Ingredion Incorporated

The conference will begin shortly. To raise and lower your hand during Q&A, you can dial star 1-1. Good day, and thank you for standing by. Welcome to the Ingredion Incorporated fourth quarter and full year 2022 earnings conference call. Time all participants on 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 11 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 11 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Noah Weiss, Vice President of Investor Relations. Please go ahead.

Good morning, and welcome to Ingredion's fourth quarter and full year 2022 earnings call. I'm Noah Weiss, 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. The press release issued today and the presentation we will reference for the fourth quarter full year result can be found on our website, Ingredion.com, in the Investors section. 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 these estimated in the forward-looking statement, 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 could be found in the company's most recently filed annual report on Form 10-K and subsequent reports on Form 2 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 Zally.

thank you noah and good morning everyone i'm pleased to report that for 2022 ingredient delivered outstanding performance with top line and adjusted profit growth growing 15 percent we finished the year with a strong fourth quarter with net sales up 13 percent and adjusted profit growth up 49 percent our teams demonstrated resilience and agility throughout 2022 as they overcame macroeconomic headwinds while executing against our driving growth roadmap, while also expanding and transforming our solutions and opportunity set with customers. 2022 was yet another year of unexpected challenges that demonstrated the strength of our business model and the ability of our teams to anticipate and respond effectively. Our largest raw material input, corn, was significantly impacted by both the Ukraine conflict and a drought in Europe. Yet, despite those supply shocks, our team was able to secure raw material, keep our customers supplied, as well as overcome unexpected raw material inflation. Also related to corn and energy, we expanded our hedging practices to mitigate profit volatility. an approach that we will continue to follow going forward. The strong demand we experienced last year, coupled with supply chain constraints, provided the opportunity to drive value creation from customer and product mix management, which was enabled by improving the terms of customer contracts. Furthermore, despite a significant strengthening of the US dollar, and two thirds of our sales being outside of the US, we successfully offset more than $200 million of foreign exchange headwinds. Lastly, I'm especially proud of the work our team did ramping up production and sales from our new Shandong facility, despite countrywide COVID challenges. With expanded capacity for specialty modified starches, our business in China is well positioned for accelerated growth as the economy reopens. As we look to 2023, we are focused once again on addressing head-on many of these same challenges, even as some begin to diminish. We will continue to utilize the levers available to us, whether it's the capacity expansions we've invested in for growth, pricing to offset inflation, operational efficiencies for cost reduction, or expanded risk management practices, all to deliver against our growth objectives. Turning to our performance, we finished the year strong, delivering record top-line performance for the fourth quarter, with sales growing 13% and adjusted operating income increasing 49%, or up 57% on a constant currency basis. For the full year, top line and adjusted operating income performance was also outstanding, both achieving 15% growth compared to the same period last year. These results were driven by robust performance across both core and specialty ingredients. Additionally, we continued to successfully offset higher raw material and logistics costs, as well as significant foreign exchange impacts. Looking at the net sales performance in a little more detail, from a segment perspective, all four regions generated strong net sales for the full year and fourth quarter, led by North and South America. Notably, on a constant currency basis, Asia-Pacific and EMEA demonstrated considerably stronger results. Turning now to our strategic pillars. During the fourth quarter and full year, our teams did an exceptional job of executing with agility across our four strategic pillars, beginning with specialties growth. Last quarter, we updated you on the progress we are making to expand our starch-based texturizer network capacity to further enhance the resiliency of our global supply chain. Of the $160 million investment, I'm pleased to report that we have completed one-third of the capital installations. This strategic set of investments will provide headroom for growth, reduce local delivered costs, and improve service by shortening supply chains. Turning to commercial excellence. Our pricing centers of excellence supported our sales teams to deliver $1.3 billion of net sales growth through pricing pass-through of input cost inflation and customer and product mix management. If we look at specialty ingredients more broadly, this business grew double digits both for the quarter and full year. This sustained momentum continues to validate the significant ongoing investments we are making to transform our portfolio toward on-trend and more competitively differentiated and unique ingredient solutions. Against our all-life sustainability goals, in the fourth quarter, we reached 47% sustainable sourcing of our five priority agricultural inputs, up from 33% last year, We are tracking well against our goal to achieve 100% sustainable sourcing for our five priority crops by 2025. We are equally excited about the potential to drive value creation from our third strategic pillar, cost competitiveness through operational excellence. We are holistically assessing how we buy, make, and move our raw materials and finished products effectively to customers and at the lowest cost. In this regard, we are making investments to enhance supply chain connectivity and visibility and drive digital transformation of the factory floor. In addition, we are extending our global operating model to bring together our global procurement organization. This represents an opportunity to better leverage our global scale and build more value-creating supplier relationships. It is also noteworthy to highlight that once again this past year, we deployed expanded raw material risk instruments to reduce cost volatility. This was also a contributor to our overall strong performance. Lastly, we continue to advance our purpose-driven and people-centric growth culture. We are pleased to have been recognized as a top employer in five Asia Pacific countries. And in early December, our 2030 emissions reduction targets were validated by SBTI. Let's now turn to the progress we are making within a couple of our specialty growth platforms and discuss how we are continuing to invest to lead in these growing markets. First, beginning with sugar reduction and specialty sweeteners, we delivered over $400 million in net sales with strong double-digit growth again in the quarter. Pure Circle's talented go-to-market team delivered 14% net sales growth and positive operating income by volume and breakthrough product innovations. We are excited by the tremendous opportunities we see for our sugar reduction franchise worldwide. I'm also pleased to mention that we increased our ownership of the Pure Circle business to 87%, up from our original 75% stake. Turning now to our plant-based proteins business. Net sales for 2022 were $36 million, up 118% from the prior year period. Although sales doubled and our profitability slightly improved, we did not grow the top line nor reduce the operating losses as much as we had expected. Our South Sioux City facility is laser-focused on improved product quality attributes that we believe will appeal to broader market segments. We see exciting growth opportunities in fortified bakery, alternative dairy, sports nutrition, and beverages. We continue to see the current $10 billion market for plant-based proteins, which is growing steadily at more than 6% per annum, as an exciting growth opportunity. we remain committed to our strategy to execute upon a formulation approach towards structuring and fortifying plant-based foods with a leading portfolio of protein flours, concentrates, and isolates. A new highlight in specialties we wanted to mention is our expansion into pharmaceutical applications and investments in India. During the second half of the year, we made two acquisitions in India in the high-value pharma ingredient space with our Q3 purchase of Amishi and our Q4 acquisition of Manitab. These additions are part of our strategy to selectively expand our pharma ingredient portfolio and diversify into high-value non-food adjacencies. Both acquisitions complement our existing global pharma footprint and add capabilities on the ground in India which is one of the fastest-growing specialty pharma markets. We anticipate double-digit net sales growth and above-average gross margins as we grow these two businesses. Now, let me hand it over to Jim for the financial review, after which I'll make a few concluding remarks before we open it up for Q&A. Jim? Thank you, Jim.