Ingredion Q3 Profit Falls 19% as Costs and Soft Demand Hit Margins

Ingredion Incorporated (NYSE: INGR) reported a 19% decline in third-quarter adjusted operating income as higher manufacturing and maintenance costs, softer demand and pressure on margins outweighed underlying sales growth excluding its divested Pakistan business. The company said its revised 2026 outlook reflects the higher-cost environment and weaker demand expectations, with full-year adjusted operating income now expected to fall by a mid-teens percentage.

Net sales for the quarter ended September 30 declined 1% to $1.79 billion from $1.82 billion a year earlier. Excluding the impact of the Pakistan divestiture, sales rose 2%. The sale of a majority interest in the business reduced the quarterly comparison by $65 million of sales and $9 million of operating income.

Gross profit fell 12% to $399 million, while gross margin contracted 280 basis points to 22.3%. Reported operating income decreased 19% to $201 million, and adjusted operating income also fell 19% to $206 million.

Reported diluted earnings per share declined to $2.23 from $2.61. Adjusted diluted EPS was $2.28, down from $2.75. Ingredion attributed $0.54 per share of the adjusted EPS decline to operating items, including a $0.72-per-share margin impact, partly offset by contributions from volume, foreign exchange and other income.

Management said roughly two-thirds of the earnings shortfall was operational, primarily reflecting maintenance and manufacturing costs, while about one-third was related to customer demand. Energy-driven inflation is also affecting input and logistics costs as well as consumer confidence and purchasing power, according to the presentation.

Segment performance

Texture & Healthful Solutions delivered its 10th consecutive quarter of net sales volume growth. Quarterly volume increased 2%, while net sales rose 1% to $610 million. However, lower price and mix and higher tapioca costs affected results. Segment operating income declined to $95 million from $105 million, reducing its operating margin to 15.6% from 17.4%.

Food & Industrial Ingredients—Latin America posted a 7% increase in sales to $624 million, supported by 4% volume growth and favorable foreign exchange. Brewing and beverage customers led the volume increase, while Mexico volumes continued to recover with an upgraded product mix. An earthquake in Colombia temporarily affected Andean volumes. Operating income declined to $109 million from $116 million, and the margin narrowed to 17.5% from 19.8%.

Food & Industrial Ingredients—U.S./Canada remained the largest earnings pressure point. Sales decreased 1% to $504 million as volume fell 3%, partly offset by a 3% benefit from price and mix. Operating income dropped to $52 million from $81 million, with the operating margin contracting to 10.3% from 16%.

Production at Ingredion’s Argo operation has stabilized, and most inventories are at or above target levels, improving service. However, management said the earnings recovery is taking longer than expected because of maintenance and manufacturing costs and soft food and beverage demand. The company is focusing on lowering maintenance spending, improving grind yields and rebuilding customer volumes.

Nine-month results and cash flow

For the first nine months of 2026, net sales declined 1% to $5.43 billion, but increased 1% when excluding the second-half impact of the Pakistan divestiture. Gross profit fell 12% to $1.23 billion, and gross margin contracted 300 basis points to 22.6%.

Reported operating income decreased 26% to $592 million, while adjusted operating income fell 16% to $676 million. Reported diluted EPS was $6.24, compared with $8.61 a year earlier, and adjusted diluted EPS declined to $7.45 from $8.60.

Cash from operations totaled $389 million through September, including a $219 million use of cash from working capital. Capital expenditures were $313 million. Ingredion paid $158 million in dividends and repurchased $85 million of common stock during the period. The company said it remains on track with its $100 million share-repurchase commitment.

2026 outlook and Tate & Lyle transaction

Ingredion expects full-year 2026 net sales to be flat and adjusted operating income to decline by a mid-teens percentage. Adjusted diluted EPS is projected at $9.25 to $9.70, compared with a GAAP range of $8.04 to $8.49. The company forecasts cash from operations of $650 million to $750 million and capital expenditures of approximately $450 million to $490 million.

Texture & Healthful Solutions sales are expected to rise by a low-single-digit percentage, with operating income ranging from flat to low-single-digit growth. Latin America sales are projected to increase by a low- to mid-single-digit percentage, though operating income is expected to decline by a mid- to high-single-digit percentage. U.S./Canada sales are forecast to fall by a mid-single-digit percentage, with operating income down 35% to 40%.

The outlook reflects tariff levels in effect as of October 31, 2026, and does not incorporate future changes in tariffs or trade restrictions. Ingredion said it is taking pricing and enterprise productivity actions to offset inflation.

Regulatory reviews for Ingredion’s pending $5 billion acquisition of Tate & Lyle are continuing, with closing expected in the second half of 2027, subject to approvals. Ingredion expects about $130 million of run-rate cost synergies by 2030 and said the transaction is expected to be more than 15% accretive to adjusted EPS in the first full calendar year after completion. Integration planning is underway, but the company cautioned that closing, regulatory clearance, integration, debt, expenses and the realization of expected benefits remain subject to uncertainty.