Ingredion Incorporated (INGR) Earnings Call Transcript & Summary

Good morning, and welcome to Ingredion, Inc.'s 2021 Annual Meeting of Stockholders. I would now like to introduce the first presenter, Greg Kenny.

Good morning, ladies and gentlemen. I'm Greg Kenny, Chairman of the Board of Ingredion Inc. It is with great pleasure that we welcome you to our Annual Stockholder Meeting. This is our second virtual annual meeting. The decision was taken once again to hold a virtual meeting. This was undertaken in the interest of the health and wellbeing of our employees, stockholders and other meeting participants. The decision to have a virtual meeting this year does not represent a change in our stockholder engagement philosophy, and we currently expect to return to our regular protocol with an in-person meeting next year. I'm proud to be the Chairman of Ingredion, a leading global ingredient solutions provider that is aligned around our corporate purpose of bringing the potential of people, nature and technology together to make life better. With that, I'd like to introduce you to Jim Zallie, the President and Chief Executive Officer of Ingredion, Inc. Jim?

Thank you, Greg. I would like to say good morning to the stockholders and guests who have joined us at this meeting today. In a year of incredible challenges, Ingredion rose to those challenges by delivering a year of continued specialty growth, strategically strengthening our portfolio and displaying momentum in our financial performance as we exited the year. At the onset of the COVID-19 pandemic, management moved swiftly to protect our employees' health and safety, maintain business continuity for our customers and make strategic investments aligned with our growth strategy for long-term value creation. I am proud of what we have accomplished in 2020 and look forward to continuing to be what's next for our consumers in the future. I would like to introduce you to some of my colleagues whom you will be hearing from this morning. You just met Gregory B. Kenny, former President and Chief Executive Officer of General Cable Corporation and Chairman of the Board of Ingredion Inc. In addition, we are joined by Janet M. Bawcom, Senior Vice President, General Counsel, Corporate Secretary and Chief Compliance Officer. Also in attendance today are other members of the Board of Directors and members of our senior management team. I would like to take this opportunity to introduce our other Directors and ask them to say hello to the attendees at this virtual meeting. First, Luis Aranguren-Trellez, Executive Vice President of Arancia, S.A. de C.V. Luis?

I'm honored to be here.

Thank you, Luis. David D. Fischer, Former President and Chief Executive Officer of Greif Inc.

Good morning, and thank you for your interest and support of the company.

Thank you, David. Paul Hanrahan, Interim Chief Executive Officer of Hygo Energy Transitions Ltd. Paul?

Good morning, everyone.

Rhonda L. Jordan, Former President Global Health and Wellness and Sustainability of Kraft Foods Inc. Rhonda?

Good morning. It's a pleasure to be joining you virtually.

Barbara A. Klein, Former Senior Vice President and Chief Financial Officer of CDW Corporation. Barbara?

Good morning, and thank you all for joining us today.

Victoria J. Reich, Former Senior Vice President and Chief Financial Officer of Essendant Inc. Victoria?

Good morning, everyone.

Stephan B. Tanda, President and Chief Executive Officer of AptarGroup Inc. Stephan?

Good morning. Thanks for joining us.

Jorge A. Uribe, Former Global Productivity and Organization Transformation Officer of The Procter & Gamble Company. Jorge?

Okay. Good morning. It's a pleasure to be here.

Dwayne A. Wilson, Former President of Fluor Corporation. Dwayne?

Thank you, Jim. Good morning, everyone, and thank you for joining us.

In addition, at this time, I would like to introduce the company's other executive officers present with us today. James D. Gray, Executive Vice President and Chief Financial Officer; Jorgen Kokke, Executive Vice President and President, Americas; Elizabeth Adefioye, Senior Vice President and Chief Human Resources Officer; Valdirene Bastos-Licht, Senior Vice President and President, Asia Pacific and Global Head of Pharma, Home & Beauty; Larry Fernandes, Senior Vice President and Chief Commercial and Sustainability Officer; Pierre Perez Landazuri, Senior Vice President, Texture, Protein and Performance Specialties and President, EMEA; Eric Seip, Senior Vice President, Global Operations and Chief Supply Chain Officer; and Jeremy Xu, Senior Vice President and Chief Innovation Officer. Also present today is John [ Hummers ] of Broadridge Financial Solutions, who will be Inspector of Election. I will conduct the meeting according to the agenda and the rules of the meeting's conduct, each of which is posted on the screen for this meeting. Stockholders are invited to ask questions during the question-and-answer period. Only validated stockholders, those who entered the meeting by entering their 16-digit control number, may ask questions by typing them in at the bottom of the screen. We will also be answering several questions that were submitted by verified stockholders in advance of the meeting. We may not be able to answer all questions during the meeting, but in accordance with the rules of conduct for this meeting, we will follow up and post a summary of all questions and answers relating to the annual meeting on the Investor Relations section of our website. Now I would like to open the meeting formally. I ask Ms. Bawcom to report whether a quorum is present.

Thank you, Mr. Zallie. The Board fixed March 25, 2021 as the record date for determining the stockholders entitled to vote at this meeting. An affidavit is with the Inspector of Elections attesting to the fact that the notice of meeting, the 2021 proxy statement and the 2020 annual report to stockholders were released to all stockholders of record commencing on April 7, 2021. As stated in the notice of the meeting, the purposes of this meeting are as follows: first, to elect to the company's Board of Directors the 11 Director nominees who are named in the company's proxy statement to serve as the Directors for a term of 1 year; second, to approve, by advisory vote, the compensation of the company's named executive officers as disclosed in the company's proxy statement; third, to ratify the appointment of KPMG LLP as the independent registered public accounting firm of the company for the fiscal year ending December 31, 2021; and fourth, to approve an amendment to the Ingredion Inc. stock incentive plan to increase the number of shares of common stock authorized for issuance under the plan. The Inspector of Election has submitted his report as follows: on the record date, there were a total of 67,228,076 shares of common stock outstanding. The holders of at least 59,971,971 shares of common stock or 89.21% of the voting power of the outstanding shares are present by proxy or in person. Accordingly, Mr. Zallie, a quorum of the stockholders is present.

Thank you, Ms. Bawcom. On the basis of the meeting secretary's report, the meeting is duly convened. I declare the polls open. The polls will close immediately prior to adjournment. Now we will carry on the formal business as set forth in the notice of the meeting. In order to conduct an orderly meeting, we will follow the procedures set forth in the agenda and the rules of meeting conduct. During the conduct of the formal business portion of this meeting, questions should pertain to the specific proposal then under consideration. If you would like to make a question or comment regarding any of the proposals, please submit your question or comment through the web portal. Ms. Bawcom, as the first item on the agenda, would you please present the nominees for Directors as nominated by the Board and are being recommended to the Board by the Corporate Governance and Nominating Committee.

Mr. Zallie, on behalf of the Board of Directors, I move that the following 11 persons named in the proxy statement be elected as directors of the company, each to hold office for a term to expire in May 2022 or until his or her respective successor has been elected and qualified. Luis Aranguren-Trellez, David B. Fischer, Paul Hanrahan, Rhonda L. Jordan, Gregory B. Kenny, Barbara A. Klein, Victoria J. Reich, Stephan B. Tanda, Jorge A. Uribe, Dwayne A. Wilson, James P. Zallie.

May I have a second?

I second the motion.

Thank you. Is there any discussion on the Director nominations? If there is, and you are a validated stockholder, please use the question box at the bottom of the screen now. Ms. Bawcom, I believe we have a question on this topic. Could you please read it?

Mr. Zallie, the following question has been submitted via the meeting portal. Why is it necessary to have 11 people on the Board with so many having similar backgrounds and experience?

Thank you for your question. The average-sized Board for an S&P 500 company is actually 11 directors. Specific to Ingredion, the Board's Corporate Governance and Nominating Committee Reviews the composition of the Board and the tenure of its members at least annually to help determine the number and experience of directors required. Based upon this review, they have recommended the current slate of 11 Director nominees. We believe that these 11 Director nominees possess the necessary qualifications and experience to effectively oversee our management, the business and the long-term interest of our stockholders. We believe the current slate of directors have the education, breadth of experience, insight and knowledge to understand global business problems and evaluate the possible solutions. In addition, we believe the current slate of 11 Director nominees contribute to Board diversity in the broadest sense, taking into account characteristics that include gender, race, ethnicity, geographic background and personal experience and that the range of diversity contributes to the effectiveness of our Board. For these reasons, we believe that the current slate of 11 Director nominees is appropriate for consideration for election by the company's stockholders. Are there any other questions?

Mr. Zallie, there are no other questions submitted via the meeting portal.

If there are no further questions, I declare the nominations closed. The second item on the agenda is the approval by advisory vote of the compensation of the company's named executive officers as disclosed in the company's proxy statement. Ms. Bawcom, would you please present this resolution.

Mr. Zallie on behalf of the Board of Directors, I move the adoption of the following resolution: resolved, that the stockholders approve on an advisory basis, the compensation of the company's named executive officers as disclosed pursuant to Item 402 of Regulation S-K, including the compensation discussion and analysis, the accompanying compensation tables and a related narrative disclosures in the proxy statement for the company's 2021 Annual Meeting of Stockholders.

May I have a second?

I second the motion.

Thank you. Is there any discussion on the resolution regarding ratification of the compensation of the company's named executive officers. If there is, and you are a validated stockholder, please use the question box at the bottom of the screen now. If there is no discussion, we will move on with our next item of business. The third item on the agenda concerns the ratification of the appointment of KPMG LLP as the independent registered public accounting firm of the company for the fiscal year ending December 31, 2021. KPMG was appointed by the company's Audit Committee. Ms. Bawcom, would you present this resolution.

Mr. Zallie, on behalf of the Board of Directors, I move the adoption of the following resolution: resolved, that the appointment by the Audit Committee of the Board of Directors of the firm KPMG LLP as the independent registered public accounting firm of the company for the fiscal year ended December 31, 2021, is hereby ratified.

May I have a second?

I second the motion.

Before opening discussion on this resolution, I would like to introduce Mr. Mark Erkenswick, representative of KPMG, who is available to make a statement, if he so desires, and to respond to appropriate questions.

This is Mark Erkenswick. I have no statements to make at this time.

Thank you, Mr. Erkenswick. Is there any discussion on the resolution regarding KPMG? If there is, and you are a validated stockholder, please use the question box at the bottom of the screen now. If there is no further discussion, we will move on with our next item of business. The fourth item on the agenda is to approve an amendment to the Ingredion Inc. stock incentive plan to increase the number of shares of common stock authorized for issuance under the plan. Ms. Bawcom, will you please present this resolution.

Mr. Zallie, on behalf of the Board of Directors, I move the adoption of the following resolutions. Resolved that the amendment to the Ingredion Inc. stock incentive plan to increase by 2.5 million the total number of shares of common stock authorized for issuance under the plan is hereby approved.

May I have a second?

I second the motion.

Thank you. Is there any discussion on the resolution regarding the increase in the total number of shares of common stock authorized for issuance under the company's stock incentive plan? If there is, and you are a validated stockholder, please use the question box at the bottom of the screen now. If there is no further discussion, we will move on to voting. Stockholders who have voted on the Internet, by telephone or by mailing or hand delivering proxies need not take any further action with respect to any of the matters to be voted on today. Any stockholder attending virtually who hasn't yet voted or wishes to change their vote may do so by clicking on the Voting button on the web portal and following the instructions there. [Voting]

Let us proceed to the next item on the agenda, which is the preliminary report of the Inspector of Election. Any proper votes submitted before the polls closed, but not reflected in the preliminary report, will appear in the final report of the inspector of election. I now ask the meeting secretary to present the preliminary report.

Mr. Zallie, the Inspector of Elections has determined that more than a majority of the votes cast with respect to the election of each of the 11 individuals nominated by the Board for election as directors were cast for the election of the nominee. In addition, the Inspector has determined that more than a majority of shares represented by proxy or present in person were cast in favor of approving by advisory vote the compensation of the company's named executive officers. In addition, the Inspector has determined that more than a majority of shares represented by proxy or present in person were cast in favor of the ratification of the appointment by the company's Audit Committee of the firm, KPMG LLP, as the independent registered public accounting firm of the company for the fiscal year ended December 31, 2021. Finally, the Inspector has determined that more than a majority of shares represented by proxy or present in person were cast in favor of the amendment to the Ingredion Inc. stock incentive plan to increase the number of shares of common stock authorized for issuance under the plan.

Thank you, Ms. Bawcom. Based on the preliminary report of the Inspector of Election, I declare that Luis Aranguren-Trellez; David B. Fischer, Paul Hanrahan, Rhonda L. Jordan, Gregory B. Kenny, Barbara A. Klein, Victoria J. Reich, Stephan B. Tanda, Jorge A. Uribe, Dwayne A. Wilson, and James P. Zallie are elected Directors. Congratulations, Directors. In addition, I declare that by advisory vote the compensation of the company's named executive officers was approved, that the appointment by the company's Audit Committee of the firm of KPMG LLP as the independent registered public accounting firm of the company for the fiscal year ending December 31, 2021, has been ratified. And finally, that the amendment to the Ingredion Inc. stock incentive plan to increase the number of shares of common stock authorized for issuance under the plan was approved. Is there any other business to be brought before the meeting? If there is, and you are a validated stockholder, please use the question box at the bottom of the screen now. There being no further business to be brought before the meeting, the polls are now closed. That concludes the business set forth in the notice of the meeting. The Annual Stockholders Meeting is hereby adjourned. At this time, I would be pleased to take your general questions. If there are any, validated stockholders may submit a question using the question box at the bottom of the screen.

I see we have a few questions in the queue. Let me get started by reading the first question. Revenue and earnings results have trended down over the past few years. What is being done to address growth in these areas? Ingredion has organized itself around 4 strategic pillars: specialty growth, commercial excellence and being cost smart, all enabled by a purpose-led culture and values, which unleash the potential of our people and foster a diverse, equitable and inclusive culture and workplace. We're building momentum in specialty sales, which have grown to 32% of net sales in 2020 from 25% in 2016. These are competitively-differentiated ingredients, which provide a unique value proposition in growing, on-trend areas. Our specialty portfolio also proved resilient despite the pandemic. Our specialty investments are enabled by a cash-generating portfolio of corn, starch and sweeter ingredients. We continue to seek to optimize and continuously improve our core portfolio in order to support our specialty growth. This includes efforts to identify pockets of growth, optimize our manufacturing and distribution network, support capacity rationalization and redeploy assets to manufacture higher-value products. Furthermore, we have a strong track record of advancing our specialty portfolio through strategic investments, such as the most recently announced KaTech and Amyris transaction that were disclosed earlier this year as well as the recent $250 million of investments in plant-based protein, $250 million of investments in sugar reduction and specialty sweeteners, $100 million of investments in noncorn-based texturizers and over $50 million in expanding our operations in China. We are focused on continuing to grow our top and bottom lines. We continue to co-create with customers. Despite the pandemic, we reconfigured our culinary kitchens and digital studios and conducted greater than 1,300 virtual customer engagements over the last 9 months. In addition, we continue to invest in go-to-market optimization, operational excellence and digital transformation to enable future growth. In summary, we believe that our growth map for value creation is the right path to continue to create value for our customers and for Ingredion. We remain confident in our long-term profit outlook, driven by specialty growth, investments in emerging markets, specialty premiums and margins and strong cost management. And we'll continue to focus on customers which will help enable Ingredion to remain the preferred source for customer co-creation and preferred customer innovation. We have another question which is related to corn prices. Corn prices have been rising. Do you have plans to counter the rise in corn prices. It is true that strong global demand, including record corn imports into China has driven U.S. corn prices to their highest levels since 2013. In markets where we were able to hedge corn, we hedge our raw material needs for production anywhere between 3 and 12 months out. In markets where we don't hedge, our commercial teams are diligent in adjusting prices where possible to pass through higher corn prices. For the remainder of 2021, we have limited margin exposure to higher corn costs for our U.S. and Canada fixed price customer contracts. In addition, in a rising corn market, we generally benefit from higher coproduct values. Furthermore, we're encouraged by some signs we are seeing increased economic activity and increased industry capacity utilization. The increased capacity utilization can partially offset raw material pricing. The price of corn and other raw materials that will no doubt be factored into our 2022 pricing negotiations with customers. Beyond that, we're really not prepared to comment on 2022 pricing at this time. If there are no further questions, thank you for attending today. I hope you and your families continue to stay safe and healthy, and thank you for your continued support of Ingredion.

Thank you. Ingredion Inc.'s 2021 Annual Meeting of Stockholders has now come to an end. Thank you for attending. You may now disconnect.