Ingredion Incorporated

Good day and thank you for standing by. Welcome to the Ingredient Incorporated Q2 2021 earnings conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 1 on your telephone. Please be advised that today's conference is being recorded. If you require any further assistance, please press star 0. I would now like to hand the conference over to your speaker today, Tiffany Willis, Vice President of Investor Relations and Corporate Communications Officer. Please go ahead.

Thanks, Joelle, and good morning, everyone, and welcome to Ingredion's second quarter 2021 earnings call. I'm Tiffany Willis, Vice President of Investor Relations and Corporate Communications Officer. On today's call are Jim Zally, our President and CEO, and Jim Gray, our Executive Vice President and Chief Financial Officer. We issued our results today in a press release that can be found on our website, ingredient.com, in the Investor section. The slides accompanying this presentation can also be found on the website and were posted today for your convenience. As a reminder, our comments within this presentation may contain forward-looking statements. These statements are subject to various risks and uncertainties. These statements include expectations and assumptions regarding the company's future operations and financial performance. including the impact of the COVID-19 pandemic. Actual results could differ materially from those predicted in the forward-looking statements, and Ingredion assumes no obligation to update them in the future as or if circumstances change. Additional information concerning factors that could cause actual results to differ materially from those discussed during today's conference call or in this morning's press release can be found in the company's most recently filed annual reports on Form 10-K and subsequent reports on Forms 10-Q and 8-K. During this call, we also refer to certain non-GAAP financial measures, including adjusted earnings per share, adjusted operating income, and adjusted effective tax rate, which are reconciled to U.S. GAAP measures and Note 2 non-GAAP information included in our press release and in today's presentation's appendix. Now, I'm pleased to turn the call over to Jim Vallee.

Thank you, Tiffany, and good morning, everyone. We delivered exceptional second quarter performance, demonstrating the strength and breadth of our customer base and the resiliency of consumer demand for the range of food products that use our ingredients. In every region, we saw double-digit growth from demand recovery across all customer segments, as well as very strong specialties growth. Our strong sales execution and price management in the face of robust and fluctuating demand contributed to our 31% net sales growth. Adjusted operating income for the quarter was up 64% versus prior year and marks our strongest quarter since 2017. All four regions performed extremely well with South America delivering another remarkable quarter driven by favorable price mix. Shifting to our strategic pillars, we've made meaningful progress against each of our strategic pillars throughout the quarter, and these continue to provide execution focus for creating long-term shareholder value. Beginning with specialties, We continue to drive sales of these higher value ingredients and systems, and we are pleased to share that they are now an even larger portion of our total net sales, at 33% as of the end of the second quarter. We experienced strong demand across our entire specialties portfolio, which led to healthy double-digit growth in all four regions. Moving to commercial excellence, Our teams are working exceptionally closely with customers as consumer demand recovery has created pressures throughout the entire supply chain. We are supporting increased food service demand as well as solid demand for packaged foods. This quarter, we also enhanced our digital capabilities for customers by completely renovating and integrating many independent websites into one global, user-friendly, content rich, customer destination. I'll speak to cost smart details momentarily, but I'm excited to share now that we have already actioned and captured $135 million in run rate savings year to date, as our teams have been relentlessly executing against our program targets. Our purpose, culture, values, and talent pillar is the foundation of our strategy. Accordingly, our employees' health and safety remains our top priority. Right now, we are monitoring closely the increased COVID infection rates in Asia Pacific, and our COVID project management office is working to accelerate vaccination availability to all of our employees around the world. In support of our diversity, equity, and inclusion efforts, I'm also proud to highlight that we stood up two more employee business resource groups in the quarter in support of our Latinx population and employees with disabilities. This now brings Ingredion's total number of business resource groups to seven with 33 chapters operating around the world. Also this quarter, we reimagined the future of work for our company and recently communicated our approach to agile ways of working, detailing the operating parameters of our hybrid model. This is centered on providing employees flexibility within a framework, balancing the needs of the business while nurturing a culture of spontaneous learning and development, collaboration, and innovation. Now, let me highlight our specialties performance for the quarter. We delivered exceptionally strong double-digit specialties ingredients growth in Q2. Demand was strong across all five of our growth platforms, reflecting a strong comeback for food service and the importance of our starch-based texturizers and clean and simple ingredients for these formulations. We also experienced strong demand for specialty sweeteners and sugar reduction solutions, and our plant-based protein sales more than doubled in the quarter from prior year. Sales of specialty ingredients have now increased to represent 33% of the company's sales. As we recently shared at Cagney, we are well positioned with a four-year plan to have specialties meet our target of 38% of sales by 2024. South America led our growth this quarter with 46% specialties growth driven by volume and price mix. Asia Pacific also performed exceptionally well with 41% specialties growth in the quarter, led by growth from the sugar reduction platform, which included acquisition growth from the inclusion of Pure Circle. Excluding Pure Circle, Asia Pacific delivered 12% specialties growth. EMEA delivered 35% specialties growth in the quarter, which includes two months of sales from KTEC. Excluding KTEC, EMEA delivered 25% specialties growth. North America's 18% specialties growth was driven primarily by food service recovery. And now let me provide an update on our recent strategic growth investments. We are very pleased with Pure Circle's net sales growth, which is ahead of our first half expectations. Most importantly, Pure Circle's project pipeline continues to expand, and new customer wins are being led by breakthrough bioconverted REBM sales and flavor blends. The amorous partnership and collaboration on REBM from fermentation is progressing well, and initial customer feedback for this great-tasting product has been very positive. Now, sharing a few highlights from the plant-based proteins platform. We received food grade certification for our Van Scoy Saskatchewan facility, and the team reached a new record level of production for protein flours and concentrates in June. With respect to our South Sioux City facility, the team continues to optimize its operations to meet anticipated increasing customer demand in the second half of 2021. Within our food systems growth platform, our recently announced KTEC acquisition is being integrated well into our EMEA business. While early days, we are pleased to see sales growth ahead of our business case. Now moving to ESG. In the second quarter, we published our 10th Annual All-Life Sustainability Plan, which contained updated and expanded 10-year ESG commitments. This report highlights our sustainability accomplishments and progress, and I could not be more proud of our team who continue to identify ways to improve our operations to benefit all stakeholders. Given the importance of ESG, we are committed to highlighting our progress on a more frequent basis, which will be both annually in our sustainability report as well as biannually in our shareholder updates. One aspect of our ESG strategy is working closely with customers. One important element of our all-life plan speaks to connected life, and I'm pleased to update you on the progress specifically related to sustainable and regenerative agriculture, which is very important to our customers and growers. We committed to sustain, sustainably source, 100% of our global waxy corn needs, a critical crop for us by the end of 2022. As of the second quarter, we are sustainably sourcing 95% of our global waxy corn needs and expect to achieve our goal ahead of schedule. We also remain committed to sustainably source 100% of our Tier 1 priority crops, including corn, tapioca, potatoes, pulses, and stevia by 2025. These crops collectively continue to represent about 99% of our global crop sourcing by volume, and we are already 25% of the way toward meeting this goal. And in addition, our commitment has been unwavering to educating growers and implementing pest management into over 70% of our agricultural supply by the end of 2027. As of the second quarter, we have reached a milestone of 57% penetration of our agricultural supply. The progress we have made in sustainable and regenerative agriculture has already made a meaningful impact and we are committed to ensuring this continues to contribute to our Connected Life goals. I'll now close my section with an update on CostSmart. When we introduced our CostSmart savings program in 2018, we set an initial run rate savings target of $125 million over three years. We subsequently increased the savings target twice, first to $150 million in 2019, and ultimately to our current stretch goal of $170 million by year end 2021. Our team's resourcefulness and perseverance resulted in our second quarter closing with a solid $135 million of run rate cost savings. And we are well positioned to deliver the full cost smart savings program target, as many of the initiatives currently underway reach completion by year-end. Now, let me hand it off to Jim Gray, who will provide a financial review. Thank you, Jim.