Ingredion Inc (NYSE: INGR) stock fell over 1.2% today (on 16 Jul, as of 10:09 AM GMT-4; Source: Google finance) after the company announced preliminary results for the second quarter of 2018, which prompted management to revise full-year 2018 guidance lower. The company’s management might not be waving the white flag just yet. While Ingredion does need to find new growth opportunities and adjust to changing realities in the food ingredients market (such as pivoting to low-calorie sweeteners), the company says it’s on track to boost specialty ingredients sales to $2 billion by 2022. The portfolio of high-margin products is expected to represent 32% to 35% of total sales that year.
That hints that Ingredion still will be struggling to grow its top line, as those numbers point to annual revenue of $5.71 billion to $6.25 billion in 2022. But it will be higher-margin revenue and generated (hopefully) from more future-proof sweetener ingredients. And management does have a track record of delivering growth on the bottom line: Net earnings have grown from $355 million in 2014 to $519 million last year.
The Company has accelerated Cost Smart savings program by establishing a $125 million target by year-end 2021 through the reduction of Cost of Sales and SG&A expenses. The Cost Smart supply chain initiatives encompass future network optimization. The Company currently expects the second quarter earnings per share and Adjusted earnings per share of $1.51 to $1.59 and $1.63 to $1.68, respectively due to lower than expected North America performance.
The Company has revised its 2018 adjusted earnings per share Guidance to $7.50 to $7.80 from $7.90 to $8.20. Its revised expectation for adjusted cash flow provided by operating activities* (“adjusted cash flow”) is $800 million – $850 million, excluding one-time tax benefits. . In North America, the company has experienced lower than expected sweetener volumes sold into beverages and higher than expected manufacturing costs. Its expectation for adjusted cash flow is $800 million – $850 million, excluding one-time tax benefits. Going forward, the Company remains on target to grow its specialty portfolio business to $2 billion in annual sales by 2022, comprising 32 to 35 percent of net revenue.
Meanwhile, the Company will cease wet-milling operations at its Stockton, California facility and establish a shipping distribution station by year-end 2018. After the transition, the Company will begin using the facility to distribute finished products to customers in the Western United States, in particular California. Currently, the facility produces high fructose corn syrup and industrial starch. The company’s actions to optimize the North America network by cessation of wet-milling at its Stockton facility are expected to save $6 million – $9 million and will reduce its fixed cost footprint.