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DATE

Tuesday, May 5, 2026 at 9 a.m. ET

CALL PARTICIPANTS

  • Chairman, President, and Chief Executive Officer — Jim Zallie
  • Vice President, Investor Relations — Noah Weiss
  • Vice President and Interim Chief Financial Officer

TAKEAWAYS

  • Net Sales -- $1.8 billion, down 1%, driven primarily by $32 million lower volume and $22 million lower price/mix, partially offset by $33 million favorable foreign exchange translation.
  • Adjusted Operating Income -- $212 million, down 22%, reflecting significant impact from operational issues at the Argo facility and softer volumes in U.S./Canada and LatAm segments.
  • Argo Facility Impact -- Operational challenges led to an actual $40 million negative impact, well above initial $10 million–$15 million expectations, due to higher maintenance, rework, and logistics costs.
  • Texture and Healthful Solutions Segment -- Net sales rose 2% and operating income increased 1%, driven by 2% volume growth, foreign exchange benefit, and continued clean label demand.
  • Pea Protein Isolate Sales Growth -- Sales in this Healthful Solutions category increased over 50% on new product innovation momentum.
  • Stevia-based Solutions -- Sales advanced 6%, reflecting broad-based demand for sugar-reduction offerings.
  • Food and Industrial Ingredients LatAm -- Net sales grew 1%, but operating income declined 9% to $115 million (20% margin) due to Mexican currency headwinds and weaker volumes in Mexico and Andean regions, partially offset by improvement in Brazil and joint ventures.
  • Food and Industrial Ingredients U.S./Canada -- Net sales fell 9%, with operating income at $34 million as Argo operations and weaker demand weighed on results.
  • Operating Cash Flow -- $33 million year to date, reflecting a planned $205 million working capital investment in receivables and payables.
  • Capital Expenditures -- $110 million invested in the quarter to support capacity, reliability, and strategic priorities (net of disposals).
  • Shareholder Return -- $52 million in dividends and $14 million in share repurchases completed in the quarter.
  • Full-Year Revenue Outlook -- Net sales expected to be flat to up low single digits; adjusted operating income seen flat to down low single digits.
  • Full-Year Adjusted EPS Guidance -- $10.45 to $11.15, assuming sequential improvement at Argo and strong Texture and Healthful Solutions performance.
  • Guidance Segment Updates -- Texture and Healthful Solutions operating income revised to up low single digits (from low to mid single digits), LatAm operating income now expected down low single digits, and U.S./Canada operating income projected down low double digits.
  • Cabo Facility Closure -- Announced plans to cease Cabo manufacturing operations in Northeast Brazil by 2026 as part of network optimization and margin improvement strategy.
  • Foreign Exchange Headwinds -- Mexican peso strength creating a significant transactional FX headwind for LatAm despite some offsetting translational benefits.
  • Energy and Logistics Inflation -- Management called out ongoing cost pressures, particularly through higher logistics costs tied to energy prices; company pursuing targeted price increases to offset, acknowledging time lags in passing through cost increases.

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RISKS

  • Argo facility challenges produced an unanticipated $40 million negative impact in the quarter, driven by extended maintenance, rework, and elevated logistics costs.
  • Mexican peso strength materially increased transactional costs in Food and Industrial Ingredients LatAm, negatively affecting operating income beyond translational benefits.
  • Citing "higher energy prices," management noted ongoing inflationary impacts may present additional cost headwinds, with some pricing pass-throughs subject to lag and elasticity risk.
  • The Cabo facility shutdown in Brazil reflects longstanding underperformance and required network rationalization to boost margins, but may entail one-time costs and operational risk during the transition.

SUMMARY

Ingredion (INGR +0.32%) reported declines in both revenue and profitability, led by operational disruptions at the critical Argo facility, which incurred significantly higher-than-forecast costs. Management revised full-year guidance lower for adjusted operating income and earnings per share, reflecting persistent operational and macroeconomic headwinds, particularly in North America and Latin America. The company underscored ongoing productivity initiatives, footprint rationalization, and a strong focus on clean label, protein fortification, and health-driven innovation to restore growth and margin leverage in future periods.

  • Jim Zallie said, “"We are still committed to getting back to the mid-teens operating income margins for that [Food and Industrial Ingredients U.S./Canada] business," contingent on normalized plant reliability.
  • Planned shutdown of the Cabo plant in Brazil is incorporated into guidance, with the dual objective of efficiency and margin improvement.
  • Operating income guidance for key segments is lower, with Texture and Healthful Solutions notably constrained by input cost inflation and pricing delays, while LatAm faces ongoing FX and mix pressures.
  • Capital priorities and share-repurchase targets remain in place despite working capital investments and macro disruption, as cash flow generation is expected to recover as operations normalize.
  • Management highlighted ongoing investments in innovation, artificial intelligence, and technical capabilities to accelerate delivery of value-added solutions for customers, even as reliability projects continue.

INDUSTRY GLOSSARY

  • Clean Label: Food and ingredient offerings with easily recognizable, minimally processed ingredients meeting consumer demand for simplicity and transparency.
  • Polyols: A category of sugar alcohols used as low-calorie sweeteners and functional ingredients in food and beverage applications.
  • Translational FX: Impact of converting foreign subsidiary financials into parent-company currency for reporting purposes.
  • Transactional FX: Exchange rate effects that arise from actual cash flow and operating transactions denominated in a currency different from the company's functional currency.
  • Co-product: A secondary product generated during the primary production process, such as corn oil or gluten feed from corn processing.
  • Solutions Portfolio: Ingredion's differentiated, often customized, ingredient offerings—such as texturizing systems or protein fortification—emphasizing functional and health attributes.

Full Conference Call Transcript

Noah Weiss: Good morning, and welcome to Ingredion Incorporated’s first quarter 2026 earnings call. I am Noah Weiss, Vice President of Investor Relations. Joining me on today's call are Jim Zallie, our Chairman, President, and CEO, and our Vice President and interim CFO. The press release we issued today, as well as the presentation we will reference for our first quarter results, can be found on our website, ingredion.com, in the investors section. As a reminder, our comments within the presentation may contain forward-looking statements. These statements are subject to various risks and uncertainties and include expectations and assumptions regarding the company's future operations and financial performance.

Actual results could differ materially from those estimated in the forward-looking statements, and Ingredion Incorporated assumes no obligation to update them in the future as or if circumstances change. Additional information concerning factors that could cause actual results to differ materially from those discussed during today's conference call or in this morning's press release can be found in the company's most recently filed annual report on Form 10-K and subsequent reports on Forms 10-Q and 8-K. During this call, we also refer to certain non-GAAP financial measures, including adjusted earnings per share, adjusted operating income, and adjusted effective tax rate, which are reconciled to U.S.

GAAP measures in Note 2, Non-GAAP Information, included in the press release and in today's presentation appendix. With that, I will turn the call over to Jim.

Jim Zallie: Thank you, Noah, and good morning, everyone. While we expected a challenging quarter after last year's strong first quarter, results were weaker than anticipated in Food and Industrial Ingredients U.S./Canada due to operational challenges at our Argo facility. At the same time, performance in our Texture and Healthful Solutions and Food and Industrial Ingredients LatAm segments were in line with our expectations despite an increasingly uncertain macroeconomic environment. Overall, net sales were down 1% and adjusted operating income was down 22% versus last year, driven by Argo and softer industry volumes in Food and Industrial Ingredients U.S./Canada and LatAm.

As expected, our Texture and Healthful Solutions segment delivered a solid quarter, with broad-based volume growth reflecting increased adoption of our expanding solutions portfolio and continued customer demand for clean label offerings. We are pleased that our Texture and Healthful Solutions segment posted its eighth straight quarter of volume growth, up 2%, led by clean label and texture solutions in EMEA and Asia-Pac. In Food and Industrial Ingredients LatAm, overall volumes were slightly down for the quarter due to expected weaker consumer demand versus a strong first quarter last year. We saw a modest recovery in Brazil, supported by improved customer demand and early benefits from our polyols network optimization completed at the end of last year.

Additionally, this morning, we announced plans to cease operations at our Cabo manufacturing facility in Northeast Brazil by 2026 as we drive enterprise productivity to deliver operational efficiencies while sharpening customer mix priorities. We expect the actions we have taken in Brazil, both commercially and operationally, to deliver continued benefits throughout the year. In our Food and Industrial Ingredients U.S./Canada segment, net sales volumes declined 7% in the first quarter driven primarily by operational issues at our Argo facility, as well as softer demand across certain food and industrial markets. As noted earlier, Food and Industrial Ingredients U.S./Canada results were negatively impacted by Argo in the quarter.

Within our February outlook, we expected $10 million to $15 million of additional costs to impact the quarter as the facility recovered to normal grind rates. However, additional operational challenges slowed the recovery and negatively impacted saleable inventory. As a result, the actual Q1 impact was much greater than anticipated, coming in at $40 million, comprised of higher maintenance spend and the costs associated with elevated levels of rework. Additionally, we incurred higher logistics costs as we sourced products from other facilities in our network to meet customer commitments. In response to challenges in our refinery operations, we took meaningful actions during the quarter to diagnose and remedy the sources of process failures.

We assembled a multidisciplinary team of internal and external experts in refinery unit operations and are pleased to say that downstream production returned to normal levels by quarter-end. Unfortunately, in the midst of this progress, on April 10, there was an isolated thermal event in Argo's corn germ processing operations. While the front-end grind and refinery were not impacted, crude oil production went offline. Our teams are working diligently to restore our germ processing capabilities, and we expect to return to normal operations in this unit within the second quarter.

Our balance-of-the-year assumptions for Food and Industrial Ingredients U.S./Canada are based on the germ processing recovery timeline that I just outlined, as well as sustaining current levels of production and yield through the refinery operations at Argo. Turning to a significant driver of Texture and Healthful Solutions growth in the quarter, our solutions sales continue to outpace overall segment growth. As a reminder, our solutions portfolio is approximately $1 billion, or 40% of this segment's revenue. Clean label remains a major growth driver within our solutions offering. It is noteworthy that even against a challenging volume backdrop, customers continue to seek clean label options.

Our industry-leading portfolio of functional native starches grew strongly in the quarter, benefiting from sustained customer demand for simpler ingredient panels and increased reformulation support. Examples include customized texturizing systems for dairy and dairy alternative applications, as well as solutions supporting reformulation for healthier bakery and beverage platforms. Solutions growth is coming from more than just clean label ingredients. It also reflects the breadth of our capabilities and how we are partnering with customers through co-development, providing formulation expertise and differentiated ingredients. This combination is helping us deepen customer engagement and improve mix within Texture and Healthful Solutions.

As part of the innovation engine for solutions, we are increasingly leveraging artificial intelligence to power the consumer insights and predictive formulation work that are at the heart of our solutions customer briefs. This is helping us accelerate the brief-to-solution cycle time. Moving to another bright spot in the quarter, our Healthful Solutions portfolio—comprised of clean taste solutions for sugar reduction and protein fortification—continued to grow strongly. Sales of our pea protein isolates, driven by recent new product innovations, grew more than 50% in the quarter, and our clean tasting stevia-based solutions also demonstrated a solid 6% growth in the quarter.

Growth in these categories is broad-based across both branded and private label, reflecting the heightened consumer pull for protein-fortified and lower sugar offerings. As we look ahead to the remainder of the year, we are actively monitoring and managing both the direct and secondary effects of higher energy prices. The largest impact we foresee is related to increased logistics costs, which we are actively working to offset within-year price increases. It is important to mention that at this point, it is too early to estimate the degree to which these inflationary pressures may impact volumes. We are also carefully monitoring fluctuations in the value of the U.S. dollar.

The Mexican peso has unexpectedly maintained its strength, and this is presenting a meaningful transactional foreign exchange headwind for the Food and Industrial Ingredients LatAm segment. The dynamics brought on by new inflationary headwinds are familiar to us, as we have successfully managed through these periods before. We have the operational experience to react with agility, and we are leveraging our pricing centers of excellence to implement targeted price increases where they are required and where possible. With that, I will turn the call over to our interim CFO for the financial review.

Unknown Speaker: Thank you, Jim, and good morning, everyone. Moving to our income statement, net sales for the first quarter were $1.8 billion, down 1% versus prior year. Gross profit declined 14% with gross margin decreasing to 22.4%, driven primarily by operational challenges at Argo, lower volumes and unfavorable mix in Food and Industrial Ingredients U.S./Canada and Food and Industrial Ingredients LatAm, and transactional foreign exchange impacts in Mexico. Reported and adjusted operating income were $203 million and $212 million, respectively. Turning to our Q1 net sales bridge, the 1% decrease was driven by $32 million in lower volume and $22 million in lower price/mix, partially offset by $33 million of favorable foreign exchange translational impacts.

We highlight net sales drivers by segment for the first quarter. Texture and Healthful Solutions net sales were up 2%, driven by sales volume growth of 2% and foreign exchange favorability of 2%, partially offset by lower price/mix. Food and Industrial Ingredients LatAm net sales were up 1%, driven by favorable foreign exchange, partially offset by lower volumes and weaker price/mix. Food and Industrial Ingredients U.S./Canada net sales declined 9%, driven by operational challenges at Argo and weaker consumer demand. Now, let us turn to a summary of results by segment. Texture and Healthful Solutions net sales were up 2% in the first quarter, and operating income was up 1%.

The increase in operating income was driven by favorable input costs, foreign exchange, and better volumes, partially offset by strategic price and mix management. In Food and Industrial Ingredients LatAm, net sales were up 1% in the quarter; however, operating income decreased by 9% to $115 million with operating margins of approximately 20%. These decreases were driven primarily by Mexico transactional currency impact and softer volumes in Mexico and the Andean region. Positive performance in Brazil and the Argentina joint venture helped offset some of these headwinds, allowing the total segment to deliver results in line with expectations. Moving to Food and Industrial Ingredients U.S./Canada, first quarter net sales were down 9%.

Operating income was $34 million, driven by operational challenges at our Argo plant and weaker volumes and mix. Net sales in All Other increased approximately 3%, driven by continued growth in protein fortification, particularly in higher-value isolate and specialty protein applications. Operating income improved by over $3 million year-on-year, reflecting improved mix and operating leverage. Turning to our first quarter earnings bridge, the top half of the slide reconciles reported to adjusted earnings per share, and the bottom half walks through the drivers of the year-over-year change. Adjusted diluted earnings per share declined by $0.63 year-over-year, including $0.71 of margin impacts and $0.14 of volume impacts that were primarily the result of the operational challenges we previously discussed.

These headwinds were partially offset by foreign exchange benefits of $0.07 and other income benefits of $0.08 per share, as well as $0.07 of non-operating items, including $0.06 of share repurchase benefits. Turning to cash flow and capital allocation, we continued to demonstrate financial discipline in the quarter. Year-to-date cash from operations was $33 million, reflecting a planned investment of approximately $205 million in working capital. This was driven primarily by receivables and payables. We invested $110 million of capital expenditures, net of disposals, to support reliability, capacity, and strategic priorities across the business. During the quarter, we continued to return cash to shareholders through $52 million in dividends and the repurchase of $14 million of shares.

This underscores our commitment to balanced capital allocation and long-term shareholder value creation. Now let me turn to our updated 2026 outlook. As Jim noted in his opening remarks, we have revised our outlook to reflect the updated impact from Argo, foreign exchange transactional impacts from continued strength of the Mexican peso relative to the U.S. dollar, the impact of higher energy prices on input costs and logistics, and softer volumes in LatAm. For the full year 2026, we now anticipate net sales to be flat to up low single digits, and adjusted operating income will be flat to down low single digits.

Our 2026 financing cost estimate is in the range of $35 million to $45 million and a reported and adjusted effective tax rate of 26% to 27.5%. Our full year adjusted earnings per share is now expected to be in the range of $10.45 to $11.15. This outlook assumes sequential operating improvements at Argo and continued resilience in the Texture and Healthful Solutions segment. Our adjusted earnings per share range is based on a diluted share count of 63.5 million to 64.5 million shares.

We anticipate that our 2026 cash from operations will now be in the range of $725 million to $825 million, reflecting our updated net income expectation, as well as working capital investments in line with net sales growth and normalized inventory levels in Food and Industrial Ingredients U.S./Canada. Capital expenditures for the full year are now anticipated to be between $400 million to $440 million. Please note that our guidance reflects current tariff levels in effect as of April 2026. In addition, this guidance excludes any acquisition-related integration and restructuring costs, as well as any potential impairment costs.

Turning to our updated full year outlook by segment, our net sales outlook for Texture and Healthful Solutions remains the same, but operating income is now expected to be up low single digits, which still reflects volume growth but is partially offset by higher input cost inflation. For Food and Industrial Ingredients LatAm, net sales are now estimated to be flat to down low single digits, and operating income is expected to be down low single digits, reflecting foreign currency transactional headwinds in Mexico and softer volumes in LatAm. As a reminder, our Mexico business is U.S. dollar-denominated, but most of our SG&A and operating costs are in pesos.

As the peso strengthens against the dollar, our transactional costs increase in dollar terms, which negatively impacts operating income and can more than offset translational benefits against a weaker U.S. dollar in other parts of our LatAm business. For Food and Industrial Ingredients U.S./Canada, we now expect net sales to be down low single digits, and operating income is projected to be down low double digits, which reflects the impact of operational challenges in Q1 on our full year outlook. All Other operating income is still anticipated to improve by $5 million to $10 million from full year 2025.

Lastly, for 2026, we expect net sales to be flat to up low single digits and adjusted operating income to be down high single digits, as we lap a very strong second quarter in 2025. That concludes my comments, and I will turn it back over to Jim.

Jim Zallie: Thank you. To close, even in a challenging quarter, we continue to see momentum in the highest value parts of our portfolio, particularly Texture and Healthful Solutions where customer demand remains robust, supported by clean label, healthy eating, reformulation, and solutions-led growth. As stated, our Food and Industrial Ingredients U.S./Canada projections are based on the sequential operational recovery at Argo throughout Q2 and reflect sustaining current levels of production and yield for the balance of the year. We are actively monitoring and managing the impacts of energy and currency movements and are pursuing targeted price increases where required and where possible. Our enterprise productivity initiatives, specifically from network optimization, are providing operational and commercial benefits which will support margin.

With a strong balance sheet and solid cash generation, we remain well positioned to invest for growth, support our strategic priorities, and deploy capital with discipline as we continue to build long-term shareholder value. We will now open the call for questions. Operator?

Operator: Thank you. Star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press 11 again. One moment for questions. And our first question comes from Pooran Sharma with Stephens. You may proceed.

Analyst: Hi. This is Jack Harden on for Pooran. Thank you for the question. Once Argo normalizes, do you still view the Food and Industrial Ingredients U.S./Canada business as capable of getting back to the mid- to high-teens operating margin profile? And is that more of a 2027 target now, or could that run rate be possible exiting 2026?

Jim Zallie: The answer to that question is yes. We are still committed to getting back to the mid-teens operating income margins for that business, consistent with what we put forward at Investor Day in September. The issues at Argo are the predominant driving factor in the margin decline and the operating income decline in that business. We are encouraged by how the grind and how the refinery operations finished the quarter. We were disappointed with the April 10 issue in the corn germ processing unit, but again, that particular issue is isolated. It is in a very specific location within the plant, separate from grind and separate from the refinery operations, and the repairs are well underway.

That unit should be back up and running again within Q2. So, in answer to your question from a standpoint of getting back the majority of the 1 thousand basis points of margin decline in this quarter compared to the 16% to 17% that we are typically projecting, I think we would say for 2027, certainly, that is our expectation at this point in time. Assuming that we can string a couple of good quarters together of run-ability and reliability, we feel that from a standpoint of the demand and how we have been able to service customers through this period, we can get back to those levels of operating income.

Analyst: Thank you. And a quick follow-up on capital allocation. With updated cash flow from operations guidance and CapEx guidance remaining the same, how should we think about capital allocation through the rest of the year? And is the prior commitment of roughly $100 million the right way to think about it, or has that been updated as well?

Jim Zallie: Do you want to take that?

Unknown Speaker: Yes. Certainly, based on our current cash flow projections and capital allocation priorities, we plan to build on the $14 million of shares we repurchased in Q1 to meet our full-year targeted commitment.

Jim Zallie: And Q1’s CapEx came in consistent with the full-year projections as well. So, yes, it is to continue as planned for the capital allocation priorities.

Operator: Thank you. Our next question comes from Joshua Spector with UBS. You may proceed.

Joshua Spector: Hi. Good morning. I wanted to drill into Texture and Health a little bit more and just understand some of your assumptions through the year. I guess if I look at the first quarter, your organic growth was about flat. You got the couple points from FX. So, assuming FX becomes less of a tailwind, you basically need organic growth to pick up. Relative to the 2% volumes and the down 2% pricing, how do you expect that to evolve through the year to get the segment to the low- to mid-single-digit growth you expect for the year in total?

Jim Zallie: The mid-single-digit target is part of our long-term algorithm for growth. We are pleased to deliver 2% net sales volume growth in the quarter, and it is noteworthy that it is the eighth consecutive quarter of sales volume growth. We really believe that the focus we have now on solutions, which is a result of the re-segmentation work we completed nearly two years ago, and the solutions-selling approach we have globally implemented—with trainings and certifications and formulation experts that collaborate with our 30-plus Idea Labs around the world, plus our technical headquarters in Bridgewater, New Jersey—all of that continues to come together very well on behalf of the customer.

At the same time, driven by regulatory changes and health-and-wellness trends, there are a number of reformulations coming to us from customers. We have also proactively decoded the private label ecosystem and the supply and co-packing networks, and we have an increasing pipeline of project briefs to support customers with solution selling and co-creation, which is driving deeper engagement and faster delivery of solutions.

All of that makes us feel confident that when macroeconomic conditions and inflationary pressures lessen a bit, that is going to enable us to move from low single digits to that mid-single-digit territory that we believe is absolutely achievable for that segment based on the portfolio we have, the differentiated ingredients we have, and the investments we have made in people and equipment capabilities within our R&D facilities.

Joshua Spector: I appreciate that. More specifically on pricing: pricing has been a persistent headwind. It sounds like you would expect pricing to pick up to cover some of the higher costs in logistics and other areas. Is that the right framework?

Jim Zallie: Let me clarify with something that occurred uniquely in the quarter. First, on margins, which is what you are getting at with pricing: margins in U.S. and Canada in Texture and Healthful Solutions actually increased in the quarter. The majority of the slight margin compression we are seeing is related to the rapid rise in tapioca costs in Asia-Pacific. Tapioca for us is a significant business, and that rapid increase started to occur at the end of Q4 last year. The time lag it takes to pass through those costs through pricing is what we are seeing in Q1.

That typically takes about a quarter to a quarter and a half to work its way through based on how tapioca pricing works. So that may help clarify the margin compression you are highlighting—heavily weighted to that particular issue.

Joshua Spector: Understood. But pricing was still reported down. Does that timing imply margin and price recover in Q2, or are there other factors still pressuring that?

Unknown Speaker: Regarding pricing and taking it back to the prior earnings call and what we said for Texture and Healthful for the full year: going into contracting, for our less differentiated products we had to price to maintain market share, and in some cases increase it. We are expecting—and are seeing—increases in fixed cost absorption through our Texture and Healthful Solutions manufacturing facilities because we did pursue volume in the contracting period. That is why you are seeing some of that play out in how pricing is viewed.

We believe that was the right approach to continue our relevance with the targeted customer base and then bring our solutions capabilities, which over time will increase margins due to the higher gross profit associated with solutions versus the less differentiated parts of the portfolio. Strategically, a few things are at work in how we approached the year given competitive dynamics. The most encouraging thing is the solutions growth in the quarter, which is margin accretive, and then we had the one issue related to tapioca costs. Given our market position, those prices will flow through; it just takes about a quarter to a quarter and a half to get them.

Operator: Thank you. Our next question comes from Benjamin Thomas Mayhew with BMO Capital Markets. You may proceed.

Benjamin Thomas Mayhew: Good morning, and thanks for taking the questions. First, on the tough macro environment and customers managing pricing: what are you seeing in terms of elasticity on your products, and how might pricing actions impact volumes should you need to pass through an extended amount of costs through the balance of the year?

Jim Zallie: Let me set this up and then I will ask our interim CFO to add color. Similar to last year with tariff implementation, we have been very proactive in putting in place a Middle East response team that is collecting all input to our business related to the inflationary impacts of increased energy prices, and we are monitoring and managing those direct and indirect impacts. We have a handle right now on the direct impacts and what we need to do to offset logistics cost increases and any increases flowing through to us directly with chemicals and packaging. You are overseeing that—do you want to provide perspective?

Unknown Speaker: As we have done in the past with tariffs and other disruptions, we believe we will be able to pass through most of the costs. There may be a small but manageable net negative impact, but overall history has shown that, contractually and consistent with market dynamics, we are able to pass those costs through.

Jim Zallie: What is more difficult to predict is the indirect impact this may have on consumer demand as our customers work to pass through incremental costs to the market. Last year, we navigated tariffs extremely well; the net impact to us after price increases was about $6 million for all tariffs that went into place last year. We managed that very well. This year, as it relates to the direct impacts we have projected from the Middle East energy price situation, we are seeing a number in a similar range—extremely manageable.

The bigger watch-out for the industry is the longer the conflict lasts and inflationary impacts are felt through packaging—plastic-related packaging up mid- to high-single digits—and gasoline prices impacting lower- to middle-income consumers. That is where the watch-out is for the second half, which is hard to predict. In the first quarter, we saw minimal to no impact, but everyone is watching cautiously despite consumers remaining robust in the U.S. in Q1.

Benjamin Thomas Mayhew: Thank you for the context. As a follow-up, your balance sheet cash balance is very strong. We know you have been looking at a robust M&A pipeline, but valuations have not been where they need to be. As you look at a potentially tougher environment, how are you thinking about your M&A pipeline? Is it getting more interesting, and are you prepared to pursue more inorganic growth?

Unknown Speaker: We are fortunate to have a strong balance sheet and strong cash flows, which provide optionality to pursue value-accretive M&A. We have a track record of remaining disciplined in pursuit of prospects and, when we do pursue and integrate a business, delivering on the business case. We have a robust M&A pipeline and are actively pursuing a number of businesses that could bring sales, EBITDA, talent, and technology—anything that enhances our winning aspiration in texture solutions and healthful solutions. That will be our priority. We will remain disciplined regarding value accretion, executability, and achievable synergies.

Operator: Our next question comes from Analyst with Barclays. You may proceed.

Analyst: Good morning. Thanks for taking my question. Following up on performance in Latin America, you have called out the volume decline, but underlying trends at Coke bottlers and large brewers in Brazil showed flattish to slightly up volume versus you having about a 7% impact on volume. Where is the mismatch?

Jim Zallie: It is a good question. We saw those results as well. For our LatAm volumes, we expect volumes to be down slightly, lapping a strong 2025. For us, brewery volumes have been lower than anticipated thus far due to conservative customer ordering ahead of the World Cup, which is surprising. We believe this has the potential to pick up in Q2. However, we are lapping soft volumes in Q3 of last year related to a particular customer contract management issue, and we think the second half volumes are going to be stronger.

The Mexican economy continues to demonstrate softness, and thus we have a cautious outlook on volumes for the remainder of the year for Mexico—GDP growth now is in the 1% to 1.5% territory. Overall, against a record Mexico performance last year, we are seeing softness. We also have the impact of the Mexican peso, which is a headwind for us. We will dig more into the numbers you refer to, specifically in brewing, and try to understand what may be happening in no- and low-alcohol beers, which appear to be growing 25% versus mainstay beers, and understand how that flows through to us. That is what we are seeing, and how we would reconcile it at this point.

Analyst: Thank you. And on price/mix in LatAm—was it more price or more mix driving the headwinds?

Unknown Speaker: The price impacts were reflected in our guidance, including our original guidance. At this point, it is more of a mix issue—differentiated customer mix and some product mix are having an impact. Overall, results were in line with expectations for the quarter, and we are not seeing a huge change in LatAm for the balance of the year. The bigger drivers in our guidance change are Argo—about half of it—and then the balance is really the Mexican peso and some of the Middle East impacts on energy costs. The LatAm piece is a smaller component.

Operator: Thank you. Our next question comes from Kristen Owen with Oppenheimer. You may proceed.

Kristen Owen: Hi, Jim and team. Thank you for the time this morning. Following up on LatAm, could you provide background on the Cabo plant—decision factors and how we should think about that influencing margins? Also, is the shutdown included in the updated outlook? And then a follow-up.

Jim Zallie: The shutdown is included in the updated outlook. We are continuously evaluating the efficiency and optimization of our operations and network. As part of a broader initiative to adjust our operating footprint in Brazil—with the goal of strengthening operational efficiency, competitiveness, and long-term business sustainability—we made the decision to cease operations at our Cabo plant in the Northeast. Economic growth in that part of Brazil, compared to when we invested, has not lived up to its potential. At the time of the investment, Brazil itself was growing 7%. Fifteen-plus years later, the potential for that plant, given its location and economic growth in that territory, just has not delivered.

While these decisions are never easy, the decision regarding Cabo aligns with our long-term vision for Brazil as we concentrate resources on higher-value generating businesses. Noteworthy is the decision we took in Q4 to close our Alcantara plant; the ingredient polyols business in Brazil is a strategic growth platform. We successfully executed the network optimization, expanded polyols production at our flagship facility at Mogi Guaçu, and that is delivering on all elements. That will provide strength for the Brazilian business this year as well as the savings associated with the Cabo facility. These were necessary moves to strengthen our footprint and network in Brazil, dealing with the realities of the marketplace.

Kristen Owen: Thank you. As a follow-up, on co-product opportunities given where fed cattle prices have moved and some crosswinds on paper and packaging, how should we think about that influencing the balance of the year?

Unknown Speaker: Co-products are always an important part of the business. Over the past few years, we have mitigated some of the volatility related to co-products. As we have been able to hedge further forward on our corn during contracting, we are also hedging forward on our co-products. That tempers volatility relative to our forecast. We will see some benefit as prices rise for the unhedged portion, but it will be muted relative to what we may have seen five or ten years ago.

Operator: Thank you. Our next question comes from Heather Lynn Jones with Heather Jones Research. You may proceed.

Heather Lynn Jones: Good morning, and thanks for the question. On guidance confidence: you had issues from last year's fire, and now there was a recent fire in the corn germ part of the plant. Have the issues from last year been fully resolved? And does your guidance assume the corn germ piece is fully resolved relatively soon?

Jim Zallie: Yes. In Q2, that issue will be behind us. Because Argo was so significant in the quarter, let me provide more context. Early in Q1, we had a failure in our corn conveying at the plant, which led to incremental intraplant logistics to have corn flow as it should, and that led to increased logistics and maintenance costs. This was repaired in the quarter and is now behind us. In addition, in our downstream refinery operations, we experienced operational reliability challenges in our syrup refining that led to product downgrades and unexpected rework costs. Typically, we can overcome that quickly; in this case, getting to the root cause took longer than anticipated.

Unfortunately, this persisted through the quarter and was the single biggest unexpected negative impact to results. That is now resolved and behind us through a SWAT team approach. As we exited the quarter, refinery production is operating at normalized rates. On April 10, we suffered a thermal event in our corn germ processing unit, which took this unit offline for approximately five to six weeks. It is scheduled to be back online within Q2 and was limited to the germ processing area. The front-end grind and refinery were not impacted. Due to the nonrecurring nature and magnitude of this event, that impact will be excluded from our adjusted results.

We are seeing sequential improvement at Argo, and our outlook assumes we will sustain the production and yield levels we are operating at today.

Heather Lynn Jones: Thank you. Just to clarify, last year’s dryer issue related to gluten feed and gluten meal is fully resolved and was not a factor in Q1; the downstream refinery issues are resolved; the corn germ issue is expected to be resolved in Q2 and is excluded from adjusted guidance.

Unknown Speaker: That is correct. One nuance: when germ processing goes down, you have more germ. We can store a good proportion to process once back online, but some will go into wet feed and will impact co-product values overall. Because you have a larger portion of product to dry, we will not be able to manage all of it through dryers. The issues from last year are resolved, but we do expect a little follow-on co-product headwind as we get germ processing back online.

Heather Lynn Jones: Understood. On segment guidance: it looks like Texture and Healthful was taken down from low- to mid-single-digit to low-single-digit operating income growth, LatAm now down, and U.S./Canada down low double digits, which is obvious due to Argo. For Texture and Healthful and LatAm, are guidance changes related to cost, or has there also been disappointing demand beyond brewing?

Unknown Speaker: For Texture and Healthful Solutions, the reduced outlook reflects higher energy costs and the lag in some regions to pass those costs through. There will be a small but manageable net negative for certain costs we cannot pass on—warehouse-to-warehouse transfers, for example. Beyond that, we expect volumes and sales roughly in line with original guidance. It is hard to assess the potential impact on consumer demand from higher cost pass-throughs; that would be reflected at the lower end of our range.

Operator: Thank you. Our next question comes from Analyst with Benchmark/StoneX. You may proceed.

Analyst: Thanks for taking my questions. You alluded to optionality regarding growth investments. Have issues like Argo or macro dynamics compromised your ability to focus on growth initiatives year-to-date? And how do you see growth investments evolving—leaning more into protein or still focused on Texture and Healthful Solutions?

Jim Zallie: Alongside our enterprise productivity initiative, we reviewed our CapEx and ring-fenced certain investments to preserve support for our texture solutions capability build. We proceeded to make people and innovation investments. One major body of work in enterprise productivity is enhancing our innovation operating model—becoming more efficient and effective with investments in artificial intelligence for predictive formulation, as well as measurement capabilities for structure-function predictability in texture solutions. We have ring-fenced and are continuing those investments. Our cash flows afford us the opportunity to invest in a balanced way in growth and reliability capital, and we reassess needs continuously. We believe we have the right balance going forward after significant discussion.

Operator: I would now like to turn the call back over to Jim Zallie for any closing remarks.

Jim Zallie: I want to thank everyone for joining us this morning. We look forward to seeing many of you at our upcoming investor events, with the next significant engagement being the BMO Farm to Market on May 13 in New York. Thank you for your continued interest in Ingredion Incorporated.

Operator: Thank you. This concludes the conference. Thank you for your participation. You may now disconnect.