Ingredion Incorporated (INGR) Q4 2025 Earnings Call Transcript
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Overview
The earnings call summary presents mixed signals: positive elements like increased share repurchase and optimistic guidance for Texture & Healthful Solutions are offset by concerns over flat net sales, manufacturing cost inflation, and unclear long-term growth timelines. The Q&A section reveals management's evasiveness on growth targets and potential risks like the strong Mexican peso and sugar tax. However, there are growth drivers like World Cup volumes and product diversification. Given these factors, the stock price is likely to remain stable, with no strong catalysts for significant movement.
Key Financial Performance
Net Sales (Q4 2025) $1.8 billion, down 2% year-over-year. The decrease was driven by $40 million in lower volume, $39 million in lower price/mix, partially offset by $36 million of favorable foreign exchange.
Gross Profit (Q4 2025) Decreased by 4% year-over-year, with gross margin slightly lower at 24.5%. This was impacted by higher manufacturing expenses in U.S./Canada Food and Ingredients.
Operating Income (Q4 2025) Reported at $220 million and adjusted at $228 million. The decrease was driven by a decrease in operating margin of minus $0.22 per share and volume of minus $0.10 per share, partially offset by foreign exchange gain of plus $0.08 per share.
Net Sales (Full Year 2025) $7.2 billion, down 3% year-over-year. The decrease was driven by $144 million in lower price/mix, $75 million in lower volume, partially offset by $8 million of favorable foreign exchange.
Gross Profit (Full Year 2025) Increased by 2% year-over-year, with gross margin increasing to 25.3%. This reflects lower raw material and input costs as well as improved margin volumes.
Operating Income (Full Year 2025) Reported at $1.016 billion and adjusted at $1.028 billion. The increase was driven by improved operating margin equivalent of $0.39 per share and other income of $0.15 per share, partially offset by volume of minus $0.47 per share.
Texture and Healthful Solutions (Full Year 2025) Net sales up 1% year-over-year, operating income up 16%, and operating income margin increased to 16.9% (up more than 200 basis points). Growth was driven by lower raw material costs, improved margin volumes, and foreign exchange favorability, partially offset by unfavorable price/mix.
Food and Industrial Ingredients LatAm (Full Year 2025) Net sales down 4% year-over-year, but operating income increased to $493 million, with operating income margin reaching a record 21.1%. Growth was driven by resilience in Mexico and network optimization in Brazil.
Food and Industrial Ingredients U.S./Canada (Full Year 2025) Net sales down 7% year-over-year, operating income down 16% to $315 million. The decline was due to production challenges at the Argo facility and lower beverage and food volume demand.
Protein Fortification Business (Full Year 2025) Net sales growth exceeded 40% year-over-year. Growth was driven by doubled production and increased average selling price through new product innovation.
Cost2Compete Savings (2025) Achieved $59 million in run rate savings, exceeding the $50 million target. Savings were driven by manufacturing optimization, procurement, and SG&A efficiencies.
Cash Flow from Operations (Full Year 2025) $944 million, including $75 million investment in working capital. This reflects strong operational cash generation.
Share Repurchases (2025) $224 million repurchased, exceeding the $100 million target. This reflects a strong commitment to returning value to shareholders.
Dividends Paid (2025) $211 million paid, with a dividend per share increase to $0.82 in Q3 2025, marking the 11th consecutive annual increase.
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Operating Highlights
Clean Label Ingredients: Achieved significant growth in Asia Pacific and U.S./Canada, driven by consumer preference for authentic ingredients and simple food labels.
Protein Fortification: Delivered a record year with net sales growth exceeding 40%, supported by new product innovation and doubled production.
Sugar Reduction Solutions: Advanced proprietary sugar reduction taste modulation platform in collaboration with Oobli, offering cost-competitive clean taste solutions.
Geographic Expansion: Clean label ingredient volumes grew significantly in Asia Pacific and U.S./Canada.
Mexico Market: Repurposed grind to diversify customer and product mix towards higher-margin ingredients, achieving record operating income.
Argo Facility Challenges: Operational difficulties led to a $40 million impact on 2025 operating income, with recovery plans in place for 2026.
Cost2Compete Savings: Achieved $59 million in run rate savings, exceeding the $50 million target, through manufacturing optimization and SG&A savings.
Indianapolis Starch Modernization: Completed a project to reduce modified starch production costs and increase capacity.
Focus on Texture and Healthful Solutions: Achieved 4% sales volume growth and 16% NOI growth, supported by strategic capital investments.
Innovation in Ingredient Solutions: Developed new solutions to replace ingredients impacted by shortages and rising costs, and advanced texture elevation for customized solutions.
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Risk or Challenges
Operational challenges at Argo facility: The largest facility in the Food and Industrial Ingredients U.S./Canada segment faced operational difficulties, including intermittent grind shutdowns, higher maintenance costs, lower yields, and reduced fixed cost absorption. This led to a $40 million impact on 2025 full-year operating income and limited inventory available for sale.
Softness in beverage sweetener volumes: The industry and the company's business faced overall softness in beverage sweetener volumes, contributing to lower sales in the Food and Industrial Ingredients U.S./Canada segment.
Economic and political volatility in LatAm: The LatAm segment faced regional economic and political volatility, which impacted demand in sectors like confectionery and paper and corrugating. Mexico demonstrated resilience but had to repurpose its grind to offset challenging economic conditions.
Weaker demand in certain sectors: Demand remained soft in the confectionery and paper and corrugating sectors in LatAm, and there was weaker sweetener demand in the U.S./Canada segment.
Manufacturing cost inflation: Higher manufacturing costs, particularly in the U.S./Canada segment, were not fully offset by pricing, impacting profitability.
Foreign currency transactional headwinds in Mexico: Foreign currency transactional headwinds, particularly in Mexico, are expected to impact operating income in 2026.
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Guidance & Outlook
Net Sales Growth: For the full year 2026, net sales are anticipated to increase by low single digits to mid-single digits, reflecting greater volume demand.
Operating Income: Reported and adjusted operating income for 2026 is expected to grow by low single digits.
Adjusted EPS: The adjusted EPS for 2026 is projected to range between $11 to $11.80, driven by sales volume growth in Texture and Healthful Solutions and slower operating income growth in Food and Industrial Ingredients segments.
Cash Flow from Operations: 2026 cash from operations is expected to range between $820 million to $940 million, reflecting slightly more working capital investment as net sales grow.
Capital Expenditures: Capital expenditures for 2026 are anticipated to be between $400 million to $440 million.
Segment-Specific Guidance: - Texture and Healthful Solutions: Net sales and operating income growth are expected to be up low single digits to mid-single digits, driven by sales volume growth.
- Food and Industrial Ingredients LatAm: Net sales are estimated to grow low single digits to mid-single digits, with operating profit flat to up low single digits due to foreign currency headwinds in Mexico.
- Food and Industrial Ingredients U.S./Canada: Net sales are expected to remain flat year-over-year, with operating income also flat, as challenges at the Argo facility persist into Q1 2026.
- All Other Businesses: Combined net sales are expected to grow high single digits, with operating income improving by $5 million to $10 million.
First Quarter 2026 Outlook: Net sales are expected to decline by low single digits, and operating income is projected to decrease by mid-double digits, primarily due to strong performance in Q1 2025.
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Shareholder Return Plan
Dividend Payout: Ingredion paid out $211 million in dividends in 2025.
Dividend Increase: The dividend per share was increased to $0.82 during the third quarter of 2025, marking the 11th consecutive annual dividend increase.
Share Repurchase Program: Ingredion repurchased $224 million of outstanding common shares in 2025, exceeding the $100 million share repurchase target announced at the beginning of the year.
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Key Q&A
Q:How much of the fourth quarter impact was due to the Argo facility versus volume decline, and how should this play out in 2026?
A:In Q4, the primary issue was operational challenges at the Argo facility, with an estimated $16 million impact due to idle and yield loss and incremental maintenance costs. For 2025, the total impact to the U.S./CAN F&I segment was about $40 million. In 2026, some Argo costs will persist in Q1, but recovery is expected in the back half, potentially improving op income by $15-$20 million year-over-year. However, manufacturing inflation, higher natural gas, and labor rates are expected to offset some gains.
Q:What were the drivers of the decline in the U.S./CAN F&I segment in Q4?
A:The decline was attributed to 2/3 from the Argo facility and 1/3 from sweetener volume softness. For the full year, the $40 million Argo impact was significant, along with earlier manufacturing events like a train derailment in Cedar Rapids ($10 million) and volume softness ($8 million).
Q:What is the outlook for Texture & Healthful Solutions (T&H) in 2026?
A:T&H op income margin for Q4 was slightly down year-over-year due to one-time items in 2024. Gross margins and gross profit grew, reflecting a healthier product mix. For 2026, price/mix is expected to move positive, driven by solutions growth and texture elevation. However, some lower ASP businesses, like tapioca glucose syrup in Thailand, may impact price/mix. Full-year T&H operating income margins were up 210 basis points in 2025.
Q:What were the volume movements in the LatAm business in Q4?
A:Net sales were up 1%, but sales volume declined by 3%, primarily due to brewing adjunct volume declines. Food and beverage volumes grew, with Mexico food volumes up 3% and beverage volumes up 1%. The company is shifting focus to higher-margin products in food and confectionery to diversify beyond brewing.
Q:What is the margin differential for the solutions business within T&H?
A:The solutions business within T&H is just over $1 billion in revenue, with gross margins 5% higher than the segment average, at approximately 30%-35%. It represents about 40% of the segment's revenue.
Q:What is the guidance for Texture & Healthful Solutions (T&H) in 2026 regarding pricing and manufacturing costs?
A:Contracting for T&H in the U.S. was completed with pricing slightly down, covering changes in raw material costs. Volume gains are anticipated, but manufacturing cost inflation (2%-2.5%) is expected to hold gross margins flat. Upside could come from operational productivity and procurement efforts.
Q:What is the capital allocation plan for 2026, including share repurchases and M&A?
A:The company plans at least $100 million in share repurchases for 2026, with flexibility for strategic M&A opportunities. CapEx is expected to be $400-$440 million, including $80-$100 million for growth projects and $40 million for cost savings and infrastructure improvements, such as a cogeneration project in Indianapolis.
Q:What are the potential risks and growth drivers for the LatAm segment in 2026?
A:Risks include a strong Mexican peso increasing operating and manufacturing expenses, and a new sugar tax on sweetened beverages, which may initially impact volumes. Growth drivers include stronger food and beverage volumes, incremental volume from the World Cup, and diversification into higher-margin products.
Q:How much of the $40 million Argo impact is expected to be recovered in the back half of 2026?
A:Approximately $20 million of the Argo impact is expected to be recovered in the second half of 2026, with an additional $10-$15 million impact anticipated in Q1.
Q:When is the U.S./CAN F&I segment expected to return to a 17%-18% op income margin?
A:The U.S./CAN F&I segment is expected to return to a 17%-18% op income margin by 2027 or 2028, following a reset to 2025 base results.
Q:What is the company's approach to addressing shifts in the packaged food industry?
A:The company is focusing on customer segmentation and channels for growth, including global key accounts, regional accounts, foodservice, and private label. It is mapping the private label ecosystem and strengthening distributor partnerships. Growth areas include dairy, foodservice, and private label, supported by solutions selling.
Q:What is the outlook for industrial starch demand and the Indianapolis starch modernization project?
A:Industrial starch demand softened in the second half of 2025, but the business remains strong. A $50 million investment in Cedar Rapids will expand capacity and modernize drying, completing in the second half of 2026. The Indianapolis starch modernization project, focused on food production, will improve safety, reduce costs, and slightly expand capacity, with a cogeneration unit to be commissioned in Q3 2026.
Q:What is the impact of GLP-1 drugs on the company's business?
A:While the impact of GLP-1 drugs on overall demand is being monitored, the company's protein fortification business has benefited, with double-digit revenue growth and a $20 million reduction in operating income loss in 2025. The business is fully contracted for 2026, with further revenue growth and operating income improvement expected.
Q:Review of Unclear Management Responses
A:Management avoided providing a direct answer to the question about when the company could return to its long-term operating income growth algorithm of 5%-7%. They cited new challenges in 2025 and indicated that the U.S./CAN F&I segment might return to a 17%-18% op income margin by 2027 or 2028, but did not provide a clear timeline for achieving the overall growth algorithm.
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Earnings Word Cloud
The most frequently occurring keywords in this quarter's earning call
Argo facility
Ingredients LatAm
LatAm sale
LatAm segment
SGA
Sales volume
Shares share
USCanada sale
USCanada segment
ability
action
challenge Argo
consumer insight
demand softness
expertise
industry
ingredient food
ingredient solution
inventory
issue
manufacturing
margin income
network
opportunity solution
portfolio
potential
production
protein fortification
record income
recovery
retirement
solution label
success
sugar reduction
sweetener
taste
volume demand
volume exchange
INGR Transcript
Ingredion Incorporated (INGR) Q4 2025 Earnings Call Transcript
Unknown2-3
The earnings call summary presents mixed signals: positive elements like increased share repurchase and optimistic guidance for Texture & Healthful Solutions are offset by concerns over flat net sales, manufacturing cost inflation, and unclear long-term growth timelines. The Q&A section reveals management's evasiveness on growth targets and potential risks like the strong Mexican peso and sugar tax. However, there are growth drivers like World Cup volumes and product diversification. Given these factors, the stock price is likely to remain stable, with no strong catalysts for significant movement.
Ingredion Incorporated (INGR) Q3 2025 Earnings Call Transcript
Unknown11-4
The earnings call presents a mixed picture: improved gross profit and operating income, but flat sales and challenges in key segments like LatAm and U.S./Canada. Positive factors include strong Texture & Healthful Solutions growth and share repurchase plans. However, uncertainties like inflation, Argo plant issues, and unclear guidance on Mexico's tax impact create caution. The Q&A reveals management's optimism but also acknowledges risks, leading to a neutral sentiment. Market cap data is unavailable, but overall, the stock is likely to remain stable over the next two weeks.
Ingredion Incorporated (INGR) Q2 2025 Earnings Conference Call Transcript
Positive8-1
The earnings call reveals a strong operating income growth of 29%, despite some regional sales challenges. The conservative guidance is balanced by the company's strategic initiatives, such as optimizing manufacturing and supply chain operations, which are expected to yield positive results. The Q&A section highlights management's cautious optimism, especially with operational efficiencies and volume growth in key segments. Additionally, the company's proactive approach to mitigating tariff impacts and its progress on asset sales further support a positive outlook. Given these factors, the stock is likely to see a positive movement in the short term.
Ingredion Incorporated (INGR) Q1 2025 Earnings Call Transcript
Unknown5-6
The earnings call presents a mixed picture: strong financial performance with increased gross profit and operating income, but challenges like foreign exchange impacts and cautious guidance due to potential supply chain disruptions. The Q&A reveals uncertainty, particularly in LATAM and potential tariffs, while shareholder returns through dividends and share repurchases are positive. The overall sentiment is neutral, reflecting balanced positive and negative factors without a clear catalyst for significant stock movement in either direction.
INGR Slides
Ingredion Q4 2025 slides: Segment divergence as T&HS shines amid Argo challenges2026-02-03
Ingredion Q3 2025 slides: Revenue drops 3%, production challenges impact earnings2025-11-04
Ingredion Q2 2025 slides: Margin expansion offsets revenue decline amid segment shifts2025-08-01
Ingredion Q1 2025 slides: Profit surges 26% despite sales dip, margins expand2025-05-06
INGR Report
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