Ingredion(INGR) - 2024 Q4 - Annual Report

Financial Performance - Net sales decreased by 9% to $7.4 billion in 2024 from$8.2 billion in 2023, primarily due to unfavorable price mix and foreign exchange impacts[151] - Operating income decreased by 8% to $883 million in 2024 from$957 million in 2023, mainly due to impairment charges from the cessation of operations at multiple manufacturing facilities[151] - Net income attributable to Ingredion increased by 1% to $647 million in 2024, with diluted earnings per share rising to$9.71 from $9.60 in 2023[151] - Gross profit margin improved to 24$127 million in 2024 from $11 million in 2023, reflecting the closure of several manufacturing facilities[156] - Cash provided by operating activities increased to$1,436 million in 2024 from $1,057 million in 2023, primarily due to changes in working capital[175] - Cash used for investing activities decreased to$47 million in 2024 from $329 million in 2023, mainly due to proceeds from the sale of the South Korea business[176] - The company reported net income of$654 million in 2024, slightly up from $651 million in 2023[185] - Adjusted EBITDA for 2024 was$1.230 billion, an increase from $1.189 billion in 2023[190] - Total equity increased to$3.823 billion in 2024 from $3.552 billion in 2023[185] Debt and Liquidity - Total debt outstanding was$1.8 billion as of December 31, 2024, with a weighted average interest rate of 4.02%[172] - Total available liquidity was $2.6 billion as of December 31, 2024, consisting of$1.5 billion in domestic liquidity and $1.1 billion in international liquidity[168] - The company’s Net Debt to Adjusted EBITDA ratio improved to 0.7 in 2024, compared to 1.5 in 2023, indicating reduced leverage[192] - Total net debt decreased to$823 million in 2024 from $1.779 billion in 2023[190] - Financing costs decreased by 66$39 million in 2024, attributed to the pay down of borrowings under the commercial paper program[157] Tax and Regulatory Matters - The effective income tax rate for 2024 was 26.4%, compared to 24.9% in 2023[189] - The company is subject to ongoing audits and changes in tax laws, which could impact profitability and cash flows[108] - The OECD's discussions on global minimum tax could lead to increased effective tax rates and cash tax payments in future years[110] Employee and Labor Relations - As of December 31, 2024, Ingredion employed approximately 11,200 people, with 33% of U.S. and Canadian employees being union members[59] - Labor relations are critical, as strikes or work stoppages could materially affect business operations[100] Research and Development - The R&D team consists of approximately 500 scientists and engineers working across 30 Ingredion Idea Labs®[52] - The company’s growth is significantly dependent on innovation in products and processes, with R&D efforts critical for market acceptance[78] Market and Economic Conditions - In 2024, approximately 56% of the company's net sales were generated from the food industry, 10% from the beverage industry, 8% from animal nutrition, and 7% from brewing[76] - Economic conditions, including inflation and unemployment, may adversely affect demand for the company's products and access to credit[72] - The company faces risks from changing consumer preferences, particularly regarding health concerns related to sweeteners and genetically modified products, which could negatively impact sales[70] Operational Challenges - The company has experienced challenges in accurately forecasting product demand, which can lead to excess inventory or shortages[75] - The company’s operations are affected by fluctuations in freight and logistics costs, which can impact overall profitability[84] - The company faces operating difficulties at manufacturing facilities, which could adversely affect operating results, financial condition, cash flows, and prospects[87] - The company may experience increased costs and reduced profitability if unable to maintain productivity and reliability of production facilities[89] Environmental and Sustainability Initiatives - The company plans to invest approximately $66 million in environmental facilities and programs in 2025[64] - The company expects to maintain compliance with environmental regulations without incurring material expenses[65] - Climate change and related legal measures may negatively impact the company's operations, including increased costs for raw materials and disruptions in production[90] - The company anticipates substantial costs to comply with new sustainability and climate-related reporting requirements[93] Cybersecurity and IT Risks - The company relies on key information technology systems that are vulnerable to interruptions and security incidents, which could damage its reputation and operations[114] - Cybersecurity threats have increased in frequency and sophistication, posing risks to the company's data security and operational integrity[115] - The company has invested in security measures, but these cannot guarantee absolute protection against cyber threats, which could lead to significant disruptions[117] - Future data security incidents could result in loss of confidential information and disrupt operations, potentially leading to government investigations or litigation[118] - The company may face significant costs related to addressing security vulnerabilities, which could impact sales and critical functions[121] Strategic Growth and Acquisitions - The company has completed several acquisitions and strategic alliances but may face challenges in identifying suitable candidates and achieving anticipated synergies[94] - The company may not have access to sufficient funds for future growth and expansion, potentially impacting its competitiveness and operational results[111] - Increased interest rates could lead to higher borrowing costs for capital expenditures and acquisitions, affecting overall financing strategies[113] Pension and Benefit Costs - The net periodic pension and postretirement benefit cost for all plans was$9 million in 2024, down from $12 million in 2023[203] - The weighted average discount rate for U.S. pension plans increased from 5.00$27 million[205] - The investment policy for pension plans assumes a long-term rate of return of 5.50% for U.S. plans and approximately 4.58% for Canadian plans[207] - The healthcare cost trend rate assumptions for U.S. plans were set at 8.40% for the next year[208] Dividend and Shareholder Returns - Dividend payments and share repurchases are at the discretion of the Board of Directors and may change based on financial results and liquidity assessments[122] - Material weaknesses in internal control over financial reporting could adversely affect investor confidence and the company's stock price[123]