Ingredion forecast a sharp recovery in earnings despite
highlighting its vulnerability to depreciation in emerging market currencies,
and to the low sugar prices which undermine the market for corn-based
Shares in the US-based corn processor soared 10% in early
deals in New York, adding $450m to its market value.
Ingredion revealed a 7.0% decline to $402.8m in earnings
for 2013, equivalent to $5.05 a share, undermined by factors including
"economic weakness" in Mexico, a major buyer of high fructose corn
syrup (HFCS), and weak currencies in many important markets.
This was particularly the case of South America, where the
group suffered a $144m hit thanks to currency devaluations, largely of
Brazil's real and Argentina's peso, which lost 25% against the dollar last
Operating profits from South America slumped 41% to
$116.4m, with Argentina responsible for "almost three-quarters" of
the decline, and economic weakness and "energy and labour costs"
adding to the setback from currency depreciation, Ingredion said.
However, the group forecast a recovery in earnings per share
to $5.35-5.75 for 2014, potentially setting a record high, despite the further
jitters since surrounding emerging market currencies, and in particular the
peso, which has lost a further 17% against the dollar so far this year.
"The guidance anticipates ongoing cost pressures and
currency headwinds in Argentina," Ingredion said.
The forecast also factors in a "challenging
environment, as sugar prices remain low", heightening competition in the
sweeteners market against HFCS.
Nonetheless, the company said that all four of its regions –
Asia Pacific, Europe, North America and South America, Europe – would deliver
growth in operating profits, compared with only one, Asia Pacific, last year.
While failing to detail sources for profit rises, the group
highlighted a $300m-500m investment programme for this year which "will
support growth and cost reduction across the organisation".
'Pressure on pricing'
The caution over the weaker sweeteners market tallies with
comments from Archer Daniels Midland, a rival manufacturer of HFCS, earlier
this week on the annual round of pricing talks with major buyers of the
product, which is popular in particular with soft drinks makers.
"Although we haven't closed every single negotiation…
at this point in time we see stable volumes for North America and declining
volumes from Mexico, "ADM chief operating officer Juan Luciano told
"That is putting some pressure on pricing in this
Indeed, "pricing is a little bit weaker than we
thought," although the impact of weaker prices "will be partially
offset by lower corn cost and our management of our footprint and our product
Mr Luciano also highlighted the dent to Mexican demand from
a tax on fizzy drinks, which "some of the experts are predicting that
maybe is going to impact about 5% of volume", and of a "great sugar
"That makes sugar prices very, very low there… That has
driven prices in these early negotiations down versus what we expected."
In New York, Ingredion shares touched $64.68 in early deals
before easing a little to $64.31 as of 10:15 local time (15:15 UK time), up
9.1% on the day.