Ingredion (INGR) 3 Feb 222021 Q4 Earnings call transcript

Ladies and gentlemen, thank you for standing by, and welcome to the Q4 2021 Ingredion Incorporated Earnings Call. At this time, all participants are in a listen-only mode. After the speakers’ presentation, there will be a question-and-answer session. [Operator Instructions] I would now like to turn the call over to your host, Jason Payant, VP of Corporate Finance.

You may begin.

to quarter welcome XXXX full and call. earnings morning, Ingredion’s and fourth year Good Vice Corporate President Vice Payant, Jason I'm of Investor President Finance Relations. of Interim and Jim our On Financial Chief and Jim call Executive Zallie, today's CEO; President are Officer. and Gray, and our Vice President results a issued on that found press can our We website, section. ingredion.com, release be our in today in the Investors were can The be found and this website convenience. your presentation also posted accompanying for slides the today on

contain no assumptions forward-looking comments to of and predicted them our within Company's may in obligation are materially uncertainties this COVID-XX reminder, future the if including results These Actual the a from future impact subject as in could change. statements. presentation various statements those forward-looking and or As statements include differ regarding operations and risks assumes to the performance, expectations the financial circumstances update and pandemic. Ingredion the and

that those filed can reports to in XX-Q factors on press Forms results release, Company's could be actual today's concerning and XX-K Form in Report morning's and on or recently most during information call the discussed X-K. Additional this cause from Annual found materially subsequent differ conference

today's share, financial tax information, also included measures, and income in this appendix. non-GAAP X, reconciled our measures certain presentation Note which During earnings to per in call, release are refer effective to adjusted rate, including we non-GAAP in and operating adjusted adjusted US press GAAP

I'm Now, the turn over Zallie. pleased to Jim call to

everyone. good Thank you, Jason, morning, and

by mix to while higher centers excellence responded For costs strong performance sales growth. top reflected with pricing line the we customer XX% of very execution sales year, price This input and demand. strong manage full net well-managed to address delivered we our

adjusted year versus income full the prior result, X% year. a grew As operating

achievements. Now, to sales of highlight a I'd our like few

net and of year, all full by grew higher input the customer the managing corn terms contracts, our we the four pass-through by of costs. regions double-digits actively across including sales For

next but this only sweetener slide, our the see you'll portfolio. applies specialty not ingredients core our starch also on As to and

are a a strong demand starches that and sweeteners core used cash-generating range of applications broad stable in XXXX. growth in Our saw

paper For saw related making and used to example, industrial recovery. economic demand starches increased in corrugating,

related starches In addition, experienced demand grades dextrose healthcare applications. of and strong to pharmaceutical

net a and grew versus fructose Argentina. high syrup the these venture other in with result, in the XX% of sales line a percentage result year. sales announced strategy, our As In of products we of joint from XX% XX% our core as prior our to portfolio overall reduced corn

grew in four Now, turning net XX% to sales strongly and net our regions each last of now specialties represent sales. year net Specialty sales. global of

delivered PureCircle with growth, also and starch-based Asia texturizer contributed demand. to specialties Pacific we platform exceptionally the sugar rice-based reduction region. the with from in and food Tapioca In growth led our EMEA, starch specialties contributions systems texturizers performing our performance by also driven strong growth KaTech well. excellent strong

South North America pass-through foodservice of corn demand and freight and America and strong costs. higher benefited from the

by Now with quarter constraints in variant. Omicron last global reduced call, which driver emergence shortages, intensified The the ocean continuing discussed to and the we on I'd of supply of driven environment. comment availability, during the pandemic our truck chain chain were COVID global like the fourth congestion, earnings impacts rail container the the supply

as to the improving exceptional quarter fourth customer commitments. these foresee throughout As of service and a result, supply from transport we quarter switched we modes in steadily we experienced necessary prioritized higher experienced cost this quarter, meet year. first as to of chain cost in costs higher-than-expected the circumstances lower the We

that in the we cost Additionally the fourth inflation input most the recent actions of contracted in beginning XXXX the address pricing experienced at quarter. effect that increase took will

our on pillars. our to key pillars. strategic continued execute quarter, the each to and of during strategic we advance year This on initiatives Moving to

finished global discussed growth our perform with XX% fourth quarter. platforms. well sales net continues in PureCircle nearly and operating the specialties XXXX, to year As by very across driven previously, of all the in grew positive increases income

to Moving Excellence. Commercial

world to expand the our original around drive savings, by We program million year as finished momentum teams of our and with they million and successfully our XX%. line continue three-year upbeat top sales new pipelines $XXX product the delivering Cost beating completed Smart $XXX Our customers. target project cumulative

drive a efficiencies now strategic will and the to continue of We competitiveness business we as part reinvent cost the work. and rebranded way across momentum learnings carry-forward our pillar, to

progress underpinned of our be to culture. growth All continues this values-driven by purpose and

later recent excellent and received of will we recognitions in strides and I a on number We make accomplishments continue comment to areas.

concluded to Now with Notably up the specific turnaround pipeline. story to with reinvigorated has highlights cash Ingredion results sales, excellent a execution we XXXX's first catalyst under growth year ownership let a for over the sugar versus platform. plan, sweeteners XX% year quarter the with reduction. integration few fourth a a finished net our reduction accretive. been wonderful positive its a in base and continues specialties R&D and in against sugar strengthened income starting turn and and This and me PureCircle operating specialty be full were customer with EPS

pandemic, In growth Despite demand and We expect to grow plant-based to category the be ups many to during the strong the the future. in on the growth expected reduction ahead. continues into double-digit downs is well protein based plant-based opportunities sugar continue specialty proteins, and overall and plant we sweeteners food digits our double growth bullish in this continued from XXXX. platform continue

Our protein snacks customer such robust supplements. dairy, remains existing across meat, bakery, many categories food and pipeline as alternative fortified alternative

net a XXXX pace. sales Our modest off of doubled

from we of Sioux throughout slower though as impacted of recent time. excellent as volume and anticipation our up and development In executed delays shortages expected and to accelerating. is products. City transition been optimize and to performing quality The months concentrate and consumer -- food slower team yield extend sales protein flour are labor and South production growth food specialty South maximize equipment high-quality development pet food exceptionally by our production Vanscoy, product sales our start-up applications the are slower batch lines Today on well production has has inventory sizes ramp-up, grade higher building drove the accelerated approximately an City ramp-up we Vanscoy start-up resulted million of Canada XXXX. XXXX. in at higher-than-expected was resulting COVID-related in costs Sioux operating made and costs we The than loss in pea our drought in However, $XX due Western in -- to progress delays

million the late expect prospects in optimistic to remain reach operating XXXX and product and we exciting to $XX forward, expect losses growth for this approximately category long-term decrease in we by by XXXX. breakeven year-over-year Going

managing and are secure it And over Jim XXXX. we pea let the costs confident requirements pea our to now, yellow actively financial for We yellow are review. for hand me Gray

everyone. North was good morning performance. America decrease corn down versus America previously Starting energy QX net first income since with and costs. of same supply North XX% Thank was period our and anticipated, were operating prior up sales in the we regional higher expected year-over-year to you, Jim, $XX compared higher XXXX. this XX% to costs the when Most million, year. and

incurred As products. higher to Jim we move costs alluded to, also

the cost preferred customers more and way appropriate. customers, due solution and transportation to Some were unexpected assessed purposefully best our but through expedient opted our when and to delivery our was portion team to in outages lanes. disruptions passed serve a of In higher and response, expected a these for

Finally, of plant-based higher year-over-year. facilities our absorption production cost our ramp-up the protein to was related

by South down offset venture contribution was third to The partially versus primarily America Absent higher exchange, quarter, the X% sales prior the operations down driven joint net X%. the our sales mix. foreign were in year. by were Argentina decrease of Arcor pricing

have would year. up sales net been versus prior Argentina, Excluding XX%

South by America impacts. the $XX XX%. income was decrease down onetime operating Two-thirds was million, of driven

to in lapping tax impact First, Arcor $X contribution of JV. to income The in items decrease. indirect million second Brazil. The input of was of costs Argentina the the remainder and net higher of an and these benefit corn op represent sales Brazil due combined

Excluding impacts, down adjusted was income quarter. foreign in XX% exchange the operating

by quarter. Moving sales volumes negative XX% region to offset the driven higher foreign up PureCircle mix, increase partially impact. points by five favorable Net and was the by across Pacific. including currency The price of Asia in were

material primarily Asia mix income operating XX% versus higher $XX was price down utility Korea. outpaced improvement, prior raw and as Pacific in year, million, costs

reported costs down PureCircle in than were EMEA, net months increase million, Pakistan exchange from increased favorable the as foreign KaTech the by energy sales more XX% quarter. was as sales In higher manufacturing mix. quarter. for price up XX%. three the well driven last operating XX% higher for that year. EMEA volumes income decrease The primarily quarter, price of mix. favorable operating the costs, During Absent for was volumes and higher offset The was income positive $XX the due to

was was income Cost Gross income, than XX% America, cost margin costs lower points. was Three of down were $XXX profit basis Reported to America's driven adjusted XXX primarily decrease of was sales which while operating $X.XXX Moving points, operating quarter to our year-over-year, to income due change, corn by basis versus XXX million. gross to income down inflation. adjusted year. Reported billion North over million operating for margin margin $XX was up the statement. input and was related the prior Smart. lower higher and gross were North over XX.X% restructuring income due operating quarters Net dollars

was share quarter earnings and fourth share per reported adjusted per $X.XX $X.XX. Our earnings was

costs. largely sales the and net impact venture. Argentina the the $XXX operations attributable to of was the of volume pass-through $X PureCircle bridge. was increase partially by acquisition, our corn QX the of to of offset sales The million volume our addition of driven Turning price/mix in increases Strong by Arcor contribution KaTech joint of higher the to million

reported decreased income by to excellence. company year, decrease capabilities $XX Corporate for operating of for up primarily operating For The Cost and Smart. centers income costs is decreased to reported related the while last due quarter global income the driven versus adjusted costs the operating versus million, quarter, operating were adjusted in investments restructuring million. in $XX income

Turning bridge. earnings to our

can left adjusted the page, On the earnings you to of reconciliation from per share. side see the reported

decrease margin offset operationally, other driven foreign the of by exchange right The decrease unfavorable income of and per quarter. higher $X.XX we volumes of decline $X.XX operating of was share $X.XX, a the side, On and per for partially $X.XX of saw share. by $X.XX

lower Moving adjusted for driven primarily impact costs of non-operational $X.XX lower an effective per of tax the saw to $X.XX the and a share quarter, of We per share per $X.XX rate of share. our by increase financing items.

delivered income the XXX up margin sales venture-related income points. the by certain and related operating than joint related adjusted lower for due was net costs the partially to to Brazilian the Arcor restructuring asset decision offset basis million. Smart, impairments down For to company the was was indirect taxes. of operating Reported income $XXX income operating operating reported Cost $XXX year year. favorable and was Gross prior adjusted full Full XX% profit billion, income $X.XXX net XX.X%, year, versus million

Our was $X.XX reported and earnings was per full per adjusted year earnings share share $X.XX.

Turning to bridge. sales our net

of million In in higher Pacific, from decrease that can Sales versus EMEA, to volumes million favorable America contributed attributable largely were was resulting North KaTech. $XXX driven million months were increases year, prior contribution in net all pass-through five driven volume $XX $XX revenue including the offset in XX% $XX These up from last South costs Asia for You price/mix. see sales was corn North incremental of and higher sales Favorable partially drivers Arcor America the Argentina XXXX. $XXX America. million joint of growth. by from price/mix South to and year-over-year PureCircle increase the venture the million America, by America, and of of by a to North of

higher primarily X% sales net driven of net favorable mix impact year. including volumes, for volume points price/mix America Pakistan. XX%, price/mix. growth the up exchange in were sales Europe, the months partially nine sales price by up Arcor and the foreign of driven of by sales higher weakness. other South were PureCircle XX%, year, and as KaTech KaTech favorable for by net sales were in and from In in by of offset driven as EMEA well X in volumes contributed joint increase a Asia Colombia, net Pacific, XX% venture the XX%, Brazil up

every with exceeding savings million, touched cumulative Cost XX%. As Cost the Smart concluding our beating function Jim mentioned, by Smart we that a organization. program in a are was our global original $XXX target effort

our manufacturing the how objectives support portion expanding carry regions, our to growth. improve network, cost delivered to creating redesigning resources improve reinvest We to of and to of global shared serve. were all to our strategic our rationalizing future achieved initiative excellence. and global this human into services to operation continuously cost Our centers savings momentum by we production significant reimagine a these operate efficiency and support effectiveness competitiveness, to We assets optimize global savings we

Operating Pacific of income centers facilities. versus year versus Asia year. income charge $XXX income ramp-up The including income joint operating asset the venture reported by plant-based global $XX bridge, our for million in costs full in were North excellence. costs $XXX operating related and America, corporate with was million Arcor income to decrease up full EMEA. in year in was decreased income income increased protein while million, South of in operating to Full operating due Operating flat approximately and year, capabilities primarily $XX up net reported versus adjusted our last adjusted million driven America, the Argentina. company For year prior operating associated is impairment investments the

Turning to earnings bridge. year our full

reported reconciliation the On the of to side adjusted. left share we page, the from

increase full other higher of per share of The $X.XX and $X.XX per margin of share was income increase On $X.XX, of an $X.XX the $X.XX partially offset of year. driven we side, by saw the decrease. foreign exchange and right by for operationally, volumes

our an to nonoperational share. Moving per share effective $X.XX $X.XX driven items, by year-to-date, adjusted of lower we rate per increase tax of primarily saw

million. our timing year expenditures cash increase usage. cash payable in the corn was for were inventory capital impacted $XX XXXX. in values to higher by were decreased input operations and prior year, Higher net down reflected versus by flow. Full higher $XXX commitments operations of balances. sales. from the spend. line year new by to provided driven by capital reflected in with balances Cash million, expectations Moving period working provided capital costs in costs due accounts Working We in Capital the prior million $XXX were

and Ingredion million shares. year, of During $XX the to shareholders dividends outstanding million we paid $XXX of repurchased

Turning to our expectations for XXXX.

potential $X.XX excludes integration year full reported acquisition-related Our $X.XX. costs. the This impact as EPS costs, range any of well restructuring XXXX impairment and to adjusted and is as

pass-through be We costs by strong net price expect and corn to the sales digits, single driven growth. digits to volume mix, high up low double higher of

versus year full financing expect to be to last in year. We up reported the adjusted to $XX of X% $XX to range income million operating million. and XXXX are expected X% be costs

$XXX and annual of XX% adjusted the to tax XX.X%, Our tax US $XXX million expected be is due assumes flow expected rate to changing effective rules. between operations which is range to from impact Cash in unfavorable to million. be

million expected Capital capital modest to growth. into $XXX million as will $XXX which investment nearly drive sales invested expect We of working net be between investment commitments million $XXX to and are be growth. specialty

of weighted for diluted range outstanding in million shares total million expect average We to be year. XX.X the the to XX.X

up of In single double low is Operating higher be increasing terms up to expected our be volumes favorable North plant-based are and net America protein to to and income driven XX% regional XX%. high to digits, expected sales price/mix, by digits sales. outlook,

to XXXX, In Argentina sales the operating versus digits, which joint results down income XX% be the XXXX would we the to anticipate of Asia for and prior be For down South to the we single be expected mid-single contribution Arcor compare net year. reflects America, when XX% we venture. segment Pacific, anticipate to net to sales up to our digits results lower

up We income expect digits higher to operating by single high driven volumes. be

higher driven EMEA, expect and low we largely income be costs. XX% to digits, offset sales For be by which net to up volumes operating higher will to up be by single XX%

to For low be income year. first quarter single to double XXXX, prior we down expect high operating versus digits digits

we Pakistan. lag values Brazil, the That corn Furthermore, comments the concludes in for an present a and in America recovery margin in XXXX. it Our back layout approximate to from and we South anticipate my I'll of $X quarter costs Korea will timing hand million Jim. lap Argentina's co-product outlook for and recognizes that have contributions

Jim. Thanks,

to I and year. earlier, Fortune As the culture We Admired for we honored were be XXth of once the Most purpose mentioned our growth World's consecutive named do. all that to Magazine's values-driven underpins list Companies again

diversity, for to to we're equity we where Index on continue a year. proud consecutive inclusion as the included with fifth our Bloomberg's have been belongs, agenda, everyone In addition, advance culture, and Gender-Equality

on a row. Campaign Corporate the also near second in Index Human Equality for Rights Foundation's the a achieved score year perfect We

In made surpassed All for significant by our XX%, XXXX crops, priority sourced outlined sustainability, Life six commitments XXX% XXXX towards in our consistent XXXX with sustainably we which terms progress our goal to of our reaching our be target. plan,

practices to As advanced an corn example through sustainable of incentivize choose sustainable more we sourcing, agriculture the by water our and PepsiCo in program to soil Nutrien Illinois. and regenerative fund with grown partnering for outcomes growers

payments As planting to transition part cost to this of sustainable farmers shared the program, more direct of practices. we to

emissions XX,XXX enrolled with acres now, And COX few close XX,XXX to by program pilot a over like summary tons. reduced comments. and I'd Our metric

overcame of year was remained the customer second to and way as was and pandemic strategic the entered but constant growth. organic deliver teams first invest significant continue million as inflation, acquisitions, growth. and in into $XXX to two of The demand another input of integrated our ventures million year to continue agility challenging capital successfully year specialty What $XXX the cost every persevere strong almost ways. joint of two though in different bit nearly display meet We

for the employees have And these possible not now of create well our questions. value. All open to talented worldwide. let's of continue Their to long-term achievements shareholder without would us position been efforts the dedication call

[Operator Instructions] Bank Ken question Our first from Zaslow comes Montreal. with of

guys. morning, good Hey,

morning, Ken. Good

Ken. Hi,

XXXX over X% the And X% then goal set be X% to long-term. in X% I a talk when up is, half and for you XXXX I cadence difference half out question that year. you about going to think more second the that sets long-term have the you first have the EBIT. to two of the about is One questions. X% was the the I between important is that of goal? growth the Can long-term how and

how make you goal aggressive, growth how you're So X% long-term or EBITDA do do get to XXXX to was numbers over for that that or you that do too X% the up? make think up, to you

right. All

let ask question to the me So Jim first. take phasing

Hey, looked hedged cost in boost co-product while first the think everybody, the of at Yes some simply half helped and we as up, we sure. which XXXX. I values, from was XXXX, to had first and benefited half margins Ken the going corn we

be we had into knew that got we as was some of As XXXX, corn open. going well as elevated and had were we to staying you we second as and that left to that exposed with the the others was of half we discussed more that

So QX in that – reflected impacted that's I us year-over-year. some in think in the and mostly and QX in QX

Now in pricing North the America, little our now a business, contracts half in change can the as forward customers. in US we bit than of to those corn cost go flat within and priced, less the where primarily we're our of were

have And so went have into we XXXX what gross that elevated in you'll see half XXXX. of while pricing effect corn, of and still the co-product value in first we just a lap benefit is the

of the lot a see and The corn we As we we should remain margin see still really half there will of should get second half. pricing the XXXX, into in second stick. the expansion

Ken the year single profit year. then high outlook digits long-term last and And and then Okay. question, the this the regarding regarding second mid

finish But world are commercial plant-based that promise the in everybody I growth very The standpoint in half hold market to products the largest or have not. regards prospects are we've from of year. the to where I bode where investments in and the thing business. of seen combination are made, as food made continue more sweetener the in investments grow still continues of segment that stability of still obviously stevia overall in at have think investments differentiated business business. this outlook, it is it all we depends which investments high is, tapioca, us starch we proteins, the commissioning rice starch second we The that. in that think all we've lead that PureCircle, about makes example, think making year of they and bullish to for well. to did we would prior. for that to investment that China, end we've the engine in very and in core at in investments significant more provide remind XXXX the and to in that momentum we we And still to the the of investments, the all, business business an guidance going And of a in occurring finish relates whether on first we specialty of the past years And in feel those that, the are good. then dynamics very, also there Ken CAGNY. would could of cash upon other made core very the core standpoint the that XX%. a the from grow I for than made But I expand of I that we have more say, The this

So color with we'll on engage give even you CAGNY. be at that you more to able and

Okay. would How is of a much of And and first And then that in XXXX, could quarter actually growth quarter long-term in XXXX, the you it rate? of recur component maybe there. to I'll XXXX? that the your reason not get leave cost the likely XXXX fourth

to and portion impact maybe how that. your quarter that's just portion quarter if is I as very a happened obviously, is we mean being will question in What of answer question, four to it of view that, key do year. priced I had Yes. -- what I relates through And one a already in a the say this comprehensively.

costs November. And that. after fact a our was half to reflect than in that associated broke the higher priced. December the again US in certain What fixed and the implied And our emergence into the be I month. again is guidance. mean and on knew, we the that majority going you contracts And energy costs higher. Canada to in news going degree were quarter, costs in but in the the revenue which that was higher we net that in If quarter impact call we of corn that our chemical was fixed-price on -- of we the had all December a experienced on was less with unanticipated, weeks the of incremental the experienced variant, earnings in literally Omicron little

ability through one. in and will in through happening a quarter to impact the so one, then price flow And of already portion quarter that is

Ken and to you or experienced particular as truck to and add as well due where load. we said on truck carrier are or unexpected particular Jim spot -- summarize on had you a driver what buy that costs had preferred that those those right, to wasn't available, so for

You rate pretty on that. significant get a increase

If labor are don't we've and market. that what you I return Omicron, more assume reflective dry to our for supply you would person think have you a ocean don't rates have a have either as to an or van deliveries seen chains that shortages on-time market of to expectation -- balanced at historically have normal freight

reflected transitory So, a not would XXXX. be do I lot are actually occurred, we of think the and in costs that

Great. I it. appreciate

from with comes question next Barclays. Our Theurer Ben

Perfect. Good morning Jim and Jim.

that short-term shall not should logistics into throughout around but just is into easy you that supply and to you've stick a actually And chain it's a think term relevant and side very the that to you just as cost little on pass bit came gives pass been pressure How stick that to easing what seeing to so something assume on driver income the to on bit, much what expect it year the difficult the these we to So, over ultimately you at your the pricing pricing on just of easing follow-up well throughput beginning? topline, said got it customers? or a the be more cost cost and or growth is through at up short of we of this bump through you've XQ. the about would headwinds most time a also the least something and cost the operating not is

Yes.

about How I... if

Sure.

You talk at about take I'll a shot the and commentary.

-- about probably unexpected and in of related QX QX and total, the back equipment had Half provider, say not look To would yet chain. supply in us call the transportation you and the that driver, to have lanes having go availability we within I'm transportation the of commitment still $XX to I available preferred of the million customer and that at going or food costs. a to transportation was rail

decision available the avenues. needs a chain supply morning. So, And have team day that that other to make they

if So, to sudden of have to truck truck. on challenged, or from if and to moving to relying our they're then a is rail rail spot they go we're intermodal going all be

And to decisions. to so going those cost P&L. the are We're going that incur the and is hit cost temporary

maintaining evident commitment our But those those that's to back go customers and we van we when in and can customer with a customer a the customers, then that cost Now, a to negotiate it's it's be relationships. going we're franchises the if customer. we of customer, incur to to that dry rate to that otherwise it's and service the

did example that saying all and our as in freight coming say answer related But in well. we a the and talked to with is Jim with one. airfreight through XX Jim the through products half some those of than customers to increases we And product cases half quarter priced to you about work make tapioca those your decisions and we is already half and question more a Thailand more a new when was you with price being have in and passing it's as for of in is last would lengthy customer addition on say in product supply chain call launch, have associated about you something from are

that if helps Ben. So, answer your question very specifically

Sioux happening around question the been And the -- Yes, you've is then on just and delays my what's out that laid second plan. helps City very much. the nicely South

still Is obviously ramp-up, volume demand So established? some not better to actually and XXXX better or things XXXX. -- you the drivers the good it in the just little of been it it amount to and is you initially to What's enough bit get driving was double been So, just on those make impact still behind understand operational impact breakeven. that delays? impact be expected but in in what it the to and expect expect what's the XXXX, the a thing to

Yes.

protein again And the most to production and largest be optimize extended relevant So, and and batch slower where we producing we plant-based we is The protein me the isolate. uptime. quality down break let one producing maximizing yield issues. are as in sync had the and ramp-up get a that's and would or pea our challenge the three where sizes Sioux with South City that's

inventory. food-grade build The is to want we So, plant complete. commercially

of are inventories what process in that volume takes certification to the match the based sync We food-grade the anticipate time. we required would have of get per some and customer product building average on in food-grade to and we demand be

So, to quality able produce the that build being food-grade manufacturing having plant sufficient and discussions ops and we're commercial organization inventory and to the good such the we of where to have ready organization relationships with feel get customers all with the consistently go. match that to a

City last good South our two the the So made news excellent is months. progress in Sioux team has that over

That high-quality steadily of food-grade anticipation in most XXXX. development inventory accelerated again was the sales are building We through impact. significant

and related facility concentrate really slower to to related and a Vanscoy, in in COVID-related is our shortages issue delays that equipment second start-up flour The deliveries. labor for Saskatchewan was and just

of that from Europe. was equipment coming in Some

very Canada. a of and all most market us. behind there for part that delays some part labor in Just tight the particular That's

quarter. commissioned we lastly, Today just increasing. well the And in in September in plant-based space. relates protein production pea And that cost are sales Western supply exceptionally the in income complete fourth Our is our and flour the kind expectations of that Specialty costs in issue that due and concentrates XXXX. XXXX. pea a to performing incurring started Canada concentrate third drought line's reflected that Hopefully proteins and of the all picture for you the the gives operating we have that's situation our in to secured into of well particular production

Perfect. very much, you That Jim. was it. Thank

Thank you.

Our Sachs. next question Adam Samuelson from comes Goldman with

Good Yes. everyone. Thank you. morning,

Hi, Adam.

morning. Busy Hey, Adam.

Hi. Good morning.

obviously, guess, very kind I question my first a about of So, inflationary thinking is XXXX-XXXX, environment.

couple targets, but Cost EBIT than it it's the you and exceeded I was in exceeded XXXX years you You XXXX completed talked you've and look being lower back remarks and about guess, on initial in a our in up those ago. and ends where targets interesting of it prepared I Smart highlighted productivity.

so And an urgent kind we moving Cost about think the a problem becomes complete is how inflationary in the particularly context Smart environment? if of that even And now program productivity in main forward? more do this

Yes.

beyond as million $XXX Cost expectations. to us well. said target. So million the deliver to twice we $XXX did you that served XXX it million and then from hit Remember And extremely Smart raised the for our target $XXX initial

Cost to transitioning cost was Smart our are pillars four of strategic competitiveness. We which one

now for relates program competitiveness. intensified strongly. be deemphasized is any an that one So very cost delivering it's upside sunsetting XXXX to years three what relationship example into that that the is being cost transitioning over in way and efficiencies things And a initiative could not in of in to

And programs. of of to for in confident items a we're of have we efficiency Global is one offset those hard. for net we of upper driving VP number to So and called which Operations feel XXXX. upsides our represents operational part embracing very something very, the structural our that range those inflation And and savings again very

no sure improvement rebranded Cost the about any that our on the cost one of which being in is three-year organization. competitiveness conclusion all misinterprets embracing way in just a to want of I the more program make it's of focus Smart to say, reduce cost cultural would that So intensified continuous

can to drives full helpful. But of that little on terms high cost and help kind uncommon All it's inflation versus of maybe us right. about with about of us mix? then the the And not what guidance you think kind end volumes the think high a range touch of we That's the That's in of state world how wide of in you the pricing year. guys. for kind of help frame points of end kind pretty range for of a bit Just kind the to you terms the versus low demand. pivot key

to Jim Sure. going is that. take

than benchmark I has assumed our late XXXX November than coming think what cost inflation ocean see so Adam, in assumed. tried kind be Hey, you But to could a upside think we've is the back the elevated. pretty less is I we've December. regard inflation what Oil into part That diesel secondary supply first cost chem of Generally, down. etcetera. of freight inflation impact rates we've here could with to if less

that a with and of our well Additionally, would say, food would consumers of food bounced really sort maybe the a up. in do the you as service within and demand with balance as return We stretched in between positioned I that October to a service South -- benefit Mexico traffic return I take maybe December. Omicron It as back to as out from eating say to could US was eating normal Europe we're in America. LatAm, strong and and behavior specialty well see out at think home, that come of of November. ingredients bit somewhat bit some a pretty

And Jim we And of still alluded upside within volumes it's Europe third this have and so out and potentially LatAm. residual think to some cost I that -- competitiveness. then just and some on

underway. that efforts can efficiency improvement and surpass many have the That can We and continuous catch inflation. up

all are those upsides. So

looking globally. at could I exporter corn Ukraine -- in think third-largest the marketplace. remind really downside corn is not you that higher is our costs move to of the That

causes to could and there disruption. say that hedged there parts Asia/Pac in obviously downside, in I and additional other even it futures the pressure doesn't then us us just but well think of specific variant really I we're COVID think or impact much on ports throughout breakouts our of where I disruptions some some think in there is congest prudent be that the as finally be costs. And buy Mexico does it ports US could further And could largely countries. which could and haul any domestically, impact or on Omicron corn some

two probably of largest about are kind really So downsides. thinking those our as

Yes.

forward. the from just quarter impact into frame hopefully saying going other around you we're guidance. it. account end the with three think We four call that the of and the unknowns the the that with knew in earnings one with again I that did fact could we pandemic it's low helps that take Omicron to we how be guidance quarter discussed probably That variant. no the the experienced some we the there of debated to degree And it. we the fact prudent And on

I helpful. it much. Thanks will Very pass on. so

Moskow question Robert comes next from Credit Our with Suisse.

about you're question the chain supply Hi. incurring. I that had disruption a costs

quarter - the and relying that you you going you're see markets past Are of say you're you're But in to volume? some quarter. first to You routes it pressure. didn't back still rerouting we're that ongoing the like for I on of now recapture first it aren't aren't these disruptions normal not? your not and saying as your and guide part that profit or spot

that January. fourth absolutely the in it. our Yes. would of past we're is we're would we to continued and -- third better I enter as I don't as say as January here and talking better it's in we head getting February. that week think in it's we the getting say And situation teams February week

the but still three it first -- of January was So weeks very intense.

Okay.

profit for guidance to mentioned layout down you digit corn your digit of So double high the single costs. low

you be or that supply mention a but February? Argentina Is -- cost also for didn't just you've incorporated but chain You that for you from that higher mentioned higher of costs. your month the will lap incorporated and

Generally, in also think really we I pricing we So costs, that have the the with North costs we that pass-through catching guide We America we're the some America towards extent are pricing have seeing to also in flat and right? think first can some but quarter. didn't obviously while we're customers. North year-over-year additional on in up I relatively carrying

But quarter, America toughest first profit comparison you in coming and your you're Okay. North flat. in still have

-- last where hedged Yeah. -- had obviously corn the look, some we the benefit values. and that's rise we from we year And had in co-product

higher to reflecting inflation going then XXXX. And reflected… which our in input throughout inflation cost customers But expectation that's we we're be into have year also go Now whether as was corn of through it, we or pricing this the freight the higher volumes, managing on have costs. some we're

Okay.

… we the year. and inflation that we're into that full trying pricing our last cost recapturing and to put witnessed

think And quarter got first. actually But... I tougher I is than second the --

That's right.

that you mean of by a, pandemic. the maybe plant-based a what think have? demand follow-up I has that volatile for you the specifics kicks you when pipeline proteins Can you And Zallie, mentioned And for also, give in? that? color it Jim think more I me two mentioned more little in year on little been And a you on

the read on impact referring et about variant cetera Rob to we with plant-based that is, Omicron service Yeah. What and I alternative consumption. many meat, was things of pandemic, meat the food the the of

offerings customers and we just primarily Again, growth long-term nutrition. meat with the was what what consumer just in ingredient the that But about plant-based all meat. was have protein those snacks, to up was to portfolio to. we're on food opening When they've alternative retail focused to plant-based shifts about the through now. are et would Panda like Express and to the And to to alternative have And of categories captivated But clean those invest experienced about challenges of are example prospects, the our as consumers So And new was McDonald's, plant-based very for we're it's feel those not then what referring relates the I it dairy, innovation. right very alternative though large cetera. and ups retail product suppliers different impact also prospects do like to, we we service with delivering with referring vis-à-vis overall, the just engagements that how proteins, Beyond that see, others feel was attributes forward. -- in for channels feel bakery we positive pandemic deliver appeal we the and taste, growth the just around affordability, they that And continue service. food of functionality, in I good many categories downs related go earlier offerings. KFC,

Do protein down I business or this what sense pea is a your in what your be, drill And it. again. just to for maybe should right have a margin competitors? structure you now -- to doing of mean competitors are normal it

you that So speed have fair benchmarking gives get once you earning say a the can know there? that good have that that you are? is done to get they're up you of to it you to good what confidence more sense and work Like really margins what

when unique has the the projections, that as well as looked demand we attributes justified isolate, the at certainly vis-à-vis in we Well, protein pea pea soy. and investment overall the and supply wheat projections

And existing plant-based meats maybe very forward of meat the you market or that grow amount the to a versus ability and X% small or supply. going a X% meats very, demand occupying so, to about think of when less just large represents today, or alternative tremendous percentage X% at

certainly about proposition, all And modeled it good all so as means a deficit years, our and this we models we five a customers, going and our margins. with from that for with to we've supply, of the the what next margins over working see means business. here value standpoint relationship of of forward relates that very the for pricing that And what out all demand feel outstripping in to and

I’ll Okay. let go. you. it Thank

question Bienvenu from Ben next comes Stephens. Our with

Thanks. morning, Hi. Good guys.

morning. Good

respect give South With on to, full And growth category does capacity to you've and And underwritten? do secular potentially incremental about organizational bandwidth more the you follow-up sort I start runway capacity? ramping plant-based of protein that in what what's think about plant to that adding the when you Sioux additional think investments? you to Rob capture your question make City want the capacity, to achieve of from the or to when there. up Vanscoy

Board the time. of one that me all It's the questions asks Yeah. our

our So what relationship a this for was are strategic proteins. in and and talking very I Because growth good question long-term question. drivers just the short-term given plant-based we past a it's Board looking about to prospects challenge,

that able returns being capacity. dairy cetera. serves protein functionality just and of But thinking now the wise the and as as not need facility are investment. to expand well right from total already and density, We to sources the think not on to nutritional We're plant-based – look also meat extremely protein. options a about the this getting in we're we very standpoint focused could as on we execution focused our of obviously alternative foothold pea a and delivery think it This at far us this the of what but well. nice us as exclusively for to facility alternative going previously, so that this alternative But very attributes just et the And I on for and it's about talked be very provide, space, that sizable. gives prudent you're protein is

complement to with as strategically it of need investments from deliver very going based as, you far So perhaps what to all can through deliver us the on in functional thought additional you plant-based attributes et plant-based a hear be forward, to on expect have protein proteins cetera. on space, taste, will necessary texture, to functionality,

And you. guys XXXX. of on when you there? the Jim Thank visibility do the Gray gross how versus this half year, is hedged costs gas, then in time if open of prices? where same revisit and but Jim. have end, can you versus guidance last I end rewind in And had buckets variance to like corn true Would on much Thank hedged question revisiting think, top you, this you Okay. on around to the you least a you're your And we be you we could those you the bit feel back XXXX? very through bottom year most guys shrewdly half think renegotiate you freight, spot – are more the I do into? which talk you stand when little about first contracted? natural

Sure.

practices the able hedges have be just and risk, year, to into With even further about not North co-products, of cost both our sufficiently regard hedges and about to at most really And But certainty structure clearly even within and third looking of a and place Ben, through in our would corn even gas, I into further natural specialty there. America reduce even as prior. our value are we we to in at into kind but it's more natural say, quarter think quarter. year now volatility the opportunity we're think really think we're regard to business I our at business. as kind hedged the the we'll the profit XXXX. our is core -- hedging and the extend looking something we in to I that gas even fourth With trying into hedging talk to the of our of get

plus bit on a very largely covered So natural gas that. plus, that closely. you're always buy We're to would we are we watching to need to where say Europe disruption. XX% I XX% subject little

from Germany energy sources is quite Russia. We Hamburg, Germany. upon have in operations dependent

freight and of we've mostly and regard go preferred on So doing of multiple And that's a XX% iterations at to market. in lanes lot think talked this. we're we freight, with radar. to we'll then the We US carriers. I contract least XX% our about And our think when out

that have we're very, about spot, preferred just XX%, changes more. to that the two, our to so carriers talking talking expected going And very preferred at lane four three, we're facility. when giving us do is spot from carrier XX% has to when that particular It's small down we be go show versus been performance your one, rate your about the XX%, use your points did you up preferred and

We're be up coverage. disruptions or it down, that incurring as with ocean elevated be extent we working rail, team So moment. the to freight. customers going When comprehensive our pick to things to those with for we're in you make But also extent freight, you're and that to to a They're the in you disruptions have that get get a van we're a up cost. those up that very the going we do working or get share dry to rates carrier, back get very to you to are the freight going in customer thoughtful, with show have on financials. to

Okay. Thank you.

Sure.

turn Ladies of Zallie, conference. remarks. and and like the gentlemen, for CEO Jim any I'd this Q&A the today's call portion to back President conclude does to closing

joining forward see on you are this Ingredion. and time Analyst an you morning. Bridgewater Please our we New we for again to of note, in-person a person. a Consumer can when Center. look the which We at Thank February Group us for combination an presenting in hosting York then, Investor on will and Until interest be at Innovation your of in continued presentation a thank X, virtually tour you virtual XX, June Day

conclude this today's presentation. and Ladies gentlemen, does

have and day. wonderful disconnect now may You a