Ingredion recently released its Q2 results, with year-to-date net sales down from the year-ago period, primarily driven by sales volume declines in North and South America.
In South America, the company’s reported and adjusted operating income for the quarter were USD113m and USD127m, respectively, decreases of 33% and 29%, respectively, compared to last year’s period. The decreases were largely attributable to North and South America. Excluding foreign exchange impacts, reported and adjusted operating income were down 29% and 25%, respectively, from the same period last year.
“As an essential business in the food supply chain, we quickly adapted to meet the changing needs of our customers due to fluctuations in consumer demand resulting from COVID-19 lockdowns and restrictions around the globe,” says Jim Zallie, president and CEO at Ingredion.
Ingredion noted impacted global demand for ingredients, primarily in April and May, due to the significant decline in out-of-home consumption from COVID-19.
“During the quarter, we experienced the significant decline in away-from-home consumption that impacted global demand for ingredients, primarily in April and May. Since then, we have seen sequential improvement in June and July as the restrictions ease and consumer mobility increases. We remain focused on optimizing for the new reality, working virtually with customers to co-create, and taking advantage of opportunities to drive simplification and efficiency in our business. As a result, we raised our Cost Smart savings target from USD150m to USD170m by 2021. We also strengthened our balance sheet and lowered our future financing costs through a USD1bn senior notes offering,” he added.
The company cites its completion of the acquisition of stevia producer PureCircle as key in its growth ambitions. In addition, the company commenced a USD85m expansion investment in China, one of the largest and fastest-growing starch markets, to further grow its starch-based texturizer platform.
In North America, the company’s second-quarter operating income was USD101m, a decrease of USD38m from the year-ago period. Meanwhile, year-to-date operating income was USD226m, a decrease of USD38m from the year-ago period. For both the quarter and year-to-date, the decrease was driven by significantly lower away-from-home consumption in the US and Canada and the shutdown of breweries in Mexico.
In South America, operating income was USD13m, a decrease of USD3m from the year-ago period. The decrease was largely attributable to unfavorable foreign currency impacts and stay-at-home orders negatively impacting sales volume, partially offset by favorable price/mix. Excluding foreign exchange impacts, segment operating income was up 6%.
For the Asia-Pacific region, the second-quarter operating income was USD22m, down USD1m from the year-ago period and year-to-date operating income was USD42m, a decrease of USD1m from the year-ago period. For both the quarter and year-to-date, the decrease was largely attributable to the impact of stay-at-home orders on sales volume, partially offset by improved tapioca margins and lower operating expenses. Excluding foreign currency impacts, segment operating income was flat for both the quarter and year-to-date.
In Europe, Middle East and Africa (EMEA), operating income was USD21m, down USD2m from the year-ago period. The decrease was largely attributable to stay-at-home orders impacting production and sales in Pakistan, partially offset by strong pricing actions and strong EMEA specialty sales volume. Excluding foreign currency impacts, segment operating income was flat.