Ingredion Incorporated

Good day, and thank you for standing by. Welcome to the Ingredion Incorporated fourth quarter 2023 earnings 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 1 1 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 1 1 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your host today, Noah Weiss, Vice President of Investor Relations. Please go ahead.

Good morning, and welcome to Ingredient's fourth quarter and full year 2023 earnings call. I'm Noah Weiss, Vice President of Investor Relations. Joining me on today's call are Jim Zally, Vice President and CEO, and Jim Gray, our Executive Vice President and CFO. The press release we issued today, as well as the presentation we will reference for our fourth quarter and full year results, can be found on our website, Ingredion.com, in the Investors section. As a reminder, our comments within the 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, 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 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 Form 10-Q and 8-K. During this call, we will 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. With that, I will turn the call over to Jim Zally.

Thank you, Noah, and good morning, everyone. Our business performed exceptionally well in 2023, surpassing several key financial records with solid net sales, very strong profitability, and robust cash flow. as well as outstanding company performance across safety, environmental, and importantly, service delivery. For the full year, we increased our net sales 3% and our adjusted operating income by 23% as we managed raw material volatility and took pricing actions and proactive cost-saving measures. As we look ahead to 2024, we are well positioned to deliver further financial growth on top of 2023's remarkably strong results and are confident that our new segmentation will better align our resources and capabilities with customers' needs to realize further growth opportunities. Let me update you now on progress against our four strategic pillars. Beginning with specialty ingredients, Full-year net sales grew by 4%, and specialty growth contributed to gross margin expansion. At the end of 2023, specialty ingredients represented 34% of consolidated net sales. Performance highlights included food systems, driven by strong private label demand, and pharma and personal care, driven by continued wellness trends, each demonstrating strong top line growth for 2023. Turning to commercial excellence. Throughout the year, our technical service teams engaged regularly with customers to co-create and provide the best ingredient solutions for their application. We were pleased to see a 26% increase in customer engagements, both in person at our idea labs and virtually through our digital connect studios. We believe this demonstrates a recognition by our customers not only of our capabilities, but also their need to innovate to drive volume growth. We also advanced our go-to-market capabilities through global training and consultative selling with a focus on consumer trends that continually drive our business, including protein and fiber fortification, clean labeling, and sugar reduction. By giving our teams the tools and information they need to help customers innovate around these trends in real time, we have been able to improve our net promoter scores, something that we regularly track. Adding to this, our investment in supply chain systems have improved on-time delivery each quarter as we progressed through 2023, giving our customers confidence that our supply chain can support just-in-time demand. In the area of cost competitiveness, we invested in our procurement capabilities, completed a redesign of the team, and have provided training globally in category management. The team has done an outstanding job of leveraging ingredient scale and implementing best practices. We are beginning to see significant value creation through real year-over-year savings, risk reduction, and improved supplier collaborations. I also want to emphasize the outstanding work that our operations team has done to ensure the safety of our employees and contractors this year. Ingredion has always been a leader in safety performance, but this year we have achieved a notable improvement in reducing the number of recordable and lost time incidents. As 2023 developed, we experienced softer customer demand. Our supply chain and operations teams responded quickly by adjusting production schedules, which enabled us to end the year with a well-balanced inventory level. As we absorbed greater fixed costs in 2023, we feel that we are well-positioned in 2024 as volumes recover to obtain leverage from our operations and lower manufacturing costs. Finally, acknowledging our purpose-driven and people-centric growth culture. I'm proud to report that we earned a perfect score in the Human Rights Campaign Foundation's Corporate Equality Index for 2023. We are also happy to announce that we were once again recognized on Fortune's Most Admired Companies list, ranking in the top five of the food production category. Regarding progress against our sustainability agenda, in 2023, we reached a new milestone with 66%. of our five priority crops being sustainably sourced. We are on track to meet our 2025 commitment of 100% sustainable sourcing. Also, we continue to expand our regenerative agriculture program with customers, resulting in an 85% year-over-year increase in acreage. Regenerative agriculture is currently seen as one of the most promising mechanisms for on-farm carbon reductions to help all companies in the food supply chain to reduce their scope three footprint. Turning now to gross margins. During 2023, we improved gross profit margins by 260 basis points to 21.4%, which demonstrates that our pricing actions and proactive cost savings initiatives have absorbed the inflation of the last three years. The gross profit margin improvement was achieved despite declining customer demand and necessary actions by our operations teams to slow production resulting in higher fixed costs. It's worth noting that this is the sixth consecutive quarter of gross margin growth. And I'd like to highlight that 2023 has been a record year for the company across a number of important financial metrics. We have increased our sales to $8.2 billion, which is an all-time high. We delivered $969 million of operating income, up 23%, which is also a record high. And adjusted EPS grew to $9.42, which is the most ever and 26% higher than last year. As changes in working capital investments turn favorable, we delivered cash from operations of over $1 billion. These combined results delivered a positive return for shareholders with 15 percent total shareholder return. Now, I will hand it over to Jim Gray for the financial review and 2024 outlook. Jim? Jim Gray Thank you, Jim, and good morning to everyone.