Ingredion Incorporated 2026 Q2 Earnings Call

Welcome to Ingredion's second quarter 2026 earnings call. I'm Noah Weiss, Vice President of Investor Relations. Joining me on today's call are Jim Zallie, our Chairman, President, and CEO, and Jason Payant, our Vice President and Interim CFO. The press release issued this morning, along with the presentation we will reference during today's call, is available on 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 those estimated in the forward-looking statements. 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 report on Form 10-K and subsequent reports on Forms 10-Q and 8-K. During the 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 appendix. As part of our prepared remarks, we will touch on the announced acquisition of Tate & Lyle and the progress we have made since announcing the transaction.

That said, given where we are in the process, we are limited in what we can disclose and cannot speculate on potential outcomes, timing, integration matters, or other transaction-related topics beyond information already in the public domain. We appreciate your understanding and ask that questions today be focused on our operating results and outlook. With that, I will turn the call over to Jim.

Thank you, Noah, and good morning, everyone. Ingredion delivered a second quarter performance which was in line with expectations, led by continued momentum in Texture & Healthful Solutions, with net sales increasing 1% to $1.85 billion. Adjusted operating income was $258 million, down 5% from the prior year. Results were impacted by softer production and demand in our Food & Industrial Ingredients U.S. Canada segment and continued macroeconomic pressures in Mexico. At the same time, performance across the rest of the portfolio was strong as we delivered the second highest quarterly operating income ever in Texture & Healthful Solutions. We are pleased to say that Argo reliability and production sequentially improved during the quarter, and at the end of June, the plant was operating at normal production rates across all major operating units.

Turning to the next slide, we are pleased with the momentum that we continue to see in Texture & Healthful Solutions. Quarter two marked the ninth consecutive quarter of net sales volume growth in the segment, up 7%, with broad-based growth from our solutions offerings and clean-label ingredients. While the consumer environment remains mixed, we are seeing robust customer innovation activity with reformulation across health and wellness, protein and fiber fortification, and clean label, all supported by new product launches. These trends align with the value propositions inherent in our Texture & Healthful Solutions growth strategy, and they reinforce our confidence in sustainable long-term volume and margin growth. Tempering the positive innovation momentum, we did see additional increases in tapioca costs in the quarter, with root prices now up more than 40% since the start of the year due to weather-related impacts limiting supply.

We are actively passing through price increases, which, as a reminder, take approximately one to one and a half quarters to realize. In Food & Industrial Ingredients LATAM, volumes were down slightly against a strong prior year comparison. While the macroeconomic conditions in Mexico have been challenging, underlying long-term market trends remain intact. The business in South America continued to benefit from broad regional strength, particularly the growth in Brazil's industrial and brewing markets. In Food & Industrial Ingredients U.S. Canada, volumes remained below prior year levels due to lower production and softer food and beverage demand. That said, reliability and performance at our Argo facility sequentially improved throughout the quarter, and we exited June operating at normal production rates. Our industrial business in U.S. Canada saw growth from the packaging sector, supported by a differentiated solution we recently launched for corrugating, which speeds up box production.

Turning to the next slide, let's review our progress against our three strategic pillars. First, under profitable growth, our announced pending acquisition of Tate & Lyle achieved an important milestone last week with the approval by Tate & Lyle shareholders of the deal. As stated previously, we believe this combination will establish Ingredion as a more comprehensive global leader in ingredient solutions with the innovation expertise and geographic reach that will help create the future of food. Our solutions-led growth strategy continues to gain traction, contributing to strong first half performance in Texture & Healthful Solutions. As part of Texture & Healthful Solutions' diversified portfolio, we strengthened our pharma business in India through an announced strategic partnership with Sanstar.

This important relationship expands our capabilities in pharmaceutical excipients with the opportunity to also partner in the development of specialty food ingredients while providing access to large-scale manufacturing in the world's most populous country and one of the fastest-growing markets for food ingredients. Moving to our next pillar, innovation remains a key differentiator for Ingredion. We are increasingly leveraging digital capabilities to accelerate innovation. During the quarter, we launched Ask Ingredion, our AI-powered formulation platform designed to help customers identify ingredients and solve formulation challenges that help them bring new products to market faster. We also strengthened our Healthful Solutions portfolio through the acquisition of Benicaros®, a clinically supported immune health prebiotic. Benicaros®' value proposition sits at the intersection of several attractive consumer trends, including digestive health, immune support, and clean label formulation.

It is an example of how we are helping customers differentiate their products by enabling them to make science-backed health benefit claims. Additionally, we continue to target new, higher-value industrial applications. Our advancements in coatings, adhesives, and barrier solutions for sustainable food packaging continue to gain traction with active customer engagements. For example, we are helping customers replace PFAS-containing grease-resistant barriers with plant-based alternatives that maintain performance while improving recyclability and being regulatory compliant. Our differentiated bio-based adhesive solutions for corrugated packaging manufacturers are improving machine productivity, reducing waste, and enhancing board performance. We are bullish on the growth prospects of these targeted industrial applications. We remain equally focused on delivering growth consistent with our sustainability commitments. Ingredion was named to Forbes' Net Zero Leaders list for the second year in a row.

This distinction is especially noteworthy because it is based on demonstrating progress against objective, quantifiable metrics for lowering greenhouse gas emissions. Finally, for the enterprise productivity pillar, we continue to invest to transform our portfolio and optimize our processes and network to best position the company for long-term value creation. Last quarter, we announced the sale of our majority stake in the Pakistan business, as well as the closure of our Cabo, Brazil plant. Both moves reduce our exposure to less differentiated ingredients and will drive improved effectiveness and efficiency. Last week, Tate & Lyle shareholders approved the terms of a recommended all-cash offer by Ingredion for the entire issued and to-be-issued share capital of Tate & Lyle, an important milestone in the U.K. scheme of arrangement process and a positive step toward completing the transaction.

With shareholder approval secured, our focus is now on progressing the required regulatory reviews and satisfying the remaining closing conditions. We are actively engaged with the relevant authorities and are working to support their review processes as efficiently as possible. The financial profile of the transaction remains compelling. With the addition of $2.7 billion of highly complementary revenue, the opportunity to deliver $130 million of expected run rate synergies by 2030, and the expectations to deliver greater than 15% adjusted EPS accretion in the first full calendar year post-acquisition, all with a clear path to achieving less than 2.5 times net leverage within 18 months of closing. Turning to the next slide, let me explain why we are so enthusiastic about the strategic rationale for the pending acquisition of Tate & Lyle. Across the food and beverage industry, manufacturers are working to successfully appeal to changing consumer buying behaviors.

Consumers are placing greater emphasis on health and wellness in response to changing regulations and lifestyle preferences. While brands remain under pressure to deliver affordability without compromising taste and the overall eating experience. These challenges increasingly require customers to optimize multiple attributes at the same time. That can include improving nutrition through fortification or reducing sugar while enhancing texture and mouthfeel to maintain great taste and delivering on affordability. This is where combining Ingredion's and Tate & Lyle's capabilities becomes particularly compelling. Together, we will bring a broader portfolio of complementary capabilities across sweetening, texture, mouthfeel, fiber, and protein fortification, supported by expanded scientific expertise and a more comprehensive global innovation network. Beyond an expanded portfolio of individual ingredients, the opportunity is to provide more integrated and complete solutions that help customers solve formulation challenges more quickly and effectively.

Combined with greater scale, deeper scientific capabilities, and enhanced digital and AI-enabled tools, we believe we will be even better positioned to support customers as consumer needs continue to evolve. Following the combination, more than half of our revenue will come from Texture & Healthful Solutions, the fastest growth segment of our business portfolio, where customer and consumer demand remains strong and volume growth endures. Ultimately, Tate & Lyle will accelerate our shift toward higher value and higher margin solutions and positions Ingredion to be an even stronger innovation partner and reliable supplier. With that, I'll turn the call over to Jason for the financial review.