Ingredion’s Margins Rise Despite U.S. Operational Hits

Date of Call: Feb 3, 2026

Financials Results

• Revenue: $1.8B for Q4, down 2% YOY; $7.2B for full year, down 3% YOY
• EPS: $0.13 increase in adjusted diluted EPS for full year, up 4.5% YOY
• Gross Margin: 24.5% for Q4, slightly lower; 25.3% for full year, up from prior year
• Operating Margin: Adjusted operating income $228M for Q4; $1.028B for full year

Guidance:

• Full year 2026 net sales expected up low single digits to mid-single digits.
• Full year 2026 reported and adjusted operating income expected up low single digits.
• Full year 2026 adjusted EPS expected in range of $11 to $11.80.
• Q1 2026 net sales expected down low single digits; operating income expected down mid-double digits.
• Texture & Healthful Solutions net sales and operating income growth expected up low single digits to mid-single digits.
• Food & Industrial Ingredients LatAm net sales up low single digits to mid-single digits; operating profit flat to up low single digits.
• Food & Industrial Ingredients U.S./Canada net sales generally flat YOY; operating income projected flat.
• All other businesses net sales up high single digits; operating income to improve $5M to $10M.
• 2026 financing costs estimated $40M to $50M; effective tax rate 25.5% to 27%.
• Capital expenditures anticipated $400M to $440M.
• Cash from operations expected $820M to $940M.

Business Commentary:

Record Operating Income and Earnings Growth:

• Ingredion reported record full year operating income and earnings per share growth, driven by strength in the Texture and Healthful solutions segment and solid results from the Food and Industrial Ingredients LatAm business.
• The growth was supported by continued demand for clean label ingredients and solutions, along with strategic investments and cost savings.

Operational Challenges and Recovery Plans:

• The Food and Industrial Ingredients U.S./Canada segment experienced a 7% decrease in net sales volume in Q4 due to operational difficulties at the Argo facility and softness in beverage sweetener volumes.
• Steps are being taken to address these issues, with expectations for a gradual recovery and improvement throughout 2026.

Currency and Economic Volatility Impact:

• The Food and Industrial Ingredients LatAm segment faced challenges due to regional economic and political volatility, impacting demand in brewing adjunct, confectionery, and paper sectors.
• Despite these challenges, the segment managed to deliver record operating income and margins, supported by strategic customer and product mix diversification in Mexico.

Strategic Investments and Cost Savings:

• Ingredion completed strategic capital growth and cost savings investments, including a starch modernization project and an expansion of a blending center, contributing to higher margins and customized solutions revenue.
• The company achieved $59 million in Cost2Compete run rate savings, exceeding its target, and is transitioning towards long-term enterprise productivity initiatives.

Sentiment Analysis:

Overall Tone: Positive

• CEO noted 'record full year operating income and earnings per share growth' and 'we delivered record gross profit and expanded margins to over 25%'. Despite challenges, management highlighted 'strong sales volume momentum', 'nearly $60 million of Cost2Compete run rate savings', and 'building a foundation for sustained long-term growth'.

Q&A:

• Question from Kristen Owen (Oppenheimer & Co. Inc.): Kicking off then with the outlook. You sprinkled some breadcrumbs throughout the prepared remarks about the Argo facility. Just help me understand how much in the fourth quarter was Argo versus the volume decline? And then how we should think about that playing out in 2026?
  Response: Argo impact was about $16M in Q4, $40M for full year 2025. Recovery expected to provide benefit in back half of 2026. U.S./Canada Food & Industrial segment operating income projected flat for 2026 due to manufacturing inflation not fully offset by pricing.

• Question from Kristen Owen (Oppenheimer & Co. Inc.): On Texture & Healthful Solutions. One of the questions that we get about Ingredion is through this Texture & Healthful Solutions, really looking to see that ASP per ton move higher, help contribute to that OI income outgrowth. Maybe pencil out for us the onetime items there? And then the price/mix headwinds that you're expecting in 2026.
  Response: Q4 op income margin impacted by one-time SG&A benefits in prior year. Gross margins expanded. Price/mix expected positive in 2026 driven by solutions growth and texture elevation, offset by some negative mix from Thailand tapioca glucose syrup.

• Question from James Cannon (UBS Investment Bank): I wanted to ask on the LatAm business. You had some mix management from business rationalizations earlier in the year. And you talked in the quarter about underlying demand there being improving. I was just wondering if you could kind of break out some of the volume movements that you saw there.
  Response: Q4 LatAm net sales up 1%. Sales volume declined 3% due to brewing adjunct volume declines (over 100% of downside). Food and beverage volumes grew. Mexico food volumes up 3%, beverage up 1%.

• Question from James Cannon (UBS Investment Bank): You talk about the solutions business being higher margin than the rest of the segment. Could you just give us some quantification of like how much of the mix is sold as solutions today, what that margin differential looks like?
  Response: Solutions business is just over $1B, representing about 40% of segment revenue, with margins 5% higher than segment average (around 30-35%).

• Question from Benjamin Theurer (Barclays Bank PLC): Can you help us maybe understand within the framework of the guidance, where you stand in terms of like contracting pricing for 2026? Is there anything off cycle in terms of like the pricing mechanisms going out to?
  Response: Contracting for U.S. Texture & Healthful completed with pricing slightly down. Expect to cover raw material cost changes but not fully cover expected manufacturing cost inflation (2-2.5%), holding gross margins flat.

• Question from Benjamin Theurer (Barclays Bank PLC): On the outlook. I mean, clearly, cash from operations, expected another strong year, close to $1 billion, with CapEx a little less than, call it, $0.5 billion. So that leaves me with like $0.5 billion free cash flow. How should we think for '26 in terms of repurchases of stock, and that maybe in context to M&A?
  Response: Established share repurchase commitment of at least $100M for 2026. Balance sheet strong; will retain optionality for strategic M&A. CapEx includes $80-100M for growth and ~$40M for cost savings/infrastructure projects.

• Question from Heather Jones (Heather Jones Research LLC): Given this recent surge in currencies, I think you called out the peso and -- the Mexican peso. And then some of the tax regulatory changes that we've got going on this year in Mexico, just wondering what are the positives that will offset those potential risks and drive growth in that segment in '26?
  Response: Dollar functional in Mexico; strong peso is a headwind. Upside from weaker peso. Watching consumer volume trends (food volumes up in Q4). New sugar tax on beverages may initially impact volumes but typically subsides. World Cup in 2026 expected to boost beverage and brewing volumes in Q2/Q3.

• Question from Heather Jones (Heather Jones Research LLC): My follow-up, is -- and you mentioned that you expect to get some of the Argo effect back in the second half of this year. Just was wondering in like your base case for the U.S./CAN business, what is your assumptions of how much of that $40 million you'll get back in the back half?
  Response: Expect Argo benefit of ~$20M to come back in second half of 2026, with Q1 still facing $10-15M impact. Phasing also impacted by tough comparison to Q1 2025 (up 26% operating income).

• Question from Benjamin Mayhew (BMO Capital Markets): My first question has to do with the long-term algo that you put out at the Investor Day for operating income growth. And I'm just wondering, given all that's been said on the call so far, when would it be possible to kind of get back to that algo level?
  Response: Investor Day outlook remains intact but updated for new challenges. Food & Industrial U.S./Canada likely resets to 2025 results, with potential to return to 17-18% operating margin by 2027/2028. Long-term growth targets remain but timing adjusted.

• Question from Benjamin Mayhew (BMO Capital Markets): My last question is more kind of broad-based here in terms of what we're seeing in the CPG industry in terms of like portfolio shift. How do you guys view your positioning as we kind of absorb the secular shift in packaged food industry?
  Response: Focused on customer segmentation and channels for growth (global key accounts, regional leading accounts, foodservice, private label). Intensified mapping of private label ecosystem and strengthening distributor partnerships. Solutions selling approach aligns well with channel shifts.

• Question from Pooran Sharma (Stephens Inc.): Just wanted to maybe start off and understand how broader industrial starch demand trends have been faring? And then kind of on that, are you able to give us a little bit of clarity as to how much what kind of benefit you're going to expect here and maybe like a cadence or a pacing to that benefit for the Indianapolis starch modernization project?
  Response: Industrial starch demand faced intense pricing in 2025, volumes softer in second half. $50M expansion/modernization at Cedar Rapids to complete H2 2026, positioning for 2027. Indianapolis starch modernization completed Q4 2025, lowering costs and expanding capacity. Cogeneration unit commissioning Q3 2026, online Q4 for energy cost savings/hedging.

• Question from Pooran Sharma (Stephens Inc.): And then just -- my follow-up here would be around the -- you've given good commentary around contracting. You mentioned the pricing declines. You mentioned kind of the tariff impacts and then just consumer affordability/economics. Just wanted to get a sense if GLPs came up in your discussions with consumers? Does that growth in kind of GLP-1s or just interest in that, has that been sending people more to spot?
  Response: GLP-1 trends having positive impact on protein fortification business. Fully contracted for 2026, expecting another year of notable revenue growth and operating income improvement. Active programs to increase valorization of pea starch, fiber, and protein isolate.

Contradiction Point 1

Price/Mix and Gross Margin Outlook for THS Segment

Contradiction on the expected direction of gross margins for the THS segment, shifting from a forecast of decline to one of stability.

Explain the price/mix challenges in Texture & Healthful Solutions for 2026 and discuss ASP trends? - Kristen Owen (Oppenheimer & Co. Inc.)

2025Q4: Expect positive price/mix and higher ASPs... flat gross margins for the segment. - [Jim Gray](CFO), [James Zallie](CEO)

What factors are causing the 5% price/mix decline in Texture & Healthful Solutions? - Benjamin Theurer (Barclays Bank PLC)

2025Q3: The updated outlook reflects... driving strength... negative price/mix (-5%)... due to the pass-through of lower input costs. - [Jim Gray](CFO)

Contradiction Point 2

Sweetener Demand and Volume Trends in U.S./Canada

Contradiction on the near-term outlook for sweetener demand recovery, shifting from expecting a sustained recovery to anticipating a period of softness.

For the U.S./Canada base case, how much of the $40 million Argo headwind is projected to be recovered in H2 2026? - Heather Jones (Heather Jones Research LLC)

2025Q4: Near-term softness in Q1 2026 is expected due to a strong comparison to Q1 2025... and a rough January. - [Jim Gray](CFO), [James Zallie](CEO)

Were the September sweetener volume recovery and quarter-to-date results affected by the $12 million Argo weakness and $6 million softer market in U.S./Canada F&II? - Pooran Sharma (Stephens Inc.)

2025Q3: The recovery in sweetener volume seen in September is believed to be... This adjustment is thought to be complete. It is too early for Q4 data, but the company does not expect to see the same step-down in demand as seen in July and August. - [James Zallie](CEO)

Contradiction Point 3

U.S./Canada Segment Operating Income Margin Outlook

Contradiction on the timeline and drivers for recovering segment operating income margins.

What was the impact of the Argo facility on Q4 2025 results and the 2026 outlook, and how much of the volume decline was due to Argo versus other factors? - Kristen Owen (Oppenheimer & Co. Inc.)

2025Q4: Segment can achieve 16-17% operating income margins once Argo fully recovers. The segment can return to a 17-18% operating income margin by 2027/2028 as Argo recovers and cost/pricing dynamics improve. - [Jim Gray](CFO), [James Zallie](CEO)

Considering the strong quarterly performance exceeding guidance, is the full-year EPS range too conservative? Please explain the factors affecting the EPS range and outline the scenarios for both the upper and lower ends? - Kristen Owen (Oppenheimer & Co. Inc.)

2025Q2: The cautious outlook for H2 2025 is due to ongoing tariff uncertainties and their indirect impact on customers, who are adjusting production schedules. ... if the Argo facility runs well, it can help offset fixed costs. - [Jim Gray](CFO)

Contradiction Point 4

Impact and Timing of Tariff-Related Costs on Margins

Contradiction on the materiality and timing of tariff impacts on segment margins.

U.S./Canada base case: How much of the $40M Argo headwind is expected to be recovered in H2 2026? - Heather Jones (Heather Jones Research LLC)

2025Q4: The net direct impact of tariffs for 2025 is expected to be minimal. ... An update to the long-term outlook for all segments will be provided at the Investor Day on September 17. - [James Zallie](CEO)

Do you expect Texture & Healthful Solutions' operating margins to return to normalized levels or sustain the current 18-18.5% range? - Pooran Sharma (Stephens Inc.)

2025Q2: James Derek Gray: Is being cautious for H2 due to potential tariff-related costs and product movement, which could cause margins to pull back slightly from Q2's high teens. - [Jim Gray](CFO)

Contradiction Point 5

THS Price/Mix Outlook and Volume Growth Drivers

Contradiction on the primary driver for THS segment performance between price/mix and volume growth.

What are the price/mix headwinds in Texture & Healthful Solutions (THS) for 2026, and how do they relate to the segment's average selling price (ASP) trends? - Kristen Owen (Oppenheimer & Co. Inc.)

2025Q4: Expect positive price/mix and higher ASPs driven by growth in higher-value solutions. - [Jim Gray](CFO) and [James Zallie](CEO)

What price mix assumptions are being made for THS given the negative trend and the 1% sales growth versus mid-single digit guidance? - James Cannon (UBS, for Josh Spector)

2025Q1: Price/mix impact will be very de minimis for the balance of the year. The strong volume growth will be the primary driver. - [Jim Gray](CFO)