of the 2024 operating reorganization and planned capital investments.
- Effects of foreign exchange, Brazilian tax-law changes and commodity or energy hedges on future earnings and cash flow.
- Progress and potential costs relating to the Bedford Park environmental matter and other regulatory or legal inquiries.