Q2 2025 Ingredion Inc Earnings Call
Good day, and thank you for sending by welcome to the second quarter, 2025 ingredient on earnings conference. Call at this time, all participants are in a listen-only mode. After the speaker's presentation, we'll open up for questions to ask a question during the session. You will 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 1 1 again.
Please be advised, that today's call is being recorded, I would like to hand it over to your speaker, Noah Weiss, vice president, of investor relations, please go ahead.
Thank you. Good morning and welcome to ingredient on second quarter 2025 earnings call. I'm Noah Weiss, vice president, Professor relations.
Joining me on today's call are Jim's Ali. 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 second quarter results can be found on our website ingredient.com in the investor section.
as a reminder, our comments within the 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 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 on the company's most recently filed annual report on form 10K and subsequent reports on form 10q and 8K. During the 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 us. Gaap measures in Note 2,
Non-gaap information included in our press release. And in today's presentation, appendix with that, I will turn the call over to Jim's alley.
Thank you. Noah and good morning everyone.
For the second quarter, ingredient on delivered. Another period of strong performance with adjusted operating income of 273 million, our highest quarter 2 in company history.
While net sales declined by 2% primarily reflecting the past through of lower corn costs. Adjusted operating income increased by 1% for the quarter and 12% for the first half of 2025.
Our performance. This quarter was led.
2%, net sales increase and an extraordinary 29% rise in operating income.
Topline growth was supported by a 3%. Increase in net sales volume with clean label Solutions, seeing significant growth in the quarter.
Segment margin expanded by 400 basis points driven by increased utilization and improved fixed cost absorption.
Our costs were further reduced by improvements in production efficiency and integrated raw material procurement.
Both of our food and industrial ingredients businesses faced modest challenges in the quarter.
Our food and Industrial ingredients, latam results were impacted by the Argentina joint venture. Lapping a strong quarter last year.
Apart from the joint venture results. This segment delivered a solid second quarter performance, as it continued to manage customer and product demand toward a more favorable mix.
In the food and Industrial ingredients US Canada segment. Our results were negatively impacted by a mechanical fire that briefly shut down our largest plant in Chicago on June 22nd.
Operations resumed before the end of the quarter and we are working to recoup some of the loss impacts throughout the second half of the year.
Turning to a summary of our, net sales volume for the quarter.
Starting with texture and helpful Solutions.
Sales volume increased by 3% with growth across US, Canada and asia-pacific.
The majority of our priority food categories within this segment demonstrate a growth.
With beverages, bakery, and dairy showing the strongest performance.
Additionally demand for clean label Solutions. Increased. During the quarter with us, Canada leading, with double-digit growth.
Furthermore, our us team has done a fantastic job.
growing customized formulations which are bespoke solutions for specific customers, consisting of 2 or more specialty ingredients,
Net sales volumes in food and Industrial ingredients, latam declined 4%. This quarter, primarily due to reduced Brewing volumes in Brazil and Mexico, as well as macroeconomic impacts across, latam notably slower economic growth impacted by higher interest rates,
Our food and Industrial ingredients us can segment, so a lower sales volumes.
In comparison to a strong quarter last year.
Industrial start sales in particular were lower as corrugated box. Demand weakened in response to customers adjusting production schedules. Amidst tariff, uncertainties,
In addition, the mechanical issues at our Chicago plant reduced available co-products supply.
In response to the growing Trend and media coverage toward health and wellness. I am pleased to note.
That we saw double-digit growth from our clean label Solutions in the US and sugar reduction portfolio globally, as well as high double-digit growth from protein isolates.
We are optimistic that this trend will endure.
As our ingredients represent differentiated value, propositions for customers, that are actively reformulating towards healthier products.
for example, our clean label, native starches are leveraging, proprietary, plant science,
To deliver low temperature stability.
For refrigerated and Frozen applications.
We are also benefiting from the requirements. Customers have to optimize the texture and affordability of the recipes as they replace volatile, ingredients such as cocoa and eggs or reformulate entirely for a healthier profile.
These opportunities leverage our comprehensive portfolio of specialty, starches and hidrocoloide, high intensity, natural sweeteners, natural fibers, and protein isolates.
Ingredients solutions selling and go-to-market position is enabling us to access more small and medium-sized customers and insurgent brands that are driving disruptive category growth.
Simply put.
Fueling long-term growth opportunities as consumers, increasingly expect product, authenticity and healthier profiles, which tastes better.
Turning to the next slide, we are pleased to report that gross margins have once again expanded sequentially, establishing a higher level of profitability coming off a record year in 2024.
This higher level of profitability is being sustained through a sharper commercial, Focus brought about by our new segment structure, as well as disciplined operational execution and enhanced risk management.
Let Me Now update you on progress against our 3, strategic pillars.
Beginning with business growth.
Texture and healthful solutions, delivered, robust performance with strong sales, volume growth and expanded expanding operating income margins.
The food and Industrial ingredients, letm segment is positioning itself for long-term growth by diversifying, its customer base Beyond brewing and beverages.
Lastly in the food and Industrial ingredient US. Canada segment. We are supporting the long-term growth of industrial starches through the expansion of our Cedar Rapids plant, which is progressing. Well,
Moving to the second strategic filler cost, competitiveness through operational excellence.
We now expect to exceed our 50 million dollar run rate savings, Target by the end of 2025 for our cost of compete program.
We have identified additional opportunities in sgna and cost of goods, sold savings that are exceeding initial projections.
Furthermore, we continue to improve our customers experience through better service, reliability, and responsiveness. In the second quarter, we saw measurable gains in. Key performance indicators such as perfect order delivery and our net promoter score reflecting, the commercial Excellence benefits of our investments in digital transformation.
We are also exceeding our procurement savings targets through integrated sourcing strategies and by cross-functional collaboration enabled by our Global operating model.
Also, a quick reference to tariffs. We experienced minimal direct impact during the quarter and in the first half of the year. And as a reminder, the majority of our products are manufactured locally and sold locally.
Moving to our last pillar are people Centric performance-based growth culture?
This quarter. We released our 15th sustainability report.
Create the future with people who care, which highlights the meaningful progress, we've made across our environmental, social, and governance priorities.
The report.
Reflects our deep commitment to building a more sustainable future through Innovation, partnership and care for the communities, in which we serve.
as a leader of our commitment, as evidence of our commitment in May Forbes recognized us as a net-zero leader,
Listing the company among the top, 200, Global organizations, most effectively, advancing efforts to reduce greenhouse gas emissions.
As we celebrate ingredient Mexico's, 100th anniversary this year. We are proud of the powerful standard for excellence that are Mexican business continues to set.
Recently ingredient on Mexico was named 1 of the 500 most important companies in the country by expansion magazine. While also earning a notable rating of 90 out of 100 in the icy 500. Corporate Integrity index.
Given the significance of our Mexican business. We are proud of how this team continues to lead with purpose and integrity.
Now, I am pleased to hand it off to Jim Gray for the financial review. Jim
Thank you, Jim and good morning, everyone.
Moving to our income statement, net sales for the second quarter or 1.8 billion dollars down 2% versus prior year.
Gross profit dollars, grew 7% with growth. Gross margin up 230 basis points to 26%.
A level which demonstrates the consistent effort from our teams to manage customer and price. Mix.
Reduce cost, input volatility and deliver, operational excellence.
3 million respectively.
With adjusted operating income up 1% versus the prior year.
Turning to our Q2, net sales Bridge.
The 2% decrease was driven by 27 million in lower price mix.
15 million in lower volume and 3 million of Foreign Exchange impact.
Turning to the next slide. We highlight net sales, drivers for the second quarter.
Texture and health post Solutions. Net sales were up to 2%.
Driven by sales volume growth of 3% and foreign exchange favorability of 3%, partially offset by Price. Mix.
Food and Industrial ingredients, latam net sales declined by 5%.
Reflecting both a reduction in net sales volumes partly due to slower macroeconomic growth.
And the impact of significant foreign exchange weakness.
Food and Industrial ingredients us can net sales, fell 6%.
Sales volume decline was impacted by the brief disruption to operations at our Chicago plant.
As well as softness and Industrial starch volume demand.
Now, let's turn to a summary of the second quarter results by segment.
For second quarter, 2025 texture and healthful solutions. Operating income was up 29%.
Which equated to an 18.5% operating income margin.
Significantly higher than prior year.
This result has been driven by increased Topline volume.
Lower raw material and input costs.
And improved production, efficiency.
In food and Industrial and gradients latam, net sales were down 5% versus last year and down, 3% on a constant currency basis.
Operating income decline modestly to 127 million, representing 2% decrease compared to last year's strong results.
This quarter's results were negatively impacted by the Argentino. Peso exchange rate and corresponding impact to our joint venture results.
Excluding the joint venture results. Segment, operating income increased due to favorable raw material costs that were partially offset by lower volumes.
Moving to food and Industrial ingredients us can.
Second quarter, net sales were down 6%.
Operating income was 86 million down 18%, driven materially by disruptions to our operations at our Chicago plan.
We estimate that this disruption has had a 10th to the quarter.
Operations have resumed.
And we expect to recover some of the impact throughout the second half as we rebuild inventory.
For the all other group.
The 10% increase in that sales was driven primarily by double digits Topline growth.
From our protein fortification and sugar reduction businesses.
Turning to our earnings bridge. On the top half, you can see the reconciliation from reported to adjusted earnings per share.
Operationally, we saw an increase of 4 cents per share for the quarter.
The increase was driven by an operating margin. Increase of 22 cents.
Partially offset by volume of -6 cents and other income of -3 cents per share.
Moving to the change in non-operational items. We had a decrease of 4 cents per share.
Driven by a higher tax rate equivalent of -7 cents per share and slightly higher. Financing costs of -2 cents per share.
Partially offset by fewer shares outstanding impact of 5 cents per share.
Shifting to our year-to-date income statement. Highlights net sales for the first 6 months where approximately 3.6 billion dollars down. 3% versus prior year.
Gross profit dollars, increase by 9% and gross margin roads to 25.9% up 290 basis points versus the same period last year.
Reported and adjusted operating income was 547 and 546 million and increase of 21% and 12% respectively.
Turning to our year-to-date earnings Bridge.
The result is an increase of 88 cents per share.
Operationally. We saw an increase of 60 cents, 666 cents per share for the first 6 months.
The increase was driven by an operating margin. Increase of 82 cents, partially offset by volume of minus 26 Cents.
Increase of 22 cents per share.
Primarily driven by lower financing costs of 9 cents as well as fewer shares outstanding of 11 cents, per share.
Moving to cash flow.
In the first half, cash generated from operations, was 262 million driven by higher net income.
Partially offset by working capital investment.
in the first half of 2025, we have sold less of our accounts receivables, due to the impact of higher short-term interest rates across Latin
First, half, Capital expenditures, net of disposals or 193 million.
The company intends to continue to invest in organic growth initiatives, that provide a significantly higher return than our cost of capital.
Lastly, we have repurchased 55 million.
Of our outstanding 555 million shares, we have paid out $106 million in dividends.
We are committed to exceeding our $100 million share repurchase target for 2025.
Now, let me turn to our updated outlook for the year.
For the full year of 2025, we anticipate net sales to be flat to slightly up.
Our Outlook reflects lower price Nets due to the pass through of lower corn costs.
And a contemporary view of the effects of foreign exchange.
We continue to anticipate that adjusted operating income will be up mid single digits for the full year.
Corporate expenses have been adjusted slightly from mid single digits to up high single digits.
Driven by higher anticipated, it Investments and project related costs.
To advance our digital infrastructure.
given our strong first half performance, we have improved our full year, adjusted EPS range,
To be $11.10 to $11.60.
We Now anticipate capital investment for the year between 400 to 425 million.
Please note that this guidance, reflects only current tariff levels in effect as of the end of July.
In addition, this guidance excludes any acquisition-related integration and restructuring costs, as well as any potential impairment costs.
Turning to our full year outlook for each segment.
We have made a few adjustments.
For texture and helpful Solutions.
We have now raised our estimate for operating income profit growth to be up low double digits.
For F&I, latam we have lowered our net sales Outlook to be flat to down.
Low single digits.
Our operating income Outlook is now up low single digits, due to the combination of weaker macro and economic businesses, environment, and weaker foreign exchange, which we anticipate for the second half of 2025.
For f and II, US Canada.
We have now lowered our outlook for Auburn and income to be down low single digits.
Based upon the second quarter's disruption to operations.
for the third quarter, 2025,
We expect net sales to be flat to up low single digits for the company.
And operating income to be flat to download single digits as we are again, lapping a very strong third quarter from last year.
That concludes my comments and let me turn it back to Jim.
Thank you, Jim.
Following our strong first half performance, we feel good about the momentum. We are carrying forward into the second half our texture and healthful solutions, business is delivering, strong sales, volume growth fueled by deepening customer engagements and a robust Innovation pipeline. We expect this momentum to continue as we co-create solutions for our customers who are actively reformulating in response to consumer health and wellness trends.
Given our leading Market position in latam, we have the experience to navigate short-term macroeconomic headwinds.
And our focus in food and Industrial ingredients US Canada. For the second half is to maximize production in order to meet customer demand and rebuild inventories.
We?
We are guided by our aspiration to be the go-to provider for texture and healthful solutions that make healthy taste better, and we are committed to delivering long-term shareholder value.
Let’s open the call for questions, operator.
To withdraw your question. Please press star 1 1 again.
Please stand by. We can power the Q&A roster. 1 moment for our first question.
Our first question will come to line of Christian Owen from Oppenheimer. Your line is open.
Hi, good morning, thank you for taking my question. Um, maybe starting with a little bit of a simplistic question here, but, um, you know, you're you're tracking well ahead of, um, where you've guided each quarter, you know, q1 you beat by 50 Cents, Q2, call it another 5 to 8 cents. Um, but you've looked at the guys, maybe 20 cents since we started the year. Um, so 1, 1 might ask if your guy is still too conservative at this point, maybe help us unpack some of the offsets here and provide a bit of color around the scenarios for the upper and lower ends of the EPS range at this point.
Sure. Can I start with that? Sure, thanks Kristen for the question. And I think um, I think it's a very fair question.
You, you know, throughout this year, I mean even starting uh you know in early February, as we were finishing up our our Q4 and full year of 2024 call.
You know, 2 days before our earnings call, we had an announcement around, you know, tariffs that might impact US and Canada. You, you roll through, q1 and and, and Q2, and you still have um tariffs. Some of them have been paused, some of them have been pushed out 90 days, you know, our our US government is getting to negotiations.
Specific countries.
And it's not so much that we have already.
Persecuted, all of our analysis, kind of, for all of our country pairs, and we've spoken to that risk. Jim highlighted it here that the first half, you know, tariff impacts, have been, you know, very minimal.
It's that some of our customers are also facing uncertainties and as they either feel like their demands are shifting or they're looking at potentially higher costs. They're thinking about what are the levers that they pull in order to to, to drive their revenue and drive their profit expectations. So, I think we're just, um, we're cautiously optimistic um,
We do see that, I think, within our U.S. and Canada business, um, that we still think there's pretty strong underlying volume.
You know, Jim Jim knows. And you know, that if if Argo runs, well, for that division, um, we have an ability to really advertise, a lot of the fixed costs. Some of which we absorbed in Q2. So, I think that's a Tailwind for us. Yeah, I think I would just compliment what Jim is saying, in relationship to a lot of the noise that's out in the
in the world right now in relationship to
perhaps indirect impact to Consumers.
That we just.
I don't have a view on yet, because
The full implementation and settling of the tariffs that are getting implemented gets implemented. So it's prudent to be somewhat.
Cautious in relationship to, you know, the outlook for the second half. Now that being said,
what I'd like to do is just put in perspective if I could
Quarter 3, because we have guided flat to down.
In operating income growth for quarter 3. So but I want to just put this in perspective, it's important to remember. We are lapping the highest quarter 3 operating income
That we've ever had and the second best quarter in the company's history for Q3.
We see right now some macroeconomic headwinds in Latin America, particularly in Brazil and Mexico, and a couple of our very large customers have spoken about that as well, impacting their business. um, we're also expecting though,
Topline growth in we're also not expecting. I should say, Topline growth in food and Industrial ingredients in quarter 3. Now with that said,
The momentum that's behind texture and helpful Solutions is anticipated to be an offset.
And could be better than our forecasts.
And lastly,
if the Argo facility runs very well,
We can make up a lot of ground to offset some of the negative impacts we endured in Q2, and we've seen that in the past.
Hopefully, that just provides a little bit of a window into how we're.
Viewing. The backdrop of
Uh, the second half and specifically quarter 3. That's right in front of us.
And which is on the, The Leverage, the operating leverage in texture and helpful Solutions. I mean, uh, the the nearly 30% growth in in operating income on 2% volume. Um, just can you help us understand what what's driving some of that. How much of that is um, operational execution, how much of that is just running the plants at at higher utilization. And then, I guess I'm, I am still a bit surprised by the negative price mix in that category. So just help us unpack some of those, um, some of those mechanics, what's driving The Leverage there and then, um, you know, do we at some point get to uh a positive price, mix impact there to get that incremental, leverage, thank you.
Jim and I will tag team on this 1. Again, I'll let you go first. Okay, so the 1 thing, I I want to just really highlight is that as you expand the portfolio and texture and healthful solutions and we add things like Hydro colloids and we're selling natural fibers. And we're looking at other raw material inputs. These are smaller inputs in our business and sometimes they can have more variability. We recognize this about 2 years ago and I have to say our supply chain and our procurement teams really stepped up and met the, the segment, you know, leadership team where they're at. And we've done a better job just building in capabilities using demand forecasting, how we look at procurement and really matching um, some of that raw material.
IAL risk that we might take in gums with what we see is demand and, and the, and the subsequent pricing. So, I feel like what we wanted to highlight was that, that really showed up as a benefit a unique benefit, a step change benefit in our Q2 texture and healthful results. And and so we did, you know, highlight this as extraordinary because I think that step up is permanent as we go forward.
More to your question though is is that as we see strong volume in texture and healthful and we are selling at higher price points per time, we are going to see that kind of high single digit low, double digit type of op income growth that might be recurring and then just the last piece just to note on the price mix. We did have um, lower tapioca costs in Thailand and that impacts not only all of our uh more functional starches, but we also have um, you know, just some some remaining syrup and Industrial business that also had nice volume pull through uh and we're seeing that through 2025 it just sells at a lower price per ton and so it's just impacting the way it averaged a little bit. We're really quite pleased with where tapioca costs are. It's enabling us to really drive a lot of volume growth uh not just through Asia pack, but you know, kind of throughout our portfolio and and North America and
In Europe.
Yeah, and just to complement, what James said? I think that that point that he's making in regards to actually it was a little bit of a slight decrease in corn cost, as well as tapioca costs, it's not, uh, in a chain, not a change in anticipated volume. And that's kind of flowing through the sales forecast, impacting average selling price.
This year, as we entered into contracting in comparison to last year,
We?
Had to moderate some of our pricing a bit.
but,
The.
uh, the pricing lever is
no longer having to be adjusted.
coming off of, you know, 2024 where there needed to be an adjustment very little in 2025, and it's kind of working its way out of the system and normalizing and if anything
we're probably looking at prices probably lifting as we head into next calendar year so that might explain some of it. We do expect
Some of the, uh, Innovation that's coming through with customized formulations.
To be at higher margins and over time, lift the margins.
For texture and healthful solutions.
Thank you very much. I'll turn it over.
Thank you.
Uh, the full year. Uh, so we would need to see some high single digits in the second half. So, I just want to understand: Where do you think this is coming from? Like, between volume, price, mix, and FX? What are your assumptions for the texture and health of solutions piece for the second half?
Yeah. And and it's a little bit of of as we're working through the the corn cycle. Um, so the second half for texture and healthful. I think that the price mix will not be a headwind. It'll be you know flattish to possibly even a Tailwind uh or uh yeah tailwind. And then we'll still see kind of the the sales volume carrying through. So we see that we're going to see a little bit of a reverse in terms of that price. Mix we had some pretty low corn costs and and uh uh passing through in the second half of 2024. And so you know just as we look at the top line for texture and healthful um you know that's going to read through. I think the other piece then is just also is that um right now and we highlighted Jim highlighted on the call the kind of the demand for clean label Solutions you know most of these higher functional.
Native starches that we're selling are a higher price points. And we're actually seeing, you know, consumer Wellness Trends and some of just the greater awareness, we have of, you know, what's on the label, uh, is impacting some of our customers, our customers of, for both small and large or leaning in and wanting, uh, reformulations that, um, are usually leading to kind of higher price per ton users better.
Better Mix upgrades for us. I think that'll positively uh, continue to impact texture and helpful. Not just in the second half, but even into 26.
Okay, got it and then food industrial latam. Um, well, we've seen obviously a little bit of the, a weakness and some of the consumer companies that buy your products, right? I mean, we've seen this, um, on the beer side, we've seen it on, on the soft drink side. There was a lot of AdWords uh volume performance throughout the second quarter and I mean at least looking at some of the fundamentals in certain areas, it it doesn't look too good yet. Just for the third quarter, maybe fourth quarter is going to be a little bit better. So you've lowered the guidance for uh the food and Industrial piece last time. But as you as you look into your order book as you look into like what what these companies are ordering from you are you seeing sequent? Are you seeing signs of sequential improvement from them? Or is it still just very weak and uncertain just given the the macroeconomic uncertainty that is out there, both markets. Be it Mexico or Brazil, as as obviously, but 2 key regions Within
your portfolio.
yeah, I think it's interesting to point out that
You know, some of the large customers that obviously um, reported results with large presence in Brazil and Mexico.
You know, described.
You know, their results or the weaker results as somewhat idiosyncratic. Um, and actually highlight it abnormal weather, for example, in, in Brazil, you know, in relationship to impact on brewing, for example, uh, and even in Mexico to, to a degree. But when we look at
Let's take the Brazilian economy. You know, it is currently experiencing relatively High inflation at 5%.
Um with uh an Outlook of 4%, inflation for 26. Uh, GDP growth is expected to be soft.
uh, to a maximum of, uh,
You know, 2% uh the local currency has depreciated by 9%. Um and interest rates are currently near 15%.
Um, and then there's the uncertainty of the tariff situation with Brazil. Really, household consumption is being pressured by persistent inflation.
The outlook for the second half, that's the backdrop macroeconomic.
They are going to be entering.
Their summer has typically been more robust from a standpoint of volumes for the products that we sell into brewing, and we view that positively. Um, the Mexican economy has also slowed, with GDP now anticipated to be flat to down slightly.
Um and interest rates are above 7% and inflation is projected to be 4%, you know, for this current year 2025. Um, but all that being said, you know, our Market position, uh, as well as the experienced management team, we have in Mexico, we're confident that given that, um, that we'll quickly see the benefits When customers, uh, and consumers, when economic conditions, uh, and consumer sentiment improves. So,
Both of those economies are.
Also, we believe some of the volume impacts that we saw is accurately being portrayed by what our customers are saying. In relationship to whether related abnormalities in the last quarter, quarter 2, and that should
Not uh, you know, repeat itself in the second half. So we're kind of taking a tempered view towards latam, I guess. Guess I would say. Now that all being said, we actually delivered, I think if you look at the results apart from the Argentina JV, a very solid performance in quarter 2. Yeah, maybe just the, just the on color, I always point out to some Mexico business is, is much larger and goes across many more categories. Um, and so, you know, been, you know, directly to your question. Right there are the agility of our team in Mexico, given its broad customer base and and kind of How High we run on utilization. We're always always looking like okay well where can we
You know, improve the mix and and which customers can we serve? Um, and then finally I just highlight that, you know, when we when we created this latam segment
We always thought that there were synergies, um, across, you know, how we operate and how we Supply product. Um, and I think the team continues to work on that. Um, so I do think that there's a little bit more of a Tailwind uh, behind latam, you know, as we continue to look at where we manufacture, what's our manufacturing cost?
Boston, you know how can we be, you know, just further optimizing that
Okay, perfect. Thank you very much. Jim and Jim, I'll pass it on. Thanks. Ben.
Thank you. One moment for our next question.
Our next question will come from line of Ben Mayhew from BMO Capital markets. Your line is open.
Hey, good morning, guys. Um, first off, hey, what's up? Curious to get your thoughts on the recent news.
Pertaining to the use of cane sugar versus high fructose corn syrup.
So what do you think is the most likely outcome as far as as you can see? And do you have any other products that could help offset any potential near-term, shift of corn syrup business, for example, in your texture and helpful Solutions portfolio.
Yeah, thanks for the question. Uh, we don't believe that we will have any noticeable impact on HFCS demand. Uh, we were very pleased with SEO's statement in support of high fructose corn syrup regarding its safety, its availability, and its affordability.
Um, the reason I guess for our belief is that the impact will not be material. Is that Coke has announced.
That the new product uh will not be replacing the existing recipe, but rather be a complement to their core portfolio.
Uh, the company said that this product will feature us cane sugar in glass bottles, thus targeting, you know, premium channels and different occasions.
um, because
You know, coaxes and incremental growth opportunity?
As opposed to any cannibalization, we do not see this is having a noticeable impact on HF demand. Um, it's also noteworthy, you know, for us, uh, hfcs used in beverage Manufacturing.
In the US represents approximately 4% of ingredients total sales.
To put it in perspective.
And, um, we don't really believe this is going to have a noticeable impact.
We're always working with our customers that answer to your second part of your question.
On sugar reduction, which we highlighted that. This
Last quarter are sugar reduction portfolio of sales.
Increased double digits.
And when we replace sugar with our high-intensity natural Stevia Solutions, we're always working to what we call build back mouthfeel, build back texture.
And build back that functionality. And so, we do have products in our product line that do add.
Mouthfeel properties that typically are replaced when sugar—whether it be...
High fructose corn syrup or liquid sugar is replaced. So, we're continuously working with customers, uh, to balance the, uh, texture. Wind sugar is replaced. So we'll benefit from that. And we are, uh, and we we did this past quarter as well, uh, in quarter 2,
Very clear. Um, and just, uh, 1 follow question. Um, is there any update on the status of the, um, potential sale of the Pakistan asset?
Um hey Ben, this is Jim Gray, you know? We're in process. I would say that uh we've been um
You know, working uh, right now with kind of 3, 3 companies that have interest in acquiring uh a majority Equity stake, uh, of the rough on maze business and so, uh, more news to come. But, um, you know, it's it's, uh, progressing. Kind of as expected on a normal, uh, type of process like this.
Great, thank you very much. I'll pass it on.
Thank you. 1 moment for our next question.
Our next question will come from the line of Puran Sharma from Stevens. Your line is open.
Um, thanks for the, thanks for the question. And uh, congrats on the, on the quarter. I um, I just wanted to maybe further, uh, a ask a, ask a, you know, follow-up on on Ben's question on, uh, the the texture and healthful solutions.
Kind of the the second half Outlook, uh, appreciate the color on on kind of the, uh, the tidbits on on getting the Topline correct. But just want to focus on the, on the, on the operating income piece. Um, and, um, a I I noticed you had, you know, really strong margins, you called out some strength and, you know, clean labeling and and some are other areas the portfolio and the prepared comments. But um, I'm just trying to work through the math here and uh, wanted to ask if, if you expect uh margins to kind of trend back down to a more normalized level, or um, how do you expect about how do you feel about the, you know, sustaining the 18 18.5%, operating margin? Uh, you know, going forward?
Yeah. Hey, Tim sure. Sure, sure. I I do see right now, I think we are being just, uh, maybe a little bit cautious on the second half with regard to, um, where we're potentially moving product and, and uh, you know, some of the costs of sourcing. Uh, so I still think that the operating income margins are going to be in that kind of High Teens. Um, but they may, they may pull back a little bit from Q2 Q2 we had, uh, you know, again, as I highlighted the, the kind of the step change in our raw material procurement. Um, but if we don't have
Some of those costs that we might be kind of planning for due to the impacts of the tariffs and how we're moving products, you know, from Asia to the U.S. or to Europe, then, I think we have a bit of an upside to, you know, how we forecast. I don't see margins, Jim.
decreasing back to the levels of
20204. Oh yeah. No. And to make it very clear, right? And I think
Uh, the level that we're at, is, is going to now, uh, remain within a fairly narrow range of maybe plus or minus a half a percent, uh, to 1% Perhaps, Perhaps 1%, uh, plus or minus from where we're, we're at currently, and the benefits again on the raw material. Procurement that. We talked about the fixed cost, absorption of the plants, the plants in texture and healthful solutions, actually ran very well. And we anticipate that will continue the clean label Solutions, uh, will lead to a higher mix along with the customized formulations a higher mix. Um, so
We believe that the step-up that we've seen will, uh, continue to operate within a range, you know, maybe plus or minus 1% of, maybe where we're at today, uh, going forward.
And then going forward over time, of course, uh, as part of a longer-term Outlook, we anticipate uh, mixed to continue to improve based on the Investments. We're making in R&D and Innovation. And over time, the uh, the margins will, uh, will increase
Great, great. I appreciate that color there. And, um,
And, um, obviously, I think you'd see a resolution when there's some sort of conclusion to this, uh, tariff dynamic. But, I would love to hear your thoughts on, um, you know, what others are saying about a potential resolution here.
For industrial. Yeah. So I I I think it's important. Uh first of all to put maybe the segment and I'm going to talk about the segment of food and Industrial ingredients US Canada. Because that's the segment that has the largest
um, aspect of industrial starts that
Goes into uh box manufacturing corrugating box manufacturing as well as paper making um just to put the segments performance in quarter 2 into prospective. First of all and I'll answer specifically your question regarding industrial. You know, it's worth remembering that quarter to 2024 for that segment was a very strong quarter and this past quarter of the 19 million decline approximately 10 million again, can be considered a 1-off related to the challenges that our Agro facility.
The remaining shortfall was due to weaker beverage volumes and softer industrial start sales for the corrugated box market.
and,
Again.
if it's worth noting that if you exclude it to 10,000, 1-off impact of Agro, the business is still operating at greater than an 18%, operating income margin
Now, for the second half, we're anticipating stronger industrial start sales.
based on what we've heard from our packaging customers, some of them
which have seen some reduced, uh, demand outlook for box shipments.
Rebalanced some inventories for industrial starch in quarter 2.
From what they are telling us and what they have said publicly, we anticipate.
Uh, box shipments are expected to increase. Now, that all being said, that's against the backdrop of uncertainty regarding the impacts of tariffs, not all of which are still settled and clear.
Um,
And so that's kind of how we're looking at, you know, the industrial star market. We have a great market position, and long term, we feel very optimistic about.
Our position as a leading supplier of Highly functional strength additives.
And coding additives for.
Packaging and paper making?
And that reinforced been reinforced by the investment, we're making in Cedar Rapids right now that will actually give us growth opportunities as that market, uh, recovers. Which again, listening to our customers. What they're saying is the second half. Uh, they're anticipating volumes to pick up,
Appreciate the color.
Thank you, pan.
Thank you. 1 moment for our next question.
Next question will come from line of James cannon from UBS. Your line is open
Hey guys, thanks for taking my question.
Sure. Thanks. James. I just wanted to poke I just wanted to poke on the, uh, Argentina piece. It seems like that. That's been pretty volatile this year with uh a lot of FX movements particularly just can you help level set what your expectations within the West Ham guidance are for uh, for that business.
Um,
Well, we don't necessarily disclose kind of what we think the the our share of the net income from the arcore JV will be going forward because obviously you know, they're a public company in Argentina. Um maybe I can just highlight, you know, what's changed a little bit? Um you know, just so at the, at the beginning of 2024
Uh, the new government coming in had decided to say, we're going to try and let the official exchange rate for the peso.
Float a little bit more and float more frequently against, um, what you know, what's considered, what? Let's call it the Blu-ray.
What happened in the beginning of 2024? Given the level of inflation, there was still pricing ahead of that inflation, anticipating that, you know, a weak peso.
In the weaker peso stabilized. Um, and we had a particularly strong Q2 2024 for the joint venture where your pricing was, um, anticipating inflation yet. Inflation started, coming down and the peso started to stabilize.
Tailwind. You had a bit of a more normal sequential performance from q1 of 25.
Um, going into in Winter, uh, which is in Q2 of 25 for for Argentina. And what you've seen, I think is just kind of a a more stabilization of a lower overall inflation rate, a little bit less change in terms of what's required either in terms of corn prices or sugar. Um, and it's led to kind of a probably a what I would consider a more normal expected result from the JV uh, for a winter quarter in Q2 of 25.
Got it. Thank you very much.
Sure, thank you.
Thank you. As a reminder, that’s Star 111 for questions. Star, 1, 1, 1.
Question will come flying over. Heather Jones from Heather Jones, research. Your line is open.
Good morning. Thanks for the question.
Um, hi Heather. I wanted to hi. Hi. Um, I wanted to ask at the risk of the labor in this. Um a question on THS Outlook.
And so I don't know how much is conservatism, but like your guidance for the year. Um,
Even if I assume.
You know, a mid teens, not a low double digit, but a mid teens increase for the year.
That implies just I think it's like 1 or 2% ebit growth in the back half.
and then, um,
And assuming those margins, your year would be close to a 17% margin and your analyst day y'all were talking about reaching 16 to 18% by 28.
so, just wanting to
Is this conservatism and if it is conservatism then it sounds like you're potentially blow past 17% this year and just wondering how we should think about the 26th.
27 and 28 Cadence from here. And just
trying to reconcile all these pieces.
Yeah. I'll I'll let Jim take a shot at that but just a reminder you know we will be updating in only um a number of weeks here uh on September 17th at our investor day the long-term outlook for each of the segments. So
That'll be, uh, updated. So Jim. Do you want to? Yeah. Hey, Heather. I think again. Um,
Pretty confident that I think that the the full year op income margin, you know, as we talked to it in terms of the segment um is going to be, you know, in that, you know, kind of upper teens range. Um, I would say that for the second half I'm still I I want to say I'm overly cautious, I think I'm going to be appropriately looking at. Um, what are the changes in some of my Transportation costs? What changes in my production costs?
If in fact, This Global product segment needs to adjust to tariffs, um, and right now was, was, you know, we got everything, kind of declared last night.
Uh, across the world um, with regard to Imports into the US.
Goes effective, August 7th. And so right now we're just, you know, we've we've run a lot of math, it's a really big model, um but we're just going to be looking at it with a very sober set of eyes.
Um, and so, I think that's prudent. Um, we do anticipate right now some costs against the back half of texture and healthful. I think that's appropriate. Um, and and.
And I think we're going to adapt to this, I think all businesses need, you know, several months to absorb it, get certainty on what is going to be the new ground rules that we're dealing with. And then the teams have a bunch of to go to on and work on, um, to figure out, optimize Supply chains, lower sources of cost, and all of that comes into effect in 26 and 27.
Yeah, and all I would say is that, you know, in relationship to the unknowns around tariffs that we feel for this calendar year, we have a very good handle.
That the net impact of tariffs will be minimal to the U.S. based on everything that we know right now for this calendar year.
What we?
Are having, uh, we're being cautious about is, of course, the uh, indirect impacts. So we're clear on the direct impacts but it's the indirect impacts which is the impacts to our customers and thus
uh,
A reason, I think, for us to be appropriately cautious.
Wondering, I know you don't typically give these details but just wondering qualitatively maybe you could give us a sense of your volume Cadence through the quarterly in.
Toss and, uh, let 'em like the, um,
Did that strengthen us? How did the quarter go along, or how should we think about that? How did you exit the quarter?
Um we you're right. We don't usually talk about kind of month-to-month within a quarter um I would the only maybe the thing I just comment on is its kind of where the placement of Easter was and and how that always affects some of the kind of the spring demand um particularly in the US. Um but other than that, I think again we're still looking at, you know what, we we consider, you know, decent sales, volume growth for texture and healthful for the second half of the year.
Yeah, we're not.
we're not seeing any, um,
Any concerns of anything abruptly changing as we exit Q2 and enter Q3, from a negative perspective?
View standpoint.
Exiting and then entering Q3.
It's very helpful. Thank you. So
thank you.
And with that, this concludes the question-and-answer session. I would like to turn the call back over to Jim Sally for closing remarks.
Thank you, and thank you all for joining us this morning. We look forward to seeing many of you at our upcoming Investor Day on September 17th in New York.
Uh, if you plan to attend in person, we did want to request that you please register for the event.
Uh, we're excited to share a multi-year outlook that builds on the progress we've shared with you today. I look forward to continuing the conversation in New York, and thank you all again for your interest in ingredients.
Thank you for your participation. In today's conference, this does include the program, you may now disconnect everyone have a great day.
Good day, and thank you for sending by welcome to the second quarter, 2025 ingredient on earnings conference. Call at this time, all participants are in a listen-only mode. After the speaker's presentation, we'll open up for questions to ask a question during the session. You will need to press star 11 on your telephone. You then hear an automated message advising. Your hand is raised to withdraw your question. Please press star 1 1 again.
Please be advised, that today's call is being recorded, I would like to hand it over to your speaker, Noah Weiss, vice president, of investor relations, please go ahead.
Thank you. Good morning and welcome to agree down. Second quarter, 2025 earnings call. I'm Noah Weiss, vice president, Professor relations.
Joining me on today's call are Jim's Ali. 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 second quarter results can be found on our website ingredient.com in the investor section.
As a reminder, our comments within the presentation may contain forward link.
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 assumptions. There is 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-K. During the 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 2.
Non-gaap information included in our press release. And in today's presentation, appendix with that, I will turn the call over to Jim Sally.
Thank you. Noah and good morning everyone.
For the second quarter, ingredient on delivered. Another period of strong performance with adjusted operating income of 273 million, our highest quarter 2 in company history.
While net sales declined by 2% primarily reflecting the past through of lower corn costs. Adjusted operating income increased by 1% for the quarter and 12% for the first half of 2025.
Our performance this quarter was led.
By our texture and healthful solution segment, which delivered 2%, net sales, increase, and an extraordinary.
Operating income.
Topline growth was supported by a 3%. Increase in net sales volume with clean label Solutions, seeing significant growth in the quarter.
Segment margin expanded by 400 basis points driven by increased utilization and improved fixed cost absorption.
Our costs were further reduced by improvements in production efficiency and improvements in integrated raw material procurement.
Both of our food and Industrial ingredients businesses faced modest challenges in the quarter, our food and Industrial ingredients. Latam results were impacted by the Argentina joint venture. Lapping a strong quarter last year.
Apart from the joint venture results. This segment delivered a solid second quarter performance, as it continued to manage customer and product demand toward a more favorable mix.
In the food and Industrial ingredients US Canada segment. Our results were negatively impacted by a mechanical fire that briefly shut down our largest plant in Chicago on June 22nd.
Operations resumed before the end of the quarter, and we are working to recoup some of the loss impacts throughout the second half of the year.
Turning to a summary of our, net sales volume for the quarter.
Starting with texture and helpful Solutions.
Sales volume increased by 3% with growth across US, Canada and asia-pacific.
The majority of our priority food categories within this segment, demonstrate a growth with beverages Bakery and dairy showing the strongest performance.
Additionally, demand for clean label solutions increased during the quarter, with the U.S. and Canada leading with double-digit growth.
Furthermore, our us team has done a fantastic job.
growing customized formulations, which are bespoke solutions for specific customers, consisting of two or more specialty ingredients.
Net sales volumes in food and Industrial ingredients, latam declined 4%. This quarter, primarily due to reduced Brewing volumes in Brazil and Mexico, as well as macroeconomic impacts across, latam notably slower economic growth impacted by higher interest rates,
Our food and Industrial ingredients us can segment, so a lower sales volumes.
In comparison to a strong quarter last year.
Industrial start sales in particular were lower as corrugated box. Demand weakened in response to customers adjusting production schedules. Amidst tariff, uncertainties,
In addition, the mechanical issues at our Chicago plant reduced the available co-products of supply.
In response to the growing trend and media coverage toward health and wellness, I am pleased to note.
That we saw double-digit growth from our clean label Solutions in the US and sugar reduction portfolio globally, as well as high double-digit growth from protein isolates.
We are optimistic that this trend will endure.
As our ingredients represent differentiated value propositions for customers that are actively reformulating towards healthier products.
for example, our clean label, native starches are leveraging, proprietary, plant science,
To deliver low temperature stability.
For refrigerated and Frozen applications.
We are also benefiting from the requirements. Customers have to optimize the texture and affordability of their recipes as they replace volatile, ingredients such as cocoa and eggs or reformulate entirely for a healthier profile.
These opportunities leverage our comprehensive portfolio of specialty starches, hydrocolloids, high-intensity natural sweeteners, natural fibers, and protein isolates.
Ingredients Solutions selling and go to market. Position is enabling us to access more small and medium-sized customers and Insurgent brands that are driving disruptive category growth.
Simply put.
And healthier profiles, which taste better?
Turning to the next slide. We are pleased to report that gross margins have once again, expanded sequentially establishing a higher level of profitability. Coming off a record year in 2024
This higher level of profitability is being sustained through a sharper commercial focus brought about by our new segment structure, as well as disciplined operational execution and enhanced risk management.
Let me now update you on progress against our three strategic pillars.
Beginning with business growth.
Texture and healthful solutions, delivered, robust performance with strong sales, volume growth and expanded expanding operating income margins.
The food and Industrial ingredients, lettsome segment is positioning itself. For long-term growth by diversifying, its customer base Beyond brewing and beverages.
Lastly, in the food and Industrial ingredients US Canada segment. We are supporting the long-term growth of industrial starches through the expansion of our Cedar Rapids plant, which is progressing. Well,
Moving to the second strategic filler cost, competitiveness through operational excellence.
We now expect to exceed our 50 million dollar run rate savings, Target by the end of 2025 for our cost to compete program.
We have identified additional opportunities in SG&A and cost of goods sold savings that are exceeding initial projections.
Furthermore, we continue to improve our customers experience through better service, reliability, and responsiveness. In the second quarter, we saw measurable gains in. Key performance indicators such as perfect order delivery and our net promoter score reflecting, the commercial Excellence benefits of our investments in digital transformation.
We are also exceeding our procurement savings targets through integrated sourcing strategies and by cross-functional collaboration enabled by our global operating model.
Also, a quick reference to tariffs: we experienced minimal direct impact during the quarter and in the first half of the year. As a reminder, the majority of our products are manufactured locally and sold locally.
Moving to our last pillar, our people Centric performance-based, growth culture.
This quarter. We released our 15th sustainability report.
Create the future with people who care, which highlights the meaningful progress, we've made across our environmental, social, and governance priorities.
The report.
Reflects our deep commitment to building a more sustainable future through Innovation, partnership and care for the communities, in which we serve.
As a leader of our commitment, as evidence of our commitment, in May, Forbes recognized us as a net-zero leader.
Listing the company among the top, 200, Global organizations, most effectively, advancing efforts to reduce greenhouse gas emissions.
As we celebrate ingredient Mexico's, 100th anniversary this year. We are proud of the powerful standard for excellence that are Mexican business continues to set.
Recently, Ingredion Mexico was named one of the 500 most important companies in the country by Expansion magazine, while also earning a notable rating of 90 out of 100 in the ICR 500 Corporate Integrity Index.
Given the significance of a Mexican business. We are proud of how this team continues to lead with purpose and integrity.
Now, I am pleased to hand it off to Jim Gray for the financial review. Jim
Thank you, Jim, and good morning, everyone.
Moving to our income statement, net sales for the second quarter or 1.8 billion dollars down 2% versus prior year.
Gross profit dollars, grew 7% growth growth margin up 230 basis points to 26%.
A level which demonstrates the consistent effort from our teams to manage customer and price. Mix.
Reduce cost, input volatility and deliver, operational excellence.
Reported in adjusted operating income or 271 and 273 million respectively.
Year.
Turning to our Q2, net sales Bridge.
The 2% decrease was driven by $27 million in lower price mix.
15 million in lower volume and 3 million of Foreign Exchange impact.
Turning to the next slide. We highlight net sales, drivers for the second quarter.
Texture and healthful solutions. Net sales were up 2%.
Driven by sales volume growth of 3% and foreign exchange favorability of 3%, partially offset by Price. Mix.
Food and Industrial ingredients, latam net sales declined by 5%.
Reflecting both the reduction in net sales volumes, partly due to slower macroeconomic growth.
And the impact of significant foreign exchange weakness.
Food and Industrial ingredients us can net sales, fell 6%.
Sales volume decline was impacted by the brief disruption to operations at our Chicago plant.
As well as softness and Industrial starch volume demand.
Now, let's turn to a summary of the second quarter results by segment.
For second quarter, 2025 tax, return healthful Solutions, operating income was up 29%.
Which equated to an 18.5% operating income margin.
Significantly higher than prior year.
This result has been driven by increased Topline volume.
Lower raw material and input costs.
And improved production, efficiency.
In food and industrial ingredients, net sales in Latin America were down 5% versus last year and down 3% on a constant currency basis.
Operating income declined modestly to $127 million, representing a 2% decrease compared to last year's strong results.
This quarter's results were negatively impacted by the Argentino. Peso exchange rate and corresponding impact to our joint venture results.
Excluding the joint venture results. Segment, operating income increased due to favorable raw material costs that were partially offset by lower volumes.
Moving to food and Industrial ingredients us can.
Second quarter, net sales were down 6%.
Operating income was 86 million down 18%.
Driven materially by disruptions to our operations at our Chicago plan.
We estimate that this disruption has had a 10 million impact to the quarter.
Operations have resumed.
And we expect to recover some of the impact throughout the second half as we rebuild inventories.
For the all other group.
The 10% increase in that sales was driven primarily by double digit top-line growth.
From our protein fortification and sugar reduction businesses.
Turning to our earnings bridge. On the top half, you can see the reconciliation from reported to adjusted earnings per share.
Operationally, we saw an increase of $0.04 per share for the quarter.
The increase was driven by an operating margin. Increase of 22 cents.
Partially offset by volume of -6 cents and other income of -3 cents per share.
Moving to the change in non-operational items. We had a decrease of 4 cents per share.
Driven by a higher tax rate equivalent of -7 cents per share and slightly higher. Financing costs of -2 cents per share.
Partially offset by fewer shares outstanding impact of 5 cents per share.
Shifting to our year-to-date income statement, highlights net sales for the first six months were approximately $3.6 billion, down 3% versus the prior year.
Gross profit dollars increased by 9%, and gross margin rose to 25.9%, up 290 basis points versus the same period last year.
Reported an adjusted operating income was 547 and 546 million an increase of 21% and 12% respectively.
Turning to our year-to-date earnings bridge.
The result is an increase of 88 cents per share.
Operationally, we saw an increase of 60 cents, or 666 cents per share, for the first six months.
The increase was driven by an operating margin. Increase of 82 cents, partially offset by volume of minus 26 Cents.
Moving to the change in non-operational items. We had an increase of 22 cents per share.
As well as fewer shares outstanding of 11 cents, per share.
Moving to cash flow.
In the first half, cash generated from operations, was 262 million driven by higher net income.
Partially offset by working capital investment.
in the first half of 2025, we have sold less of our accounts receivables, due to the impact of higher short-term interest rates across Latin
First, half capital expenditures, net of disposals, were $193 million.
The company intends to continue to invest in organic growth initiatives, that provide a significantly higher return than our cost of capital.
Lastly, we have repurchased 55 million.
Of our outstanding. 555 million of our outstanding common shares and have paid out 106 million in dividends.
We are committed to exceeding our 100 million. Share, repurchase Target for 2025.
Now, let me turn to our updated outlook for the year.
For the full year of 2025, we anticipate net sales to be flat to slightly up.
Our outlook reflects lower price myths due to the pass-through of lower corn costs.
And a contemporary view of the effects of foreign exchange.
We continue to anticipate that adjusted operating income will be up mid-single digits for the full year.
Corporate expenses have been adjusted slightly from mid-single digits to up high-single digits.
Driven by higher anticipated, it Investments and project related costs.
To advance our digital infrastructure.
Given our strong first half performance, we have improved our full year adjusted EPS range.
To be 11.10 cents to $11.60.
We now anticipate capital investment for the year to be between $400 million and $425 million.
Please note that this guidance reflects only current tariff levels in effect as of the end of July.
In addition, this guidance excludes any acquisition related integration and restructuring costs, as well as any potential impairment costs.
Turning to our full-year outlook for each segment.
We have made a few adjustments.
For texture and helpful Solutions.
We have now raised our estimate for operating income profit growth to be up low double digits.
For F&I, latam we have lowered our net sales Outlook to be flat to down.
Low single digits.
Our operating income Outlook is now up low single digits due to the combination of weaker macroeconomic, business environment, and weaker forming exchange, which we anticipate for the second half of 2025.
For f and II, US Canada.
We have now lowered our outlook for Auburn and income to be down low single digits.
Based upon the second quarter's disruption to operations.
for the third quarter, 2025,
We expect net sales to be flat to up low single digits for the company.
And operating income is expected to be flat to down single digits as we are again lapping a very strong third quarter from last year.
That concludes my comments and let me turn it back to Jim.
Thank you, Jim.
Following our strong first half performance. We feel good about the momentum. We are carrying forward into the second half.
Our texture and healthful solutions, business is delivering, strong sales, volume growth fueled by deepening customer engagements and a robust Innovation pipeline. We expect this momentum to continue as we co-create solutions for our customers who are actively reformulating in response to consumer health and wellness trends.
Given our leading market position in LATAM, we have the experience to navigate short-term macroeconomic headwinds.
And our focus in food and Industrial ingredients US Canada. For the second half is to maximize production in order to meet customer demand and rebuild inventories.
We?
Are Guided by our aspiration to be the go-to provider for texture and healthful solutions that make healthy taste better and are committed to delivering long-term shareholder value. Now
Let's open the call for questions, operator.
Thank you. And as a reminder, to ask a question, you will need to press star 1 1 1 on your telephone and wait for a name to be announced to withdraw your question. Please press star 1 1 1 again.
1 moment for our first question.
Our first question will come from the line of Christian Owen from Oppenheimer. Your line is open.
Hi, good morning, thank you for taking my question. Um, maybe starting with a little bit of a simplistic question here, but, um, you know, you're you're tracking well ahead of, um, where you've guided each quarter, you know, q1 you beat by 50 Cents Q2 call in another 5 to 8 cents. Um, but you've looked at the guys, maybe 20 cents since they started the year. Um, so 1 1 might ask if your guy is still too conservative at this point, maybe help us unpack some of the offsets here and provide a bit of color around the scenarios for the upper and lower end. So the EPS range at this point
Sure. Can I start with that? Sure, thanks Kristen for the question. And I think um, I think it's a very fair question.
You, you know, throughout this year, I mean even starting uh you know in early February, as we were finishing up our our Q4 and full year of 2024 call.
You know.
2 days before our earnings call, we had an announcement around, you know, tariffs that might impact US and Canada. You, you roll through, q1 and and, and Q2, and you still have um tariffs. Some of them have been paused, some of them have been pushed out 90 days. You know, our our US government is getting to negotiations with specific countries.
And it's not so much that we have already.
Persecuted, all of our analysis for all of our country pairs, and we've spoken to that risk. Jim highlighted it here that the first half, you know, tariff impacts have been very minimal.
It's that some of our customers are also facing uncertainties and as they either feel like their demands are shifting or they're looking at potentially higher costs. They're thinking about what are the levers that they pull in order to to, to drive their revenue and drive their profit expectations. So, I think we're just, um, we're cautiously optimistic um,
We do see that, I think within our US-Canada business, um, that we still think that there's pretty strong underlying volume.
You know, Jim Jim knows that, you know, that if if Argo runs, well, for that division, um, we have an ability to really advertise a lot of the fixed costs. Some of which we absorbed in Q2. So, I think that's a Tailwind for us. Yeah, I think I would just complement what Jim is saying, in relationship to, a lot of the noise that's out in the
in the world right now in relationship to
perhaps indirect impact to Consumers.
That we just.
don't have a view on yet because
The full implementation and settling of the tariffs that are getting implemented is in place. So, it's prudent to be somewhat cautious.
Cautious in relationship to, you know, the outlook for the second half. Now that being said,
what I'd like to do is just put in perspective if I could
Quarter 3 because we have guided flat to down in operating income growth for quarter 3. So but I want to just put this in perspective, it's important to remember. We are lapping the highest quarter 3 operating income
That we've ever had and the second best quarter in the company's history for quarter 3.
We see right now, the macroeconomic headwinds and latam particularly, Brazil and Mexico, and a couple of our very large customers. Have spoken about that as well, impacting their business. Um, we're also expecting though,
Topline growth in we're also not expecting. I should say, Topline growth in food and Industrial ingredients in quarter 3. Now with that said,
The momentum that's behind texture and helpful Solutions is anticipated to be an offset.
And could be better than our forecasts.
And lastly,
if the Argo facility runs very well,
we can make up a lot of ground to offset some of the negative impacts, we endured in quarter 2, and we've seen that in the past,
Hopefully, that just provides a little bit of a window into how we're...
Viewing. The backdrop of
uh the second half and specifically quarter 3. That's right in front of us.
The the nearly 30% growth in in operating income on 2% volume. Um, just can you help us understand what what's driving some of that. How much of that is um operational execution, how much of that is just running the plants at at higher utilization. And then I guess, I am still a bit surprised by the negative price mix in that category. So just help us unpack some of those, um, some of those mechanics, what's driving The Leverage there and then um, you know, do we at some point get to uh a positive price, mix impact there to get that incremental, leverage, thank you.
Jim and I will tag team on this 1. Again, I'll let you go first. Okay, so the 1 thing, I I want to just really highlight is that as you expand the portfolio and texture and healthful solutions and we add things like hydrochlo, and we're selling natural fibers, and we're looking at other raw material inputs. These are smaller inputs in our business and sometimes they can have more variability. We recognize this about 2 years ago and I have to say our supply chain and our procurement teams really stepped up and met the the segment, you know, leadership team where they're at. And we've done a better job just building in capabilities using demand forecasting, how we look at procurement and really matching. Um, some of that raw material risk that we might take in gums with what we see is demand and and the and the subsequent price
I've seen, so I feel like what we wanted to highlight was that, that really showed up as a benefit a unique benefit, a step change benefit in our Q2 texture and helpful results. And, and so we did, you know, highlight this as extraordinary because I think that step up is permanent as we go forward. More. To your questions though is, is that as we see strong volume in texture and healthful and we are selling at higher price points per ton, we are going to see that kind of high single digit low, double digit type of op income growth that might be recurring and then just the last piece just to note on the price mix. We did have um, lower tapioca costs in Thailand and that impacts not only all of our uh more functional starches, but we also have um, you know just some some remaining syrup and Industrial business that also had nice volume pull through uh, and we're seeing that through 2025.
It just sells at a lower price per ton and so it's just impacting the way it averaged a little bit. We're really quite pleased with where tapioca costs are. It's enabling us to really drive a lot of volume growth uh not just through Asia pack but you know, kind of throughout our portfolio and and North America and in Europe.
Yeah, in just a compliment what Jim said. I think that that point that he's making in regards to actually it was a little bit of a slight decrease in corn cost, as well as tapioca costs, it's not uh, in a chain, not a change in anticipated volume. And that's kind of flowing through the sales forecast impacting uh average selling price.
this year, as we entered into Contracting in comparison to last year,
We?
Had to moderate some of our pricing a bit.
but,
The.
uh, the pricing lever is
Uh, no longer having to be adjusted.
Coming off of, you know, 2024 where there needed to be an adjustment very little in 2025, and it's kind of working its way out of the system and normalizing and if anything we're probably looking at prices probably lifting as we head into next calendar year so that might explain some of it. We do expect
Some of the, uh, Innovation that's coming through with customized formulations.
To be at higher margins and over time, lift the margins.
For texture and healthful solutions.
Thank you very much. I'll turn it over.
Thank you.
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