Q1 2024 Ingredion Inc Earnings Call

Operator: Good day, and thank you for standing by. Welcome to the first quarter 2024 Ingredion Incorporated earnings call. At this time, all participants are in a listen-only mode.

Good day, and thank you for standing by.

Speaker Change: Welcome to the first quarter 2024 ingredient incorporated earnings call.

At this time all participants are in a listen only mode.

Operator: After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you'll need to press star 1 1 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 118. Please, the advice of today's conference is being recorded. I would now like to hand the conference over to Noah Weiss, Vice President of Investor Relations. Please go ahead.

Speaker Change: After the Speakers' presentation, there'll be a question and answer session.

Speaker Change: Ask a question during the session you will need to press star one one on your telephone you will then hear an automated message advising your hand is raised.

To withdraw your question. Please press star one again.

Speaker Change: Please be advised that today's conference is being recorded.

Noah Weiss: Good morning, and welcome to Ingredion's first quarter 2024 earnings call. I'm Noah Weiss, Vice President of Investor Relations. Joining me on today's call are Jim Zallie, our President and CEO, and Jim Gray, our Executive Vice President and CFO. The press release we issued today, as well as the presentation we will reference for our first quarter results, can be found on our website, Ingredion.com, in the Investors section. As a reminder, our comments within this presentation may contain forward-looking statements. These statements are subject to various risks and uncertainties and include expectations and assumptions regarding the company's future operations and financial performance.

Speaker Change: I would now like to hand, the conference over to Noel White, Vice President of Investor Relations. Please go ahead.

Noah Weiss: Actual results could differ materially from those estimated in the forward, and Ingredion assumes 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 the company's most recently filed annual report on Form 10-K and subsequent reports on Forms 10-Q and 8-Q. During this call, we also referred to certain non-GAAP financial measures, including Adjusted Earnings per Share, Adjusted Operating Income, and Adjusted Effective Tax Rate, which are reconciled to U.S. GAAP measures in Note 2 non-GAAP information included in our press release and in today's presentation. With that, I will turn the call over to James Zallie. Thank you, Noah.

Speaker Change: Good morning, and welcome to <unk> first quarter 2024 earnings call I'm, Noel White, Vice President of Investor Relations. Joining me on today's call are Jim Sally, our president and CEO and Jim Gray, our executive Vice President and CFO.

Noel White: The press release, we issued today as well as the presentation, we will reference for our first quarter results can be found on our website ingredient dot com in the investors section.

Speaker Change: As a reminder, our comments within this presentation may contain forward looking statements. These statements are subject to various risks and uncertainties and include expectations and assumptions regarding the company's future operations and financial performance actual results could differ materially from those estimated in the forward looking statements and ingredient assumes no obligation.

Speaker Change: To update them.

Speaker Change: As 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 on the Companys. Most recently filed annual report on Form 10-K, and subsequent reports on forms 10-Q.

Speaker Change: An 8-K during this call. We also refer to certain non-GAAP financial measures, including adjusted earnings per share adjusted operating income and adjusted effective tax rate, which are reconciled to U S. GAAP measures in note two non-GAAP information included in our press release and in today's presentation appendix.

Speaker Change: With that I will turn the call over to Jim <unk>.

James P. Zallie: And good morning, everyone. Ingredion's first quarter results exceeded our expectations in comparison with a strong comparison with last year's record first quarter performance. As anticipated, our net sales volumes in the quarter improved sequentially, despite the impacts of extreme cold weather on shipments in the U.S. and taking into account the sale of our South Korea business. As you can see on slide five, while the consolidated net sales and operating income were lower year over year, the operating income for quarter one 2024 was still the second highest in the company's history and continued the upward trend from prior years. Inclusive of the current period, we have delivered 5% net sales growth over the last five years at a compounded annual growth rate of 5% and an adjusted operating income compounded annual growth rate of 7% over the same period.

Jim: Thank you Noah and good morning, everyone.

Jim: <unk> first quarter results exceeded our expectations against a strong comparison with last year's record first quarter performance.

Jim: As anticipated our net sales volumes in the quarter improved sequentially. Despite the impacts of extreme cold weather on shipments in the U S and taking into account the sale of our South Korea business.

Jim: As you can see on slide five while the consolidated net sales and operating income were lower year over year. The operating income for quarter. One 2024, we're still the second highest in the company's history and continue the upward trend from prior years.

Jim: Inclusive of the current period, we have delivered 5% net sales growth over the last five years compounded annual growth rate and an adjusted operating income compounded annual growth rate of 7%.

Jim: Over the same period.

James P. Zallie: Furthermore, while we delivered adjusted operating profit for the first quarter of 2024 at the top end of our guided range, the current market environment would have been conducive to delivering even better profitability had it not been for the impact of extreme cold weather on our US shipments, which we estimate was at least $10 million. Now, let me update you on progress against our three strategic pillars. Starting with our business growth pillar. During the quarter, we completed the reorganization of our business, which resulted in new reportable segments, which we are sharing for the first time today.

Jim: Furthermore, while we delivered adjusted operating profit for the first quarter of 2024 at the top end of our guided range. The current market environment would have been conducive to delivering even better profitability had it not been for the impact of extreme cold weather on our U S shipments, which we.

Jim: We estimate.

Jim: Was at least $10 million.

Jim: Now, let me update you on progress against our three strategic pillars.

Jim: Starting with our business growth pillar.

Jim: During the quarter, we completed the reorganization of our business, which resulted in new reportable segments, which we are sharing for the first time today.

James P. Zallie: For Texture and Healthful Solutions, we feel increasingly confident regarding volume momentum as we saw strong demand from distributors in the quarter, and volumes overall in April were up nicely year over year. Also noteworthy, project-related customer engagement in the US was up 60% in quarter one, which we view as a positive leading indicator of future growth for our Texture and Healthful Solutions segment. We have completed the commissioning of the capacity expansion for our higher value Stevia product lines at our Pure Circle facility in Kuala Lumpur to support our sugar reduction franchise growth.

Jim: For texture and helpful solutions, we feel increasingly confident regarding volume momentum as we saw strong demand from distributors in the quarter.

Jim: And volumes overall in April were up nicely year over year.

Jim: Also noteworthy project related customer engagements in the U S are up 60% in quarter, one, which we view as a positive leading indicator of future growth for our texture and helpful Solutions segment.

Jim: We have completed the commissioning of the capacity expansion for our higher value stevia product lines, and our pure circle facility in Kuala Lumpur to support our sugar reduction franchise growth.

James P. Zallie: Lastly, in terms of a positive indicator of overall economic growth, we have seen a strong demand recovery for industrial starch from papermaking and packaging customers in North America. Turning to our second pillar, cost competitiveness through operational excellence, in February, we closed on the sale of our South Korean business.

Jim: Lastly in terms of a positive indicator of overall economic growth, we have seen a strong demand recovery for industrial starch from paper, making and packaging customers in North America.

Jim: Turning to our second pillar cost competitiveness through operational excellence in February we closed on the sale of our South Korea business. The proceeds from this divestiture will be used to support our capital allocation priorities.

James P. Zallie: The proceeds from this divestiture will be used to support our capital allocation priorities. During the quarter, we also launched a multi-year cost savings program, which we are calling Cost to Compete. We are already advancing toward our target to deliver $50 million of savings by the end of 2025, and I'll highlight this program more in a few minutes. Some of the notable cost-to-compete initiatives include a project we have undertaken to unlock capacity across our manufacturing footprint by applying machine learning and AI.

Jim: During the quarter, we also launched a multiyear cost savings program, which we are calling cost to compete.

Jim: We are already advancing toward our target to deliver $50 million of savings by the end of 2025 and I'll highlight this program more in a few minutes.

Jim: Some of the notable cost to compete initiatives.

Jim: Include a project, we have undertaken to unlock capacity across our manufacturing footprint by applying machine learning NII. In addition, we are continuing to optimize our supply chain distribution and warehouse network and pursuit of service excellence efficiencies and savings.

James P. Zallie: In addition, we are continuing to optimize our supply chain, distribution, and warehouse network in pursuit of service excellence, efficiencies, and savings. Lastly, we continue to be encouraged by the results achieved by our centralized procurement team, which has recorded some big wins on freight cost savings through globally led procurement strategies combined with strong local execution. Regarding our purpose-driven and people-centric growth culture, I'm proud to report that we were recognized for the 10th time by Ethosphere as one of its 2024 world's most ethical companies. This award reflects the deep commitment of our teams around the world who lead with integrity and prioritize ethics across our organization.

Jim: Lastly, we continue to be encouraged by the results achieved by our centralized procurement team, which has recorded some big wins on freight cost savings through globally led procurement strategies combined with strong local execution.

Jim: Regarding our purpose driven and people centric growth culture I'm proud to report that we were recognized for the 10th time by Ethisphere as one of its 2024 world's most ethical companies.

Jim: This award reflects the deep commitment of our teams around the world, who lead with integrity and prioritize ethics across our organization.

James P. Zallie: Regarding sustainability-related achievements, I would like to commend our team for lowering greenhouse gas emissions by 22 percent compared to 2019 levels and for increasing the share of purchased electricity from renewable sources to 25 percent, which is a big jump from only 5 percent two years ago. This has been done through a combination of investments in solar and biomass energy. In fact, for Brazil specifically, following the completion of our recent conversion to biomass boilers at our two largest facilities, 96 percent of all of our energy needs in Brazil now come from renewable sources.

Jim: Regarding sustainability related achievements I would like to commend our team for lowering greenhouse gas emissions by 22% compared to 2019 levels and for increasing the share of purchased electricity from renewable sources to 25%, which is a big jump from only 5% two years ago.

Jim: This has been done through a combination of investments in solar and biomass energy in fact for Brazil, specifically following the completion of our recent conversion to biomass boilers at our two largest facilities, 96% of all of our energy needs in Brazil now come from renewable sources.

James P. Zallie: I would now like to comment a bit more on volume trends in the quarter. As we have shown in previous quarters... This is a volume index based upon our 2019 quarterly shipment averages, excluding high fructose corn syrup and adjusting for material changes in our portfolio. This graph illustrates the heightened volume demand during 2021 and 2022 in reaction to the globally constrained supply chain. In the middle of 2023, we experienced a notable drop in orders as customers destocked inventories, primarily impacting our texture product line.

Jim: I would now like to comment a bit more on volume trends in the quarter as we have shown in previous quarters.

Jim: This is a volume index based upon our 2019 quarterly shipment averages excluding high fructose corn syrup, and adjusting for material changes in our portfolio.

Jim: This graph illustrates the heightened volume demand during 2021, and 2022 and reaction to globally constrained supply chains.

Jim: In the middle of 2023, we experienced a notable drop in orders as customers destock inventories, primarily impacting our texture product line.

James P. Zallie: This year, we anticipate a gradual improvement in volumes and have already seen a significant pickup in distributor demand and solid volume growth in April. It is worth noting that for the quarter, on the slide being shown, we are also projecting where volume was expected to land if not for the impact of extreme cold weather on our U.S. shipment. Ingredion has a legacy of transforming and evolving its business in response to changing market dynamics.

Jim: This year, we anticipate a gradual improvement in volumes and have already seen a significant pickup in distributor demand and solid volume growth in April.

Jim: It is worth noting that for the quarter on the slide being shown we are also projecting where volume was expected to land if not for the impact of extreme cold weather on our U S shipments.

Jim: Ingredient has a legacy of transforming and evolving its business in response to changing market dynamics, our ability to strategically adapt has ensured long term prosperity for the company and is one of the many reasons. We are approaching a rare milestone to be listed now for 122 years on the New York stock exchange.

James P. Zallie: Our ability to strategically adapt has ensured long-term prosperity for the company and is one of the many reasons we are approaching a rare milestone to be listed now for 122 years on the New York Stock Exchange. Ingredion's previous region structure was instrumental in maintaining local accountability to deliver results.

Jim: Ingredients previous region structure was instrumental in maintaining local accountability to deliver results.

James P. Zallie: That culture of accountability will continue as we shift to a more customer and market-focused segment in pursuit of growth, which will be further enabled by our maturing global operating model. Our reorganization and financial re-segmentation would not have been possible five years ago without the global operating model currently in place. As we look forward, we believe the more compelling natural geographic alignment of the new segments will create operational and market synergies. As we execute our strategy to drive growth and deliver on our winning aspiration to be recognized as the go-to provider for texture and healthful solutions that make healthy taste better, I'm pleased to announce that Dr. Michael Leonard will join Ingredion as Senior Vice President, Chief Innovation Officer, and Head of Protein Fortification, effective May 13, 2024.

Jim: That culture of Accountability will continue as we shift to a more customer and market focused segments in pursuit of growth.

Jim: Which will be further enabled by our maturing global operating model.

Jim: Our reorganization and financial recession, Mentation would not have been possible five years ago without the global operating model currently in place.

Jim: As we look forward, we believe the more compelling natural geographic alignment of the new segments will create operational and market synergies.

Jim: As we execute our strategy to drive growth and deliver on our winning aspiration to be recognized as the go to provider protector and helpful solutions that make healthy taste better.

Jim: I am pleased to announce that Dr. Michael Leonard will join ingredient as senior Vice President Chief Innovation Officer, and head of protein fortification effective may 13th 2020 for.

James P. Zallie: Mike brings broad industry leadership experience in both developed and emerging markets with both CPG and ingredient multinationals, as well as high-growth startup companies, which will be a tremendous asset to Ingredion and our customers. As we mentioned recently at Cagney, we are committed to driving continuous cost efficiencies as a means to maintain consistent profitable growth. Cost to Compete will deliver $50 million of run rate savings by 2025.

Jim: Mike brings broad industry leadership experience in both developed and emerging markets with both CPG and ingredient multinationals as well as high growth startup companies, which will be a tremendous asset to ingredient <unk> and our customers.

Jim: As we mentioned recently at Cagny, we are committed to driving continuous cost efficiencies as a means to maintain consistent profitable growth.

Jim: Cost to compete we will deliver $50 million of run rate savings by 2025.

James P. Zallie: We are pursuing savings in two areas. $25 million will come from SG&A, which will show up in our reported operating expenses. And another $25 million will come from cost of goods sold savings, which will positively impact our gross margin. We see a significant opportunity to continue to leverage our shared services infrastructure that we have built over the past five years to lead that effort. We are also pleased to announce that Vanessa Bordeaux has joined Ingredion as Vice President, Global Shared Services.

Jim: We are pursuing savings into areas $25 million will come from SG&A, which will show up in our reported operating expenses.

Jim: And another $25 million will come from cost of goods sold savings, which we which will positively impact our gross margin.

Jim: We see a significant opportunity to continue to leverage our shared services infrastructure that we've built over the past five years.

Jim: To lead that effort. We are also pleased to announce that Vanessa Bordeaux joined ingredient as vice President Global shared services.

James P. Zallie: In her role, she will continue to drive continuous improvement and change with a strong focus on global process standardization, risk reduction, and internal controls management. Now, I will hand it over to Jim Gray for the financial review. Jim?

Vanessa Bordeaux: Her role she will continue to drive continuous improvement and change with a strong focus on global process standardization risk reduction and internal controls management.

James Derek Gray: Thank you, Jim. And good morning, everyone. Moving to our income statement, net sales for the first quarter were approximately $1.9 billion, down 12% versus the prior year. Gross profit dollars decreased 14 percent, but gross margins were resilient, remaining greater than 22 percent again this quarter and down slightly when compared to the strong performance of Q1 of last year. Reported and Adjusted Operating Income were $213 million and $216 million, respectively. The decrease in operating income was driven by the impact of extreme cold weather in the U.S.

Vanessa Bordeaux: Now I will hand, it over to Jim Greg for the financial review Jim.

James Derek Gray: Thank you Jim and good morning, everyone.

James Derek Gray: Moving to our income statement net sales for the first quarter were approximately $1 9 billion.

James Derek Gray: Down 12% versus the prior year.

James Derek Gray: Gross profit dollars decreased 14%, but.

James Derek Gray: Gross margins were resilient remaining greater than 22% again, this quarter and down slightly when compared to the strong lap of Q1 of last year.

James Derek Gray: Reported and adjusted operating income were $213 million and $216 million respectively.

James Derek Gray: The decrease in operating income was driven by the impacts of extreme cold weather in the U S.

James Derek Gray: Hyperinflation in Argentina.

James Derek Gray: And the carryforward of higher cost inventory into the quarter.

James Derek Gray: Hyperinflation in Argentina and the carry forward of higher cost inventory into the quarter. Turning to our Q1 Net Sales Bridge, the 12% decrease in net sales was driven by $176 million in lower price mix and 40 million in lower volume, partially offset by a positive foreign exchange impact of $12 million.

James Derek Gray: Turning to our Q1 net sales bridge.

James Derek Gray: The 12% decrease in net sales was driven by $176 million and lower price mix and $40 million and lower volume.

James Derek Gray: Partially offset by a positive foreign exchange impact of $12 million.

James Derek Gray: Additionally, the exit from South Korea had a $51 million impact on sales volume. Turning to the next slide, we highlight Net Sales Drivers for the first quarter. For the total company, net sales were down 12%, and 10% when excluding the net impact of South Korea's sales from the results. Texture and Healthful Solutions net sales were down 10%.

James Derek Gray: Additionally, the exit from South Korea had a $51 million impact on sales volume.

James Derek Gray: Turning to the next slide we highlight net sales drivers for the first quarter.

James Derek Gray: For the total company net sales were down 12%.

James Derek Gray: And 10% when excluding the net impact in South Korea sales from the results.

James Derek Gray: Texture and helpful solutions net sales were down 10%.

James Derek Gray: Sales volume was flat compared to the prior year, which is indicative of returning volume demand for texture ingredients. Price mix was down 9% for the quarter, partly reflecting the higher pricing from last year as these businesses priced through double-digit inflation for specialty corn and natural gas, primarily in Europe and the U.S. Food and Industrial Ingredients LATAM net sales were down 8%, which was primarily driven by lower corn costs year over year being reflected in price.

James Derek Gray: Sales volume was flat to prior year.

James Derek Gray: Which is indicative of returning volume demand for texture ingredients.

James Derek Gray: Price mix was down 9% for the quarter.

James Derek Gray: Harley, reflecting the higher pricing from last year as these businesses priced through double digit inflation for specialty corn and natural gas primarily in Europe and the U S.

James Derek Gray: Food and industrial ingredients Latam net sales were down 8%.

James Derek Gray: This was primarily driven by lower corn costs year over year being reflected in price mix.

James Derek Gray: Of note, sales volume was impacted primarily by the timing of a customer demand poll in Columbia, which we anticipate to come back during the balance of the year. Lastly, food and industrial ingredients, U.S. canned net sales were down 11 percent.

James Derek Gray: Of note sales volume was impacted primarily by the timing of customer demand pull in Colombia.

James Derek Gray: Which we anticipate to come back during the balance of the year.

James Derek Gray: Lastly, food and industrial ingredients U S can net sales were down 11%.

James Derek Gray: Price mix was down 7%, reflecting pass-through of lower corn costs on variable rate customer contracts. However, sales volume was impacted by slowed production and reduced U.S. shipments due to cold weather. Let me turn to a recap of our Q1 segment performance. Texture and Healthful Solutions net sales were down 10% compared to the prior year and down 9% on a constant currency basis. Texture and Healthful Operating Income was $74 million, demonstrating an OI margin of 12.4%.

James Derek Gray: Price mix was down 7%, reflecting pass through of lower corn costs on variable rate customer contracts.

James Derek Gray: Sales volume was impacted by slowed production and reduced U S shipments due to cold weather.

Speaker Change: Let me turn to a recap of our Q1 segment performance.

Speaker Change: Texture and helpful solutions net sales were down 10% compared to the prior year and down 9% on a constant currency basis.

Speaker Change: Texture unhelpful operating income was $74 million.

Speaker Change: Demonstrating an oi margin of 12, 4% driven.

James Derek Gray: Driven by a less favorable price mix, as I mentioned previously, and the carry forward of higher cost inventory, we expect OI margins to improve for the full year to be between 13% and 16%. In Food and Industrial Ingredients, LATAM, net sales were down 8% versus last year and down 12% on a constant currency basis.

Speaker Change: Driven by less favorable price mix as I mentioned previously and the carryforward of higher cost inventory.

Speaker Change: We expect our margins to improve for the full year to be between 13% and 16%.

James Derek Gray: And food and industrial ingredients Latam net sales were down 8% versus last year and down 12% on a constant currency basis.

James Derek Gray: Food and Industrial LATAM Operating Income was $101,000,000, with an OI margin of 16%, down slightly from last year, primarily driven by the impact of the devaluation of the Argentine peso on our joint venture, as well as higher utility costs. We expect OI margins for the full year to be between 16% and 19%. Moving to food and industrial ingredients, US can net sales were down 11% for the quarter.

James Derek Gray: Food and industrial Latam operating income was $101 million.

James Derek Gray: With an OE margin of 16% down slightly from last year, primarily driven by the impact of the devaluation of the Argentine peso on our joint venture as well as higher utility costs.

James Derek Gray: We expect <unk> margins for the full year to be between 16% and 19%.

James Derek Gray: Moving to food and industrial ingredients U S can net sales were down 11% for the quarter.

James Derek Gray: Food and Industrial U.S. canned Operating Income was $87 million, with an OI margin of 16%, up slightly versus last year's quarter. The improvement was driven by the renewal of multi-year customer contracts and tight management of raw material costs. Largely offset by higher fixed costs associated with downtime due to extreme cold weather in the U.S. We expect full year OI margins for this segment to be between 15% and 18%. For all other net sales decreased 35% for the quarter, largely driven by the overlap of the exit of our South Korean business.

James Derek Gray: Food and industrial use <unk> operating income was $87 million.

James Derek Gray: With an OE margin of 16%.

James Derek Gray: Up slightly versus last year's quarter.

James Derek Gray: The improvement was driven by renewal, a multiyear customer contracts and tight management of raw material costs, largely offset by higher fixed costs associated with downtime due to extreme cold weather in the U S.

James Derek Gray: We expect full year Oi margins for this segment to be between 15% and 18%.

James Derek Gray: For all other net sales decreased 35% for the quarter largely driven by the overlap of the exit of our South Korea business.

James Derek Gray: All other operating loss was minus 4 million, better by four million from the year-ago period. The improvement was driven by a lower operating loss for protein fortification and other factors. Our full year outlook for all other is to reduce the operating loss by one-third. Turning to our earnings bridge, on the left side, you can see the reconciliation from reported to adjusted earnings per share. On the right side, operationally, we saw a decrease of minus 86 cents per share for the quarter. The decrease was driven primarily by an operating margin decrease of minus 47 cents, and an unfavorable volume of minus 34 cents per share.

James Derek Gray: All other operating loss was minus $4 million.

James Derek Gray: Better by $4 million from the year ago period.

James Derek Gray: The improvement was driven by a lower operating loss for protein fortification and other factors.

James Derek Gray: Our full year outlook for all other is to reduce the operating loss by one third.

James Derek Gray: Turning to our earnings bridge on the left side you can see the reconciliation from reported to adjusted earnings per share.

James Derek Gray: On the right side operationally, we saw a decrease of minus <unk> 86 per share for the quarter the decrease.

James Derek Gray: This was driven primarily by an operating margin decrease of minus 47.

James Derek Gray: And unfavorable volume of minus 34 per share.

James Derek Gray: Moving to our non-operating items, we had an increase of $0.14 per share, primarily driven by lower financing costs of $0.13 per share. Moving to cash flow, first quarter cash from operations was $209 million.

James Derek Gray: Moving to our non operational items, we had an increase of <unk> 14 per share primarily driven by lower financing costs of <unk> 13 per share.

James Derek Gray: Moving to cash flow.

James Derek Gray: First quarter cash from operations was $209 million cash from.

James Derek Gray: Cash from operations benefited from consistent net income and Lower Than Expected Investment in Working Capital as we pulled from inventories in the U.S. Greater Than Expected. Net capital expenditures were $65 million, slightly below our expected pace of investment for the year.

James Derek Gray: The operations benefited from consistent net income.

James Derek Gray: And lower than expected investment in working capital as we pulled from inventories in the U S greater than expected.

James Derek Gray: Net capital expenditures were $65 million slightly below our expected pace of investment for the year.

James Derek Gray: During the first quarter, we paid out $51 million in dividends and began to repurchase outstanding common shares. As we look forward, our capital allocation priorities continue to be first, organic investment. Second, a return to shareholders through our dividends, and third, a strategic deployment of cash into M&A and share repurchase. Now, let me turn to our outlook for 2024. Before we go through the updates to the full year 2024 guidance, it is worth noting a few items that will impact the quarterly cadence for our business.

James Derek Gray: During the first quarter, we paid out $51 million in dividends and began to repurchase outstanding common shares.

James Derek Gray: As we look forward our capital allocation priorities continue to be first organic investment.

James Derek Gray: Our return to shareholders through our dividend.

James Derek Gray: Third strategic deployment of cash into M&A and share repurchases.

Speaker Change: Let me turn to our outlook for 2024.

Speaker Change: Before we go through the updates to the full year of 2020 for guidance. It is worth noting a few items that will impact the quarterly cadence for our businesses.

James Derek Gray: Last year, we witnessed a shift in the corn cost layout, which means that we will see lower price mix through 2024 as we pass along lower raw material costs to fee-based costs. This is a normal expectation for our business model and should be a supporting factor to gross margins as we go through the remainder of the year. For the balance of 2024, we anticipate sales volume growth. A reduction in cogs per ton and Continuous Improvement in Gross Margin, although excluding the impact of the divestiture of South Korea from our outlook. We expect full-year net sales to be flat to up in the low single digits.

James Derek Gray: Last year, we witnessed a shift in the corn costs lay out which means that we will see lower price mix through 2024, as we pass along lower raw material costs to fee based customers.

James Derek Gray: This is a normal expectation for our business model and should be a supporting factor into gross margins as we go through the remainder of the year.

James Derek Gray: For the balance of 2024, we anticipate sales volume growth.

James Derek Gray: A reduction in Cogs per ton.

James Derek Gray: And continuous improvement in gross margins.

James Derek Gray: Excluding the impact of the divestiture of South Korea from our outlook.

James Derek Gray: We expect full year net sales to be flat to up low single digits.

James Derek Gray: Reflecting improved volume demand offset by a decline in price mix as we pass through lower raw material costs where applicable, we anticipate that adjusted operating income will be up mid-single digits with year-over-year growth in Q2 through Q4. We are decreasing our financing cost outlook to align with the reduction in overall debt levels and now see it in the range of $85 million to $105 million. For the full year of 2024, we now expect reported effective tax rates of 24.5% to 25.5% and an adjusted effective tax rate of 26.5% to 27.5%.

James Derek Gray: Reflecting improved volume demand offset by a decline in price mix as we pass through lower raw material costs, where applicable.

James Derek Gray: We anticipate that adjusted operating income will be up mid single digits with year over year growth in Q2 through Q4.

James Derek Gray: We are decreasing our financing cost outlook to align with the reduction of overall debt levels and now see it in the range of $85 million to $105 million.

James Derek Gray: For the full year of 2024, we now expect reported effective tax rates of 24, 5% to 25, 5%.

James Derek Gray: On an adjusted effective tax rate of 26, 5% to 27, 5%.

James Derek Gray: The company now expects its full year reported EPS to be in the range of $10.35 to $11, which includes an $82 million gain from the sale of our South Korea business. For the full year, we now anticipate adjusted EPS to be in the range of $9.20 to $9.85. We expect diluted weighted average shares outstanding to be between 66 and 67 million shares, which does not reflect the balance of your share repurchase.

James Derek Gray: The company now expects its full year reported EPS to be in the range of $10 35 to $11, which includes an $82 million gain from the sale of our South Korea business.

James Derek Gray: For the full year, we now anticipate adjusted EPS to be in the range of $9 20.

James Derek Gray: To $9 85.

James Derek Gray: We.

James Derek Gray: Diluted weighted average shares outstanding to be between 66 and 67 million shares.

James Derek Gray: Which does not reflect balance of your share repurchases.

James Derek Gray: We have been able to buy back shares in the second quarter and are seeking to buy back shares comparable to 2023's repurchases for the balance of the year. 2024 cash from operations is anticipated to be in the range of $750 million to $900 million, and capital expenditures are expected to be approximately $340 million. Corporate costs are expected to be up mid-single digits, in line with previous guidance, for the second quarter of 2024

James Derek Gray: We have been able.

James Derek Gray: To buy shares in the second quarter.

James Derek Gray: And are seeking to buy back shares comparable to 2020 threes repurchases for the balance of the year.

James Derek Gray: 2020 for cash from operations is anticipated anticipated to be in the range of $750 million to $900 million in.

James Derek Gray: Capital expenditures are expected to be approximately $340 million.

James Derek Gray: Corporate costs are expected to be up mid single digits in line with previous guidance.

James Derek Gray: We anticipate net sales to be flat, to download single digits, and Operating Income to be up, low to mid-single digits on a year-over-year basis. In the appendix, we have included a 2024 full year segment outlook that is comparable to 2023. That concludes my comments, and I'll hand it back to Jim.

James Derek Gray: For the second quarter of 2024, we anticipate net sales to be flat.

James Derek Gray: To down low single digits.

James Derek Gray: And operating income to be up low to mid single digits on a year over year basis.

James Derek Gray: In the appendix we have included a $20 24 full year segment outlook and our estimated comparable to 2023.

James Derek Gray: That concludes my comments and I'll hand back to Geoff.

James P. Zallie: Thank you, Jim. Based on our first quarter performance along with our revised outlook, we believe we remain well positioned for another year of growth with momentum continuing throughout 2024. Volumes continue to show improvement, with distributors replenishing their inventories and the headwind of destocking now fully behind us. These trends, along with increased customer engagements to drive innovation, are evidence of more favorable market conditions than we have seen in the last 12 months. During the quarter, improvements in working capital led to another strong quarter of cash flow from operations.

Geoff: Thank you Jim based on our first quarter performance, along with our revised outlook. We believe we remain well positioned for another year of growth with momentum continuing throughout 2024.

Geoff: Volumes continue to show improvement with distributors replenishing their inventories and the headwind of Destocking now fully behind us.

James Derek Gray: These trends along with increased customer engagements to drive innovation are evidence of more favorable market conditions than we have seen in the last 12 months.

James Derek Gray: During the quarter improvements in working capital led to another strong quarter of cash flow from operations.

James P. Zallie: We see this continuing as demand gradually improves, and we start to see the benefit of lower corn costs starting in quarter two. Also, Cost to Compete provides us with another meaningful lever to meet our long-term financial commitments with the delivery of at least $50 million in cost savings over the next two years. This will positively impact margins and overall profitability. Looking ahead, we will use our strong cash position to continue to invest in areas of growth that offer the highest returns, as well as return capital to shareholders.

James Derek Gray: We see this continuing as demand gradually improves and we start to see the benefit of lower corn costs starting in quarter two.

James Derek Gray: Also cost to compete provides us with another meaningful lever to meet our long term financial commitments with the delivery of at least $50 million in cost savings over the next two years.

James Derek Gray: This will positively impact margins and overall profitability.

James Derek Gray: Looking ahead, we will use our strong cash position to continue to invest in areas of growth that offer the highest returns as well as return capital to shareholders. Our strategic initiatives are aligned with our winning aspiration and we are excited about the opportunities that lie ahead.

James P. Zallie: Our strategic initiatives are aligned with our winning aspiration, and we are excited about the opportunities that lie ahead. Now, we open the call to questions. As a reminder, to ask a question, please press star 1 1 on your telephone and wait for your name to be announced. To withdraw your question, please press star 118.

Speaker Change: Now, let's open the call for questions.

Speaker Change: As a reminder to ask a question. Please press star one on your telephone and wait for your name to be announced.

Speaker Change: Withdraw your question. Please press star one again.

James Derek Gray: Yeah.

Operator: Our first question comes from the line of Adam Samuelson with Goldman Sachs. Yes, thank you. Good morning, everyone.

James Derek Gray: Our first question comes from the line of Adam Samuelson with Goldman Sachs.

Adam Samuelson: Yes. Thank you good morning, everyone.

Adam Samuelson: Hey Adam. Hi. So I guess the first question, maybe on the capital allocation point, Jim Gray, I think I heard in your prepared remarks, share your purchases for this year. [inaudible] Transcripts provided by Transcription Outsourcing, LLC. Yeah, sure. You know, I think it's always a balance, right?

Adam Samuelson: Hey, Adam Adam Hi.

James Derek Gray: Hi.

Adam Samuelson: So I guess the first question.

Adam Samuelson: Maybe on the capital allocation point, Jim Gray I think I heard in your prepared remarks share repurchases for this year consistent with last year, which were a $100 million or so.

James Derek Gray: Just trying to get a better clarity on kind of why why not higher given the strength of the of the company's free cash flow. The divestiture proceeds from Korea, which are in the <unk> and the door net leverage which.

James Derek Gray: Looks like it would be tracking closer to the one times level by the end by the end of the year, just help us frame kind of where why the kind of step down in leverage implied by that outlook are.

James Derek Gray: Help us bridge that.

James Derek Gray: You know, now, when we look at the end of Q1, obviously, with some of the proceeds from Korea coming in, the cash position of the company looks strong. So therefore, being confident to say that we're going to, you know, seek up to $100 million of share repurchases through the year makes sense. But as we've also always stated, you know, that organic capital investment and at least some M&A that accelerates either our, you know, our texture solutions, our healthful solutions, or, or, you know, solidifies our competitive position in the markets where we play have always been a priority.

Speaker Change: Yes sure.

Speaker Change: I think it's always a balance right.

Speaker Change: Now when we look at the end of Q1, obviously with some of the proceeds from Korea, and the cash position of the company looks strong.

Speaker Change: So therefore being confident to say that we're going to seek up to $100 million of share repurchases through the year.

Speaker Change: It does make sense, but as we've also always stated.

Speaker Change: That organic capital investment in at least some M&A that accelerates either are or texture solutions are helpful solutions or or solidifies, our competitive position in the markets, where we play has always been a priority and if those returns look attractive for the medium to long term for <unk>.

James Derek Gray: And, you know, and if those returns look attractive for the medium to long term, you know, for shareholders, and they're returning rates that are going to be higher than, necessarily, just buying back shares today, then I think we're going to prioritize those. So it's a balance, I think, Adam, but right now, we're pretty confident to come back and say, you know, we'd really like to pick up close to, you know, $100 million of share repurchases as we finish 2024. Yeah, I think, Adam, that it is the view at this current point in time, based on what we see.

Speaker Change: Shareholders and they're returning.

Speaker Change: Rates that are going to be higher than necessarily just buying back shares. Today, then I think we're going to prioritize those.

Speaker Change: It's a balance I think Adam but right now we're pretty confident to come back and say, we'd really like to pick up close to $100 million of share repurchases.

Speaker Change: We finished 2024, yes, I think I think Adam that it.

Speaker Change: Is the view at this current point in time based on what we see.

James Derek Gray: Across the Balance Between Organic Capital Growth Investment Opportunities, M&A, and The Opportunity for Share Repurchase. [inaudible] of evidence that we believe in the intrinsic value of a company to be opportunistic with share repurchases in the same amount as last year. Okay.

Speaker Change: Across the balance between organic capital growth investment opportunities M&A.

Speaker Change: And the opportunity.

Speaker Change: For share repurchase.

Speaker Change: Obviously, our dividend being.

Speaker Change: Solidified so I think it's it's how we're viewing it at this moment in time and if there are any changes we will certainly be updating those as we go forward throughout the year, but currently that's the view that we have and it's not an insignificant.

Speaker Change: Amount.

Speaker Change: <unk>.

Speaker Change: Of evidence that we believe in the intrinsic value of the company to be opportunistic with share repurchases and the same amount as last year.

Speaker Change: Okay.

Adam Samuelson: And maybe I could just ask a follow-up on the volume trend side. You kind of commented that April trends were kind of continuing to return to growth. I just want to be clear, is that kind of across the three now reporting units, or any framing on areas of particular customer strength by region or category that you could call out? I think we see, you know, the modified starch, food starch category, and specialty starch category, volumes gradually improving throughout 2024. That was certainly...

Speaker Change: And maybe I could just ask a follow up on the volume trend side.

Speaker Change: You kind of commented to April trends kind of continuing to return to growth.

Speaker Change: Just want to be clear is that kind of across the three now reporting units or any any framing on areas of particular customer strength by by region or category.

Speaker Change: You could that you could call out. Thank you I think we I think we see the modified starch food starch category specialty starch category the volumes gradually improving throughout 2024 that was certainly.

James P. Zallie: Solid in April. We commented on industrial starch for papermaking and corrugating. That's been exceptionally strong, which we again view as a hopeful sign of increased economic activity. Sweeter volumes were down a bit, but generally in line with the historic trends. And so for Ingredion at Large, we're anticipating a mid-single-digit uptick in sales volumes demand for 2024. You know, pretty much.

Speaker Change: Solid in April we commented on industrial starch for paper, making corrugated thats been exceptionally strong.

Speaker Change: Which we again view as a hopeful sign of increased economic activity.

Speaker Change: Sweetener volumes were down a bit but generally in line with the historic trends and so for ingredient at large we're anticipating mid single digit uptick in sales volumes demand for 2024.

James P. Zallie: And it's also noteworthy to say that we were pleased with double-digit volume growth in China for the quarter. You know, recognizing that it does compare to the prior year's quarter in China when China went with herd immunity in December of 22 into January of 23, but also that Chinese New Year was early this year.

Speaker Change: Pretty much and it's also noteworthy to say that we're pleased with double digit volume growth in China for the quarter.

Speaker Change: Recognizing that it does compare.

Speaker Change: Two.

Speaker Change: Prior year's quarter, and China, when China went with herd immunity.

Speaker Change: In December of 'twenty two into January of 'twenty three.

Speaker Change: But also Chinese new year was early this year, so, but we were very encouraged to see that and then also the price of corn has come down significantly in China, which should be supportive of volume growth going forward as well. So that's how we're looking I guess at volume across the world right now.

James P. Zallie: But we were very encouraged to see that. And then also, you know, the price of corn has come down significantly in China, which should be supportive of volume growth going forward as well. So that's how we're looking, I guess, at volume across the world right now. All right, that's all. That's all helpful. Our next question comes from the line of Andrew Strelzik with BMO Capital. Hey, good morning.

Speaker Change: Alright, that's all that's all helpful I'll pass it on thanks.

Speaker Change: Our next question comes from the line of Andrew <unk> with BMO capital markets.

Andrew Strelzik: Thanks for taking the questions. The first one, I guess I just wanted to ask about the guidance. And if I put a couple of your comments together, you said the first quarter exceeded your expectations, you're more confident about the textured volumes, and then also now you have the cost save. So I guess I'm curious why you're only taking up the load of the guidance a little bit. Are there any other offsets?

Andrew: Hey, good morning, Thanks for taking the questions.

Andrew: The first one I guess I just wanted to ask about the guidance.

Andrew: I put.

Andrew: A couple of your comments together you said the first quarter exceeded your expectations Youre more confident in the textured volumes and then also the call.

Andrew: Cost saves so I guess I'm curious why you're only taking up the loan to the guidance a little bit are there any other offsets.

James Derek Gray: to think about or recognize it's a bit early in the year, but just curious how you approach the guidance given given this Yeah, well, I appreciate that you realize that it's early in the year. I think what we look at is, as we announced earlier, both at Cagney and at the beginning of the year, you know, we are seeing that, Unknown Speaker The businesses have had some pretty easy volume losses from last year, particularly, you know, the depth of that was in Q2.

Andrew: To think about it recognize it's a bit early in the year, but just curious how you approached the guidance given given those dynamics.

Andrew: Yes.

Speaker Change: Well I appreciate that you appreciate that it's early in the year.

Speaker Change: I think what we look at is.

Andrew: As we announced.

Andrew: Earlier.

Andrew: At Cagny in the beginning of the year.

Andrew: We are seeing that.

Andrew: The businesses have some some pretty easy volume lapse from last year, particularly.

Andrew: The depth of that was in Q2, so we're pretty confident.

James Derek Gray: So we're pretty confident around volume coming back, you know, as Jim just mentioned, I think that does help our fixed cost absorption. And so that's really, I think the key underpinning of the positive side of income growth. I think the cautions that we would have would be just really watching, you know, particularly US customers, maybe less so European customers, in terms of how they're managing price, how they're managing through innovation, and what that has in terms of an impact on unit volume demand.

Andrew: Around volume coming back as Jim just mentioned I think that does help our fixed cost absorption and so thats really.

Andrew: I think the key underpinning between the positive side.

Andrew: Op income growth I think the caution that we would have would be.

Andrew: Just really watching particularly U S customers and maybe lost so European customers in terms of how they're managing price, how they're managing through innovation.

Andrew: And what that has in terms of an impact on unit volume demand.

James Derek Gray: And so they're kind of out of the gate; I would say that, you know, what I'm seeing in pricing change in the US is probably still in the mid single digits, maybe the high end of the low single digits. And so I'm going to be just a little bit cautious about whether or not that doesn't really just accelerate consumer demand in the grocery basket. So we just want to see that come through.

Andrew: And so they're kind of out of the gate I would say that.

Andrew: What I'm seeing in pricing change in the U S is probably still in the mid single digits, maybe the high end of low single digits, and so I'm going to be just a little bit cautious on whether or not that.

James Derek Gray: I think we are seeing it in some of the, you know, some of the pockets. You know, I gave you an example, like, you know, like, for example, you wouldn't think that condiments would necessarily be kind of a good, you know, fast moving unit volume.

Andrew: Doesn't really just accelerate consumer demand and the grocery basket.

Andrew: So we just we want to see that come through.

Andrew: I think we are seeing it in some of the.

Andrew: Some of the pockets.

Andrew: I'll give you. An example, like for example, you wouldn't think that condiments.

Andrew: I wouldn't necessarily be kind of a good.

Andrew: Fast moving unit volume, but.

Andrew: The improvement in condiments from some of the.

Andrew: Scan data that we see for the first quarter was really healthy.

James Derek Gray: But you know, the improvement in condiments from some of the, you know, scan data that we see for the first quarter was really healthy year over year. So I think there are definitely signs of green shoots here. I think the other two cautions that we would always have in our business are, you know, hey, any political turmoil, or warfare, what impact does it have on oil prices? And can you have some energy, you know, energy that changes in terms of availability?

Andrew: Year over year. So I think there are definitely signs of green shoots here.

Andrew: I think the other two cautions that we would always have in our businesses any political.

Andrew: Turmoil warfare, what impact does it have on oil prices and can you have some energy.

Andrew: Energy that changes in terms of availability.

Andrew: Even though we do hedge natural gas you still have that can have an impact there and then I think third is just global supply chains, and any kind of freight ocean freight disruptions can always cause.

James Derek Gray: Even though we do hedge natural gas, you still have that can have an impact there. And then I think third is just global supply chains, you know, and any kind of freight ocean freight disruptions can always cause, you know, some disruption over three to six months. Those are Andrew, those are kind of what's on our radar. Okay, that's really helpful color.

Andrew: Some some disruption over a three to six month period. Those are Andrew those are kind of are what's on our radar.

Andrew Strelzik: And then my second question is just digging in a little bit on the cost savings plan. And I guess I'm just curious about the cadence of that coming through over the course of the next two years. You know, maybe a little more color on where exactly that comes from? And does any of it get reinvested?

Andrew: Okay. That's really helpful color and then my second question is just digging in a little bit on the cost savings plan and I guess I'm just curious how to think about the cadence of that coming through over the course of the next two years.

Speaker Change: Maybe a little more color on where exactly that comes from.

Andrew: Does any of that get reinvested or should we assume most of that's falling to the bottom line.

James P. Zallie: Or should we assume, you know, most of that's falling to the bottom? Let me take a shot at just framing it, and then Jim, you can pick up on the comments. Obviously, when you initiate a program like this, and just a reminder, we have a pretty good track record of delivering on cost takeout going back to the inception of what we called CostSmart in 2019, which was a three-year program that sunsetted in 2021.

Speaker Change: Let me take a shot at just framing it and then Jim you can pick up on the comments, obviously when you initiate a program like this and just a reminder, we have a pretty good track record of delivering on cost takeout going back.

Jim: To the inception of what we called cost Smart in 2019, which was a three year program, which sunset. It in 2021, we originally set that target at $125 million raised it to 150 and ended up delivering a little north of $170 million. So.

James P. Zallie: We originally set that target at $125 million, raised it to $150 million, and ended up delivering a little north of $170 million. So, hiatus for a couple years, and now it costs to compete at $50 million. With those programs, typically, they ramp up with savings.

Speaker Change: Hiatus for a couple of years and now cost to compete at $50 million.

Speaker Change: And.

James P. Zallie: So, there will be more of the $50 million of savings that will accrue in 2025 as opposed to 2024, but 2024 will have a meaningful amount of savings delivered, more so in the SG&A area. And the COGS will come more so in 2025 as we also look at opportunities across our footprint as well, and there'll be more information that we'll be able to share over time related to that. But real substantive cost savings.

Andrew: With those programs typically they ramp up.

Andrew: With savings so.

Andrew: There will be more of the <unk> at $50 million of savings that will accrue.

Andrew: In 2025 as opposed to 'twenty, four but 24 will have a meaningful amount.

Andrew: Amount of savings delivered more so in the SG&A.

Andrew: Area and the Cogs will come more so in the 2025% as we also look at opportunities across our footprint as well and there'll be more information that will be able to share over time related to that but real.

Andrew: Substantive.

Andrew: Cost savings now.

Andrew: Clearly, what we want to do.

Andrew: Is <unk>.

James P. Zallie: Now, clearly, what we want to do is fulfill our winning aspiration to be the go-to provider for texture solutions and helpful solutions. And so we are going to be investing strategically in capabilities that are going to enable us to deliver on that promise for customers when it comes to things like texture data measurement science, the sophisticated sensory capabilities that you need, and formulation management, for example. So those are some of the things that we will invest in. However, some of that is already factored into some of our budgeting process starting this year as well. Jim, do you want to add some color to that?

Andrew: Fulfill our winning aspiration.

Andrew: To be the go to provider for texture solutions.

Andrew: And <unk>.

Andrew: Helpful Solutions, and so we are going to be investing strategically and capabilities that are going to enable us to deliver on that promise for customers. When it comes to things like texture data measurement science.

Andrew: The sophisticated sensory capabilities that you need.

Andrew: And formulation management for example, so those are some of the things that we will invest in however.

Andrew: Some of that is already factored into some of our budgeting process. Starting this year as well Jim you want add some color on that Andrew I think what we're always trying to do is just dampen the rate of wage inflation and increase on the company right.

James Derek Gray: Yeah. Andrew, I think what we're always trying to do is just dampen the rate of wage inflation increase on the company, right, so that we always – every company has to pay market rates of year-over-year wage change, right? So what you have to do is look at your organization to be able to say, you know, where are some things that we need to do that we can now stop doing because we're now, you know, three global segments versus having kind of four regions.

Speaker Change: Every company has to pay.

Jim: Market rates of year over year wage change right. So what you have to do is look at your organization to be able to say, whereas some things that we need and that we can now stop doing.

Jim: Because we're now.

Jim: Three global <unk> segments.

Jim: Versus having kind of four regions.

James Derek Gray: And then also from that, you know, just efficiencies and tightening and greater effectiveness, where do you want to make very select choices to reinvest? But I think the overall thing that you'll see is kind of a dampening of our year-over-year change in SG&A rates. And then, obviously, as we get after COGS, which we already have an annual program called Net Structural Savings, where we're chasing inflation and trying to dampen the manufacturing expense inflation that we incur every year.

Jim: And then also from that just efficiencies in tightening and greater effectiveness.

Jim: Or do you want to make very select choices to reinvest, but I think the overall that youll see us as kind of a dampening of our of our year over year change in SG&A rate and then obviously as we.

Jim: You get after Cogs, which we already have an annual program called net structural savings.

Jim: We're chasing inflation and trying to dampen the manufacturing expense inflation that we incur every year.

James Derek Gray: But this will be the cost to compete will allow us to get after some event-driven actions within our manufacturing network. So that's our goal. Okay, great. Thank you very much, El Paso. Our next question comes from the line of Ben Bienvenu with... Hey, thanks. Good morning, everyone.

Jim: But this will be the cost to compete will allow us to get after some some event driven.

Jim: Actions within our manufacturing network.

Jim: That's our goal.

Speaker Change: Okay, great. Thank you very much I'll pass it on.

Benjamin Shelton Bienvenu: Good morning, Ben. Hey, good morning, Ben. James Zallie, you made a comment about the $10 million impact from weather in the first quarter on shipment volumes. Is that $10 million or, you know, 1011 cents of EPS? Does that get deferred into, you know, the second quarter or later in the year? Or is that just lost sales? And maybe Jim Gray, as you think about that as another put and take, kind of piggybacking on Andrew's question around guidance.

Jim: Our next question comes from the line of Ben <unk> with Stephens.

Ben: Hey, Thanks, good morning, everyone.

Ben: Morning, guys, Hey, good morning, Ben.

Ben: Jim It seems valley you made a comment about the $10 million impact from weather in the first quarter.

Ben: On shipment volumes is that $10 million or 10, or 11 cents of EPS does that get deferred into the second quarter or later in the year or is that just lost sales and maybe Jim Gray as you think about that as another put-and-take kind of piggybacking on Andrew's question around guidance.

James P. Zallie: You know, with the solid start to the year, some tailwinds, you know, wondering how that figured into kind of the posture that you took on guide. Yeah, so let me make a quick comment just so that what we said was greater than $10 million of impact in the quarter, it was predominantly comprised two-thirds of idle fixed costs under absorption and one-third due to lost sales. And we felt that impact at our larger plants in US Canada in the food and industrial ingredients segment, but also to a degree, at our Indian Kansas City plants that support the texture and healthful segment. And this was due to that extremely cold weather that we had for about two weeks in January, which did impact the runnability of our production at again, a few of the Midwestern plants.

James Derek Gray: With a solid start to the year some tailwind.

James Derek Gray: Wondering how that figured into.

James Derek Gray: Kind of a posture that you took on guidance.

James Derek Gray: Yes, So let me make a quick comment just so the what we said was greater than $10 million of impact in the quarter. It was predominantly comprised two thirds of idle fixed cost under absorption and one third due to lost sales and we felt that impact at our larger plan.

James Derek Gray: <unk>.

James Derek Gray: In U S, Canada, food and industrial ingredients segment, but also to a degree at our Indian Kansas City plants that support the texture and healthful segment and this was due to that.

James Derek Gray: Extremely cold weather that we had for about two weeks in January which did impact the run ability of our production.

James P. Zallie: And it also did impact and experience challenges in rail and truck deliveries, as many of those were frozen during that period, but we've quantified that impact. And so that's how we've kind of estimated its impact. And obviously, we're running the plants now very well and very hard and trying to catch up, but some of those are one-time losses. Opportunities, because the demand was there, the demand was there, the opportunities were there. And we were impacted; we were not alone, but we were affected.

James Derek Gray: <unk> again, a few of the Midwestern plants and it also did impact and experienced challenges in rail and truck deliveries and as many of those were frozen during that period, but we've quantified that impact.

James Derek Gray: And that's how we've kind of estimated its impact and obviously, we're running the plants now very well and very hard and trying to catch up but some of those are one time lost.

James Derek Gray: And that's how we've quantified it, Jim. Yeah, so the third of the impact from lost sales will not be caught up. But as we look at the fixed costs due to some of the, you know, under absorption, as we continue to run in Q2 and Q3, in order to kind of rebuild some of our inventory levels, then that will help a little bit in terms of some fixed cost absorption in Q2, Q3. Very good. Thanks for that. Unknown Speaker My next question is just related to the reclassification of your segments, you know, recognizing there's some limited kind of historical data. I have kind of two questions.

James Derek Gray: Opportunities because the demand was there the demand was there the opportunities were there.

James Derek Gray: And.

Speaker Change: We were impacted we were not alone, but we were impacted and that's how we quantify that Jim yes. So the third of the impact from lost sales will not be caught up but.

James Derek Gray: As we look at the the fixed cost due to some of the.

James Derek Gray: Under absorption as we.

James Derek Gray: Continuing to run in Q2 and three.

James Derek Gray: In order to kind of rebuild some of our inventory levels, then that will help a little bit in terms of some fixed cost absorption in Q2 Q3.

Speaker Change: Okay very good thanks for that.

Benjamin Shelton Bienvenu: One, what story do you expect these new segments to tell as it relates to your business and kind of the long-term strategy and performance of your various segments? And then, you know, as you think, why did you segment them the way you did? I guess. And how should we be thinking about kind of monitoring these new segments versus, historically, you know, being focused on geography? Well, let me take a shot at the why and then the overall. Thank you.

Speaker Change: My next question is just related to the reclassification of your segments.

James Derek Gray: On.

James Derek Gray: Recognizing there is some limited kind of historical data.

James Derek Gray: Two questions one.

Speaker Change: What story do you expect these new segments to tell as it relates to your business and kind of the long term strategy and performance of your various site.

Speaker Change: Segments and then.

James Derek Gray: Two.

James Derek Gray: As you think why did you segment than the way you did I guess and how should we be thinking about kind of monitoring these new segments.

James Derek Gray: Versus historically being focused on geographies. Thanks.

Speaker Change: Well, let me, let me take a shot of Y and thank you for the question. Thank you for the question very robust it is.

James P. Zallie: Thank you for the question. Thank you for the question. Very robust indeed.

James P. Zallie: Yeah, no, it's a very helpful question of context from a standpoint of where we're headed strategically as an organization. So first of all, something maybe that we haven't talked a lot about is throughout all of 2023, we undertook a company-wide strategy refresh, Enterprise-Wide, leveraging the Play-to-Win Framework, and it's a very simple framework to understand.

Speaker Change: Very helpful question of context from a standpoint of where we're headed strategically as an organization. So first of all something maybe that we haven't talked a.

James Derek Gray: A lot about is throughout all of 2023.

James Derek Gray: We undertook a companywide.

James Derek Gray: <unk> refresh enterprise wide.

James Derek Gray: Leveraging the play to win framework.

James Derek Gray: And it's a very simple framework to understand it basically starts with what is youre winning aspiration.

James P. Zallie: It basically starts with, what is your winning aspiration? Where to play, how to win, what must-have capabilities do you need to have, and what are your enabling management systems to then execute? So our whole organization obviously could quickly identify with the simplicity of the framework, and it became very clear to us that when it comes to Texture Solutions with specialty starches and our market leadership position and our breadth and depth in that category, it afforded us a platform to expand upon to really be a more complete solutions provider for texture solutions and then in helpful solutions.

James Derek Gray: Where to play how to win.

James Derek Gray: Must have capabilities do you need to have and what are your enabling management systems to then execute.

James Derek Gray: So our whole organization, obviously, you could quickly identify with the simplicity of the framework.

James Derek Gray: And it became very clear to us that when it comes to.

James Derek Gray: Texture solutions with specialty starches, and our market leadership position and our breadth and depth in that category.

James Derek Gray: That.

James Derek Gray: It afforded us a platform to expand upon to really be a more complete solutions provider for texture solutions, and then and healthful solutions.

James P. Zallie: Given how much of a mega trend health and wellness is and will continue to be, in the areas of sugar reduction, in the areas of protein fortification, and fiber fortification, we felt we could play to win, and that comprised that segment. And then we looked at the customer base. There are many global customers, and these are global trends as well and have global relevance. We talk about, for example, there are 400 terms, terminologies for very precise descriptions of texture in Japan, 200 in China, etc.

James Derek Gray: Given how much of a mega trend health.

James Derek Gray: Health and wellness.

James Derek Gray: And we will continue to be.

James Derek Gray: Is that in the areas of sugar reduction in the areas of protein fortification fiber fortification.

James Derek Gray: We felt we can play to win.

James Derek Gray: And that comprised that segment and then when we looked at the customer base.

James Derek Gray: There are many global customers and these are global trends as well in global relevance.

James Derek Gray: We talk about for example, there.

James Derek Gray: There are 400 terms terminology for very precise descriptions of texture, and Japan, 200, China et cetera, So that was the wisdom or logic behind that and then also.

James P. Zallie: So that was the wisdom or logic behind that. And then also, the products that we sell there are typically not sold in bulk or with liquid in liquid form. So they are transported internationally.

James Derek Gray: The products that we sell there are typically not sold in.

James Derek Gray: In bulk or with.

James Derek Gray: Liquid in liquid form so they transport internationally and so the network of plants that we supply lend themselves more to a global organizational structure. When it comes to making tradeoffs on behalf of global key accounts to be most customer friendly so that.

James P. Zallie: And so the network of plants that we supply lends itself more to a global organizational structure when it comes to making trade-offs on behalf of global key accounts to be most customer-friendly. So that makes a lot of sense when it comes to our LATAM business. We have a tremendously strong position in Mexico, and Mexico continues to grow, and, by the way, delivered another record quarter for us this past quarter, and then just the natural Hispanic language and cultural similarities between that and our market leadership position in Brazil, and our market leadership position in Andean, and with now a very solid joint venture in Argentina. We felt, organizationally, from those cultural similarities, that that was a change that we made because, remember And that was just a more what we call natural geographic alignment.

James Derek Gray: Made a lot of sense when it comes to our Latam business.

James Derek Gray: We have a tremendously strong position in Mexico, and Mexico continues to grow and by the way delivered another record quarter for us this past quarter.

James Derek Gray: And then just the natural Hispanic language and cultural similarities between that and our market leadership position in Brazil, and our market leadership position in A&D and with now a very solid joint venture in Argentina.

James Derek Gray: We felt.

James Derek Gray: Organizationally.

James Derek Gray: From.

James Derek Gray: Those cultural.

James Derek Gray: Similarities.

James Derek Gray: That was a change that we made because remember Mexico was part of North America before and despite U S. MCA, we felt there are more compelling.

James Derek Gray: Talent management opportunities across that platform and that was just a more what we call natural geographic alignment. Similarly, the U S, Canada food and industrial ingredients businesses.

James P. Zallie: Similarly, the US and Canada food and industrial ingredients businesses where you're driving operational excellence but also having to make some strategic capital decisions for facilities related to reliability to support some of the slower growth categories that we've identified, HFCS, of course, being one of them, which is now, again, about 8% of our sales only and a lower percentage of our gross profits. The and the industrial starch businesses that will take different capital decisions that we wanted to frame.

James Derek Gray: Where you're driving operational excellence, but also having to make some strategic capital decisions for facilities related to reliability to support some of the slower growth typically the slower growth categories that we've identified hfcs of course being one of them, which now again is.

James Derek Gray: About 8% of our sales only and a lower percentage of our gross profit.

James Derek Gray: The and the industrial starch businesses.

James Derek Gray: That will take different capital decisions that we wanted to frame now what's also interesting to point out, though and I have to do this is that for the food industrial U S. Canada business this quarter.

James P. Zallie: Now, what's also interesting to point out, and I have to do this, is that for the food industrial US Canada business this quarter, operating income was 87 million with an OI margin of 16%, which was up slightly from last year's quarter. The improvement was really driven by, and we've talked about this before, multi-year customer contracts, and tight management of raw material costs, largely offset by higher fixed costs associated again with the extreme weather.

James Derek Gray: Operating income was $87 million with NOI margin of 16%, which was up slightly from last years.

James Derek Gray: Quarter.

James Derek Gray: The improvement was really driven by and we've talked about this before multi year customer contracts tight management of raw material costs.

James Derek Gray: Largely offset by higher fixed costs associated again with the extreme weather.

James Derek Gray: So.

James P. Zallie: It's interesting to point out that sales volumes for that segment, US and Canada food industrial ingredients, would have been close to flat, and operating income would have been up for the quarter if it had not been for the extremely cold weather that impacted that business unit. So there's a unit that, again, running it for operational excellence, and really executing, has a very attractive margin profile, which we don't know if investors really fully appreciate the stability and the health of that business as a cash generator, which we will obviously be using to fuel the growth in our texture and healthful solutions segment.

James Derek Gray: It's interesting to point out that sales volumes for that segment U S. Canada food industrial ingredients would've been close to flat and operating income would have been up for the quarter. If it had not been for the extremely cold weather that impacted that business unit. So there is a unit that again running at for operational excellence.

James Derek Gray: And and.

James Derek Gray: Really executing.

James Derek Gray: It has a very attractive margin profile, which we don't know if.

James Derek Gray: If really.

James Derek Gray: Investors really fully appreciate it.

James Derek Gray: Stability in the health of that business is a cash generator, which we will obviously be using to fuel the growth in our texture and helpful solution segment, sorry, it's a little bit long winded, but hopefully that gives you some context on how we thought about things strategically in the Genesis.

James P. Zallie: Sorry, it's a little bit long winded, but hopefully that gives you some context on how we thought about things strategically in the genesis of it, which came out of the Play-to-Win Framework. Thanks for all the comments.

James Derek Gray: Of it which came out of play to win framework.

Benjamin Shelton Bienvenu: I appreciate it. Thanks, Ben. Our next question comes from the line of Kristen Owen with Oppenheimer. Hi, good morning, Jim and Jim. That one's going to be tough to follow up.

Speaker Change: Thanks for all the comments I appreciate it.

Speaker Change: Thanks Ben.

James Derek Gray: Our next question comes from the line of Kristen Owen with Oppenheimer.

Kristen Owen: But I'll do my best here. The first question I have is actually just a clarification on the 2Q guide, the net sales flat down to low single digits. Just remind us that this is excluding the SK business. And can you help us with what that SK business was in 2Q23 so we've got the right comp? Yes, it is excluding the South Korea business. You know, I want to say that I think that that's going to be around. Transcripts provided by Transcription Outsourcing, LLC. Okay, perfect. Thank you so much.

Kristen Owen: Hi, Good morning, Tim and Jim that one is going to be tough to follow up but.

Kristen Owen: I'll do my best here.

Kristen Owen: First question I have is actually just a clarification on the <unk> guide the net sales flat down to low single digits.

Kristen Owen: Remind us that is excluding the SK business and can you help us with what that SK business was <unk> 23. So we said we've got the right comp there.

Speaker Change: Yes, it is excluding the.

Speaker Change: The South Korea business I want to say that I think that thats going to be around.

Speaker Change: See the $70 million, but let me follow up with you on that.

Speaker Change: We will put we will put a clarification out on that.

James Derek Gray: So then I did want to ask a follow-up to the previous sort of re-segmentation, but more granular about what those KPIs are, how we should think about or track, whether it's ASPs or revenue per ton, just how to think about the proxy for the specialty value uplift that you're getting through this reorientation and appreciate the cash cow nature of sort of the core business, but as we What's a KPI that you guys are watching that would be helpful for us to be paying attention to?

Speaker Change: Perfect. Thank you so much.

Speaker Change: And then I did want to ask a follow up to the previous sort of re segmentation, but more granular about what those kpis or how we should think about or track, whether its asp's or revenue per ton.

Speaker Change: Just how to think about the proxy for the specialty value uplift that you are getting through this this reorientation and appreciate the cash cow nature of sort of the core business, but but as we're watching some of these higher growth areas with higher margin. What's the kpis that you guys are watching that there would be helpful for us to be.

Speaker Change: Paying attention to.

James Derek Gray: Yeah, with the new segments, I think that, you know, we have an intention to also be disclosing gross margins for the three primary segments, right? So that'll be, you know, part of our required reporting in 2025. You know, as we work through our 2023 historical, we're going to have a, you know, a better perspective of the lap and how the gross margins are changing. So, you know, we're nearly, you know, right in the midst of working through all of that historic 2023 and appreciate, you know, the work that my team is doing to get us there.

Speaker Change: Yes.

Speaker Change: The new segments I think that.

Speaker Change: We have an intention to also be disclosing for the three primary segments gross margins right. So that'll be part of our required reporting in 2025.

Speaker Change: As we work through our 2023 historical we're going to have.

Speaker Change: Our perspective of the lap.

Speaker Change: And how the gross margins are changing so we're nearly there.

Speaker Change: Right in the midst of working all of that historic 2023.

Speaker Change: And I appreciate that.

Speaker Change: The work that my team is doing to get us there.

James Derek Gray: But I think as we look forward, you'll see that, you know, the texturing helpful solutions are going to have gross margins in the high 20s as well as, you know, there are product lines in there that are well into the 30s. And so those higher gross margins are reflective of, you know, the customer value in terms of the price per ton paid. And then also, you know, as we've spoken at Cagney as part of our strategy, we look at the texture market globally, which is almost $20 billion. We think it's growing at least in the mid-single digits, maybe in the low single digits. But we've talked about urbanization.

Speaker Change: I think as we look forward youll see that.

Speaker Change: The texture and help those solutions is going to have gross margins in the high <unk> as well as those product lines and are well into the <unk>.

Speaker Change: And so those higher gross margins are reflective of yes.

Speaker Change: The customer value.

Speaker Change: In terms of the price per ton paid and then also as we've spoken at Cagny as part of our strategy, we look at that.

Speaker Change: <unk> market.

Speaker Change: Globally, almost $21 billion, we think it's growing at least in the mid.

Speaker Change: Mid single digits, mainly the low single digits, but we've talked about urbanization and we've talked about the pull for convenience to make the.

James Derek Gray: We've talked about the pull for convenience to make the eating occasion and the grocery shopping experience easier, and we really play well to that demand pull. So you should see a KPI from us either on sales volume or volume itself, but also growth that we think is supporting the texture and helpful solutions. That will be something that's important to us. And then when we look at, I think, our food and industrial ingredients business, while we have, I think, very competitive positions in some of those broader product categories, and we're always going to highlight things like, you know, hey, how do we think the confectionery pull is for glucose syrups? But look to us to also talk about sustainability because, you know, we have this wonderful feedstock and we already have all the infrastructure built.

Speaker Change: The eating occasion in the grocery shopping experience easier and we really play well.

Speaker Change: To that demand pull so you should see a kpis from us either on sales volume our volume itself, but also the growth that we think is supporting the texture and helpful solutions that will be something thats important to us.

Speaker Change: And then when we look at.

Speaker Change: I think our food and industrial ingredients business.

Speaker Change: While we have I think very competitive positions and some of those broader product categories, and we're always going to highlight things like.

Speaker Change: Hey, how do we think the confectionery Paul is for glucose syrups.

Speaker Change: But look to us to also talk about sustainability because.

Speaker Change: We have this wonderful.

Speaker Change: Feedstock and we already have all the infrastructure built in and I think that as the world looks to sustainable.

James Derek Gray: And I think that as the world looks to sustainable sources for some chemical inputs that may have been previously petroleum-based, I think there's some opportunities for us to take some, you know, step changes in how we might direct our wet mill output, but in a way that then looks at stabilizing revenue growth and maybe slightly changing the trajectory of revenue growth. So, Kristen, we're very much focused on volume, on top-line growth, as well as being really clear in terms of the level of profitability within the segment. That'll start with gross margin. Today we're disclosing OI margin ranges, and we'll work through that as we go through the year. I really appreciate the commentary.

Speaker Change: Sources for either some chemical.

Speaker Change: They may have been previously petroleum based I think there are some opportunities for us to take some.

Speaker Change: Step change and how we might direct our wet mill output, but in a way that then looks at stabilizing revenue growth and maybe slightly changing the trajectory of revenue growth. So so Christine we will be we're very much focused on volume on top line growth as well as we want to be really clear in terms of the level of profit.

Speaker Change: Ability within the segments that will start with gross margin today, we are disclosing Oi margin ranges and we will and we'll work through that as we go through the years.

Speaker Change: Really appreciate the commentary I'll leave it there.

Kristen Owen: I'll leave it there. Our next question comes from the line of Ben Theurer with Barclays. Good morning, Jim and Jim, and thanks as well for taking my question. Not much left.

Speaker Change: Our next question comes from the line of Ben Theurer with Barclays.

Benjamin M. Theurer: Hi, Good morning, Jim and Jim and Thanks, as well taking my question not much left.

Benjamin M. Theurer: Lots been asked but just wanted to follow up a little bit on the volume in the different regions and one of the things.

Benjamin M. Theurer: There's a lot to be asked, but I just wanted to follow up a little bit on the volume in the different regions. And one of the things that I wanted to understand a little bit better is that you just called out Mexico being very strong. And I mean, obviously, some of the food and beverage companies reporting very decent volume performance in the region. We also had Brazil results coming through from some very strong corporates. It kind of doesn't align with that minus 3% volume you had.

Benjamin M. Theurer: I wanted to understand a little bit better you just called out Mexico being very strong and we've seen obviously some of the food and beverage companies reporting very decent volume performance in the region.

Benjamin M. Theurer: We also had Brazil results coming through from some corporate is very strong.

Benjamin M. Theurer: It kind of doesn't align with that minus 3% volume you had I just wanted to understand how much of that is still that destocking overhang that negative impact and what you're seeing sequentially with your customers in Latin America as to the engagement to buy product again from you guys.

Benjamin M. Theurer: I just wanted to understand how much of that is still that de-stocking overhang, that negative impact, and what you're seeing sequentially with your customers in Latin America as to the engagement to buy a product again from you. Yeah, Ben, thanks for the question.

James Derek Gray: So literally, we had a significant customer in Columbia, we have an exclusive arrangement with them, they had some budget slash demand management, and the volume is such that it's a contractual obligation for them to take the volume. And we've seen it in the past in prior years, but never have we seen in the entire quarter that this unique customer did not pull any volume, but there is a contractual obligation. And they have historically always met their full year calendar year obligation.

Speaker Change: Yes, Ben Thanks for the question none.

Speaker Change: So literally we had.

Benjamin M. Theurer: A significant customer.

Speaker Change: In Colombia, we have an exclusive arrangement with them. They had some budget flash demand management the volume is such that.

Benjamin M. Theurer: It's on a contractual obligation for them to take the volume throughout the full year. They are the customer absolutely needs. The volume there is every intention for them to take it.

Benjamin M. Theurer: And it was just.

Benjamin M. Theurer: Unexpected kind of unexpected kind of how they load their channel.

James Derek Gray: But if not for that, Jim, last time, that was all of the 3% decline; sales volume would have been just slightly down. Yeah, just so that's, it's a very good, it's a very astute observation on your part to pick that out, and there's a unique explanation for it.

Benjamin M. Theurer: And we've seen it in the past in prior years, but never have seen in the entire quarter that this unique customer did not pull any volume, but there is a contractual obligation and they have historically always met their full year calendar year obligation, but if not for that Jim.

Jim: Yes that was all of the 3% decline sales volume would have been just slightly down yes.

Jim: It's a very good it's a very astute observation on your part to pick that out and there is a unique explanation for it.

James Derek Gray: Yeah. It's fantastic. Very good. And then as it relates to your expectations, and what's ultimately been reported in texture and health for solutions, that flat volume, was that within the expectation range that you had for the quarter? Or were you expecting maybe that maybe to be a little bit better in one cue but then just got impacted by some of these adverse situations? Yeah, let me take a shot at it a little bit and then let Jim add some color commentary.

Speaker Change: Fantastic very good and then as it relates to like your expectations.

Speaker Change: And what's ultimately being reported in texture and help with solutions that flat volume was that like.

Speaker Change: Within the expectation range that you had for the quarter or were you expecting maybe that already to be a little bit better in <unk>, but then just got impacted by some of these at.

Speaker Change: At worst situations that happened during the quarter weather related.

James P. Zallie: So first of all, on texture and healthful solutions. To remind you, the performance of what is now the newly defined segment was really exceptionally strong in quarter one of 2023. And that was because we were able to achieve some really, very strong exceptional pricing and reaction to double-digit inflation at the time for specialty corn types and the run-up in natural gas prices that were happening in Europe. And as these, I will call them extraordinary costs, moderated as we entered 2024, there was just a natural reset to pricing levels that was necessary.

Speaker Change: Yes, let me take a shot at it a little bit and then let Jim add some color commentary. So first of all a texture and helpful solutions to remind you.

Speaker Change: The performance of what is now the newly defined segment was really exceptionally strong in quarter one of 2023.

Jim: And that was because we were able to achieve some really very strong exceptional pricing in reaction to double digit inflation at the time for specialty corn types and the run up in natural gas prices that were happening in Europe.

Jim: And as these I will call them extraordinary costs moderated as we enter 2024, there was just a natural reset to pricing levels that was that was necessary.

Jim: In addition to the pricing impact margins in quarter, one were compressed due to the higher value of 2023 inventory, which carried over into the new year as we move through 2024, however, newer inventory will reflect the lower cost of the specialty corn and lower.

James P. Zallie: In addition to the pricing impact, margins in quarter one were compressed due to the higher value of 2023 inventory, which carried over into the new year. As we move through 2024, however, newer inventory will reflect the lower cost of specialty corn and lower fixed costs as these items normalize. Because this is a make-to-inventory business, it takes two to four months, typically, for this segment to work through changes in inventory and carrying costs.

Jim: <unk> fixed costs as these items normalize.

Jim: This is a make to inventory business. It takes two to four months typically for this segment typically work through changes in inventory carrying costs.

Speaker Change: And the other thing Thats just noteworthy.

Jim: Is this segment is absorbing still some costs from the early stage capacity expansion investments for growth that we made in recent years. For example, we more than doubled our specialty starch capacity in China and expanded capacity for specialty starches in Thailand, and Mexico. So it's a combination of all.

James P. Zallie: And the other thing that's just noteworthy is the segment is still absorbing some costs from the early stage capacity expansion investments for growth that we made in recent years. For example, we more than doubled our specialty starch capacity in China and expanded capacity for specialty starches in Thailand and Mexico.

James P. Zallie: So it's a combination of all of that that hopefully helps, Put in perspective, texture and helpful solutions this quarter. But we really are very bullish, obviously, on the winning aspiration, the strategy, and the health of that position and the assets that we have around the world to support customer growth. Yeah, I think the heart of your question as well, Ben, is I mean, we are seeing that volume, that volume uptake, it is not near, I mean, look, you know, look, if you look at the Q1 lap and 23 on a, on a scan basis, volumes, you know, you asked, at least for for the type of texture products were down five, 6% unit volumes, you know, and then obviously, we got into Q2 of last year, and unit volumes within, you know, from grocery retail, really, really stepped down.

Jim: All of that that hopefully helps put.

Jim: Put in perspective.

Jim: Texture and helpful solutions this quarter, but we really are very bullish obviously on the winning aspiration of the strategy and the health of that position and the assets that we have around the world to support customer growth.

Jim: Okay.

Jim: The heart of your question as well I mean, we are seeing that volume that volume uptick it is not new I mean.

Jim: Look if you look at the Q1 lap in 'twenty three.

Jim: On a scan basis volumes you asked at least for the type of texture products were down five 6% unit volumes and then obviously, we got into Q2 of last year and unit volumes were then.

Jim: From grocery retail really really stepped down.

James P. Zallie: And so I do think that we are seeing that kind of 0% sales volume that we advertise for the segment is pretty good. I'm feeling, you know, pretty solid that we're definitely seeing broad customer takeaway. Perfect. Jim, Jim, thank you very much.

Jim: And so I do think that we are seeing that kind of zero percent sales volume that we advertised for the segment.

Jim: As pretty good I'm, feeling pretty solid that we're definitely seeing broad customer takeaway.

Speaker Change: Perfect Jim Jim Thank you very much.

Benjamin M. Theurer: Thank you, Ben. Okay, can I just want to respond to Kristen's question on so Q2 Korea net sales last year were about $80 million. So just to put that one on the record for everybody. Our next question comes from the line of Josh Spector with UBS. Good morning, this is Lucas Beaumont on behalf of Josh.

Jim: Thank you Ben can I just want to respond to Christian's question on so Q2 Korea net sales last year was about $80 million. So just to put that one on the record for everybody.

Speaker Change: Our next question comes from the line of Josh Spector with UBS.

Joshua David Spector: Josh Your line is now open.

Joshua David Spector: Hi, Good morning. This is like a standalone on for Josh.

Lucas Charles Beaumont: I just wanted to sort of go back to kind of the re-segmentation. I was curious about sort of why the expectations and margins in the texture health segment are sort of below food and industrial. Is any of that sort of being driven by how you're allocating SG&A or transfer pricing across the business? And would you expect that to kind of diverge over time? And so the texture kind of benefits as you get further scaled in? Lucas, that is kind of dead on.

Joshua David Spector: I just wanted to sort of get back to kind of a restatement in session. I was just curious if that's sort of why the expectations on margins and the texture health segment are sort of below 300, and industrial is any of that sort of being driven by how youre allocating SG&A or transfer crossing across the business and would you.

Jim: That's the kind of diverge over time.

Jim: So that takes you to kind of benefits you get.

Jim: The scale of it.

James P. Zallie: So Texture and Healthful Solutions is a global segment, as Jim has alluded to, and it does carry higher gross margins than the other businesses by at least six to 800 basis points. And it also gets a higher proportion of SG&A costs. And those are the people capabilities that we need, the technologists, the food scientists, the solution selling, sales capabilities, you know, the marketing insights to be able to really lead with those solutions that our customers are looking for.

Jim: Lucas.

Speaker Change: Is that is kind of dead on.

Jim: So texture and helpful solutions.

Jim: As a global segment as Jim has alluded to.

Jim: And it does carry higher gross margins than the other businesses by at least six to 800 basis points.

Jim: And it also gets a higher proportion of SG&A costs.

Jim: And those are the people capabilities that we need the technologist the food scientists the solution selling.

Jim: Sales capabilities, the marketing insights to be able to really lead with those solutions that our customers are looking for.

James P. Zallie: And so, you know, much like, you know, some competitors in Europe that may carry, you know, like a flavor or a fragrance house that may have more SG&A as a percentage of sales in the business to reflect the competencies and the people capabilities that you need to support this type of business, that's the similar, you know, kind of business model and operating expense model that's in our texture and health pool solution. And we do see that as the top line grows, we do expect to get operating expense leverage out of that.

Jim: And so much like some competitors.

Jim: In Europe that may carry.

Jim: A flavor and fragrance house may have more SG&A as a percentage of sales in the business to reflect the competencies and the people capabilities that you need to support this type of business.

Jim: Thats the similar.

Jim: Sure.

Jim: Kind of business model and an operating expense model, that's in our texture and helpful solutions.

Jim: And we do see that as the topline grows we do expect to get operating expense leverage out of that.

James P. Zallie: And also, Jim, the investments that I highlighted as far as the early stage capacity expansion that we've made, we are obviously in the early innings of getting the returns on those investments, which are allocated cost-wise to that business. And then maybe, Lucas, just one note since I know that the team is a little bit newer, but when we do acquisitions and tuck-in acquisitions, any amortization of intangibles, we keep those in, so we don't adjust out or call those out. And so there is some amortization as well against some of the past acquisitions that we've done that now really fall into the texture and healthful solutions segment. Great, thanks.

Speaker Change: And also Jim.

Jim: Investments that we highlighted as far as the early stage capacity expansion that we've made we are obviously in the early innings of getting the returns on those investments, which are allocated cost wise to that business.

Jim: And then maybe Lucas just one note since I know that the team is a little bit newer but.

Lucas: When we do acquisitions and tuck in acquisitions.

Lucas: Amortization of intangibles, we keep those in.

Lucas: So we don't adjust out or call those out and so there is some amortization as well.

Lucas: Some of the past acquisitions that we've done that and now really fall into the texture and helpful Solutions segment.

Lucas Charles Beaumont: And then, just secondly, I just want to ask you about kind of the cash flow phasing sort of during the year. So typically, sort of one Q is sort of a use or a minor contribution, but you sort of got 30% of your full year target already in the first quarter. So I mean, you called out sort of working capital as being effective, but if you kind of just walk us through how you sort of see the progression and the moving parts there through the year, that'd be great. Yeah, sure.

Speaker Change: Alright, Thanks, and then just secondly, I just wanted to ask you about kind of the free cash flow advertising so during the year.

Speaker Change: Typically set of wonky as sort of a use or a minor contribution, but you said about 30% of your full year target already in the first quarter.

Speaker Change: So I mean, you called out sort of working capital is being effective at it.

Speaker Change: Kind of just walk us through how you sort of see the progression on the moving parts here through the year that'd be great. Thanks.

James Derek Gray: And I think that one of the things that we called out was that because of the cold weather in January, we really had to pull out of inventory more and sell out of inventory. So I do see that we're kind of building back some of that inventory in Q2, Q3. So, traditionally, you might have seen Q2, Q3, generating a bit more cash from operations with a smaller investment in working capital. I'm kind of seeing that as just a bit of a timing shift in Q2, Q3.

Speaker Change: Sure.

Speaker Change: And I think that one of the things that we called out was that big.

Speaker Change: Because of the cold weather in January we really had to pull out of inventory.

Speaker Change: More than sell out of inventory. So I do see that we're kind of we should be building back some of that inventory in Q2 Q3. So we're traditionally you might have seen Q2 Q3 generating a bit more.

Speaker Change: Cash from ops with a smaller.

James Derek Gray: And then I think more broadly for the full year, what we're really watching is kind of the balance between, you know, how raw materials are working through our balance sheet, our working capital, in terms of accounts receivable, as well as accounts payable. But that's, it's primarily a timing thing, I think, between Q1, Q2, and Q3. Right, thank you. Our next question comes from the line of Heather Jones with Heather Jones. Good morning. Good morning, Heather. Good morning, Heather.

Speaker Change: Investment in working capital I'm kind of seeing that just a bit of a timing shift in Q2 Q3.

Speaker Change: And then and then I think more broadly for the full year, what we're really watching us as kind of the balance between how raw materials are working through.

Speaker Change: Our balance sheet, our working capital in terms of accounts receivable as well as accounts payable.

Speaker Change: And so right now traditionally where we've had so I think some nice leverage in accounts payable from different types of financing programs around the globe with short term rates still a bit elevated we may not see some of our suppliers and our farmer partners taken advantage of that so I'm, just a little bit thought.

Speaker Change: Full about what are the accounts payable leverage might be year over year.

Speaker Change: But that's it's primarily a timing thing I think between Q1 Q2 Q3.

Speaker Change: Alright, thank you.

Speaker Change: Sure.

Speaker Change: Yeah.

Speaker Change: Our next question comes from the line of Heather Jones with Heather Jones Research.

Heather Lynn Jones: Good morning.

Heather Lynn Jones: Good morning, good morning, Heather.

Heather Lynn Jones: Thanks for taking the question. So I hate to belabor the South Korea question, but I just want to make sure I'm understanding this correctly. So, Jim, you mentioned that South Korea's revenue in Q2 of 23 was 80 million. So an adjusted base of, Ross Beauschmidt, Unknown Attendee, Joshua Spector, Benjamin Bienvenu, Lucas Beaumont, Unknown Attendee, Andrew Strelzik, Noah Weiss, Adam Samuelson, Kristen Owen, Rob Ritchie, Approximately, yeah. Okay. And then when you talk about OI for Q2 being uploaded in the single digits, is that off of the base excluding Korea? And if it is, what's the adjusted base that is correct?

Heather Lynn Jones: Thanks for taking the question.

Heather Lynn Jones: So I hate to belabor, the South Korea question, but I just.

Heather Lynn Jones: Wanted to make sure I'm understanding this correctly so.

Heather Lynn Jones: Jim You had mentioned that South Korea in Q2 of 'twenty, three with $80 million.

Heather Lynn Jones: Revenues and adjusted base.

Heather Lynn Jones: Roughly $1 9 billion and so the flat to down low single digits off of that base or 1.99.

Speaker Change: Approximately yes.

Speaker Change: Okay, and then when you talk about ally for Q2 to be up low to mid single digits is that also the base, excluding Korea and if it is whats the adjusted base that we should be good.

James Derek Gray: Um, so that would be, um, approximately, I would say that that's probably, you know, your career is going to be anywhere between five to $7 million to OI. It kind of depends on each quarter for Korea in terms of kind of where they were at the prior year. So what we can do, we can follow up from that. But approximately, I think that's about where we're at on an OI basis. Okay.

Speaker Change: Correct.

Speaker Change: So that would be.

Speaker Change: Approximately I would say that thats probably.

Speaker Change: I was going to be anywhere between five to <unk>.

Speaker Change: $7 million of Oi, it kind of depends on each quarter for.

Speaker Change: For Korea.

Heather Lynn Jones: In terms of kind of where they were at to the prior year. So what we can do it with a follow up from that but approximately I think that's about where we're at on Oi basis.

Heather Lynn Jones: And then my second question is going back to the question about the high cost carry forward inventory and texturants. I understand the dynamics behind that, but wondering if you could, is that completely worked through going into Q2? Or are there some lingering effects in Q2 on that? Very small amount that will be worked through in quarter two. So for the most part, the higher cost inventories are, by now, by now, through the system. Would you say so, Jim?

Heather Lynn Jones: Okay.

Heather Lynn Jones: And then my second question is going back to the question about the high cost carryforward inventory texture.

Heather Lynn Jones: I understand the dynamics behind that but I'm wondering if you could is that completely worked through going into Q2 or is there some lingering effects into Q2 on that business.

Speaker Change: Very small amount that will be worked through in quarter. Two so for the most part the higher cost inventories are by.

Speaker Change: By now by now through <unk> through.

Heather Lynn Jones: Through the system, you would say so Jim yes, yes.

James P. Zallie: Yeah. Okay, thank you. I know it's late.

Speaker Change: Okay. Thank you and I know it's late.

Speaker Change: Save the rest of mine for later, thank you so much.

Speaker Change: Thanks Heather.

Heather Lynn Jones: So I'll save the rest of mine for later. Thank you so much. Thank you. That concludes today's question-and-answer session. I'd like to turn the call back to James Zallie for closing remarks. All right.

Speaker Change: That concludes today's question and answer session I would like to turn the call back to Jim Daly for closing remarks.

Heather Lynn Jones: Yeah.

James P. Zallie: Well, thank you all for joining us this morning. We look forward to seeing many of you at the upcoming BMO conference in New York on May 16th. And I want to thank everyone for their continued interest in Ingredion. This concludes today's conference. Thank you for participating. You may now disconnect.

Jim Daly: Alright, well. Thank you all for joining us. This morning, we look forward to seeing many of you at the upcoming BMO Conference in New York on May 16th.

Jim Daly: And I want to thank everyone for your continued interest in ingredients.

Speaker Change: This concludes today's conference call. Thank you for participating you may now disconnect.

Operator: ??? ??? ??? ??? ??? ??? Unknown Executive, Unknown Attendee, Unknown Attendee, Unknown Attendee, Unknown Attendee, Unknown Attendee, Unknown Attendee, Unknown Attendee, Unknown Attendee, Unknown Attendee, Unknown Attendee, Unknown Attendee, Unknown Attendee, Unknown Attendee, Unknown Attendee, Unknown Attendee, Unknown Attendee, ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? © The Ultimate Parody Site! Music Music Music Music Music Music Music Music Music Music Music Music, ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? Good day and thank you for standing by. Welcome to the first quarter 2024 Ingredion Incorporated earnings call. At this time, all participants are in a listen-only mode.

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Operator: After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you'll need to press star 1 1 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 118. Please be advised that today's conference is being recorded. I would now like to hand the conference over to Noah Weiss, Vice President of Investor Relations. Please go ahead.

Heather Lynn Jones: Good day, and thank you for standing by.

Heather Lynn Jones: Looking to the first quarter 2024 ingredient incorporated earnings call.

Heather Lynn Jones: At this time all participants are in a listen only mode.

Heather Lynn Jones: After the speaker's presentation, there will be a question and answer session.

Heather Lynn Jones: To ask a question during the session you will need to press star one one on your telephone.

Heather Lynn Jones: We will then hear an automated message advising you and has raised.

Heather Lynn Jones: To withdraw your question. Please press star one again.

Heather Lynn Jones: Please be advised that today's conference is being recorded.

Heather Lynn Jones: I would now like to hand, the conference over to Noel White, Vice President of Investor Relations. Please go ahead.

Noah Weiss: Good morning, and welcome to Ingredion's first quarter 2024 earnings. I'm Noah Weiss, Vice President of Investor Relations. Joining me on today's call are Jim Zallie, our President and CEO, and Jim Gray, our Executive Vice President and CFO. The press release we issued today, as well as the presentation we will reference for our first quarter results, can be found on our website, Ingredion.com, in the Investors section. As a reminder, our comments within this presentation may contain forward-looking statements. These statements are subject to various risks and uncertainties and include expectations and assumptions regarding the company's future operations and financial performance.

Noel White: Good morning, and welcome to <unk> first quarter 2024 earnings call I Am <unk>, Vice President of Investor Relations. Joining me on today's call are Jim <unk>, our president and CEO and Jim Gray, our executive Vice President and CFO.

Noah Weiss: Actual results could differ materially from those estimated in the forward, and Ingredion assumes 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 the company's most recently filed annual report on Form 10-K and subsequent reports on Forms 10-Q and 8-Q. During this call, we also referred to certain non-GAAP financial measures, including Adjusted Earnings Per Share, Adjusted Operating Income, and Adjusted Effective Tax Rate, which are reconciled to U.S. GAAP measures in Note 2 non-GAAP information included in our press release and in today's presentation. With that, I will turn the call over to James Zallie. Thank you, Noah.

Noel White: The press release, we issued today as well as the presentation, we will reference for our first quarter results can be found on our website ingredient dot com in the investors section.

Noel White: As a reminder, our comments within this presentation may contain forward looking statements. These statements are subject to various risks and uncertainties and include expectations and assumptions regarding the company's future operations and financial performance.

Noel White: Actual results could differ materially from those estimated in the forward looking statements and ingredient and assumes no obligation to update them.

Noel White: As 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 on the Companys. Most recently filed annual report on Form 10-K, and subsequent reports on forms 10-Q.

Noel White: An 8-K.

Noel White: During this call. We also refer to certain non-GAAP financial measures, including adjusted earnings per share adjusted operating income and adjusted effective tax rate, which are reconciled to U S. GAAP measures and note to non-GAAP information included in our press release and in today's presentation appendix with that I will turn the call over.

Noel White: To Jim's out of it.

James P. Zallie: And good morning, everyone. Ingredion's first quarter results exceeded our expectations in comparison with a strong comparison with last year's record first quarter performance. As anticipated, our net sales volumes in the quarter improved sequentially, despite the impacts of extreme cold weather on shipments in the U.S. and taking into account the sale of our South Korea business. As you can see on slide five, while the consolidated net sales and operating income were lower year over year, the operating income for quarter one 2024 was still the second highest in the company's history and continued the upward trend from prior years. Inclusive of the current period, we have delivered 5% net sales growth over the last five years at a compounded annual growth rate of 5% and an adjusted operating income compounded annual growth rate of 7%. Over the same period,

Jim: Thank you Noah and good morning, everyone.

Jim: <unk> first quarter results exceeded our expectations against a strong comparison with last year's record first quarter performance.

Jim: As anticipated our net sales volumes in the quarter improved sequentially. Despite the impacts of extreme cold weather on shipments in the U S and taking into account the sale of our South Korea business.

Jim: As you can see on slide five while the consolidated net sales and operating income were lower year over year. The operating income for quarter. One 2024 was still the second highest in the company's history and continue the upward trend from prior years.

Jim: Inclusive of the current period, we have delivered 5% net sales growth over the last five years compounded annual growth rate and an adjusted operating income compounded annual growth rate of 7%.

Jim: Over the same period.

James P. Zallie: Furthermore, while we delivered adjusted operating profit for the first quarter of 2024 at the top end of our guided range, the current market environment would have been conducive to delivering even better profitability had it not been for the impact of extreme cold weather on our U.S. shipments, which we estimate was at least $10 million. Now, let me update you on progress against our three strategic pillars, starting with our business growth pillar.

Jim: Furthermore, while we delivered adjusted operating profit for the first quarter of 2024 at the top end of our guided range. The current market environment would have been conducive to delivering even better profitability had it not been for the impact of extreme cold weather on our U S shipments, which we.

Jim: We estimate.

Jim: Was at least $10 million.

Jim: Now, let me update you on progress against our three strategic pillars.

Jim: Starting with our business growth pillar.

James P. Zallie: During the quarter, we completed the reorganization of our business, which resulted in new reportable segments, which we are sharing for the first time today. For Texture and Healthful Solutions, we feel increasingly confident regarding volume momentum as we saw strong demand from distributors in the quarter, and volumes overall in April were up nicely year over year. Also noteworthy.

Jim: During the quarter, we completed the reorganization of our business, which resulted in new reportable segments, which we are sharing for the first time today.

Jim: For texture and helpful solutions, we feel increasingly confident regarding volume momentum as we saw strong demand from distributors in the quarter.

Jim: And volumes overall in April were up nicely year over year.

Jim: Also noteworthy project related customer engagements in the U S are up 60% in quarter, one, which we view as a positive leading indicator of future growth for our texture and helpful Solutions segment.

James P. Zallie: Project-related customer engagement in the U.S. was up 60% in Q1, which we view as a positive leading indicator of future growth for our Texture and Healthful Solutions segment. We have completed the commissioning of the capacity expansion for our higher value Stevia product lines at our Pure Circle facility in Kuala Lumpur to support our sugar reduction franchise growth. Lastly, as a positive indicator of overall economic growth, we have seen a strong demand recovery for industrial starch from papermaking and packaging customers in North America. Now, turning to our second pillar, cost competitiveness through operational excellence. In February, we closed on the sale of our South Korean business.

Speaker Change: We have.

Speaker Change: Completed the commissioning of the capacity expansion for our higher value stevia product lines, and our pure circle facility in Kuala Lumpur to support our sugar reduction franchise growth.

Jim: Lastly in terms of a positive indicator of overall economic growth, we have seen a strong demand recovery for industrial starch.

Jim: From paper, making and packaging customers in North America.

Jim: Turning to our second pillar cost competitiveness through operational excellence in February we closed on the sale of our South Korea business. The proceeds from this divestiture will be used to support our capital allocation priorities.

James P. Zallie: The proceeds from this divestiture will be used to support our capital allocation priorities. During the quarter, we also launched a multi-year cost savings program, which we are calling Cost to Compete. We are already advancing toward our target to deliver $50 million of savings by the end of 2025, and I'll highlight this program more in a few minutes. Some of the notable cost-to-compete initiatives include a project we have undertaken to unlock capacity across our manufacturing footprint by applying machine learning and AI.

Jim: During the quarter, we also launched a multiyear cost savings program, which we are calling cost to compete.

Jim: We are already advancing toward our target to deliver $50 million of savings by the end of 2025 and I'll highlight this program more in a few minutes.

Jim: Some of the notable cost to compete initiatives.

Jim: <unk> include a project, we have undertaken to unlock capacity across our manufacturing footprint by applying machine learning Nai.

Jim: In addition, we are continuing to optimize our supply chain distribution and warehouse network in pursuit of service excellence efficiencies and savings.

James P. Zallie: In addition, we are continuing to optimize our supply chain, distribution, and warehouse network in pursuit of service excellence, efficiencies, and savings. Lastly, we continue to be encouraged by the results achieved by our centralized procurement team, which has recorded some big wins on freight cost savings through globally led procurement strategies combined with strong local execution. Regarding our purpose-driven and people-centric growth culture, I'm proud to report that we were recognized for the tenth time by Ethosphere as one of its 2024 World's Most Ethical Companies. This award reflects the deep commitment of our teams around the world who lead with integrity and prioritize ethics across our organization.

Jim: Lastly, we continue to be encouraged by the results achieved by our centralized procurement team, which has recorded some big wins on freight cost savings through globally led procurement strategies combined with strong local execution.

Jim: Regarding our purpose driven and people centric growth culture I'm proud to report that we were recognized for the 10th time by Ethisphere as one of its 2024 world's most ethical companies.

Jim: This award reflects the deep commitment of our teams around the world, who lead with integrity and prioritize ethics across our organization.

James P. Zallie: Regarding sustainability-related achievements, I would like to commend our team for lowering greenhouse gas emissions by 22 percent compared to 2019 levels and for increasing the share of purchased electricity from renewable sources to 25 percent, which is a big jump from only 5 percent two years ago. This has been done through a combination of investments in solar and biomass energy. In fact, for Brazil specifically, following the completion of our recent conversion to biomass boilers at our two largest facilities, 96 percent of all of our energy needs in Brazil now come from renewable sources.

Jim: Regarding sustainability related achievements I would like to commend our team for lowering greenhouse gas emissions by 22% compared to 2019 levels and for increasing the share of purchased electricity from renewable sources to 25%, which is a big jump from only 5% two years ago.

Jim: This has been done through a combination of investments in solar and biomass energy in fact for Brazil, specifically following the completion of our recent conversion to biomass boilers at our two largest facilities, 96% of all of our energy needs in Brazil now come from renewable sources.

James P. Zallie: I would now like to comment a bit more on volume trends in the quarter. As we have shown in previous quarters, this is a volume index based upon our 2019 quarterly shipment averages excluding high fructose corn syrup and adjusting for material changes in our portfolio. This graph illustrates the heightened volume demand during 2021 and 2022 in reaction to the globally constrained supply chain. In the middle of 2023, we experienced a notable drop in orders as customers destocked inventories, primarily impacting our texture product line.

Jim: I would now like to comment a bit more on volume trends in the quarter.

Jim: As we have shown in previous quarters.

Jim: This is a volume index based upon our 2019 quarterly shipment averages excluding high fructose corn syrup, and adjusting for material changes in our portfolio.

Jim: This graph illustrates the heightened volume demand during 2021, and 2022 and reaction to globally constrained supply chains.

Jim: In the middle of 2023, we experienced a notable drop in orders as customers destock inventories, primarily impacting our texture product line.

James P. Zallie: This year, we anticipate a gradual improvement in volumes and have already seen a significant pickup in distributor demand and solid volume growth in April. It is worth noting that for the quarter, on the slide being shown, we are also projecting where volume was expected to land if not for the impact of extreme cold weather on our U.S. shipment. Ingredion has a legacy of transforming and evolving its business in response to changing market dynamics.

Jim: This year, we anticipate a gradual improvement in volumes and have already seen a significant pickup in distributor demand and solid volume growth in April.

Jim: It is worth noting that for the quarter on the slide being shown we are also projecting where volume was expected to land if not for the impact of extreme cold weather on our U S shipments.

Jim: Ingredient has a legacy of transforming and evolving its business in response to changing market dynamics, our ability to strategically adapt has ensured long term prosperity for the company and is one of the many reasons. We are approaching a rare milestone to be listed now for 122 years on the New York stock exchange.

James P. Zallie: Our ability to strategically adapt has ensured long-term prosperity for the company and is one of the many reasons we are approaching a rare milestone to be listed now for 122 years on the New York Stock Exchange. Ingredion's previous region structure was instrumental in maintaining local accountability to deliver results.

Jim: Ingredients previous region structure was instrumental in maintaining local accountability to deliver results.

James P. Zallie: That culture of accountability will continue as we shift to a more customer and market-focused segment in pursuit of growth, which will be further enabled by our maturing global operating model. Our reorganization and financial re-segmentation would not have been possible five years ago without the global operating model currently in place. As we look forward, we believe the more compelling natural geographic alignment of the new segments will create operational and market synergies. As we execute our strategy to drive growth and deliver on our winning aspiration to be recognized as the go-to provider for texture and healthful solutions that make healthy taste better, I'm pleased to announce that Dr. Michael Leonard will join Ingredion as Senior Vice President, Chief Innovation Officer, and Head of Protein Fortification, effective May 13, 2024.

Jim: That culture of Accountability will continue as we shift to a more customer and market focused segments in pursuit of growth.

Jim: Which will be further enabled by our maturing global operating model, our reorganization and financial re segmentation would not have been possible five years ago without the global operating model currently in place.

Jim: As we look forward, we believe the more compelling natural geographic alignment of the new segments will create operational and market synergies.

Speaker Change: As we execute our strategy to drive growth and deliver on our winning aspiration to be recognized as the go to provider protector and helpful solutions that make healthy taste better I am pleased to announce that Dr. Michael Leonard will join ingredient as senior Vice President Chief Innovation Officer and head of <unk>.

Speaker Change: Teen fortification effective may 13th 2024.

James P. Zallie: Mike brings broad industry leadership experience in both developed and emerging markets with both CPG and ingredient multinationals, as well as high-growth startup companies, which will be a tremendous asset to Ingredion and our customers. As we mentioned recently at Cagney, we are committed to driving continuous cost efficiencies as a means to maintain consistent profitable growth. Cost to Compete will deliver $50 million of run rate savings by 2025.

Speaker Change: Mike brings broad industry leadership experience in both developed and emerging markets with both CPG and ingredient multinationals as well as high growth startup companies, which will be a tremendous asset to ingredients and our customers.

Speaker Change: As we mentioned recently at Cagny, we are committed to driving continuous cost efficiencies as a means to maintain consistent profitable growth.

Jim: Cost to compete we'll deliver $50 million of run rate savings by 2025.

James P. Zallie: We are pursuing savings in two areas. $25 million will come from SG&A, which will show up in our reported operating expenses. And another $25 million will come from cost of goods sold savings, which will positively impact our gross margin. We see a significant opportunity to continue to leverage our shared services infrastructure that we have built over the past five years to lead that effort. We are also pleased to announce that Vanessa Bourdeaux has joined Ingredion as Vice President, Global Shared Services.

Jim: We are pursuing savings into areas $25 million will come from SG&A, which will show up in our reported operating expenses.

Jim: And another $25 million will come from cost of goods sold savings, which we which will positively impact our gross margin.

Jim: We see a significant opportunity to continue to leverage our shared services infrastructure that we've built over the past five years.

Jim: To lead that effort. We are also pleased to announce that Vanessa Bordeaux joined ingredient as vice President Global shared services.

James P. Zallie: In her role, she will continue to drive continuous improvement and change with a strong focus on global process standardization, risk reduction, and internal controls management. Now, I will hand it over to Jim Gray for the financial review. Jim?

Vanessa Bordeaux: In her role she will continue to drive continuous improvement and change with a strong focus on global process standardization risk reduction and internal controls management.

James Derek Gray: Thank you, Jim, and good morning, everyone. Moving to our income statement, net sales for the first quarter were approximately $1.9 billion. Down 12% versus the prior year. Gross profit dollars decreased 14 percent, but gross margins were resilient, remaining greater than 22 percent again this quarter and down slightly when compared to the strong performance of Q1 of last year. Reported and Adjusted Operating Income were $213 million and $216 million, respectively. The decrease in operating income was driven by the impact of extreme cold weather in the U.S.

Vanessa Bordeaux: Now I will hand, it over to Jim Greg for the financial review Jim.

James Derek Gray: Hyperinflation in Argentina and the carry forward of higher cost inventory into the quarter. Turning to our Q1 Net Sales Bridge, the 12% decrease in net sales was driven by $176 million in lower price mix and 40 million in lower volume, partially offset by a positive foreign exchange impact of $12 million.

James Derek Gray: Thank you Jim and good morning, everyone.

James Derek Gray: Moving to our income statement net sales for the first quarter were approximately $1 $9 billion down.

James Derek Gray: Down 12% versus the prior year.

James Derek Gray: Gross profit dollars decreased 14%, but gross margins were resilient remaining greater than 22% again, this quarter and down slightly when compared to the strong lap of Q1 of last year.

James Derek Gray: Reported and adjusted operating income were $213 million and $216 million respectively.

James Derek Gray: The decrease in operating income was driven by the impacts of extreme cold weather in the U S. <unk>.

James Derek Gray: Hyperinflation in Argentina.

James Derek Gray: And the carryforward of higher cost inventory into the quarter.

James Derek Gray: Additionally, the exit from South Korea had a $51 million impact on sales volume. Turning to the next slide, we highlight Net Sales Drivers for the first quarter. For the total company, net sales were down 12%, and 10% when excluding the net impact of South Korea's sales from the results. Texture and Healthful Solutions net sales were down 10%.

James Derek Gray: Turning to our Q1 net sales bridge.

James Derek Gray: A 12% decrease in net sales was driven by $176 million and lower price mix and $40 million and lower volume.

James Derek Gray: Partially offset by a positive foreign exchange impact of $12 million.

James Derek Gray: Additionally, the exit from South Korea had a $51 million impact on sales volume.

James Derek Gray: Turning to the next slide we highlight net sales drivers for the first quarter.

James Derek Gray: For the total company net sales were down 12%.

James Derek Gray: And 10% when excluding the net impact of South Korea's sales from the results.

James Derek Gray: Texture and helpful solutions net sales were down 10%.

James Derek Gray: Sales volume was flat to prior year.

James Derek Gray: Sales volume was flat compared to the prior year, which is indicative of returning volume demand for texture ingredients. Price mix was down 9% for the quarter, partly reflecting the higher pricing from last year as these businesses priced through double-digit inflation for specialty corn and natural gas, primarily in Europe and the U.S. Food and Industrial Ingredients LATAM Net Sales were down 8%, which was primarily driven by lower corn costs year over year being reflected in price.

James Derek Gray: Which is indicative of returning volume demand for texture ingredients.

James Derek Gray: Price mix was down 9% for the quarter.

James Derek Gray: Harley, reflecting the higher pricing from last year as these businesses priced through double digit inflation for specialty corn and natural gas primarily in Europe and the U S.

James Derek Gray: Food and industrial ingredients Latam net sales were down 8%.

James Derek Gray: This was primarily driven by lower corn costs year over year being reflected in price mix.

James Derek Gray: Of note, sales volume was impacted primarily by the timing of the customer demand poll in Columbia, which we anticipate to come back during the balance of the year. Lastly, food and industrial ingredients, U.S. canned net sales were down 11 percent.

James Derek Gray: Of note sales volume was impacted primarily by the timing of customer demand pull in Colombia.

James Derek Gray: Which we anticipate to come back during the balance of the year.

James Derek Gray: Lastly, food and industrial ingredients, you can net sales were down 11%.

James Derek Gray: Price mix was down 7%, reflecting pass-through of lower corn costs on variable rate customers. Sales volume was impacted by slowed production and reduced U.S. shipments due to cold weather. Let me turn to a recap of our Q1 segment performance. Texture and Healthful Solutions net sales were down 10% compared to the prior year and down 9% on a constant currency basis.

James Derek Gray: Price mix was down 7%, reflecting pass through of lower corn costs on variable rate customer contracts.

James Derek Gray: Sales volume was impacted by slowed production and reduced U S shipments due to cold weather.

Speaker Change: So let me turn to a recap of our Q1 segment performance.

James Derek Gray: Texture and helpful solutions net sales were down 10% compared to the prior year and down 9% on a constant currency basis.

James Derek Gray: Texture and Healthful Operating Income was $74 million, demonstrating an OI margin of 12.4%, driven by a less favorable price mix, as I mentioned previously, and the carry forward of higher cost inventory. We expect OI margins to improve for the full year to be between 13% and 16%. In food and industrial ingredients, LATAM, net sales were down 8% versus last year and down 12% on a constant currency basis.

James Derek Gray: Texture and helpful operating income was $74 million.

James Derek Gray: Demonstrating an oi margin of 12, 4% driven.

James Derek Gray: Driven by less favorable price mix as I mentioned previously and the carryforward of higher cost inventory.

James Derek Gray: We expect our margins to improve for the full year to be between 13% and 16%.

James Derek Gray: And food and industrial ingredients Latam net sales were down 8% versus last year and down 12% on a constant currency basis.

James Derek Gray: Food and industrial Latam operating income was $101 million.

James Derek Gray: Food and Industrial, LATAM, Operating Income was $101,000,000, with an OI margin of 16%, down slightly from last year, primarily driven by the impact of the devaluation of the Argentine peso on our joint venture, as well as higher utility costs. We expect OI margins for the full year to be between 16% and 19%. Moving to food and industrial ingredients, U.S. can net sales were down 11% for the

James Derek Gray: With an OE margin of 16% down slightly from last year, primarily driven by the impact of the devaluation of the Argentine peso on our joint venture as well as higher utility costs.

James Derek Gray: We expect <unk> margins for the full year to be between 16% and 19%.

James Derek Gray: Yes.

James Derek Gray: Moving to food and industrial ingredients, you can net sales were down 11% for the quarter.

James Derek Gray: Food and Industrial U.S. canned Operating Income was $87 million, with an OI margin of 16%, up slightly versus last year's quarter. The improvement was driven by the renewal of multi-year customer contracts and tight management of raw material costs. Largely offset by higher fixed costs associated with downtime due to extreme cold weather in the U.S. We expect full year OI margins for this segment to be between 15% and 18%. For all other net sales decreased 35% for the quarter, largely driven by the overlap of the exit of our South Korean business.

James Derek Gray: Food and industrial use <unk> operating income was $87 million.

James Derek Gray: With an OE margin of 16%.

James Derek Gray: Up slightly versus last year's quarter.

James Derek Gray: The improvement was driven by renewal, a multiyear customer contracts and tight management of raw material costs, largely offset by higher fixed costs associated with downtime due to extreme cold weather in the U S.

James Derek Gray: We expect full year Oi margins for this segment to be between 15% and 18%.

James Derek Gray: For all other net sales decreased 35% for the quarter largely driven by the overlap of the exit of our South Korea business.

James Derek Gray: All other operating loss was minus 4 million, better by four million from the year-ago period. The improvement was driven by a lower operating loss for protein fortification and other factors. Our full year outlook for all other is to reduce the operating loss by one-third. Turning to our earnings bridge, on the left side, you can see the reconciliation from reported to adjusted earnings per share. On the right side, operationally, we saw a decrease of minus 86 cents per share for the quarter. The decrease was driven primarily by an operating margin decrease of minus 47 cents, and an unfavorable volume of minus 34 cents per share.

James Derek Gray: All other operating loss was minus $4 million.

James Derek Gray: Better by $4 million from the year ago period.

James Derek Gray: The improvement was driven by a lower operating loss for protein fortification and other factors.

James Derek Gray: Our full year outlook for all other is to reduce the operating loss by one third.

James Derek Gray: Turning to our earnings bridge on the left side you can see the reconciliation from reported to adjusted earnings per share.

James Derek Gray: On the right side operationally, we saw a decrease of minus 86 per share for the quarter the.

James Derek Gray: The decrease was driven primarily by an operating margin decrease of minus <unk> 47.

James Derek Gray: And unfavorable volume of minus <unk> 34 per share.

James Derek Gray: Moving to our non-operating items, we had an increase of $0.14 per share, primarily driven by lower financing costs of $0.13 per share. Moving to cash flow, first quarter cash from operations was $209 million.

James Derek Gray: Moving to our non operational items, we had an increase of <unk> 14 per share primarily driven by lower financing cost of <unk> 13 per share.

James Derek Gray: Moving to cash flow.

James Derek Gray: First quarter cash from operations was $209 million cash from operations benefited from consistent net income.

James Derek Gray: Cash from operations benefited from consistent net income and Lower Than Expected Investment in Working Capital as we pulled from inventories in the U.S. Greater Than Expected. Net capital expenditures were $65 million, slightly below our expected pace of investment for the year.

James Derek Gray: And lower than expected investment in working capital as we pulled from inventories in the U S greater than expected.

James Derek Gray: Net capital expenditures were $65 million slightly below our expected pace of investment for the year.

James Derek Gray: During the first quarter, we paid out $51 million in dividends and began to repurchase outstanding common shares. As we look forward, our capital allocation priorities continue to be first, organic investment. Second, a return to shareholders through our dividends, and third, a strategic deployment of cash into M&A and share repurchase. Let me turn to our outlook for 2024. Before we go through the updates to the full year 2024 guidance, it is worth noting a few items that will impact the quarterly cadence for our business model. Last year, we witnessed a shift in the corn cost layout, which means that we will see a lower price mix through 2024 as we pass along lower raw material costs to fee-based customers.

James Derek Gray: During the first quarter, we paid out $51 million in dividends and began to repurchase outstanding common shares.

James Derek Gray: As we look forward our capital allocation priorities continue to be first organic investment.

James Derek Gray: Our return to shareholders through our dividend.

James Derek Gray: And third strategic deployment of cash into M&A and share repurchases.

Speaker Change: Let me turn to our outlook for 2024.

Speaker Change: Before we go through the updates to the full year 2020 for guidance. It is worth noting a few items that will impact the quarterly cadence for our businesses.

Speaker Change: Last year, we witnessed a shift in the corn costs lay out which means that we will see lower price mix through 2024, as we pass along lower raw material costs to fee based customers.

James Derek Gray: This is a normal expectation for our business model and should be a supporting factor to gross margins as we go through the remainder of the year. For the balance of 2024, we anticipate sales volume growth, a reduction in COGS per ton, and Continuous Improvement in Gross Margin. Excluding the impact of the divestiture of South Korea from our outlook, we expect full year net sales to be flat to up low single digits.

Speaker Change: This is a normal expectation for our business model and should be a supporting factor into gross margins as we go through the remainder of the year.

Speaker Change: For the balance of 2024, we anticipate sales volume growth.

Speaker Change: A reduction in Cogs per ton.

Speaker Change: And continuous improvement in gross margins.

Speaker Change: Excluding the impact of the divestiture of South Korea from our outlook.

Speaker Change: We expect full year net sales to be flat to up low single digits.

James Derek Gray: Reflecting improved volume demand offset by a decline in price mix as we pass through lower raw material costs where applicable, we anticipate that adjusted operating income will be up mid-single digits with year-over-year growth in Q2 through Q4. We are decreasing our financing cost outlook to align with the reduction in overall debt levels and now see it in the range of $85 million to $105 million. For the full year 2024, we now expect reported effective tax rates of 24.5% to 25.5% and an adjusted effective tax rate of 26.5% to 27.5%.

Speaker Change: Reflecting improved volume demand offset by a decline in price mix as we pass through lower raw material costs, where applicable.

Speaker Change: We anticipate that adjusted operating income will be up mid single digits with year over year growth in Q2 through Q4.

Speaker Change: We are decreasing our financing cost outlook to align with the reduction of overall debt levels and now see it in the range of $85 million to $105 million.

Speaker Change: For the full year of 2024, we now expect reported effective tax rates of 24, 5% to 25, 5%.

Speaker Change: On an adjusted effective tax rate of 26, 5% to 27, 5%.

James Derek Gray: The company now expects its full year reported EPS to be in the range of $10.35 to $11, which includes an $82 million gain from the sale of our South Korea business. For the full year, we now anticipate adjusted EPS to be in the range of $9.20 to $9.85. We expect diluted weighted average shares outstanding to be between 66 and 67 million shares, which does not reflect the balance of your share repurchase.

Speaker Change: The company now expects its full year reported EPS to be in the range of $10 35 to $11, which includes an $82 million gain from the sale of our South Korea business.

Speaker Change: For the full year, we now anticipate adjusted EPS to be in the range of $9 20.

Speaker Change: To $9 85.

Speaker Change: We expect diluted weighted average shares outstanding to be between 66 and 67 million shares.

Speaker Change: Which does not reflect balance of your share repurchases.

Speaker Change: We have been able.

James Derek Gray: We have been able to buy back shares in the second quarter and are seeking to buy back shares comparable to 2023's repurchases for the balance of the year. 2024 cash from operations is anticipated to be in the range of $750 million to $900 million, and capital expenditures are expected to be approximately $340 million. Corporate costs are expected to be up mid-single digits, in line with previous guidance, for the second quarter of 2024

Speaker Change: To buy shares in the second quarter.

Speaker Change: And are seeking to buy back shares comparable to 2020 threes repurchases for the balance of the year.

Speaker Change: 2020 for cash from operations is anticipated anticipated to be in the range of $750 million to $900 million and.

Speaker Change: Capital expenditures are expected to be approximately $340 million.

Speaker Change: Corporate costs are expected to be up mid single digits in line with previous guidance.

James Derek Gray: We anticipate net sales to be flat, to download single digits, and Operating Income to be up, low to mid-single digits on a year-over-year basis. In the appendix, we have included a 2024 full year segment outlook that is comparable to 2023. That concludes my comments, and I'll hand it back to Jim.

Speaker Change: For the second quarter of 2024, we anticipate net sales to be flat.

Speaker Change: Down low single digits.

Speaker Change: And operating income to be up low to mid single digits on a year over year basis.

Speaker Change: In the appendix we have included a 2020 for full year segment outlook and our estimated comparable to 2023.

Speaker Change: That concludes my comments and I'll hand back to Geoff.

James P. Zallie: Thank you, Jim. Based on our first quarter performance along with our revised outlook, we believe we remain well positioned for another year of growth with momentum continuing throughout 2024. Volumes continue to show improvement, with distributors replenishing their inventories and the headwind of destocking now fully behind us. These trends, along with increased customer engagements to drive innovation, are evidence of more favorable market conditions than we have seen in the last 12 months. During the quarter, improvements in working capital led to another strong quarter of cash flow from operations.

Geoff: Thank you Jim based on our first quarter performance, along with our revised outlook.

Geoff: We believe we remain well positioned for another year of growth with momentum continuing throughout 2024.

Geoff: Volumes continue to show improvement with distributors replenishing their inventories and the headwind of Destocking now fully behind us.

Geoff: These trends along with increased customer engagements to drive innovation are evidence of more favorable market conditions than we have seen in the last 12 months.

Geoff: During the quarter improvements in working capital led to another strong quarter of cash flow from operations.

James P. Zallie: We see this continuing as demand gradually improves, and we start to see the benefit of lower corn costs starting in quarter two. Also, Cost to Compete provides us with another meaningful lever to meet our long-term financial commitments with the delivery of at least $50 million in cost savings over the next two years. This will positively impact margins and overall profitability. Looking ahead, we will use our strong cash position to continue to invest in areas of growth that offer the highest returns, as well as return capital to shareholders.

Geoff: We see this continuing as demand gradually improves and we start to see the benefit of lower corn costs starting in quarter two.

Geoff: Also cost to compete provides us with another meaningful lever to meet our long term financial commitments with the delivery of at least $50 million in cost savings over the next two years.

Geoff: This will positively impact margins and overall profitability.

Geoff: Looking ahead, we will use our strong cash position to continue to invest in areas of growth that offer the highest returns as well as return capital to shareholders. Our strategic initiatives are aligned with our winning aspiration and we are excited about the opportunities that lie ahead.

James P. Zallie: Our strategic initiatives are aligned with our winning aspiration, and we are excited about the opportunities that lie ahead. Now, let's open the call for questions. As a reminder, to ask a question, please press star 1 on your telephone and wait for your name to be announced. To withdraw your question, please press star 1 once again.

Speaker Change: Now, let's open the call for questions.

Speaker Change: As a reminder to ask a question. Please press star one one on your telephone and wait for your name to be announced.

Speaker Change: Your question. Please press star one again.

Operator: Our first question comes from the line of Adam Samuelson with Goldman Sachs. Yes, thank you. Good morning, everyone.

Speaker Change: Our first question comes from the line of Adam Samuelson with Goldman Sachs.

Adam Samuelson: Yes. Thank you good morning, everyone.

Adam Samuelson: Hey Adam, hi. So I guess the first question, maybe on the capital allocation point, Jim Gray, I think I heard in your prepared remarks, share your purchases for this year. [inaudible] Transcripts provided by Transcription Outsourcing, LLC. [inaudible] Yeah, sure.

Adam Samuelson: Hey, Adam.

Adam Samuelson: Hi.

Adam Samuelson: So I guess the first question maybe on the capital allocation point, Jim Great I think I heard in your prepared remarks share repurchases for this year consistent with last year, which were a $100 million or so.

Adam Samuelson: I'm, just trying to get a better clarity on kind of why why not higher given the strength of the of the company's free cash flow.

Geoff: Divestiture proceeds from Korea, which are in the door net leverage which.

Geoff: It looks like it would be tracking closer to the one times level by the end by the end of the year, just help us frame kind of where why the kind of step down in leverage implied by that outlook.

Geoff: Help us bridge that.

James Derek Gray: You know, I think it's always a balance, right? Now, when we look at the end of Q1, obviously, with some of the proceeds from Korea coming in, the cash position of the company looks strong. So therefore, being confident to say that we're going to, you know, seek up to $100 million of share repurchases through the year, it does make sense. But as we've also always stated, you know, that organic capital investment and at least some M&A that accelerates either our texture solutions or our healthful solutions or, or, you know, solidifies our competitive position in the markets where we play have always been a priority.

Speaker Change: Yes sure I.

Speaker Change: I think it's always a balance right.

Speaker Change: Now when we look at the end of Q1, obviously with some of the proceeds from Korea, and the cash position of the company looks strong.

Speaker Change: Therefore, being confident to say that we're going to.

Speaker Change: Seek up to a $100 million of share repurchases through the year.

Speaker Change: It does make sense, but as we've also always stated.

Speaker Change: Organic capital investment in at least some M&A that accelerates either are or texture solutions are helpful solutions or or solidifies, our competitive position in the markets, where we play has always been a priority and <unk>.

James Derek Gray: And, you know, and if those returns look attractive for the medium to long term, you know, for shareholders, and they're returning rates that are going to be higher than, necessarily, just buying back shares today, then I think we're going to prioritize those.

Speaker Change: Those returns look attractive for the medium to long term for shareholders and are returning.

Speaker Change: Rates that are going to be higher than necessarily just buying back shares. Today, then I think we're going to prioritize those.

Speaker Change: So it's a balance I think Adam but right now we're pretty confident can come back and say, we'd really like to pick up close to $100 million of share repurchases.

Speaker Change: As we finished 2024, yes, I think I think out of that.

James Derek Gray: So it's a balance, I think, Adam, but right now, we're pretty confident to come back and say, you know, we'd really like to pick up close to, you know, $100 million of share repurchases as we finish 2024. Yeah, I think, Adam, that it is the view at this current point in time, based on what we see, across the balance between organic capital growth investment opportunities, M&A, and The Opportunity for share repurchase, with obviously our dividend being, you know, solidified.

Speaker Change: Is the view at this current point in time based on what we see.

Speaker Change: Across the balance between organic capital growth investment opportunities M&A.

Speaker Change: And the opportunity.

Speaker Change: For share repurchase.

Speaker Change: Obviously, our dividend being.

Speaker Change: Solidified so I think it's it's how we're viewing it at this moment in time and if there are any changes we will certainly be updating those as we go forward throughout the year, but currently that's the view that we have and it's not an insignificant.

James Derek Gray: So I think that's how we're viewing it at this moment in time. And if there are any changes, we will certainly be updating those, you know, as we go forward throughout the year. But currently, that's the view that we have.

Adam Samuelson: And it's not an insignificant amount of evidence that we believe in the intrinsic value of a company to be opportunistic with share repurchases in the same amount as last year. And maybe I could just ask a follow-up on the volume trend side. You kind of commented that April trends were kind of continuing to return to growth. I just want to be clear, is that kind of across the three now reporting units, or any framing on areas of particular customer strength by region or category that you could call out? I think we see the modified starch, food starch category, and specialty starch category volumes gradually improving throughout 2024. That was certainly...

Speaker Change: Amount.

Speaker Change: <unk>.

Speaker Change: Of evidence that we believe in the intrinsic value of the company to be opportunistic with share repurchases and the same amount as last year.

Speaker Change: Okay.

Speaker Change: And maybe I could just ask a follow up on the volume trend side.

Speaker Change: You kind of commented to April trends kind of continuing to return to growth.

Speaker Change: I wanted to be clear is that kind of across the three now reporting units or any <unk>.

Speaker Change: Any framing on areas of particular customer strengths by by region or category.

Speaker Change: You could that you could call out I think we I think we see the modified starch food starch category specialty starch category the volumes gradually improving throughout 2024 that was certainly.

James P. Zallie: Solid in April. We commented on industrial starch for papermaking and corrugating. That's been exceptionally strong, which we again view as a hopeful sign of increased economic activity. Sweeter volumes were down a bit, but generally in line with the historic trends, and so for Ingredion at Large, we're anticipating a mid-single-digit uptick in sales volumes demand for 2024. You know, pretty much.

Speaker Change: Solid in April.

Speaker Change: We commented on industrial starch for paper, making corrugated thats been exceptionally strong.

Speaker Change: Which we again view as a hopeful sign.

Speaker Change: Your line of increased economic activity.

Speaker Change: Sweetener volumes were down a bit but generally in line with the historic trends and so forth ingredient at large we're anticipating mid single digit uptick in sales volumes demand for 2024.

James P. Zallie: And it's also noteworthy to say that we were pleased with double-digit volume growth in China for the quarter. You know, recognizing that it does compare to the prior year's quarter in China when China went with herd immunity in December of 22 into January of 23, but also that Chinese New Year was early this year.

Speaker Change: Pretty much and it's also noteworthy to say that we're pleased with double digit volume growth in China for the quarter.

Speaker Change: Recognizing that it does compare.

Speaker Change: Two.

Speaker Change: Prior year's quarter, and China, when China went with herd immunity.

Speaker Change: In December of 'twenty two into January of 'twenty three.

Speaker Change: But also Chinese new year was early this year, so, but we were very encouraged to see that and then also the price of corn has come down significantly in China, which should be supportive of volume growth going forward as well. So that's how we're looking I guess at volume across the world right now.

James P. Zallie: But we were very encouraged to see that. And then also, you know, the price of corn has come down significantly in China, which should be supportive of volume growth going forward as well. So that's how we're looking, I guess, at volume across the world right now. All right, that's all. It's all helpful. I'll pass.

Speaker Change: Alright, that's all that's all helpful I'll pass it on thanks.

Adam Samuelson: Our next question comes from Andrew Strelzik with BMO Capital. Hey, good morning. Thanks for taking the questions. The first one, I guess I just wanted to ask about the guidance and if I could put together a couple of your comments together. You said the first quarter exceeded your expectations. You're more confident.

Speaker Change: Our next question comes from the line of Andrew <unk> with BMO capital markets.

Andrew Strelzik: In the textured volumes, and then also now you have the cost saver, So I guess I'm curious why you're only taking up the load of the guidance a little bit. Are there any other offsets? to think about or recognize it's a bit early in the year, but just curious how you approach the guidance given given this. Yeah, well, I appreciate that you appreciate that it's early in the year. I think what we look at is, as we announced earlier, both at Cagney and at the beginning of the year, we are seeing that the businesses have some pretty easy volume laps from last year, particularly the depth of that was in Q2. So we're pretty confident about volume coming back, as Jim just mentioned.

Andrew: Hey, good morning, Thanks for taking my questions.

Andrew: The first one I guess I just wanted to ask about the guidance and if I put a.

Andrew: A couple of your comments together you said the first quarter exceeded your expectations Youre more confident in the textured volumes and then also the call.

Andrew: Cost saves so I guess I'm curious why you're only taking up the loan to the guidance a little bit are there any other offsets.

Andrew: Think about it recognize it's a bit early in the year, but just curious how you approach the guidance given given those dynamics.

Andrew: Yes.

Speaker Change: Well I appreciate that you appreciate that it's early in the year.

Andrew: I think what we look at is.

Andrew: As we announced earlier both at Cagny in the beginning of the year, we are seeing that.

Andrew: The businesses have some some pretty easy easy volume lapse from last year, particularly.

Speaker Change: The depth of that was in Q2, so we're pretty confident.

James Derek Gray: I think that does help our fixed cost absorption. And so that's really, I think, the key underpinning of the positive side of opt-income growth. I think the cautions that we would have would be just really watching, particularly U.S. customers, maybe less so European customers, in terms of how they're managing price, how they're managing through innovation, and what that has in terms of an impact on unit volume demand. And so they're kind of out of the gate.

Speaker Change: Around volume coming back as Jim just mentioned I think that does help our fixed cost absorption and so thats really.

Speaker Change: The key underpinning.

Speaker Change: The positive side.

Speaker Change: Income growth I think the caution that we would have would be.

Speaker Change: Just really watching particularly U S customers, maybe lost so European customers in terms of how they're managing price, how they're managing through innovation.

Speaker Change: And what that has in terms of an impact on unit volume demand.

Speaker Change: And so they're kind of out of the gate I would say that.

James Derek Gray: I would say that what I'm seeing in pricing change in the U.S. is probably still in the mid-single digits, maybe the high end of the low-single digits. And so I'm going to be just a little bit cautious on whether or not that doesn't really just accelerate consumer demand in the grocery basket. So we just want to see that come through. I think we are seeing it in some of the, you know, some of the pockets.

Speaker Change: What I am seeing in pricing change in the U S is probably still in the mid single digits, maybe the high end of low single digits, and so I'm going to be just a little bit cautious on whether or not that.

James Derek Gray: You know, I gave you an example, like, you know, like, for example, you wouldn't think that condiments would necessarily be kind of a good, you know, fast moving unit volume. But you know, the improvement in condiments from some of the, you know, scan data that we see for the first quarter was really healthy year over year. So I think there are definitely signs of green shoots here. I think the other two cautions that we would always have in our business are, you know, hey, any political turmoil, or warfare, what impact does it have on oil prices? And can we have some energy, you know, energy that changes in terms of availability?

Speaker Change: It doesn't really just accelerate consumer demand and the grocery basket.

Speaker Change: So we just we want to see that come through.

Speaker Change: I think we are seeing it in some of the.

Speaker Change: Some of the pockets.

Speaker Change: Ill give you. An example, like for example, you wouldn't think the condiments.

Speaker Change: Necessarily be kind of a good.

Speaker Change: Fast moving unit volume, but.

Speaker Change: The improvement in condiments from some of the.

Speaker Change: Scan data that we see for the first quarter was really healthy.

Speaker Change: Year over year. So I think there are definitely signs of green shoots here.

Speaker Change: I think the other two cautions that we would always have in our businesses any political.

Speaker Change: Turmoil warfare, what impact does it have on oil prices and can you have some energy.

Speaker Change: <unk>.

Speaker Change: Energy that changes in terms of availability.

Speaker Change: Even though we do hedge natural gas you still have that can have an impact there and then I think third is just global supply chains, and any kind of freight ocean freight disruptions can always cause.

James Derek Gray: Even though we do hedge natural gas, you still have that can have an impact there. And then I think third is just global supply chains, you know, and any kind of freight ocean freight disruptions can always cause some disruption over a three to six month period. Those are Andrew, those are kind of what's on our radar.

Speaker Change: Some some disruption over a three to six month period. Those are Andrew those are kind of are what's on our radar.

Andrew Strelzik: Okay, that's really helpful color. And then my second question is just digging in a little bit on the cost savings plan. And I guess I'm just curious how to think about the cadence of that coming through over the course of the next two years. You know, maybe a little more color on where exactly that comes from? And does any of it get reinvested?

Andrew: Okay. That's really helpful color and then my second question is just digging in a little bit on the cost savings plan and I guess I'm just curious how to think about the cadence of that coming through over the course of the next two years.

Speaker Change: <unk>.

Speaker Change: Maybe a little more color on where exactly that comes from.

Speaker Change: Does any of that get reinvested or should we assume most of that's falling to the bottom line.

James P. Zallie: Or should we assume, you know, most of that's falling to the bottom? Let me take a shot at just framing it. And then Jim, you can pick up on the comments. Obviously, when you initiate a program like this, and just a reminder, we have a pretty good track record of delivering on cost takeout going back to the inception of what we called cost smart in 2019, which was a three-year program that sunsetted in 2021. We originally set that target at 125 million, raised it to 150 and ended up delivering a little north of 170 million. So hiatus for a couple years, and now the cost to compete is $50 million.

Speaker Change: Let me take a shot at just framing it and then Jim you can pick up on the comments, obviously when you initiate a program like this and just a reminder.

Speaker Change: We have a pretty good track record of delivering on cost takeout going back.

Jim: To the inception of what we called cost Smart in 2019, which was a three year program, which sunset. It in 2021, we originally set that target at $125 million raised it to 150 million ended up delivering a little north of $170 million. So.

Jim: Hiatus for a couple of years and now cost to compete at $50 million.

James P. Zallie: With those programs, typically, they ramp up with savings. So there will be more of the $50 million of savings that will accrue in 2025 as opposed to 2024. But 2024 will have a meaningful amount of savings delivered, more so in the SG&A area, and the COGS will come more so in 2025 as we also look at opportunities across our footprint as well. And there'll be more information that we'll be able to share over time related to that. But real substantive cost savings.

Jim: And.

Speaker Change: With those programs typically they ramp up.

Speaker Change: With with savings so.

Speaker Change: There will be more of the <unk> at $50 million of savings that will accrue.

Speaker Change: In 2025 as opposed to 'twenty four but 24, we will have a meaningful amount of savings delivered more so in the SG&A.

Speaker Change: Area and the Cogs will come more so in the 2025% as we also look at opportunities across our footprint as well and there'll be more information that will be able to share over time related to that but real.

Speaker Change: Substantive.

Speaker Change: Cost savings now clearly what we want to do.

James P. Zallie: Now, clearly, what we want to do is fulfill our winning aspiration to be the go-to provider for texture solutions and helpful solutions. And so we are going to be investing strategically in capabilities that are going to enable us to deliver on that promise for customers when it comes to things like texture data measurement science, the sophisticated sensory capabilities that you need, and formulation management, for example. So those are some of the things that we will invest in. However, some of that is already factored into some of our budgeting process starting this year as well. Jim, do you want to add some color to that?

Speaker Change: Is fulfill our winning aspiration to be the go to provider for texture solutions.

Speaker Change: And <unk>.

Speaker Change: Helpful Solutions, and so we are going to be investing strategically and capabilities that are going to enable us to deliver on that promise for customers. When it comes to things like texture data measurement science.

Speaker Change: The sophisticated sensory capabilities that you need.

Speaker Change: And formulation management for example, so those are some of the things that we will invest in however.

Speaker Change: Some of that is already factored into some of our budgeting process. Starting this year as well Jim you want add some color on that yes, Andrew I think what we're always trying to do is just dampen the rate of wage inflation increase on the company right.

James Derek Gray: Yeah. Andrew, I think what we're always trying to do is just dampen the rate of wage inflation increase on the company, right, so that we always, every company has to pay the market rates of year-over-year wage change, right? So what you have to do is look at your organization to be able to say, you know, where are some things that we need and that we can now stop doing because we're now, you know, three global, three segments versus having kind of four regions?

Speaker Change: Every company has to pay.

Jim: Market rates of year over year wage change right. So what you have to do is look at your organization to be able to say, whereas some things that we need and that we can now stopped doing.

Jim: Because we're now.

Jim: Three global <unk> segments.

Speaker Change: Versus having kind of four regions.

James Derek Gray: And then also from that, you know, just efficiencies and tightening and greater effectiveness, where do you want to make very select choices to reinvest? But I think the overall thing that you'll see is kind of a dampening of our year-over-year change in SG&A rates. And then, obviously, as we... [inaudible] Okay, great. Thank you very much. I'll pass it.

Speaker Change: And then also from that just efficiencies in tightening and greater effectiveness.

Speaker Change: Or do you want to make very select choices to reinvest, but I think the overall that youll see us as kind of a dampening of our of our year over year change in SG&A rate and then obviously as we.

Speaker Change: You get after Cogs, which we already have an annual program called net structural savings where we are.

Speaker Change: Chasing inflation and trying to dampen the manufacturing expense inflation that we incur every year.

Speaker Change: But this will be the cost to compete will allow us to get after some some event driven.

Speaker Change: Actions within our manufacturing network.

Speaker Change: That's our goal.

Speaker Change: Okay, great. Thank you very much I'll pass it on.

Andrew Strelzik: Our next question comes from the line of Ben Bienvenu with Steve. Hey, thanks. Good morning, everyone.

Speaker Change: Our next question comes from the line of Ben <unk> with Stephens.

Benjamin M. Theurer: Hey, Thanks, good morning, everyone.

Benjamin Shelton Bienvenu: Hey, good morning, Ben. James Zallie, you made a comment about the $10 million impact from weather in the first quarter on shipment volumes. Is that $10 million or, you know, 1011 cents of EPS? Does that get deferred into the second quarter or later in the year? Or is that just lost sales? And maybe Jim Gray, as you think about that as another put and take, kind of piggybacking on Andrew's question about guidance.

Benjamin M. Theurer: Good morning, guys, Hey, good morning, Ben.

Benjamin M. Theurer: Jim It seems valley you made a comment about the $10 million impact from weather in the first quarter.

Benjamin M. Theurer: On shipment volumes.

Benjamin M. Theurer: That $10 million or 10, 11 cents of EPS does that get deferred into the second quarter or later in the year or is that just lost sales and maybe Jim Gray as you think about that as another put and take kind of piggybacking on Andrew's question around guidance.

James P. Zallie: You know, with the solid start to the year, some tailwinds, you know, wondering how that figured into kind of the posture that you took on guys. Yeah, so let me make a quick comment just so the what we said was greater than $10 million of impact in the quarter, it was predominantly comprised two-thirds of idle fixed costs under absorption and one-third due to lost sales. And we felt that impact at our larger plants in US Canada in the food and industrial ingredients segment, but also to a degree, at our Indian Kansas City plants that support the texture and healthful segment. And this was due to that extremely cold weather that we had for about two weeks in January, which did impact the runnability of our production at again, a few of the Midwestern plants.

James Derek Gray: With a solid start to the year some tailwind.

Speaker Change: <unk>.

James Derek Gray: Wondering how that figured into.

Speaker Change: Kind of a posture that you took on guidance.

James Derek Gray: Yes so.

Speaker Change: Let me make a quick comment just so the what we said was greater than $10 million of impact in the quarter. It was predominantly comprised two thirds of Idaho fixed cost under absorption and one third due to lost sales and we felt that impact at our larger plants in U.

Speaker Change: The us Canada food and industrial ingredients segment, but also to a degree at our India in Kansas City plants that support the texture and healthful segment and this was due to that.

Speaker Change: Extremely cold weather that we had for about two weeks in January which did impact the run ability of our production of again, a few of the Midwestern plants and it also did impact and experienced challenges in rail and truck deliveries and as many of those were frozen during that period, but we've quantified that impact.

James P. Zallie: And it also did impact and experience challenges in rail and truck deliveries, as many of those were frozen during that period, but we've quantified that impact. And so that's how we've kind of estimated its impact. And obviously, we're running the plants now very well and very hard and trying to catch up, but some of those are one-time losses. Opportunities, because the demand was there, the demand was there, the opportunities were there. And we were impacted; we were not alone, but we were affected.

James Derek Gray: And that's how we've kind of estimated its impact and obviously, we're running the plants now very well and very hard and trying to catch up but some of those are one time lost.

James Derek Gray: Opportunities.

James Derek Gray: Because the demand was there the demand was there the opportunities were there.

James Derek Gray: And.

James Derek Gray: We were impacted we were not alone, but we were impacted and that's how we've quantified it Jim yes. So the third of the impact from loss sales will not be caught up but.

Benjamin Shelton Bienvenu: And that's how we've quantified it, Jim. Yeah, so the third of the impact from lost sales will not be caught up. But as we look at the fixed costs due to some of the, you know, under absorption, as we continue to run in Q2 and Q3, in order to kind of rebuild some of our inventory levels, then that will help a little bit in terms of some fixed cost absorption in Q2, Q3. Very good. Thanks for that. My next question is just related to the reclassification of your segments, you know, recognizing there's some limited kind of historical data. I have kind of two questions.

James Derek Gray: As we look at the.

James Derek Gray: The fixed cost due to some of the.

James Derek Gray: Under absorption as we.

James Derek Gray: Continuing to run in Q2 and three.

James Derek Gray: In order to kind of rebuild some of our inventory levels, then that will help a little bit in terms of some fixed cost absorption in Q2 Q3.

Speaker Change: Okay very good thanks for that.

James P. Zallie: One, what story do you expect these new segments to tell as it relates to your business and kind of the long-term strategy and performance of your various segments? And then, you know, as you think, why did you segment them the way you did? I guess. And how should we be thinking about kind of monitoring these new segments versus, historically, you know, being focused on geography? Well, let me take a shot at the why and then the overall. Thank you.

Speaker Change: My next question is just related to the reclassification of your segments.

Speaker Change: Recognizing there is some limited kind of historical data.

James Derek Gray: I've kind of two questions one.

James Derek Gray: What story do you expect these new segments to tell as it relates to your business and kind of the long term strategy and performance of your various.

James Derek Gray: The segments and then too.

James Derek Gray: As you think why did you segment than the way you did I guess and how should we be thinking about kind of monitoring these new segments.

James Derek Gray: Versus historically being focused on geographies.

Speaker Change: Well, let me, let me take a shot of Y and thank you for the question. Thank you for the question very robust it is.

James P. Zallie: Thank you for the question. Thank you for the question. Very robust indeed.

Speaker Change: Helpful question of context from a standpoint of where we're headed strategically as an organization. So first of all something maybe that we haven't talked a.

James P. Zallie: Yeah, no, it's a very helpful question of context from a standpoint of where we're headed strategically as an organization. So first of all, something maybe that we haven't talked a lot about is throughout all of 2023, we undertook a company-wide strategy refresh, Enterprise-Wide, leveraging the Play-to-Win Framework, and it's a very simple framework to understand.

Speaker Change: A lot about is throughout all of 2023.

Speaker Change: We undertook a companywide.

Speaker Change: <unk> refresh enterprise wide.

Speaker Change: Leveraging the play to win framework.

Speaker Change: And it's a very simple framework to understand it basically starts with what is youre winning aspiration.

James P. Zallie: It basically starts with, what is your winning aspiration? Where to play, how to win, what must-have capabilities do you need to have, and what are you enabling management systems to then execute? So our whole organization obviously could quickly identify with the simplicity of the framework, and it became very clear to us that when it comes to texture solutions with specialty starches and our market leadership position and our breadth and depth in that category, it afforded us a platform to expand upon to really be a more complete solutions provider for texture solutions.

Speaker Change: Where to play how to win.

Speaker Change: Must have capabilities do you need to have and what are your enabling management systems to then execute.

Speaker Change #100: So our whole organization, obviously, you could quickly identify with the simplicity of the framework and it became very clear to us that when it comes to.

Speaker Change: Texture solutions with specialty starches, and our market leadership position and our breadth and depth in that category.

Speaker Change: That.

Speaker Change: It afforded us a platform to expand upon to really be a more complete solutions provider for texture solutions and then an helpful solutions.

James P. Zallie: And then in healthful solutions, Given how much of a megatrend health and wellness is and will continue to be, in the areas of sugar reduction, protein fortification, and fiber fortification, we felt we could play to win. And that comprised that segment. And then we will, when we looked at the customer base, there are many global customers, and these are global trends as well and global relevance. We talked about, for example, there are 400 terms, terminologies, for very precise descriptions of texture in Japan, 200 in China, etc.

James Derek Gray: Given how much of a mega trend health.

James Derek Gray: The health and wellness.

James Derek Gray: Is and will continue to be.

James Derek Gray: Is that in the areas of sugar reduction in the areas of protein fortification fiber fortification.

James Derek Gray: We felt we can play to win.

James Derek Gray: And that comprised that segment and then we when we looked at the customer base.

James Derek Gray: There are many global customers and these are global trends as well in global relevance.

James Derek Gray: We talk about for example, there.

James Derek Gray: There are 400 terms terminology for very precise descriptions of texture, and Japan 200, China etcetera. So that was the wisdom or logic behind that and then also.

James P. Zallie: So that was the wisdom or logic behind that. And then also, the products that we sell there are typically not sold in bulk or with liquid in liquid form. So they are transported internationally.

James Derek Gray: The products that we sell there are typically not sold in.

James Derek Gray: In bulk or with.

James Derek Gray: Liquid in liquid form so they transport internationally and so the network of plants that we supply lend themselves more to a global organizational structure. When it comes to making tradeoffs on behalf of global key accounts to be most customer friendly so that.

James P. Zallie: And so the network of plants that we supply lends itself more to a global organizational structure when it comes to making trade-offs on behalf of global key accounts to be most customer-friendly. So that makes a lot of sense when it comes to our LATAM business. We have a tremendously strong position in Mexico, and Mexico continues to grow, and, by the way, delivered another record quarter for us this past quarter, and then just the natural Hispanic language and cultural similarities between that and our market leadership position in Brazil, and our market leadership position in Andean, and with now a very solid joint venture in Argentina. We felt, organizationally, from those cultural similarities, that that was a change that we made because, remember And that was just a more what we call natural geographic alignment.

James Derek Gray: Made a lot of sense when it comes to our Latam business.

James Derek Gray: We have a tremendously strong position in Mexico, and Mexico continues to grow and by the way delivered another record quarter for us this past quarter.

James Derek Gray: And then just the natural Hispanic language and cultural similarities between that and our market leadership position in Brazil, and our market leadership position in A&D and with now a very solid joint venture in Argentina.

James Derek Gray: We felt organs.

James Derek Gray: Organizationally.

James Derek Gray: From.

James Derek Gray: Those cultural.

James Derek Gray: Similarities.

James Derek Gray: That that was a change that we made because remember Mexico was part of North America before and despite U S. MCA, we felt there are more compelling.

James Derek Gray: Talent management opportunities across that platform.

James Derek Gray: And that was just a more what we call natural geographic alignment Similarly, the U S, Canada, food and industrial ingredients businesses.

James P. Zallie: Similarly, the US and Canada food and industrial ingredients businesses where you're driving operational excellence but also having to make some strategic capital decisions for facilities related to reliability to support some of the slower growth categories that we've identified, HFCS, of course, being one of them, which now, again, is about 8% of our sales only and a lower percentage of our gross profits. The and the industrial starch businesses.

James Derek Gray: Where you're driving operational excellence, but also having to make some strategic capital decisions for facilities related to reliability to support some of the slower growth typically the slower growth categories that we've identified hfcs of course being one of them, which now again is.

James Derek Gray: About 8% of our sales only and a lower percentage of our gross profits.

James Derek Gray: The and the industrial starch businesses.

James P. Zallie: That will take different capital decisions that we wanted to frame. Now, what's also interesting to point out, though, and I have to do this, is that for the food industrial US Canada business this quarter, operating income was $87 million with an OI margin of 16%, which was up slightly from last year's quarter. The improvement was really driven by, and we've talked about this before, multi-year customer contracts, tight management of raw material costs, largely offset by higher fixed costs associated, again, with extreme weather.

James Derek Gray: That will take different capital decisions that we wanted to frame now what's also interesting to point out, though and I have to do this is that for the food industrial U S. Canada business this quarter.

James Derek Gray: Operating income was $87 million with NOI margin of 16%, which was up slightly from last years.

James Derek Gray: Quarter.

James Derek Gray: The improvement was really driven by and we've talked about this before multi year customer contracts tight management of raw material costs.

James Derek Gray: Largely offset by higher fixed costs associated again with the extreme weather.

James Derek Gray: So.

James P. Zallie: So, it's interesting to point out that sales volumes for that segment, US and Canada food industrial ingredients, would have been close to flat, and operating income would have been up for the quarter if it had not been for the extremely cold weather that impacted that business unit. So there's a unit that, again, running it for operational excellence and really executing, has a very attractive margin profile, which we don't know if investors really fully appreciate the stability and the health of that business as a cash generator, which we will obviously be using to fuel the growth in our texture and healthful solutions segment. Sorry, it's a little bit long winded, but hopefully that gives you some context on how we thought about things strategically in the genesis of it, which came out of the Play-to-Win framework.

James Derek Gray: It's interesting to point out that sales volumes for that segment U S. Canada food industrial ingredients would've been close to flat and operating income would have been up for the quarter. If it had not been for the extremely cold weather that impacted that business unit. So there is a unit that again running at for operational excellence.

James Derek Gray: And and.

James Derek Gray: Really executing.

James Derek Gray: It has a very attractive margin profile, which we don't know if.

James Derek Gray: If really.

James Derek Gray: Investors really fully appreciate it.

James Derek Gray: Stability in the health of that business is a cash generator, which we will obviously be using to fuel the growth in our texture and helpful solution segment, sorry, it's a little bit long winded, but hopefully that gives you some context on how we thought about things strategically in the Genesis.

James Derek Gray: Of it which came out of play to win framework.

Speaker Change #105: Thanks for all the comments I appreciate it.

Speaker Change: Thanks Ben.

Benjamin Shelton Bienvenu: Thanks for all the comments. I appreciate it. Thanks, Ben. Our next question comes from the line of Kristen Owen with Op-Ed. Hi, good morning, Jim and Jim. That one's going to be tough to follow up.

Speaker Change: Our next question comes from the line of Kristen Owen with Oppenheimer.

Kristen Owen: But I'll do my best here. The first question I have is actually just a clarification on the 2Q guide, the net sales flat down to low single digits. Just remind us that this is excluding the SK business. And can you help us with what that SK business was in 2Q23 so we've got the right comp? Yes, it is excluding the South Korean business. You know, I want to say that I think that that's going to be around. [inaudible] Okay, perfect. Thank you so much.

Kristen Owen: Hi, Good morning, Tim and Jim that one is going to be tough to follow up but.

Kristen Owen: I'll do my best here.

Kristen Owen: First question I have is actually just a clarification on the <unk> guide.

Kristen Owen: Net sales flat down to low single digits.

Kristen Owen: Remind us that is excluding the SK business and can you help us with what that SK business was in Q2 'twenty three so we said we've got the right comp there.

Speaker Change: Yes, it is excluding the.

Kristen Owen: The South Korea business I want to say that I think that that's going to be around.

Speaker Change: See the $70 million, but let me follow up with you on that.

Speaker Change: We'll put a clarification out on that.

James Derek Gray: So then I did want to ask a follow-up to the previous sort of re-segmentation, but more granular about what those KPIs are, how we should think about or track, whether it's ASPs or revenue per ton, just how to think about the proxy for the specialty value uplift that you're getting through this reorientation and appreciate the cash cow nature of sort of the core business, but as we What's a KPI that you guys are watching that would be helpful for us to be paying attention to?

Speaker Change: Okay perfect. Thank you so much.

Speaker Change: I did want to ask.

Speaker Change: Follow up to the previous sort of re segmentation, but more granular about what those kpis or how we should think about or track, whether its asp's or revenue per ton.

James Derek Gray: Think about the proxy for the specialty value uplift that you're getting through this this reorientate Chen and I appreciate the cash cow nature of sort of the core business, but but as we're watching some of these higher growth areas with higher margin.

Speaker Change: What's the Kpis that you guys are watching that there would be helpful for us to be paying attention to.

James Derek Gray: Yeah, with the new segments, I think that, you know, we have an intention to also be disclosing gross margins for the three primary segments, right? So, that'll be, you know, part of our required reporting in 2025. You know, as we work through our 2023 historical, we're going to have a, you know, a better perspective of the lap and how the gross margins are changing. So, you know, we're nearly, you know, right in the midst of working through all of that historic 2023 and appreciate, you know, the work that my team is doing to get us there.

Speaker Change: Yes, with the new segments I think that.

James Derek Gray: We have an intention to also be disclosing for the three primary segments gross margins right. So that will be.

Speaker Change: Part of our required reporting in 2025.

Speaker Change: As we work through our 2023 historical we're going to have a better perspective of the lap.

Speaker Change: And how the gross margins are changing so ordinarily.

Speaker Change: Right in the midst of working all of that historic 2023.

Speaker Change: And I appreciate.

Speaker Change: The work that my team is doing to get us there.

James Derek Gray: But I think as we look forward, you'll see that, you know, the texturing helpful solutions are going to have gross margins in the high 20s as well as, you know, there are product lines in there that are well into the 30s. And so, those higher gross margins are reflective of, you know, the customer value in terms of the price per ton paid. And then also, you know, as we've spoken about at Cagney, as part of our strategy, we look at the texture market globally, which is almost $20 billion.

Speaker Change: I think as we look forward youll see that at the.

Speaker Change: The texture and help those solutions is going to have gross margins in the high <unk> as well as those product lines that are well into the <unk>.

Speaker Change: And so those higher gross margins are reflective of.

Speaker Change: Of the customer value.

Speaker Change: In terms of the price per ton paid and then also as we've spoken at Cagny as part of our strategy, we look at that.

James Derek Gray: <unk> market.

Speaker Change: Globally, almost $21 billion, we think it's growing at least in the end.

James Derek Gray: We think it's growing at least in the mid-single digits, maybe in the low single digits. But we've talked about urbanization. We've talked about the pull for convenience to make the eating occasion and the grocery shopping experience easier.

Speaker Change: Mid single digits, mainly the low single digits, but we've talked about urbanization and we've talked about the pull for convenience to make the the eating occasion in the grocery shopping experience easier.

James Derek Gray: And we really play well with that demand pull. So, you should see a KPI from us either on sales volume or volume itself, but also growth that we think is supporting the texture and helpful solutions. That will be something that's important to us. And then when we look at, I think, our food and industrial ingredients business, while we have, I think, very competitive positions in some of those broader product categories, and we're always going to highlight things like, you know, hey, how do we think the confectionary pull is for glucose syrups?

Speaker Change: And we really play well to that demand pull so you should see our kpis from us either on sales volume our volume itself, but also the growth that we think is supporting in the texture and helpful solutions that will be something thats important to us.

James Derek Gray: And then when we look at.

James Derek Gray: I think our food and industrial ingredients business.

Speaker Change: While we have I think very competitive positions and some of those broader product categories, and we're always going to highlight things like.

Speaker Change: Hey, how do we think the confectionery Paul is for glucose syrups.

James Derek Gray: But look to us to also talk about sustainability because, you know, we have this wonderful feedstock, and we already have all the infrastructure built, and I think that as the world looks to sustainable sources for some chemical inputs that may have been previously petroleum-based, I think there's some opportunities for us to take some, you know, step changes in how we might direct our wet mill output, but in a way that then looks at stabilizing revenue growth and maybe slightly So, Kristen, we're very much focused on volume, on top-line growth, as well as being really clear in terms of the level of profitability within the segment. That'll start with gross margin. Today we're disclosing OI margin ranges, and we'll work through that as we go through the year. I really appreciate the commentary.

Speaker Change: But look to us to also talk about sustainability.

Speaker Change: We have this wonderful.

James Derek Gray: Seedstock and we already have all the infrastructure built in and I think that as the world looks to sustainable.

James Derek Gray: Sources for either some chemical.

Speaker Change: Inputs that may have been previously petroleum based I think there's some opportunities for us to take some.

James Derek Gray: Step change and how we might direct our wet mill output, but in a way that then looks at stabilizing revenue growth and maybe slightly changing the trajectory of revenue growth. So so kristin will be we're very much focused on volume on topline growth as well as we want to be really clear in terms of the level of.

James Derek Gray: Stability within the segments that will start with gross margin today, we are disclosing Oi margin ranges and we'll work through that as we go through the years.

Speaker Change: Really appreciate the commentary I'll leave it there.

Kristen Owen: I'll leave it there. Our next question comes from the line of Ben Theurer with Barclays. Good morning, Jim and Jim, and thanks as well for taking my question. Not much left.

Speaker Change: Our next question comes from the line of Ben Theurer with Barclays.

Benjamin M. Theurer: Hi, Good morning, Jim and Jim and Thanks, as well taking my question not much left.

Benjamin M. Theurer: There's a lot to be asked, but I just wanted to follow up a little bit on the volume in the different regions. And one of the things that I wanted to understand a little bit better is that you just called out Mexico being very strong. And I mean, obviously, some of the food and beverage companies reporting very decent volume performance in the region. We also had Brazil results coming through from some very strong corporates.

Benjamin M. Theurer: A lot's been asked but just wanted to follow up a little bit on the volume in the different regions and one of the things.

Benjamin M. Theurer: Then I wanted to understand a little bit better you just called out Mexico being very strong and we've seen obviously some of the food and beverage companies reporting very.

Benjamin M. Theurer: Very decent volume performance in the region.

Benjamin M. Theurer: We also had Brazil results coming through from some corporate is very strong.

Benjamin M. Theurer: It kind of doesn't align with that minus 3% volume you had. I just wanted to understand how much of that is still that destocking overhang, that negative impact, and what you're seeing sequentially with your customers in Latin America as to the engagement to buy a product again from you. Yeah, Ben, thanks for the question.

Ben: Kind of doesn't align with that minus 3% volume you had I just wanted to understand how much of that is still that destocking overhang that negative impact and what you're seeing sequentially with your customers in Latin America as to the engagement to buy product again from you guys.

Benjamin M. Theurer: So literally, we had a significant customer in Columbia, we have an exclusive arrangement with them, they had some budget slash demand management, and the volume is such that it's a contractual obligation for them to take the volume throughout the full year. The customer absolutely needs the volume, and there's every intention for them to take it. And it was just a, you know, kind of an unexpected, kind of an unexpected way they load their channel.

Speaker Change: Yes, Ben Thanks for the question none.

Speaker Change: So literally we had a significant customer.

Speaker Change: In Colombia, we have an exclusive arrangement with them. They had some budget slash demand management the volume is such that.

Speaker Change: It's on a contractual obligation for them to take the volume.

Speaker Change: The full year they are the customer absolutely needs. The volume there is every intention for them to take it.

Benjamin M. Theurer: And we've seen it in the past in prior years, but never have we seen in the entire quarter that this unique customer did not pull any volume, but there is a contractual obligation, and they have historically always met their full year calendar year obligation.

Speaker Change: And it was just.

Speaker Change: Kind of an unexpected kind of unexpected kind of how they lowered their channel.

Benjamin M. Theurer: And we've seen it in the past in prior years, but never have seen in the entire quarter that this unique customer did not pull any volume, but there is a contractual obligation and they have historically always met their full year calendar year obligation, but if not for that Jim.

Speaker Change: In Latam that was all of the 3% decline sales volume would have been just slightly down yes, yes. So that's a very good it's a very astute observation on your part to pick that out and there is a unique explanation for it yes, okay fantastic very good and then as it relates to like your expectations and what's ultimately being reported.

Speaker Change: And texture and help with solutions that flat volume was that like.

Benjamin M. Theurer: Within the expectation range that you had for the quarter or were you expecting maybe that already to be a little bit better in <unk>, but then just got impacted by some of these <unk>.

Speaker Change: At worst situations that happened during the quarter weather related.

James Derek Gray: But if not for that, Jim, last time, that was all of the 3% decline; sales volume would have been just slightly down. Yeah, yeah. So that's, it's a very good, it's a very astute observation on your part to pick that out, and there's a unique explanation for it.

Speaker Change: Yes, let me take a shot at it a little bit and then let Jim add some color commentary. So first of all a texture and helpful solutions to remind you.

James Derek Gray: Yeah. Yeah, let me take a shot at it for a little bit and then let Jim add some color commentary. So first of all, on texture and healthful solutions, to remind you, the performance of what is now the newly defined segment was really exceptionally strong in quarter one of 2023. And that was because we were able to achieve some really, very strong exceptional pricing and reaction to double-digit inflation at the time for specialty corn types and the run-up in natural gas prices that were happening in Europe.

Speaker Change: The performance of what is now the newly defined segment was really exceptionally strong in quarter one of 2023.

James Derek Gray: And that was because.

Jim: We were able to achieve some really very strong exceptional pricing in reaction to double digit inflation at the time for specialty corn types and the run up in natural gas prices that were happening in Europe.

James Derek Gray: And as these, I will call them extraordinary costs, moderated as we entered 2024, there was just a natural reset to pricing levels that was necessary. In addition to the pricing impact, margins in quarter one were compressed due to the higher value of 2023 inventory, which carried over into the new year. As we move through 2024, however, newer inventory will reflect the lower cost of specialty corn and lower fixed costs as these items normalize.

Jim: And as these I will call them extraordinary costs moderated as we entered 2024, there was just a natural reset to pricing levels that was that was necessary.

Jim: In addition to the pricing impact margins in quarter, one were compressed due to the higher value of 2023 inventory, which carried over into the new year as we move through 2024, however, newer inventory will reflect the lower cost of the specialty corn and lower.

James Derek Gray: Fixed cost as these items normalize.

James Derek Gray: You know, because this is a make to inventory business, it takes two to four months for this segment to typically work through changes in inventory and carrying costs. And the other thing that's just noteworthy is that the segment is absorbing.

Jim: This is a make to inventory business. It takes two to four months typically for this segment to typically work through changes in inventory carrying costs.

James Derek Gray: And the other thing Thats just noteworthy.

Jim: Is this segment is absorbing still some costs from the early stage capacity expansion investments for growth that we made in recent years. For example, we more than doubled our specialty starch capacity in China and expanded capacity for specialty starches in Thailand, and Mexico. So it's a combination of all.

James P. Zallie: Still some costs from the early stage capacity expansion investments for growth that we made in recent years. For example, we more than doubled our specialty starch capacity in China and expanded capacity for specialty starches in Thailand and Mexico. So it's a combination of all of that that hopefully helps put things in perspective, texture, and helpful solutions this quarter. But we really are very bullish, obviously, on the winning aspiration, the strategy, and the health of that position and the assets that we have around the world to support customer growth.

Jim: All of that that hopefully helps put.

Jim: Put in perspective.

James P. Zallie: Extra and helpful solutions this quarter, but we really are very bullish obviously on the winning aspiration of the strategy and the health of that position and the assets that we have around the world to support customer growth.

James P. Zallie: Yeah, I think the heart of your question as well, Ben, is we are seeing that volume, that volume uptake, but it is not nearly as much, you know, look, if you look at the Q1 lap and 23 on a scan basis, you know, volumes, you know, for us, at least for the type of texture products, were down five, 6% unit volumes, you know, and then obviously, we got into Q2 of last year And so I do think that we are seeing that kind of 0% sales volume that we advertise for the segment is pretty good.

James P. Zallie: Okay.

Jim: The heart of your question as well Ben we are seeing that volume that volume uptick it is not new I mean.

Jim: Look if you look at the Q1 lap in 'twenty three.

Jim: On a scan basis volumes U S at least for the type of texture products were down five 6% unit volumes and then obviously, we got into Q2 of last year and unit volumes were then.

Jim: From grocery retail really really stepped down.

Jim: And so I do think that we are seeing that kind of zero percent sales volume that we advertised for the segment.

Jim: Is pretty good and we're feeling pretty solid that we're definitely seeing broad customer takeaway.

James P. Zallie: I'm feeling, you know, pretty solid that we're definitely seeing broad customer takeaway. Perfect. Jim, Jim, thank you very much. Can I just respond to Kristen's question on so Q2 Korea net sales last year were about $80 million. So just to put that one on the record for everybody. Our next question comes from the line of Josh Spector with UBS. Good morning, this is Lucas Beaumont on for Josh.

Speaker Change #102: Perfect Jim Jim Thank you very much.

Jim: Okay can I just want to respond to christine's question on so Q2 Korea net sales last year was about $80 million. So just to put that one on the record for everybody.

Jim: Our next question comes from the line of Josh Spector with UBS.

Lucas Charles Beaumont: Josh Your line is now open.

Joshua David Spector: Hi, Good morning. This is like a standalone answer Josh.

Lucas Charles Beaumont: I just wanted to sort of go back to kind of the re-segmentation. I was curious about sort of why the expectations and margins in the texture health segment are sort of below food and industrial. Is any of that sort of being driven by how you're allocating SG&A or transfer pricing across the business? And would you expect that to kind of diverge over time? And so the texture kind of benefits as you get further scaled in? Lucas, that is kind of dead on.

Joshua David Spector: I just wanted to sort of get back to kind of a restatement session. I was curious about sort of why the expectations on margins and the texture health segment are sort of below 200, and industrial is any of that sort of thing driven by how youre allocating SG&A or transfer crossing across the business and would you expect.

Lucas Charles Beaumont: That's the kind of diverge over time.

Lucas Charles Beaumont: So that takes you to kind of benefits you get.

Joshua David Spector: The scale of it.

James P. Zallie: So, Texture and Healthful Solutions is a global segment, as Jim has alluded to, and it does carry higher gross margins than the other businesses by at least 600 to 800 basis points. And it also gets a higher proportion of SG&A costs. And those are the people capabilities that we need, the technologists, the food scientists, the solution selling, sales capabilities, you know, the marketing insights to be able to really lead with those solutions that our customers are looking for.

Jim: Lucas.

Speaker Change: Is that is kind of dead on.

Speaker Change: So texture and helpful solutions as a as a global segment as Jim has alluded to.

James P. Zallie: And it does carry a higher gross margins than the other businesses by at least six to 800 basis points.

Speaker Change: And it also gets a higher proportion of SG&A costs.

Speaker Change: And those are the people capabilities that we need the technologist the food scientists.

Speaker Change: Solution selling.

Speaker Change: <unk> capabilities, the marketing insights to be able to really lead with those solutions that our customers are looking for.

James P. Zallie: And so, you know, much like, you know, some competitors in Europe that may carry, you know, like a flavor or a fragrance house that may have more SG&A as a percentage of sales in the business to reflect the competencies and the people capabilities that you need to support this type of business, that's the similar, you know, kind of business model and operating expense model that's in our texture and healthful solution. And we do see that as the top line grows, we do expect to get operating expense leverage out of that.

James P. Zallie: And so much like some competitors.

James P. Zallie: In Europe that may carry.

James P. Zallie: A flavor and fragrance house, they may have more SG&A as a percentage of sales in the business to reflect the competencies and the people capabilities that you need to support this type of business.

Speaker Change: Thats the similar.

Speaker Change: <unk>.

Speaker Change: <unk> business model and an operating expense model, that's in our texture and helpful solutions.

Speaker Change: And we do see that as the topline grows we do expect to get operating expense leverage out of that.

James P. Zallie: And also, Jim, the investments that I highlighted as far as the early stage capacity expansions that we've made, we are obviously in the early innings of getting the returns on those investments, which are allocated cost-wise to that business. And then, Lucas, just one note, since I know that the team is a little bit newer, but when we do acquisitions and tuck-in acquisitions, any amortization of intangibles, we keep those So we don't adjust for or call those out.

James P. Zallie: And also Jim.

Speaker Change: Investments that we highlighted as far as the early stage capacity expansion that we've made we are obviously in the early innings of getting the returns on those investments, which are allocated cost wise to that business.

Speaker Change: And then maybe Lucas just one note since I know that the team is a little bit newer but.

Lucas: When we do acquisitions and tuck in acquisitions.

Speaker Change: Amortization of intangibles, we keep those in.

Lucas: So we don't adjust out or call those out and so there is some amortization as well.

James P. Zallie: And so there is some amortization as well against some of the past acquisitions that we've done that now really fall into the texture and healthful solutions segment. Great, thanks. And then, just secondly, I just want to ask you about kind of the pre-cash flow phasing sort of during the year. So typically, sort of 1Q is sort of a use or a minor contribution, but you sort of got 30% of your full year target already in the first quarter.

Lucas: Some of the past acquisitions that we've done that and now really fall into the texture and helpful Solutions segment.

Speaker Change #105: Alright, Thanks, and then just secondly, I just wanted to ask you about kind of the free cash flow rising so during the year.

Lucas: Typically set of wonky as sort of a use or a minor contribution, but you said about 30% of your full year target already in the first quarter.

James P. Zallie: So I mean, you called out sort of working capital as being effective, but if you kind of just walk us through how you sort of see the progression and the moving parts here through the year, that'd be great. Yeah, sure. And I think that one of the things that we called out was that because of the cold weather in January, we really had to pull out of inventory more and sell out of inventory.

James P. Zallie: So I mean, you called out sort of working capital is being effective at it.

James P. Zallie: Kind of just walk us through how you see the progression on the moving parts here through the year that'd be great. Thanks.

James Derek Gray: So I do see that we're kind of building back some of that inventory in Q2, Q3. Where, traditionally, you might have seen Q2, Q3 generating a bit more cash from operations with a smaller investment in working capital. I'm kind of seeing that as just a bit of a timing shift in Q2, Q3. And then I think more broadly for the full year, what we're really watching is kind of the balance between, you know, how raw materials are working through our balance sheet, our working capital, in terms of accounts receivable, as well as accounts payable.

James P. Zallie: Sure.

James Derek Gray: And I think that one of the things that we called out was that big.

Speaker Change #107: Because of the cold weather in January we really had to pull out of inventory.

Speaker Change #107: More than sell out of inventory. So I do see that we're kind of we should be building back some of that inventory in Q2 Q3. So we're traditionally you might have seen Q2 Q3 generating a bit more.

James Derek Gray: Cash from ops with a smaller.

Speaker Change #107: Investment in working capital I'm kind of seeing that just a bit of a timing shift in Q2 Q3.

James Derek Gray: And then and then I think more broadly for the full year, what we're really watching us as kind of the balance between how raw materials are working through.

James Derek Gray: Our balance sheet, our working capital in terms of accounts receivable as well as accounts payable.

James Derek Gray: And so right now traditionally where we've had so I think some nice leverage in accounts payable from different types of financing programs around the globe with short term rates still a bit elevated we may not see some of our suppliers and our farmer partners taken advantage of that so I'm, just a little bit thoughtful about.

Lucas: What are the accounts payable leverage might be year over year.

James Derek Gray: But that's, it's primarily a timing thing, I think, between Q1, Q2, Q3. Right, thank you. Our next question comes from the line of Heather Jones with Heather Jones. Good morning. Good morning, Heather.

Speaker Change: But that's it's primarily a timing thing I think between Q1 Q2 Q3.

Speaker Change #101: Alright, thank you.

Jim Gray: Sure.

James Derek Gray: Our next question comes from the line of Heather Jones with Heather Jones Research.

Heather Lynn Jones: Good morning.

Heather Lynn Jones: Good morning, good morning, Heather.

Heather Lynn Jones: Thanks for taking the question. So I hate to belabor the South Korea question, but I just want to make sure I'm understanding this correctly. So, Jim, you mentioned that South Korea in Q2 of 23 with 80 million, and so the flat to down low single digits, it's off of that base, the 1..99.

Heather Lynn Jones: Thanks for taking the question.

Heather Lynn Jones: So I hate to belabor, the South Korea question, but I just.

Heather Lynn Jones: Wanted to make sure I'm understanding this correctly so.

James Derek Gray: Approximately, yeah. Okay. And then when you talk about OI for Q2 to be uploaded in mid-single digits, is that off of the base excluding Korea? And if it is, what's the adjusted base for that? Correct.

Heather Lynn Jones: Jim You mentioned that South Korea in Q2 of 'twenty, three with $80 million.

James Derek Gray: Revenues and adjusted base.

James Derek Gray: Roughly $1 9 billion and so the flat to down low single digits off of that base or 1.99.

Speaker Change #106: Approximately yes.

James Derek Gray: Okay, and then when you talk about ally for Q2 to be up low to mid single digits is that also the base, excluding Korea and if it is.

Speaker Change #106: The adjusted base that we should be good.

James Derek Gray: Um, so that would be, um, you know, approximately, I would say that that's probably, you know, your career is going to be anywhere between five to $7 million of OI. It kind of depends on each quarter for Korea in terms of kind of where they were at the prior year. So what we can do, we will follow up from that. But, approximately, I think that's about where we're at on an OI basis.

James Derek Gray: Correct.

James Derek Gray: That would be.

James Derek Gray: Approximately I would say, that's probably Korea is going to be anywhere between five to <unk>.

Speaker Change #106: $7 million of Oi, it kind of depends on each quarter for.

Speaker Change #106: For Korea.

Speaker Change #106: In terms of kind of where they were at to the prior year. So what we can do it we can fall off from that but approximately I think that's about where we're at on Oi basis.

James Derek Gray: Okay. And then my second question is going back to the question about the high cost of carry forward inventory and lubricants and understanding the dynamics behind that. But wondering if you could, is that completely worked through going into Q2? Or are there some lingering effects from Q1 on that? Very small amount that will be worked through in quarter two. So for the most part, the higher cost inventories are now through through through the system. Would you say so, Jim?

Speaker Change #106: Okay.

James Derek Gray: And then my second question is going back to the question about the high cost carryforward inventory texture and.

Speaker Change #101: I understand the dynamics behind that but I'm wondering if you could is that completely worked through going into Q2 or is there some lingering effects into Q2 on that business.

Jim: Very small amount that will be worked through in quarter. Two so for the most part the higher cost inventories are by.

James Derek Gray: By now by now through <unk> through the system, you would say so Jim yes, yes.

James P. Zallie: Yeah. Okay, thank you. I know it's late, so I'll save the rest of mine for later.

Speaker Change: Okay. Thank you and I know, it's late so I'll save the rest demand for later. Thank you. So much. Thank you. Thanks Heather.

Heather Lynn Jones: Thank you so much. Thank you. That concludes today's question and answer session. I'd like to turn the call back to James Zallie for his closing remarks. All right. Well, thank you all for joining us this morning. We look forward to seeing many of you at the upcoming BMO conference in New York on May 16th, and I want to thank everyone for your continued interest in Ingredion. This concludes today's conference. Thank you for participating. You may now disconnect.

Heather Lynn Jones: That concludes today's question and answer session I would like to turn the call back to Jim Daly for closing remarks.

Heather Lynn Jones: Yeah.

James P. Zallie: Alright, well. Thank you all for joining us. This morning, we look forward to seeing many of you at the upcoming BMO Conference in New York on May 16th.

Jim Daly: And I want to thank everyone for your continued interest in ingredients.

Heather Lynn Jones: Sure.

Speaker Change #103: This concludes today's conference call. Thank you for participating you may now disconnect.