Morningstar on Ingredion

This Morningstar analyst has nice things to say about Ingredion (INGR). Here’s a sample:

Ingredion (INGR) is benefiting from secular drivers of growth in ingredients, including health and wellness trends (removing salt, fat, sugar, and sodium and reducing calories and raw material costs); demographics (growing urban populations and more women working in developing markets); and more snacking and demand for processed and convenience foods in developed markets.

The investment case is built on specialty ingredients’ growing share (26% of sales) at the expense of low-value-added, or core, ingredients (74% of sales), which are barely growing and are much less profitable. We think the specialty segment has an operating margin of 30% and generates 47% of EBIT, while the core segment has an 11.5% margin and generates 53% of EBIT. By 2020, we expect specialty will generate 32% of sales and 54% of operating profit, accounting for three fourths of the increase in Ingredion’s operating profit over 2016-20. Because Ingredion’s acquisition strategy is focused on expanding the specialty segment, specialty’s share of sales and profit is likely to be higher than that achievable from organic growth alone.

Posted by on February 10th, 2017 at 7:11 pm

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