Ingredion Incorporated

Thank you for standing by and welcome to the Ingredient Incorporated second quarter 2022 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'll need to press star 11 on your telephone. As a reminder, today's program may be recorded. And now I'd like to introduce your host for today's program, Jason Payne, Vice President of Corporate Finance and Interim Vice President of Investor Relations. Please go ahead, sir.

Good morning, and welcome to Ingredion's second quarter 2022 earnings call. I'm Jason Payne, Vice President of Corporate Finance and Interim Vice President of Investor Relations. On today's call are Jim Zally, our President and CEO, and Jim Gray, our Executive Vice President and CFO. We issued our results today in a press release that can be found on our website, ingredient.com, in the Investors 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 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. An 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 in the company's most recently filed annual report 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 in 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 Salley.

Thank you, Jason, and good morning, everyone. We are pleased to discuss Ingredion's second quarter performance and continued business momentum. We delivered outstanding top-line performance of 16 percent net sales growth for the second quarter. Our pricing centers of excellence continue to offset higher corn and other input costs, including foreign exchange impacts. Combined with a better product mix, our second quarter adjusted operating income grew 3% over last year's very strong second quarter. And just to note, this year's second quarter performance is now the strongest quarter we've delivered since 2017. Looking more closely at our top line performance, across all four regions, comparable net sales grew double digits in the second quarter. As I mentioned, our commercial teams continue to successfully manage the terms of our customer contracts to address higher corn and input costs and continue to take actions to offset foreign exchange impacts as the U.S. dollar continued to strengthen. Of note, we offset more than $40 million of foreign exchange sales headwinds in EMEA and Asia Pacific combined. Regarding customer demand, I would like to note that on a comparable basis, our shipped product volumes are now ahead of pre-pandemic levels for the same quarter in 2019. This is an important milestone for us given the impact the pandemic has had on the industry and our business over the last two years. At the same time, net sales have grown significantly and specialty ingredients have increased as a percentage of both volume and net sales, reflecting a higher value mix. Now, moving on to our strategic pillars. We continue to make great progress against each of the four pillars that are shaping our growth strategy. Global specialties once again exhibited strong top-line growth up mid-double digits in the quarter. Specialties performance was robust across all five growth platforms with texturizing ingredients and sugar reduction leading the net sales dollar increase. Additionally, plant-based protein sales were up strongly in the quarter and are now up more than 185% year-to-date. Moving to commercial excellence. While challenges remain across global supply chains, we've implemented several process improvements to best respond to customer demand. With regard to cost competitiveness through operational excellence, we have expanded our hedging programs and continue to build our capability to address commodity risks, primarily in North America. As a result, we anticipate significantly less commodity volatility in the second half of the year. We also maintain momentum against our fourth strategic pillar, accelerating a purpose-driven and people-centric growth culture. We published our 2021 sustainability report, Making Life Better, which details our progress against our 2030 global sustainability goals to address important societal and environmental sustainability challenges. During the quarter, we advanced several sustainability initiatives to drive positive, lasting impact in the communities where we live and work. One such example that I would like to highlight is a pilot program that Ingredion Brazil is leading. Working with Heineken and several other suppliers, we are teaching and training farmers to adopt regenerative farming practices. This pilot program resulted in a 25% reduction of emissions in scope and increased the amount of carbon captured in the soil by 40%. Separately, to further reduce our global carbon emissions, we have successfully exited coal usage at our Argo plant in Illinois, which resulted in an 8% reduction in our total Zone 1 and 2 carbon emissions. This change delivered nearly a third of the reductions needed to meet our 2030 greenhouse gas emissions goal. Also in the quarter, we published our 2021 Diversity, Equity, and Inclusion Report, which highlights our broad efforts to increase representation across our employee population. We are committed to creating a growth culture focused on diverse talent, inclusiveness, and community partnerships. As I mentioned, specialty delivered very strong growth this quarter across all four regions, and net sales grew double digits over and above the strong growth we experienced in the first half of 2021. While the growth was led by our texturizing portfolio, we also generated strong growth from our sugar reduction and specialty sweetener ingredients and plant-based proteins. Notably, our first half specialties net sales results are above our expected four-year net sales growth outlook, which we outlined at our recent investor day. Now, let me spend a moment to update you specifically on sugar reduction, which grew 20% in the second quarter, led by Pure Circle, where customer wins, drove 28% net sales growth and positive operating income. Pure Circle's continued momentum demonstrates its market leadership for high-intensity natural sweeteners in a rapidly growing market for reduced sugar foods and beverages. And we are pleased to share that we have increased our ownership of Pure Circle from 75% to 82% in the quarter. we anticipate further increases to our ownership of Pure Circle over the next three years. As we look ahead to the second half of the year, we are focused on navigating the challenges in the current business landscape. First, we continue to remain committed to offsetting inflationary increases through a combination of pricing and productivity improvements from our operations. We have demonstrated an ability to do this well in the first half, and we expect to be able to offset additional cost increases as they arise. Second, supply chain challenges continue to be impacted by labor availability, COVID restrictions, and the Ukraine conflict. Our teams are operating with agility to overcome these challenges to ensure continuity of supply and service to customers. Energy prices remain elevated, and there is increasing concern around the potential natural gas supply disruptions in Europe. We are currently developing contingency plans to mitigate possible impacts in the region. And lastly, while foreign exchange impacts have been relatively benign over the past two years, we are currently experiencing higher foreign currency weakness on the back of a strengthening U.S. dollar. Our pricing centers of excellence have served us well, and we will continue to price through raw material costs increases as well as foreign exchange. Now, let me hand it over to Jim Gray for the financial overview. Jim?