Ingredion Incorporated (INGR)

INGR 
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Industry: Consumer Non-Durables
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Ingredion, Inc. (INGR)

Guidance Conference Call

July 15, 2013 9:00 am ET

Executives

Aaron H. Hoffman - Vice President of Investor Relations & Corporate Communications

Ilene S. Gordon - Chairman, Chief Executive Officer and President

Cheryl K. Beebe - Chief Financial Officer and Executive Vice President

Analysts

Kenneth B. Zaslow - BMO Capital Markets U.S.

Timothy S. Ramey - D.A. Davidson & Co., Research Division

Amon Wilkes - Gabelli & Company, Inc.

David Driscoll - Citigroup Inc, Research Division

Akshay S. Jagdale - KeyBanc Capital Markets Inc., Research Division

Ann H. Gurkin - Davenport & Company, LLC, Research Division

Presentation

Operator

Ladies and gentlemen, thank you for standing by, and welcome to the Ingredion Conference Call. [Operator Instructions] As a reminder, this conference is being recorded.

I would now like to turn the conference over to our host, Mr. Aaron Hoffman, Vice President of Investor Relations and Corporate Communications. Please go ahead, sir.

Aaron H. Hoffman

Thank you very much. Good morning and thanks, everyone, for joining us today on rather short notice. Joining me on the call this morning are, as always, Ilene Gordon, our Chairman and CEO; and Cheryl Beebe, our Chief Financial Officer.

Our updated view on the second quarter and full year 2013 was issued yesterday in a press release that can be found on our website, ingredion.com. The slides accompanying this presentation can also be found on the website and were posted about an hour ago for your convenience.

As a reminder, our comments within this presentation may contain forward-looking statements. These statements are subject to various risks and uncertainties, actual results could differ materially from those predicted in the forward-looking statements, and Ingredion is under no obligation to update them in the future as or if circumstances change. Additional information concerning factors that could cause actual results to differ materially from those discussed during today's conference call or in this morning's press release can be found in our -- in the company's most recently filed annual report on Form 10-K and subsequent reports on Forms 10-Q and 8-K.

So now I'll turn the time over to Ilene.

Ilene S. Gordon

Thanks, Aaron. Let me add my welcome and appreciation to those joining us this morning on the call and the webcast.

Ingredion has produced a long history of delivering against our commitments, and we take that obligation quite seriously. Over the past 3 years, we've managed against volatile commodities and currencies, energy issues and macroeconomic crises. And in that time, we've delivered outstanding earnings growth. However, there are times in business where market environments create situations that simply cannot be offset or overcome in the short term. Today's call is to address one of those times and to recalibrate our expectations with yours.

As we've discussed for more than a year, the situation in South America has posed challenges, and our managers there have worked diligently to navigate a difficult environment. We have also consistently discussed with you that there was risk in Argentina, as the economy was unstable and could deteriorate rapidly. This concern has come to fruition. From a high-level view, Argentina has moved into a rather severe situation that has placed significant pressure on our results in the region. At the same time, the Brazilian economy continues to be somewhat stagnant and our sales to the brewing industry remain soft.

North America is also seeing a general slower-than-expected volume recovery. To be clear, we still expect the region to be flat to up for 2013, but we can't rely on North America to offset the large negatives in South America. Both Asia Pacific and EMEA are trending largely as originally expected.

The result of these factors is that we expect second quarter EPS to be in a range of $1.15 to $1.20. We also anticipate that full year EPS will be between $5.10 and $5.40. Cheryl will walk you through all of the puts and takes in just a moment.

In spite of today's news, our view of our business model remains unchanged. We are dealing with these short-term issues while always investing for our future. We remain confident in our long-term EPS target of 10% to 12% compounded annual growth rate. We have a strong balance sheet and we'll continue to make shareholder friendly moves with our capital.

Let me now turn the time over to Cheryl to walk you through the change in outlook for the quarter and the year. Cheryl?

Cheryl K. Beebe

Thank you, Ilene.

We have experienced a rapid decline in the results for the second quarter, with a negative impact of approximately $10 million in operating income. While we put together the second quarter guidance, the assumption is that we would have more pricing flexibility to handle the impact of inflation, currency devaluation and volume performance. April results were in line with this view. In June, when we saw the May results, we saw a slight deterioration, with costs increasing, while preliminary June results showed a far greater deterioration, which led us to revise the assumptions for the remainder of the year.

The cautionary comments on the year-end call and first quarter call, that if Argentina imploded, we could not hold the range, unfortunately, are playing out. The operating income impact on the outlook is estimated at $35 million: $10 million in the second quarter and $25 million for the rest of the year. Our revised estimate incorporates little change in the third quarter from the second quarter, with volume and pricing improving slightly in the fourth quarter, as Argentina hits its seasonally strongest quarter in their summer.

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