Ingredion (NYSE:INGR): A High-ROCE Compounder in the Specialty Ingredients Space

Investors seeking durable returns often gravitate toward companies that consistently improve their capital efficiency. Ingredion (NYSE:INGR), a global leader in specialty ingredients, has emerged as a compelling case study in this regard. Over the past five years, the company has demonstrated a notable improvement in its Return on Capital Employed (ROCE), a metric that measures a firm's profitability relative to the capital it employs. This article evaluates the sustainability of Ingredion's ROCE trajectory, its alignment with long-term ESG goals, and the implications for future growth.

ROCE Trends: From 9.4% to 14.3% in Five Years

ROCE is calculated as EBIT divided by capital employed (total assets minus total current liabilities). Data from Ingredion's financial statements reveals a clear upward trend in this metric. In 2020, the company reported EBIT of $506 million and capital employed of $5.4 billion (total assets of $6.858 billion minus total current liabilities of $1.458 billion), yielding a ROCE of approximately 9.4%. By 2024, EBIT had grown to $883 million, while capital employed rose to $6.154 billion (total assets of $7.435 billion minus total current liabilities of $1.281 billion), resulting in a ROCE of 14.3%. This represents a 53% improvement in ROCE over five years, slightly exceeding the 42% figure often cited in market analyses.

The growth in EBIT has outpaced the increase in capital employed, reflecting Ingredion's ability to generate higher returns from its invested capital. While the company's ROCE remains below the 16% industry benchmark for food and beverage firms, the upward trajectory suggests a disciplined approach to capital allocation and operational efficiency.

Sustainability as a Catalyst for ROCE

Ingredion's ESG strategy is not merely a reputational tool but a strategic lever for enhancing ROCE. The company's 2030 All Life plan includes ambitious targets such as a 25% reduction in absolute greenhouse gas (GHG) emissions, a 30% reduction in water use intensity in high-stress regions, and 100% sustainable sourcing of Tier 1 crops by 2025. These initiatives are designed to reduce long-term operational costs and mitigate regulatory risks, both of which directly support capital efficiency.

For instance, water conservation projects in high-stress regions not only align with environmental goals but also lower utility expenses, improving EBIT margins. Similarly, sustainable sourcing reduces supply chain volatility and input costs, enhancing profitability. By embedding sustainability into its core operations, Ingredion is creating a flywheel effect: ESG-driven cost savings free up capital for reinvestment, which in turn drives higher ROCE.

Challenges and Risks to ROCE Sustainability

Despite these positives, several factors could pressure Ingredion's ROCE in the near term. The company's 2024 revenue declined by 8.95% year-over-year, a trend that could erode EBIT growth if input costs or demand remain volatile. Additionally, the capital employed figure has increased by 21% since 2020, suggesting that the company is reinvesting heavily in its operations. While this is a positive sign for long-term growth, it could temporarily dilute ROCE if returns on new investments lag behind historical performance.

Moreover, the absence of full-year 2025 financial data introduces uncertainty. While third-quarter 2025 results show adjusted operating income of $254 million, the full-year EBIT and capital employed figures remain unconfirmed. Investors must monitor these metrics closely to assess whether the ROCE improvement is a structural trend or a cyclical anomaly.

Future Outlook: A High-ROCE Compounder?

Ingredion's trajectory suggests it is on the path to becoming a high-ROCE compounder, but success hinges on two key factors. First, the company must continue to execute its ESG initiatives effectively, ensuring that sustainability efforts translate into measurable cost savings and operational efficiencies. Second, Ingredion must navigate macroeconomic headwinds-such as inflation and shifting consumer preferences-without compromising its capital discipline.

The company's recent focus on innovation in plant-based and clean-label ingredients also positions it to capture growth in high-margin markets. If these innovations drive revenue expansion without a proportional increase in capital employed, ROCE could stabilize at or above the 16% industry benchmark.

Conclusion

Ingredion's five-year ROCE improvement from 9.4% to 14.3% underscores its ability to enhance capital efficiency through a combination of operational discipline and ESG-driven cost savings. While challenges such as revenue volatility and capital reinvestment risks remain, the company's strategic alignment with sustainability and innovation provides a strong foundation for sustained ROCE growth. For investors, Ingredion represents a compelling case of a specialty ingredient firm leveraging ESG and operational rigor to compound returns over time.