Ingredion Incorporated Stock

Good day. Thank you very much for joining us. Next on stage, we have Ingredion, a leading global ingredient solutions provider. We're pleased to welcome Jim Zallie to the stage, who was appointed President and CEO of Ingredion in January of 2018, elected to the Board of Directors in September '17 and now serves also as Chairman of the Board. Given the announced acquisition plan for Tate & Lyle, Jim will address the deal in his opening remarks and then our focus during the fireside questions will be on current business developments. With that, Jim, please go ahead.

Thank you, Ben, and it's a pleasure to be back at the Barclays Conference. It's been a busy year for Ingredion as we continue to transform our portfolio, our business. And as you'll see with the announced acquisition of Tate & Lyle to continue to create the future of food on behalf of our customers and with our customers. So let me get right into it. Obviously, anything I say today will be protected by the safe harbor provisions in the forward-looking statements. For those of you that are not familiar with Ingredion, I just wanted to give you a quick snapshot.

We're a global ingredient solutions provider. We've been around for a long time, more than 100 years. Revenue is $7.2 billion. We're traded on the New York Stock Exchange. Market cap $6.6 billion, as you can see. But most importantly is the global reach and the extensive customer intimacy, 15,000 customers around the world and ship and sell products in 120 countries around the world. And our business, we resegmented it a few years ago, and it's a combination of global and/or multiregional multi-country segments. One is Global Texture and Healthful Solutions, about 1/3 of our revenue. Food and Industrial Ingredients, LatAm, you could see also about 1/3 of our revenue, Food and Industrial Ingredients, U.S., Canada, about 30%; and then other businesses, which is made up of the Pakistan business, which we recently sold a majority stake in as well as our sugar reduction and protein fortification businesses. 75% sold to food and beverage, 20% approximately sold to nonfood applications, which would be industrial, but also into pharma and personal care businesses, which are increasingly becoming larger and important and higher margins and growing fast.

And then we grind a lot of corn and we sell that for animal nutrition. And the cash flow, the strong cash flow that the business has generated over the last 3 years, we've generated more than $1 billion of cash each and every year. This year, projected $700 million to $800 million. A lot of that comes from the Food and Industrial Ingredients segments that we then are investing into the faster-growing Texture and Healthful Solutions business. And so these are the 3 segments, and they're scalable. They are profitable businesses in their own right. And they are all about working with customers to enable customers to generate consumer-preferred innovation through the ingredients we supply to give them a front-of-pack labeling differentiation. For example, texture, a certain texture, a certain crispness or crunchiness or velvety texture or protein fortified claim or the ability to reduce sugar. So we're all about influencing front-of-pack claims and consumer-preferred innovation.

The Global Texture and Healthful Solutions business, I wanted to highlight because it's at the center of the strategy for the acquisition to acquire Tate & Lyle. Tate & Lyle is going to bring $2.7 billion of revenue. This business $2.4 billion. So together, more than $5 billion with the combined company, it will be more than 50% of our revenue. But this business has been doing very well, 9 consecutive quarters for net sales volume growth this past quarter, quarter 2 and the second highest operating income in the business' history.

And the operating margin, which you can see going back from '24, '25, and you can see in this most recent quarter at 18.7%, continuing to increase its margins, a lot of focus on solution selling, which inherently have higher margins and also just higher growth rates as well. And we have been reshaping our portfolio, transforming our portfolio over a number of years, if you've been tracking us over, say, the last decade. But most recently, in the last couple of years, we divested our South Korea business. That was a business that had exposure to high fructose corn syrup and industrial starch pretty much. We divested that.

We sold it at a multiple above our current multiple or the multiple at the time, and we generated $250 million of proceeds. This most recently, in June, we divested the majority stake, 51% of our position, which we held for many, many years, many decades in Pakistan. It was a great business at the time, but not strategic to where we want to take the portfolio into the future more towards higher-value specialties. It was a business that was exposed to textiles and also into glucose syrups. Predominantly, we generated $165 million of net proceeds from that. And also, we announced most recently last year, the closure and execution of the Alcantara facility in Brazil outside of Rio and then invested in our Mogi Guacu facility, and that went off seamlessly. And then most recently this year, announced the closure and divestment of our Cabo facility. But the big news was on June 8, where we announced the acquisition -- intended acquisition of Tate & Lyle, significant enterprise value of $5 billion.

It adds to our Texture portfolio, mouthfeel, fiber fortification and sugar reduction capabilities. We also announced a stronger entry into India. For the last couple of years, we've made acquisitions in pharma for India. And I think of it this way, taking the investments in Pakistan and basically putting them into the most populous country in the world that's growing at a nice clip, but also very strong pharma presence and a lot of upside in food ingredients as well. And we partnered with a very strong company called Sanstar, one of the leading corn wet millers, a good family-owned business, but also publicly listed in India and had cultivated that relationship for a number of years and then consolidated an acquisition of a company called Mannitab for pharmaceutical excipients also in India as well. And so the net effect is we're transforming the portfolio to a higher growth, higher-margin mix. And again, with Tate & Lyle, more than 50% of the portfolio in Texture and Healthful solutions.

And this, as you can see, the revenue will get to approximately $10 billion and the EBITDA at $1.8 billion. And you can see the fact that there's really 2 complementary portfolios. And really, what it does is it creates more scale for us to service our customers. And that portfolio will give us an ability to provide more differentiated value, specifically through solution selling. Both companies focus more and more on solution selling, but think of it as adding more tools to the toolbox to provide more textural innovation, more sugar reduction solutions and more fiber fortification, which are highly on trend as the reformulation boom takes place, appealing towards increased regulation around products to be healthier, more clean label, and also enables us to also provide more affordable solutions as well. The other thing that it does is it provides a complementary network of supply with more inherent just naturally built-in redundancies of supply.

And that is something that we're hearing from customers, they're very pleased about because of what they went through during the pandemic, during the supply chain crisis, but also what's happening right now geopolitically with increasing tensions related to tariffs or related to energy prices. And having reliable supply is one of the things also that we think is going to position us as a preferred supplier with this combination and makes it very compelling. And it makes us better positioned to serve consumer needs and address industry trends such as clean label, again, affordability, sugar reduction. We call multisensory experiences, which is textural innovation. For those of you that have been tracking the food space and have been reading a number of the food articles in the last 1 to 2 years, you're hearing more about texture being positioned as the new flavor, multi-textured foods. You're familiar with Boba Tea, Boba Tea now making its way into pudding-like products.

Consumers looking for different eating experiences and companies looking to drive innovation and drive overall liking for products that will taste interesting and great influenced by texture. Ingredion with this acquisition, intends to be the go-to provider for Texture and Healthful Solutions that make healthy taste better. And then you can see also pharma, home and personal care. The other thing that this acquisition will do, both companies have not so well-known areas of focus in the area of skin and hair care as well. These are businesses that are now not so small. They're $200 million, $300 million businesses. Combined, it's going to be even larger, growing at high single digits and higher profit margins as well. So the acquisition is very compelling on that front. And really, the way we go to market with solutions is it starts with bringing consumer insights, talking the same language as our customers and then developing a co-creation brief where they're skin in the game on both sides and then really customized formulations and then helping them scale the products up.

And an interesting statistic, we don't work with just large CPG companies. We're working with private label manufacturers. We're working with insurgent brands as well. And most of the volume growth, the very elusive volume growth that's happening in the food industry, where it's happening is coming from insurgent brands. And we are partnering with a lot of these insurgent brand companies, especially in the areas of protein fortification, sugar reduction. And all of that, this acquisition, we believe, brings complementary capabilities to drive a higher margin mix. The acquisition will deliver $130 million of cost synergies. That's not taking into account any cross-selling or revenue synergies. That's 4.8% only on the stated revenue of Tate & Lyle, which is something we think is very achievable. We have to execute that, but it's very achievable. It's not something that we think is overly stretchy. And you can see what that will do to the adjusted EBITDA once we complete the acquisition.

And when the acquisition completes, which is scheduled to complete in the second half of next year, we'll be at 3x leverage with a commitment based on their own inherent cash flow and based on our own strong balance sheet to take our targeted leverage down to less than 2.5, 18 months post the close. And our capital allocation priorities remain focused on investing for growth where we have projects for growth, obviously, reliability cost savings, but then preserving the dividend where we have had 11 straight years of dividend increases and opportunistic buybacks. Even this year, despite this acquisition, we're going to generate $700 million to $800 million of cash, and we reaffirmed our intent to buy back more than $100 million of shares this year. And in the last 3 years, we bought back $550 million of shares approximately. So we are right now in the regulatory and antitrust review stage and again, expect completion towards the second half of next year.

And then obviously, for 12 to 24 months, we'll be feverishly working to deliver on the synergies and the promise of the acquisition. And again, 15% EPS accretion or greater than 15% EPS accretion of adjusted EPS in the first full calendar year post acquisition. And so what this reinforces in regards to the investment thesis for Ingredion is multiple pathways to value creation, specifically the ability with scale and again, the focus to expand the Texture and Healthful solutions portfolio to be that go-to provider for Texture and Healthful solutions that make healthy taste better for our customers, just a broader solution set overall with the ability to drive 1% to 2% volume growth, 2% to 4% will come from mix upgrades, primarily solution selling. And then that will help drive the 4% to 6% Texture and Healthful Solutions compounded annual growth rate.

Many of the product lines, specifically in the areas of clean label are higher average selling price, higher gross margins. Those are growing fast right now based on all the reformulation that's taking place. And these are durable positions. There will be a combined enhancement of our IP estate as well that will make us a more intimate partner for customers to help drive innovation. And we think that provides really defensible positions, especially in the areas that we're targeting. And we get more scale from the acquisition, and we've talked about those numbers. And then the disciplined capital allocation as well. Again, very strong balance sheet today with a commitment to get the leverage down to 2.5x in approximately 18 months post close. So with that, I'm going to go over and talk to Ben. So Ben?

Perfect. Take a seat. Time for the fire.

All right.

Well, thanks for that. And as I said, we're not going to go any deeper on any questions Tate & Lyle related. But maybe to start off, Jim, obviously, a big topic, and we've heard this in the morning as well, is just the health of the North American consumer. So maybe just help us from your side, what are you seeing in terms of any change in customer behavior, maybe potential trade down? And how is your portfolio kind of like balanced, call it, private label, value goods? How to think about your exposure as to the consumer dynamics in the U.S.?

Yes. I think, first of all, it's important to highlight that we're a global company, not just a U.S.-centric company, even though so much of our focus is also obviously on the health of the U.S. consumer, but we're a global company and diversified in that regard. We're a company that helps our customers formulate affordably, affordable solutions. And so that's been part of our DNA for quite a long period of time. Going forward for the second half, we haven't dialed back any of our, say, outlooks on volume, but we are watching the consumer very, very closely because of all the news that we're all watching in relationship to some food companies' outlooks for the forward outlook. And I think that the other thing that's compelling about our business is that we sell across multiple customer channels. So we're selling to the fast-moving consumer goods companies, yes, but we also are selling to private label. Maybe 15%, 20% of our business in the U.S. goes to private label through direct partnerships or the co-manufacturing networks that they use.

In Europe, it's a higher percentage. It could be 40%, 45%. In the U.K., it can be even a little bit higher than that. So private label is not an insignificant portion. We sell to food service and quick service restaurant customers and are there with continuous new product launches and those insurgent brand customers that we're talking about as well. So we're diversified across the customer base. And what we've been focused on through solution selling, and we believe that the 9 consecutive quarters of net sales volume growth in texture and healthful solutions, which I don't think is any small feat that we've been able to achieve and a large portion of that's been coming from steady growth in the U.S. market is because we're trying to be smart about segmenting our customers, trying to identify which of those customers are -- have the right strategies, are listening to their consumers and are partnering.

And the whole solution selling model, which starts with that consumer insights and the customer briefs is allowing us to -- it's an overused expression, but skate to where the puck is going, to try to find those pockets of growth because invariably, there are always pockets of growth. Even though volume has been elusive, there's pockets of growth.

Example, this most recent quarter, our protein fortification business was up 40%. And that's driven by, of course, the demand -- the tightness in the whey market for dairy proteins, but protein fortified products. And even for affordable solutions, our ingredients get formulated into those products for value launches for food service. So it's about really being customer intelligent, segmenting customers and segmenting the opportunities and being diversified. But we're watching it very closely because I think we're at a point where if energy prices and diesel prices continue to go up, the transportation, the delivery cost to get food to customers, it's -- I still believe it's a K-shaped economy. I know that Scott Bessent is talking about a C-shaped economy. I'm still thinking it's a K-shaped economy. And we have offerings for both products for more of the premiumization and nutritionally fortified, but also for the more affordable products. So that's how we're looking at it right now. We're watching it closely.

Okay. So staying maybe within Texture and Healthful Solutions is obviously, you've highlighted has been posting very solid volume growth and just to understand a little bit better what are the consumer trends that are driving that and where you see continued momentum for further growth? And particularly, if you could touch on things such as reformulations, et cetera, how that is going to play a key role within Texture and Healthful Solutions and your customer road map.

So we're seeing -- and we've been talking about it on the last number of earnings calls. We're seeing a lot of reformulations come our way, partly because of how we've reorganized our go-to-market model to engage with customers with co-creation and solutions briefs and solution selling, but also because volume growth is incredibly elusive for the entire industry, and everybody is trying to figure out exactly why. Is it the extreme economizing that's going on with consumers? Is it GLP-1s? Is it regulations where if they're having to remove synthetic dyes, they might as well make the product overall more clean label. So we're seeing growth coming from our clean label franchise. We're seeing products that are requiring to be protein fortified or having less sugar in them. And thus, we have our high-intensity natural sweetener products. But at the end of the day, the products always at the end of the day, have to taste great.

And we're seeing incremental briefs for textural innovation because -- and there are so many stories, so many quotes, so many headlines if you read them. A lot in the confectionery space right now talking about multi-textured foods and texture being the new flavor. And we are being seen as the go-to provider for textural innovation. And that's why we're so excited about the Tate & Lyle acquisition because it's going to give us more texture tools in the toolbox to do that. So we think that's driving a lot of the growth right now just based on the strategy we have and the value propositions that we're offering for the industry that's looking to drive volume growth through innovation. The branded goods manufacturers because of the affordability challenge and because they took price up too high, lost share to private label.

Private label then saw that as an opportunity and private label went very hard maybe 6, 9, 12 months ago to target a lot of that share. The CPG companies said, time out, what are we doing? We got to readjust here. They've lowered prices. They've gained back some of that volume. It's a battle. And we're there helping, enabling both drive innovation because at the end of the day, they both need innovation to drive sustainable volume growth. And we're there at that intersection to help them. That's what's happening, and that's what we're seeing, and that's what we're trying to do on the customers' behalf.

How much does your global footprint actually play a role here with maybe expertise and knowledge of having ingredient -- alternative ingredients to offset some of those changes?

It helps a lot because of the supply network that we have. So we can obviously ship products around the world, especially for the Global Texture and Healthful Solutions business. But really where it's helping is the transportation of ideas, the transfer of ideas and winning products in one geography that we then through our network can transfer to another geography. And a lot of our customers are multinational customers. And if something is working in one country, they'll want to roll it out into another country. And having a global presence being globally positioned helps with that as well.

Okay. Got it. Now one of the things that obviously has kind of like been a little bit of a setback over the last couple of quarters have been the issues at the Argo facility. I want to dig into that a little bit. So obviously, there were a lot of headwinds still and the last couple of quarters, it seems like things are coming back. So first of all, where are we in terms of operational performance right now? And do you see any incremental headwinds from the downtime outside of like the increased cost that you called out earlier?

So for those of you in the audience that may not be having tracked us very closely, I'll just give you the quick story on -- it's the U.S., Canada Food and Industrial Ingredients business. It's the business which is 28% of our revenue, and it's the business that has underperformed predominantly, that's the business that's underperformed going back to Q2, Q3, Q4 of last year, where our Argo facility, which is the largest facility, its facility outside of Chicago, really cost us $40 million of operating income. So last year for Ingredion, we had a record year for operating income and EBITDA, record. The year prior to that was a record, the year prior to that was a record. And despite $40 million of cost headwind, inefficiencies from the Argo facility in quarters 2, 3, 4, we delivered a record year.

In quarter 1 of this year, we had a $40 million negative impact from Argo. So $40 million for 3 quarters last year, $40 million just in quarter 1. Quarter 2, there was market relief because the plant had stabilized. We stabilized the grind, we've stabilized the refinery and a lot of the rework that we had has been predominantly worked off. We had an unfortunate thermal event where we had to -- which impacted our germ processing, and that happened on April 10. By June, early mid-June, it was back up and running through just heroic efforts on our part. Exiting June, so exiting the second quarter, the plant was running very, very well. And what we're saying to the Street is that we intend to see sequentially throughout the year and going into next year sequentially improve.

When you have your largest facility that struggles and struggling, you don't -- it doesn't -- it's like turning a super tanker. You can't turn it on a dime. But it is stabilized and it is sequentially improving, and we expect it to continue to sequentially improve. So not anything has changed in that regard. However, what we're watching is we're watching our consumer demand for the products that it produces because when you struggle, it takes some time to get back volume. And then we're obviously watching what I said earlier, which is the consumer volume. But I'm pleased to say the plant is running much better. And there's been an incredible amount of focus. We announced additional capital spend to help improve reliability, but also we've gotten into processes and training and all of the things that you need to do the blocking and tackling. And so we feel that the plant is in a -- is definitely in a much better place than it was for the last 4 quarters, and it is stabilized and it isn't on the ascent.

The key here is to keep demonstrating that and then win back the trust and the volume from the customers that was hurt during that period of time. We believe -- this is something, Jason, who's sitting in front of me here, we believe that perhaps there's a $20 impact in the stock related to that Argo facility. So you're right to call it out, and we've got to earn back the right to get that $20 back in the stock price. Just to put it in perspective, the operating income margin for the U.S., Canada Food and Industrial Ingredients business going back to, say, quarter 1 of '25 was probably at 17%, 18%. I think we're in quarter 1 at 7.8% or 8% just -- so 10 points of margin on that business alone. And so we will get back, but we've got to earn it back. In quarter 2, we were back up to 12% operating income margin. So it's coming back, but it's just got to take some time to come back.

How do you think actually about the shape of that recovery in terms of timing? What's your...

I mean I just -- I wish -- it's not going to be a Nike swoosh or a hockey stick. I think that what we are saying is sequential improvement is basically what we're striving for. And I think if we do that with the growth in the Texture and Healthful and the stability we have in the rest of the business will be in good shape -- we'll be in good shape.

All right. I wanted to touch before we're coming to an end time-wise, also some of the global footprint you've talked about early on. And obviously, food, industrial LatAm is still a very sizable business. Also it's a far profitable business, obviously. We'll lose a little bit of relevance with the Tate & Lyle acquisition. But as of now, it's obviously -- it's a big player. So as we look at that, there seem to be very mixed market dynamics in Latin America and if we think about the bigger countries. So maybe help us and help the audience understand a little bit better where you play a key role in Latin America, what are like the macroeconomic drivers and what have been maybe the issues, but what have been as well more of the brighter spots within Latin America over the last couple of quarters?

So Ingredion has an incredibly strong position in Latin America, and that's defined as Mexico, where we have a jewel of a business in Mexico. We have 3 manufacturing facilities and a great business in Mexico. We have a #1 position in the market in Brazil and a #1 position in the Andean region, which consists of Colombia as well as in Peru. To put it in perspective, again, 32% of our overall revenue comes from LatAm. That's because of a legacy of long-standing more than 100-year history of investments there as well. And the operating income margin, Ben called it out, but it was 20.3% quarter 2 of last year, quarter 2 of this year, 19.3%, so a 1% decline. That -- those headwinds this year have been related to the Mexican peso, the strength of the Mexican peso because our costs are denominated in Mexican pesos. And so that's been a not immaterial impact to the business. And also, the Mexican economy has not been as robust, growing at about 1% GDP.

Our Brazilian business has been doing well this year. But the one thing that's maybe newsworthy from today is on August 10, I believe you would all remember, it was a Monday at 7:30 in the morning, there was a 7.4 earthquake in Western Colombia. Our plant is located in Cali, Colombia. So our plant did incur an outage, some outages. Natural gas was disrupted to the country. And so we were down for maybe 5, 6 days. So in quarter 3, there will be a small impact. So going forward, there will be an impact. I mean it's not our largest business. Mexico is by far our largest business. But the fortunate thing is none of our employees were injured. About 20 of our employees' families were displaced. So that was a pretty severe earthquake. We're going to need a little bit of extra capital, not anything great, maybe $10 million, $15 million to invest in some things to make some of the infrastructure safe.

But the plant is back up and running, and we're up and running now at historical rates. But we were down for a good 5, 7 days, and everybody has been pretty shaken up down there because there's been aftershocks and all of that. So for the go forward, it's been the peso story, has been the peso in Mexico. Brazil is fine. And now we've had this unfortunate -- I think it's August 10 event in Colombia, but we're back up and running and running pretty well. And it won't be a material impact. But it will be a handful of million dollars of impact approximately.

Now just 2 real quick ones at the end. So one, obviously, corn cost is a very relevant piece of your COGS profile and corn prices have gone up quite meaningful over the last couple of weeks. So just tell us what your expectations are and how you kind of like think of like pass-through dynamics and potential impact to profitability just short term given where corn prices have moved.

So for those of you that haven't tracked again, Ingredion over the years, we've done, I think, a really good job over the last, say, 5, 6, 7 years of reducing any volatility associated with any increase or decrease of corn prices and the then association of the impact of co-products. That's the sale of corn, oil, germ, meal, feed to our overall, what we call net corn position. So we've done a very good job because we've been selling forward more of the coproducts, but our business model allows us to do back-to-back hedging with customer contracts. And really, it takes out a lot of the volatility. So as corn prices increase, and typically they do, which is a hedge against inflation, which is exactly what you're seeing right now, that doesn't really affect us because our customers are keenly aware of it. They understand it, and it's not a heavy lift to communicate to them.

The industry is very rational in that regard, and everybody understands that this just has to be passed through. What the ultimate impact is on consumers is a different matter, right? Because, again, it gets back to how much inflation can the consumer absorb coming at them from a variety of areas. But for us, for contracting for next year, for pricing pass-through, our business model is developed, mature and strong enough that it just happens and customers understand that element of the need to pass through price increases. The other thing, though, that you didn't ask about, which I'll just mention is there was a very severe drought in Europe, as you all know, this past year, and the corn crop is down quite significantly. The good news for us is we're covered. We've planted sufficiently.

And on a delivered cost basis, and we've done this in the past, we can bring in product from the U.S. So even for our specialty hybrids, we're feeling very good about our position for Europe, and so if that was on your mind, what about the European corn crop with the drought for Ingredion at least, we feel very good about our position there also. So we don't see corn being a factor for us as we head into '27 in any headwind way. We don't see that.

Perfect. Well, just at time. Thank you very much, and good luck with Tate & Lyle. We look forward to closing that. And hopefully, September next year, we can talk more details about this. Thank you very much. We're heading over to the breakout.

Thank you.

Good day, and thank you for standing by. Welcome to Ingredion's Second Quarter 2026 Earnings Call. [Operator Instructions]. Please be advised that today's conference is being recorded. I'd now like to hand the conference over to Noah Weiss, Vice President of Investor Relations. Please go ahead.

Good morning, and welcome to Ingredion's Second Quarter 2026 Earnings Call. I'm Noah Weiss, Vice President of Investor Relations. Joining me on today's call are Jim Zallie, our Chairman, President and CEO; and Jason Payant, our Vice President and Interim CFO.

The press release issued this morning, along with the presentation we will reference during today's call, is available on ingredion.com, in the Investors section. As a reminder, our comments within this 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 assumes no obligation to update them in the future as or if stances 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 the 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 and [indiscernible] non-GAAP information included in our press release and in today's presentation appendix.

As part of our prepared remarks, we will touch on the announced acquisition of Tate & Lyle and the progress we have made since announcing the transaction. That said, given where we are in the process, we are limited in what we can disclose and cannot speculate on potential outcomes, timing, integration matters or other transaction-related topics beyond information already in the public domain. We appreciate your understanding and ask that questions today be focused on our operating results and outlook. With that, I will turn the call over to Jim.

Thank you, Noah, and good morning, everyone. Ingredion delivered a second quarter performance, which was in line with expectations, led by continued momentum in texture and healthful Solutions, with net sales increasing 1% to $1.85 billion. Adjusted operating income was $258 million, down 5% from the prior year. Results were impacted by softer production and demand in our food and industrial ingredients U.S./Canada segment and continued macroeconomic pressures in Mexico. At the same time, performance across the rest of the portfolio was strong as we delivered the second highest quarterly operating income ever in texture and healthful solutions. We are pleased to say that Argo reliability and production sequentially improved during the quarter. And at the end of June, the plant was operating at normal production rates across all major operating units.

Turning to the next slide. We are pleased with the momentum that we continue to see in texture and healthful solutions. Quarter 2 marked the ninth consecutive quarter of net sales volume growth in the segment, up 7% with broad-based growth from our solutions offerings and clean label ingredients. While the consumer environment remains mixed, we are seeing robust customer innovation activity with reformulation across health and wellness, protein and fiber fortification and clean label all supported by new product launches. These trends align with the value proposition inherent in our Texture and Healthful Solutions growth strategy and they reinforce our confidence in sustainable long-term volume and margin growth.

Tempering the positive innovation momentum, we did see additional increases in tapioca costs in the quarter with route prices now up more than 40% since the start of the year due to weather-related impacts limiting supply. We are actively passing through price increases which, as a reminder, take approximately 1 to 1.5 quarters to realize. In Food and Industrial Ingredients, LatAm, volumes were down slightly against a strong prior year comparison. While the macroeconomic conditions in Mexico have been challenging, underlying long-term market trends remain intact.

The business in South America continued to benefit from broad regional strength particularly the growth in Brazil's industrial and brewing markets. In food and industrial ingredients U.S./Canada, volumes remain below prior year levels due to lower production and softer food and beverage demand. That said, reliability and performance at our Argo facility sequentially improved throughout the quarter, and we exited June operating at normal production rates. Our industrial business in U.S. Canada saw growth from the packaging sector, supported by a differentiated solution we recently launched for corrugating, which speeds up box production.

Turning to the next slide. Let's review our progress against our three strategic pillars. First, under profitable growth. Our announced pending acquisition of Tate & Lyle achieved an important milestone last week with the approval by Tate & Lyle shareholders of the deal. As stated previously, we believe this combination will establish Ingredion as a more comprehensive global leader in ingredient solutions with the innovation expertise and geographic reach that will help create the future of food.

Our solutions led growth strategy continues to gain traction, contributing to strong first half performance in texture and healthful Solutions. As part of texture and Healthful Solutions diversified portfolio, we strengthened our pharma business in India through an announced strategic partnership with SandStar. This important relationship expands our capabilities in pharmaceutical excipients with the opportunity to also partner in the development of specialty food ingredients while providing access to large-scale manufacturing in the world's most populous country and one of the fastest-growing markets for food ingredients.

Moving to our next pillar, Innovation remains a key differentiator for Ingredion. We are increasingly leveraging digital capabilities to accelerate innovation. And during the quarter, we launched ask Ingredion, our AI-powered formulation platform designed to help customers identify ingredients and solve formulation challenges that help them bring new products to market faster. We also strengthened our healthful solutions portfolio through the acquisition of Benicaros, a clinically supported immune health prebiotic. Benicaro's value proposition sits at the intersection of several attractive consumer trends, including digestive health, immune support and clean label formulation. It is an example of how we are helping customers differentiate their products by enabling them to make science-backed health benefit claims.

Additionally, we continue to target new higher-value industrial applications. Our advancements in coatings, adhesives and barrier solutions for sustainable food packaging continue to gain traction with active customer engagements. For example, we are helping customers replace PFAS containing grease-resistant barriers with plant-based alternatives that maintain performance while improving recyclability and being regulatory compliant. Our differentiated bio-based adhesive solutions for corrugated packaging manufacturers are improving machine productivity, reducing waste, and enhancing board performance. We are bullish on the growth prospects of these targeted industrial applications.

We remain equally focused on delivering growth consistent with our sustainability commitments. Ingredion was named to Forbes Net Zero Leaders list for the second year in a row. This distinction is especially noteworthy because it is based on demonstrating progress against objective, quantifiable metrics for lowering greenhouse gas emissions. Finally, for the enterprise productivity pillar, we continue to invest to transform our portfolio and optimize our processes and network to best position the company for long-term value creation. Last quarter, we announced the sale of our majority stake in the Pakistan business as well as the closure of our Cabo, Brazil Plant. Both moves reduce our exposure to less differentiated ingredients and will drive improved effectiveness and efficiency.

Last week, Tate & Lyle shareholders approved the terms of a recommended all-cash offer by Ingredion for the entire issued and to be issued share capital of Tate & Lyle, an important milestone in the U.K. scheme of arrangement process and a positive step toward completing the transaction. With shareholder approval secured, our focus is now on progressing the required regulatory reviews and satisfying the remaining closing conditions. We are actively engaged with the relevant authorities and are working to support their review processes as efficiently as possible. The financial profile of the transaction remains compelling.

With the addition of $2.7 billion of highly complementary revenue, the opportunity to deliver $130 million of expected run rate synergies by 2030 and the expectations to deliver greater than 15% adjusted EPS accretion in the first full calendar year post acquisition, all with a clear path to achieving less than 2.5x net leverage within 18 months of closing. Turning to the next slide. Let me explain why we are so enthusiastic about the strategic rationale for the pending acquisition of Tate & Lyle. Across the food and beverage industry, manufacturers are working successfully appeal to changing consumer buying behaviors. Consumers are placing greater emphasis on health and wellness in response to changing regulations and lifestyle preferences.

While brands remain under pressure to deliver affordability without compromising taste, and the overall eating experience. These challenges increasingly require customers to optimize multiple attributes at the same time. That can include improving nutrition through fortification or reducing sugar while enhancing Texture and Healthful to maintain great taste and delivering on affordability. This is where combining Ingredion and Tate & Lyle's capabilities becomes particularly compelling.

Together, we will bring a broader portfolio of complementary capabilities across sweetening, texture, mouth feel, fiber and protein fortification supported by expanded scientific expertise and a more comprehensive global innovation network. Beyond an expanded portfolio of individual ingredients, the opportunity is to provide more integrated and complete solutions that help customers solve formulation challenges more quickly and effectively. Combined with greater scale, deeper scientific capabilities and enhanced digital and AI-enabled tools, we believe we will be even better positioned to support customers as consumer needs continue to evolve.

Following the combination, more than half of our revenue will come from texture and healthful Solutions, the fastest growth segment of our business portfolio, where customer and consumer demand remains strong and volume growth in doors. Ultimately, Tate & Lyle will accelerate our shift toward higher-value and higher-margin solutions and positions Ingredion to be an even stronger innovation partner and reliable supplier. With that, I'll turn the call over to Jason for the financial review.

Thank you, Jim, and good morning, everyone. Moving to our income statement. Net sales for the second quarter were $1.85 billion, up 1% versus prior year. Reported and adjusted operating income were $188 million and $258 million, respectively. Adjusted operating income declined 5%, driven by Argo related manufacturing issues and foreign exchange and macroeconomic headwinds in Mexico, which were partially offset by strong texture and healthful Solutions performance.

Turning to our Q2 net sales bridge. The 1% increase was driven by $36 million of favorable foreign exchange and $20 million of higher volume, partially offset by $39 million of unfavorable price mix. Moving to the next slide. We highlight net sales drivers by segment for the second quarter. Texture and Household Solutions net sales were up 5%, driven by sales volume growth of 7% and foreign exchange favorability of 1%, partially offset by lower price/mix. Food and Industrial Ingredients LatAm net sales were up 3%, and driven by favorable foreign exchange, partially offset by lower volumes and weaker price mix.

Food and industrial ingredients U.S. Canada net sales declined 7%, driven by operational challenges at Argo and weaker consumer demand. Now let's turn to a summary of results by segment. Shared Healthful Solutions net sales and operating income were both up 5% in the quarter. The increase in operating income was driven by volume growth and favorable foreign exchange, partially offset by unfavorable price/mix and higher tapioca costs. Texture & Healthful Solutions delivered its second highest quarterly operating income ever, despite persistent inflationary pressures, which demonstrates the strength of the portfolio, the quality of execution by our team and the benefits of our solutions-led strategy.

Included Industrial Ingredients LATAM, net sales were up 3%. And Operating income decreased by 7% to $118 million with operating margins of 19.3%. This decrease was driven primarily by transactional currency impacts in Mexico and a more challenging demand environment. Moving to food and industrial ingredients U.S. Canada. Second quarter net sales were down 7%. The Operating income was $58 million, impacted by production challenges at our Argo facility and softer volumes and price mix. Net sales in all other increased 8%, driven by more than 40% net sales growth in protein fortification. Particularly from higher-value isolates and specialty protein applications.

Operating income improved by $7 million year-over-year, reflecting improved mix and operating leverage. Turning to our second quarter earnings bridge. The top half of the slide reconciles reported to adjusted diluted earnings per share and the bottom half walks through the drivers of the year-over-year change. Adjusted diluted EPS declined $0.05 compared to the prior year, primarily driven by $0.34 of margin impacts. These headwinds were partially offset by favorable foreign exchange impacts of $0.05 per share other income benefits of $0.09 per share and $0.12 of nonoperating benefit, $0.07 from share repurchases and $0.05 from lower financing costs. Shifting to our year-to-date income statement highlights.

Net sales for the first 6 months were approximately $3.6 billion, flat versus the prior year. Reported and adjusted operating income were $391 million and $470 million, a decrease of 29% and 14%, respectively. Turning to our year-to-date earnings bridge. The resulted a decrease of $0.68 per share. Operationally, we saw a decrease of $0.85 per share for the first 6 months, driven by a margin decrease of $1.04, partially offset by other income and foreign exchange of $0.17 and $0.12, respectively.

Moving to the change in nonoperational items. We had an increase of $0.17 per share, primarily driven by fewer shares outstanding of $0.13 per share and lower financing costs equivalent to $0.04 per share. Turning to cash flow and capital allocation. We maintained disciplined financial management throughout the quarter. Year-to-date cash from operations was $123 million, reflecting a planned investment of approximately $231 million in working capital that was driven primarily by receivables and payables. We invested $210 million of capital expenditures, net of disposals, to support reliability, capacity and strategic priorities across the business.

During the first half, we continued to return cash to shareholders through $105 million in dividends and the repurchase of $14 million of shares, which underscores our commitment to balance capital allocation and long-term shareholder value creation. Now let me turn to our 2026 outlook. We are reaffirming our full year 2026 adjusted earnings per share outlook after amending guidance for the sale of the majority stake in our Pakistan business at the end of the second quarter. For the full year 2026, we still anticipate net sales to be flat to up low single digits but are now expecting adjusted operating income to be down mid-single digits, reflecting the impact of the sale of our majority stake in the Pakistan business on the second half of the year.

We expect full year adjusted earnings per share to be in the range of $10.30 to $10.90, in line with previous guidance after reflecting the sale of our majority stake in the Pakistan business. Guidance assumes diluted shares outstanding of $63 million to $64 million, which includes completion of our planned $100 million of share repurchases this year. We anticipate that our 2026 cash from operations will now be in the range of $700 million to $800 million, with the decrease again stemming from the sale of the majority stake in our Pakistan business. Capital expenditures for the full year are now anticipated to be between $450 million to $490 million with additional spend allocated to our Argo facility.

Please note that our guidance reflects current tariff levels in effect at the end of July 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. For Texture & Healthful Solutions, we now expect net sales to be up mid-single digits and operating income to now be up mid- to high single digits. Driven by higher volumes and solution sales growing at a faster rate than the overall business.

For food [indiscernible] LatAm, net sales are now estimated to be up low single digits and operating income is expected to be down low single digits. Reflecting transactional foreign currency and macroeconomic headwinds in Mexico, partially offset by foreign currency translation benefits in Brazil. 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 increased in dollar terms, which negatively impacts operating income and can more than offset translational benefits from a weaker U.S. dollar in other parts of our LATAM business.

For Food and Industrial Ingredients U.S./Canada, we expect net sales to be down low single digits and operating income to now be down 20% to 25%, driven by Argo's operational headwinds in the first half of the year. All other net sales is expected to be down 20% to 25%, and its operating loss is now anticipated to be approximately $15 million after the sale of the majority stake in our Pakistan business. Lastly, for the third quarter of 2026, we expect net sales to be up low single digits and adjusted operating income to be down mid-single digits, which reflects the impact of the sale of the majority stake in our Pakistan business.

Sequentially, Q3 corporate costs are expected to be higher as Q2 benefited from the timing of certain adjustments that are typically evaluated later in the year. Additionally, the second quarter benefited from a $2 million mark-to-market gain on our new investment in Sunstar which is recorded in the texture and Healthful Solutions segment. A mark-to-market adjustment based on our equity stake in Sunstar will be made at the end of each subsequent quarter. That concludes my comments, and I'll turn it back over to Jim.

Thank you, Jason. As we wrap up, I'd like to highlight 4 reasons we remain confident in the direction of the business despite a dynamic macroeconomic environment and the first half challenges we experienced in food and industrial ingredients, U.S., Canada. First, Texture and Healthful Solutions continues to validate our growth strategy Strong net sales volume performance, solutions-led growth and market share gains helped deliver the second highest quarterly operating income in the segment's history. Second, at Argo, we have made meaningful progress. Operational performance improved, production levels increased and as stated, we expect to be operating at normalized run rates for the balance of the year. Our focus remains on sustaining reliability and restoring profitability. Third, we are already seeing the benefits from our enterprise productivity initiatives.

These efforts, which are evidenced in our control of operating expenses, are helping to offset inflationary pressures, improving cost discipline and creating opportunities to reinvest for growth. And fourth, we are continuing to reshape our business portfolio in significant ways. The announced pending acquisition of Tate & Lyle will be transformational. And our integration planning efforts are underway to help ensure we're prepared to move quickly and effectively as one organization once the transaction closes. Our balance sheet and cash flow also provide us with flexibility to invest in the business or future integration activities and return capital to shareholders as we reaffirm our commitment to $100 million of share repurchases this year and to our continued track record of dividend growth. Now let's open the call for questions.

[Operator Instructions]. Our first question comes from Kristen Owen with Oppenheimer.

I wanted to follow up here, Jim, on the updated guidance, specifically around U.S. can. Really happy to see some forward progress on Argo. Just in your second half guidance, is there any additional like volume or maybe mix headwinds implied there just as you get or go to meet spec? And then I have an unrelated follow-up question.

Yes, I'll tell you what. I'll talk about Argo and what we -- what gives us confidence going forward. But let me turn it over to Jason to take the view on the second half guidance. Jason, go ahead.

Yes, thanks. So being specific about what changed, it's really only amending the range to reflect the sale of the majority stake in the Pakistan business. So our underlying full year expectations are otherwise unchanged. The composition shifted a little bit. We're seeing better performance in TNHS and a little bit softer performance in F&I U.S. Canada. Part of that is because of network optimization with some of our native starches that's benefiting TNHS and pulling a little bit back from F&I US can. The business is performing in line with expectations and we continue to see solid execution across TNHS, which is very encouraging.

And Jim will talk a little bit more about Argo. But as it remains an area of focus, production rates and yields are improving sequentially and they finished June running at normal rates. And the reality of our Q2 -- really Q2 to Q3 is we did have some corporate cost benefits in that corporate costs are going to sequentially be higher in Q3. We also had that Sunstar benefit. It was about a $2 million gain in Q2 that we believe will unwind. And what we've also seen a little bit in Q3 is we've been relatively fortunate in that the Argentine peso has been fairly benign over the last 5 months, but we did see a steep decline in July, and that's going to negatively impact Q3.

So that's why we're seeing a little bit of a pull forward of some benefits into Q2 that are going to unwind a little bit and basically all unrelated to Argo other than potentially some higher cost in inventory that are still flowing through the P&L in Q3.

And I can, Kristen, just give you a little bit more specifics regarding Argo. We have systematically addressed the various issues that arose at Argo over the last number of quarters. I guess, starting with the grind, it is now operating reliably and at expected run rates.

We've talked previously about the downstream refinery issues and that led to downtime and rework and that's now been completely addressed. And the vast majority of the costs associated with that rework that impacted us previously, that's all now behind us and the unexpected thermal event that occurred on April 10 that took down our germ processing unit came back up in early June really with heroic efforts by engineering, procurement, the operations teams and the supplier that was able to get us a rebuilt baghouse operation and our oil processing is now operating at historical run rates. So we feel these 3 accomplishments along with the investment of some targeted additional capital directed specifically towards reliability at Argo gives us confidence in the guidance that we put forward for the rest of the year.

That's super helpful. And then you talked about some of the transitory costs. I'm interested in some of the elevated input costs. I mean Tapioca is when you -- you guys have been really clear about -- but just help us understand how much of the inflationary costs that you're seeing, how much of that do you expect to stay with you versus maybe just some timing around your ability to pass that through in price?

Yes. Let me turn it over to Jason because Jason has been actually on point similar to how the finance team was on point last year with tariffs, and we set up a tariff hub. This year, we've got a Middle East response team in response to, obviously, the conflict in the Middle East and what that's doing. But Jason, do you want to talk specifically about inflation and the tariffs and how we're looking at the net impact of that for the full year?

Yes. I mean, to Jim's comments, we -- similar to the tariff response team last year. We now have a Middle East response team. and really impacting to a greater degree, our APAC and EMEA businesses. And what we're seeing there is generally in APAC. And it's a little bit compounded with the tapioca increases. But because of our history of passing through Tapioca price changes, which can occur fairly dramatically and fairly quickly, that business is very solid and moving those prices through. It does take about quarter to 1.5 quarters to completely pass those prices through and get more to a neutral place. At the end of the day, we're estimating that the net impact outside of Tapioca for the inflationary pressures from the Middle East conflict. It's really manageable and the impact is in the range of a few million dollars, and that's all factored into the guidance

our next question comes from Ben Klieve with Benchmark.

I wanted to ask a follow-up here on the Argo progression. Great to hear all the progress on getting that operational at a full run rate by the end of the quarter. But I'm wondering if you can isolate the kind of margin structure that you're seeing out of that facility here at the end of the quarter. Great that volumes are back, but I'm wondering kind of where margins stand at the end of the quarter and kind of how you see the margin profile for that facility specifically kind of evolving over the next couple of quarters as those mechanical improvements that you noted are made.

Jason, do you want to take that? I know our margins were up, I don't know, 400 basis points [indiscernible].

Yes. And as we stated on the Q1 earnings call, what we were looking for, even with the thermal event that, to Jim's point, required significant efforts by the team with sequential improvement during the quarter, and that's what we saw. So it does take some time for those costs to completely flow through inventory in the P&L. So we'll carry a little bit of that in for the July but the plant now has room to run. And as the plant can run as we can rebuild inventories, we should get back to normal historical margins towards the end of the year.

Okay. Great. And then my follow-up is related to Argo as well here. You noted the investments to kind of enhance the kind of predictability for Argo going forward. I'm wondering if you can just lean into this a little bit. Tell us a bit about not only kind of what's changed operationally, but what these investments are to enhance the reliability out of this, so we can just kind of get a bit more comfort that this facility is going to be kind of more boring going forward?

We also want it to be more boring as well. The investments are in targeted locations throughout the plant to improve reliability. We're also making changes. It's not just about the capital. We've conducted extensive root cause analysis. Across maintenance, training, leadership and operating procedures. And so for example, some of the things that occurred were related to some management of change issues that we have standardized more strongly. And those we don't -- those issues won't reoccur. But the targeted investments will be in some redundancies. And, for example, the tanks that we use to the cost clarification tanks basically. And it's where you take the feedstock for the starch and you liquefy it which is the main heart of the facility that feeds all the downstream refineries. And so we now have -- or will have the redundancies built in to prevent any kind of impact should one of those tanks not perform as they should which is one of the things that impacted us as well.

So that's where a notable amount of that, say, capital, but it's not just capital. I want to assure you, it's across the areas of maintenance, training, leadership and operating procedures. And a lot of these things have been improved, and we do feel we've turn the corner in relationship to stabilizing the plant. And now we just have to continue to demonstrate sequential incremental improvements quarter-on-quarter.

Our next question comes from Ben Theurer with Barclays.

I wanted to dig a little bit and trying to understand a little bit more of the dynamics within the volume performance across sector. And particularly within Food & Industrial U.S., maybe to start off, I mean, obviously, you still have a little bit of an impact from Argo. But could you help us understand how significant the continued weakness in food and beverage sweetener volumes has been over the course of the quarter? And -- but essentially, what is a decline if Argo would have been normal or not an impact on food and industrial U.S. Canada volumes?

Yes, I can take that one. I would say the teams really did a good job. If you look at our volume impact relative to the OI impact, it really was a lot about moving things around the network. And where we are seeing softer volumes in general, that was not the lion's share of the impact for us. So as the plant gets up and running and we can take additional opportunities for volume, we should expect that to normalize. We are seeing a little softness in the industrial side, basically market-driven.

We expect that to improve balance of year as things normalize from a macroeconomic standpoint globally. But really, the larger share of the impact is from the Argo challenge is not necessarily the weaker demand environment.

And we did go through kind of jump through some hoops to make sure that we serve as customers, which also came at some incremental cost, but the volume was there to ship in to supply.

Okay. Got it. And then as we think about like just rounds of pricing, I mean, obviously, across the different regions. There are different challenges everywhere, right? I mean you have in Lat Am, U.S. Mexico a little bit softer. In the U.S., you have lower demand. I mean, I think the only area of not so many issues are Texture and Healthful solutions. But as we think about preparing customers for pricing initiatives and looking into what you can or should do in terms of pricing? What are the conversations you're having in terms of like just price evolution in, let's say, more the food and industrial areas, North America as well as Latin America and what has been mix versus real price realization in terms of impact on the top line? And how should we think about this for the second half and then beyond that, maybe into 2027 as you start renegotiating some of the contracts.

Yes. I think the pricing approach that we've taken in year has been entirely related to that Middle East response team that we've assembled analogous to the tariff hub that we had established. And now, of course, we're looking again at what implications there may be of the 301 tariffs that appear to be going into place in August -- mid-August. And as Jason said, those, surprisingly have went the customers have understood that those in-year price increases are justified.

And to your point, they're kind of across regions depending on origins of the impacts and the ingredients that are impacted and how freight and logistics are impacted and maybe chemicals could be impacted. So -- but -- and the net impact of that is really not that much because of the offsets with the pricing increases. But that's really how we've been managing that. It's really too early to talk about next year and corn prices and all of that. What I will say is the one area outside of the Middle East response team that we are laser-focused on is the tapioca cost run-up. As we referenced, I think, from our quarter 1 call, we view that impact as temporary and it's not going to be a structural margin impact.

We're going to see some near-term margin pressures as pricing catches up to cost, as Jason says, 1, 1.5 quarters to typically realize that. But we have seen due to the dry conditions in Thailand, we have seen really record tapioca prices. Now the thing to point out, though, is the way this works is when tapioca prices do come down and they will come down based on history, they do come down. We benefit from the sticky down, then we will have to give back some of that to customers. But typically, we benefit on the other side of that. But we've been laser-focused on that, and so far, so good on that. And the volumes for Tapioca because of its premium nature, have continued to be strong.

Our next question comes from Pooran Sharma with Stephens.

Good morning, and thanks for the question. Wanted to understand a little bit about the -- you've spoken about the industrial applications. And kind of sustainable packaging. I wanted to better understand at what point do you think that these opportunities become meaningful enough to offset some of the secular pressure we're seeing in some of the more commoditized products?

Yes. I think that what's important to note about our industrial business, and that would be, I would say, ex, say, CPG nonfood, which is personal care, beauty care and pharma, which we really don't talk about all that much, but which is those two segments are higher margin and growing at high single digits. But separate from those two, which we will talk more about in the future, as we made the investments, as we've talked about in India, et cetera. But specific to your question about the industrial, it's a sizable business when you think about the Americas and a position we have in Asia.

So for the last number of years, what we have done is focused more on the corrugating side of that business, where we see box production and linerboard production as being more durable and in need of better speeds better strength for lower -- what they call basis weights or [ grammage ]. And we've been investing in a targeted fashion in some technologies to help the corrugator speed up that business. And so a larger portion of our business is exposed there as opposed to uncoated free sheet, for example, which is in a secular decline in a decline. And so in addition, there is a growing market for sustainable food packaging and food compliant, packaging for coatings, we talked about grease resistance, et cetera.

And so we call that advanced packaging materials. So we've had in concert with support from innovation and R&D, targeted new product development in that area, and those products are being trialed with customers, and they are growing. And so we're seeing nice volume and value growth. And these are also at very respectable margins, not quite at what our solutions margins are, but close. So -- and in comparison to other industrial gets that are less differentiated, they're absolutely a trade up. So -- we're excited by the prospects of that. And what I would point to is we strategically expanded, as you know, the capacity for Cedar Rapids.

And we made an investment and that was designed for exactly that business and to support some of those growth opportunities that we see in the future. So again, we think the trend is favorable to appeal to it. And we -- again, we think we're very focused and selective on what we've chosen, and we hope to talk more about that in the future to you and its impact.

Our next question comes from Andrew Strelzik with BMO.

I had a couple and apologies if any of this has already been asked. I hopped on a little late. But you mentioned in the press release some of the kind of integration planning work you've been able to do at -- with the tape business. Can you talk about, at this stage what you're able to do in terms of that work? And any surprises or learnings from that process as it relates to the combination of the 2 businesses.

Yes. No real surprises. What I would say is, just as a reminder, this week was an exciting week for us because on Tuesday, shareholder approval or last week, I should say, shareholder approval was indeed an important milestone. And the transaction is now subject to ordinary regulatory approval in 11 jurisdictions, including the U.S. and the EU. And to date, we're on track with all requisite filings and the projected time line reflects the anticipated time required to get clearance for a deal of this size. So right now, that's kind of where it is. It's where it's at in the normal process. And again, we feel good about the shareholder approval and other step in the process. But that's really where we're at with the Tate & Lyle acquisition.

Okay. I do know that you said it's kind of too early to talk about pricing and corn prices and those types of things. But I guess, I've just been trying to think through, given we're on kind of year 2 of volume declines and for the industry, right, we've been pressured globally, kind of where utilization rates sit now for the industry or Ingredion in the U.S. and globally? And kind of -- I know that agree down has done a lot to improve the risk management over the last 5-plus years. but just how you think about the ability to offset a higher corn price environment should that materialize if utilization rates maybe aren't where they need to be.

Well, just in relationship to corn prices, first of all, and I'll talk about, say, utilization here in a second and the essence of your question. But just on corn, we successfully managed through multiple corn cycles using a combination of disciplined hedging and pass-through pricing. And while volatility can create short-term timing differences, our hedge program and the pricing mechanisms preserve earnings stability. So we would not expect changes in corn prices alone may impact margins and alter our long-term outlook. So that's kind of the strength of our business model.

And I think that's just important to remind everybody about. And then what I would say is in our industry in the U.S., there has been a significant announcement by one of the manufacturers that they will be closing one of their facilities which represents about 5%, I believe, of capacity utilization sometime in 2027. So that is on the horizon. That will impact contracting going into 2027. And at the same time, I think we've not seen this year, we talked about F&II.

Previously, there was a question about the volumes, and we have felt that putting aside the Argo challenges, the volumes were there to service our customers, especially for the products that we produce, given where we sit in comparison to, say, larger producers of some of the sweeteners. So -- but this impact of this closure of this one facility, which is 5% of capacity of the industry in 2027 is something that's going to be pretty notable.

Okay. That's super helpful. And then just one last one, if I could squeeze it in. the Canada tariff announcement and the potential impact on your plant in Ontario, can you just talk about maybe work around some potential implications? And again, apologies if you've already addressed that.

I can take that one. And we have not addressed it. But what I can say is, obviously, that's still evolving. Nothing is in place yet other than having been announced. What I will say is we've managed through this multiple times this year already. And as we assess it, it appears that the impact on us will be fairly limited. We have the network capabilities to move product around where we need to. And historically, we've seen that we can pass through these additional costs to our customers. and we would expect to do the same going forward.

Our next question comes from Josh Spector with UBS.

I apologize because I want to bring it back to Argo for a second here. I guess, when I go through what you guys have said the last couple of quarters, I mean, you guys said it was a $40 million impact in 1Q. My math looks like maybe it was $20 million, $25 million in 2Q. Maybe your 3Q guide implies about $10 million to $15 million in 3Q?

I guess, overall, that gets about $70 million to $75 million. I'm just wondering, one, are those numbers roughly right for 2Q, 3Q? And are those numbers we should be adding back for next year for a base assumption in F&I, U.S. and Canada? Or is there anything else offsetting that? You commented about some network inefficiencies serving texture and health. So I just want to square that away, if I can.

Yes. So let me help with some of the numbers, but Jason is better at doing this than I am. So for quarter 2, 3, 4 last year, cumulative. The impact was $40 million. And in quarter 1 of this year, the impact was $40 million, and that was what was so frustrating for us about quarter 1. And I'll let you take it from there from a standpoint of the estimates for Q2 and how we have I think, prudently taking an outlook to the second half quarters 3 and 4, for Argo reliability.

Yes. I think in general, and we can follow up your math is directionally correct. What I would say is one piece that we need to think about is some of the network moves we made because there's native starches that we make at Argo that we also make in our Texture and Healthful Solutions network. So some of those volumes have moved and it will take time to move those volumes back. particularly since we look to benefit the business as a whole versus just one segment to another. And when you have that situation, we have intersegment sales, obviously, and there's a bit of profit kept by the manufacturing entity and the remainder is passed to the [indiscernible].

So that's a little bit of the math that's probably not quite as apparent when you're looking at that, but that will have a bit of an impact in Q3 and Q4. That will give you a little bit of a tailwind in TNHS, and it will offset with a little bit of a headwind in F&I U.S. Can But having said that, we do expect F&I US can to get back to normal operations. There will be a little bit of a hangover from those network moves as we move into next year. But we do see the F&I U.S. Can business returning to normal profit margins and levels next year.

Okay. Yes, I'll follow up on some of that off-line. That sounds a little bit more complicated. I did want to ask on Texture and Health, just, I mean, obviously, the second quarter was very strong. I mean 7% volume is great to see. I mean, clearly, we're not seeing any end market growing at that level. So I'm wondering if you could help decompose that a little bit between wins like share gains? And just given some of the commentary around Tapioca. Is there any pull forward in 2Q you think, from customers expecting price increases? Or is this a good run rate you'd expect?

Yes. We don't think there's any pull forward in the Q2 numbers. we're pleased with the 7% net sales volume growth, and we're pleased that it was our ninth consecutive quarter of sales volume growth. And that really continues to be driven by what we see as structural trends that we've been discussing really for the past several years, particularly clean label, where we have a great franchise, texture solutions, sugar reduction, protein fortification and where we're working increasingly on customized formulations and systems with large CPGs, private label manufacturers and in surgeon brands all through a revamped solution selling model supported by customer briefs and a strong pipeline of projects.

And so customers increasingly want customized systems to appeal to really the trends, the regulation changes, the appeal towards health and wellness, and some of the folks that are on some of the anti-obesity medications, again, looking for protein-fortified and fiber fortified ingredients.

Our next question comes from Heather Jones with Heather Jones Research.

Thanks for the questions. I wanted to revisit the THS volume question. If I'm doing the math correctly, it was like a 2-year stack of plus 10% on volumes. And if I'm remembering correctly, at the time of the Q1 call, it didn't sound like the I mean, you sound like things were good, but not that good. So I was just wondering if you could give us a sense of how -- what the cadence for demand was as the quarter progressed. And I know you mentioned that there was some tailwind from the Argo issue, someone that got shifted to shifted to [ texturants ], but did we -- did you see some restocking maybe in EMEA or whatever? Just wonder if you could help us understand what drove that.

Yes. Heather, I think we saw volume supported across the board. As you can see, the strong volume, and we still are seeing our solutions growing at a faster clip than the balance of the business, but we are also seeing strong performance in the remainder, including some of our native starches. Which obviously is very positive from our standpoint. Nothing really around restocking. Just overall, the market is performing pretty well.

Okay. And then thinking again about the Argo impact and just fast forward into '27. And I don't know if you all are ready to quantify this, but the impact of go, as all were talking about earlier, I mean it backs up to a pretty sizable number. Have you done any work around how much the benefit to THS nets against that of how we should be thinking about that net benefit? I know you talked about at qualitatively, but have you all thought putting any numbers to it?

Yes. I mean, in general, I would say it's a few million dollars a quarter. And also, I would remind you that there is a tailwind there from the [indiscernible] $2 million gain on our shares that hit the TNHS business. So that's a bit of a onetimer that we think is going to unwind in the third quarter. But remember, it's not just moving the native starch. It's when you're filling up that other plant, you also get that absorption benefit that can sort of be outsized when you're talking about a date of starch.

So your back half guidance for U.S. can implies anywhere from like 5% to 20% plus year-on-year growth. Is that a function of demand growth? Or is that a function of does Argo improve at the clip you anticipate? Or is there some backslid in there? How should I think about that guidance range?

Yes. No, Argo, that definitely includes Argo improving in the second half. As I mentioned earlier, we did see a little bit of a benefit in Q2. So there was some -- a little bit of a pull forward in Q2 because of how our corporate costs laid out in the SandStar benefit. But that assumes Argo recovering balance of year. As we look at that layout, we just continue to see it improving quarter by quarter by quarter. And that's what we anticipated in our guidance.

But we also haven't -- but we also haven't in the second half, just projected an automatic uptick straight up. It's not -- it's a sequential increase in improvement.

Yes. And to give more color around that, a lot of the products we make at Argo are dual supplied. And in cases where we're having challenges like we did in Q1 and Q2, our customer will pull more from 1 of the other suppliers. As we start to pull that volume back, that's why you see a little bit of a ramp-up in the third quarter and the fourth quarter and then expecting that to normalize next year.

Our next question comes from Pooran Sharma with Stephens.

You guys have talked about the solutions business for quite some time now. So I just wanted to understand if we could just get some higher-level details here around where you're at in terms of customer penetration. Are your largest global customers already heavily utilizing the platform? Or do you think the bigger opportunity for still expanding solutions is with existing customer relationships?

Yes. What we have been talking about as it relates to our solution selling model, which has really evolved and transformed over the last really 2 years is -- has been done while at the same time and our customer base and aligning our go-to-market resources towards where we have seen the majority of the reformulation and innovation coming from. So some of the dynamics that we've observed is obviously going back a year, 1.5 years ago, the amount of innovation and new product introductions coming from private sectors, and we had already pivoted towards understanding that ecosystem, the co-man, the co-manufacturing networks and where the innovation was getting done.

And we incrementally have continued to focus there. the branded manufacturers have fought back to gain share, and they are also heavily trying to innovate right now to drive organic volume growth. And historically, we've had great relationships with them and that's also benefited. But also -- and we've talked about this in some different interviews. We also are very focused on the growth of insurgent brands. And these kind of start-up companies, really, if you are formulated into their winning products, they are driving the majority of the organic volume growth in the food industry. And as a supplier, the business that you can generate with them in a relatively short period of time can be attractive as well.

So we've reoriented our go-to-market model as it relates to our inside sales or selling as well as the regular sales force and how we reach these insurgent brands and support their efforts. So it's really in those 3 areas. And then equally, as it relates to foodservice and food consumed away from home, especially the QSRs and the focus for them on affordability and texture and textural innovation. So it's coming from a really a variety of areas that we feel we have consciously purposefully segmented and deployed resources against to try our best to move to where we see the pursuit of the consumer and where real underlying organic volume growth exists. And that's why we think we've had 9 consecutive quarters of net sales volume growth for Texture and Healthful Solutions

Thank you. That concludes today's question-and-answer session. I'd like to turn the call back to Jim Zallie for closing remarks.

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 Barclays Global Consumer Conference on September 8 in Boston. At this time, I want to thank everyone for your continued interest in Ingredion.

This concludes today's conference call. Thank you for participating. You may now disconnect.

Good day, and thank you for standing by. Welcome to the Q1 2026 Ingredion Inc. Earnings Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. After the speaker's presentation, there will be a question-and-answer session. [Operator Instructions] I would now like to hand the conference over to your speaker today, Noah Weiss, Vice President of Investor Relations.

Good morning, and welcome to Ingredion's First Quarter 2026 Earnings Call. I'm Noah Weiss, Vice President of Investor Relations. Joining me on today's call are Jim Zallie, our Chairman, President and CEO; and Jason Payant, 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 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.

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.

Turning to the next slide. 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 end of quarter 2 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 salable inventory. As a result, the actual quarter 1 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 source 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 German 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 time line 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 to point out 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 improved mix within texture and helpful 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 continue 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 with in-year price increases. It's important to mention that at this point, we don't foresee major challenges related to sourcing any of our important manufacturing inputs. The work done in recent years to increasingly localize our supply chain should position us well to mitigate disruptions.

We are also monitoring the impact higher energy costs are having on packaging inflation and gasoline prices. and the effect that together they could have on consumer demand in the second half. At this point, it's 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 F&II, 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'll turn the call over to Jason for the financial review.

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. Moving to the next slide. 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 & 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's turn to a summary of results by segment. Texture & 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 & 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 impacts and softer volumes in Mexico and the Indian 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 & 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 this 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 nonoperating items, including $0.06 of share repurchase benefits.

Turning to cash flow and capital allocation. we continue 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 balance 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 at the end 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 Hospital 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 increased 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 Argo 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 the second quarter of 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'll turn it back over to Jim.

Thank you, Jason. 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 quarter 2 and reflects 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. Now let's open the call for questions. Operator?

[Operator Instructions]

And our first question comes from Pooran Sharma from Stephens.

This is [ Jack Harton ] on for Pooran. 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?

Yes. 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 in the Investor Day in September of last year. The issues at Argo are the predominant driving factor in relationship to 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 germ processing unit.

But again, that particular issue is isolated. It's in a very specific location within the plant separate from grind, separate from the refinery operations and the repairs are well underway, and that unit should be back up and running again within quarter 2.

So in answer to your question from a standpoint of getting back the majority of the 1,000 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 aspiration. That is our expectation at this point in time. And assuming that we can string a couple of good quarters together of runability reliability, we feel that from a standpoint of the demand and how we've been able to service customers through this period, we feel that we can get back to those levels of operating income.

And a quick follow-up on capital allocation. With the 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 $100 million roughly the right way to think about it? Or has that been updated as well? .

Jason, do you want to take that?

Yes. I would say, yes. Certainly, based on our current cash flow projections and capital allocation priorities, we plan to build on the 14 million shares we repurchased in Q1 to meet our full year targeted commitment.

And quarter 1's CapEx came in consistent with the full year projections as well. So yes, it's to continue as planned for the capital allocation priorities.

Thank you. Our next question comes from Josh Spector with UBS.

I wanted to drill into Texture and Healthful a little bit more and just understand some of your kind of assumptions through the year. I guess, if I look at the first quarter, your organic growth was about flat. You got the couple of points basically from FX. So assuming FX becomes less of a tailwind, you basically need organic growth to pick up. So I'm just curious, relative to kind of 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 kind of you expect for the year in total? .

Well, the mid-single-digit target is part of our long-term algorithm for growth. We're pleased to deliver the 2% net sales volume growth in the quarter. And I think it's noteworthy, again to highlight that it's the eighth consecutive quarter of sales volume growth. We really believe that the focus that we have now on solutions, which is a result of the resegmentation work that we completed nearly 2 years ago, and the solution selling approach that 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 and at the same time, driven by regulatory changes, Health and Wellness trends, there is a number of reformulations that are coming to us from customers, we also have proactively decoded, I guess, you could say, better than we have in the past, the private label ecosystem and the supply networks, the co-packing networks and we have an increasing pipeline of project briefs to support customers with solution selling and co-creation, which is driving really deeper engagement and faster delivery of solutions to customers.

And so I think all of that makes us feel confident that when the macroeconomic conditions and inflationary pressures, less than a bit, that's going to enable us to move from what currently is low single digits to that mid-single-digit territory that we believe is absolutely achievable and correct for that segment based on the portfolio that we have based on the differentiated ingredients that we have and based on the investments that we have made in capabilities, both in people capabilities as well as in equipment capabilities within our R&D facilities. So that's what gives us the confidence that we can do that.

Okay. No, I appreciate that. I guess I'd be more specifically curious on pricing because you guys have done well on volumes, but pricing has been a persistent headwind. It sounds like from kind of how you described the call today, you'd expect pricing maybe to pick up to cover some of the higher costs that you're starting to see is in other areas. Is this the right framework or go ahead. .

Yes. Let me try to clarify in relationship to something that occurred uniquely in the quarter to try to help put that in perspective. So first of all, let me speak to margins, which is what you're also getting at with your question around pricing. What's encouraging to highlight is that margins in U.S. and Canada in Texture and Healthful solutions actually increased in the quarter. The majority of the slight margin compression we're seeing is related to the rapid rise in tapioca costs in Asia Pacific. And Tapioca for us is a significant business. And that increase or a pretty rapid increase in tapioca costs in Asia Pac started to occur at the end of quarter 4 last year. And so the time lag that it takes to pass through those costs through increasing pricing is what we're seeing in quarter 1 manifest itself. And so that typically takes about 1 quarter, 1.5 quarters to work its way through just on how tapioca pricing works.

So that may help to clarify what you're highlighting in relationship to the quarter and some of the margin compression that we experienced. It's something that's pretty heavily weighted and unique to that particular issue.

Okay. I guess one other just quick follow-up around that issue is just -- so pricing was still reported down. So how do I square escalation in costs in the pricing side there? Is that the timing that, that margin on that price recovers in 2Q? Or are there other factors outside of this, which are still pressuring that? .

Yes. So regarding pricing and taking it back to, I think, maybe the prior earnings call and what we said in relationship to Texture and Healthful for the full year. Going into contracting, we were for our less differentiated products, having to price to maintain market share and in some cases, increase our market share to a degree.

And 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 and that's why the setup for this year you're seeing some of that play itself out in the way of how pricing is being viewed. But we believe that, that was absolutely the right approach to continue with our relevance with the customer base that we segmented and targeted to then bring our solutions capabilities, which over time are going to increase our margins just due to the higher gross profit associated with solutions versus the, say, less differentiated parts of the Texture and Healthful solutions portfolio.

So there's a few things going on here strategically as it relates to how we approach the year from a standpoint of what the market say, gave us related to competitive dynamics going into contracting and how we pursue pricing. But the thing to be most encouraged about is the solutions growth in the quarter which are margin accretive and over time. And then we had this one issue related to the tapioca costs, which, again, we've been there on the other side of that before many times. And given our market position, those prices will flow through, it just takes about a quarter to 1.5 quarters to get them.

Next question comes from Benjamin Mayhew with BMO Capital Markets.

So my first question has to do with just thinking about the tough macro environment, customers having to manage pricing. So I'm just wondering what are you seeing in terms of elasticity on your products? And how -- when you're trying to take this pricing, how might that impact volumes should you need to pass through an extended amount of costs through the balance of the year. .

I'm going to let Jason take this, but let me just set it up. So obviously, very similar to last year in relationship to the tariff implementation, we obviously have been very proactive to put in place a Middle East response team that is collecting all of the input to our business as it relates to the inflationary impacts of increasing energy prices. And we're monitoring and managing those direct and indirect impact.

So we have a handle right now on certainly the direct impacts and what we need to do to offset the logistics cost increases and any increases that are flowing through to us directly with chemicals and/or packaging. Jason, do you want to -- you're overseeing that? Do you want to give some perspective on it's early. I know it's very early in the cycle, but the team is actively working that.

Yes. And as we've done in the past with tariffs and other disruptions like this, we do believe that 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. I mean at this point, what's more difficult to predict is the indirect impacts this may have on consumer demand as our customers work to pass through those incremental costs on to the market.

Yes, I think that's absolutely correct. I think that last year, if you remember, we navigated tariffs extremely well. And in fact, I think the net impact to us was after putting through price increases, a net impact of about $6 million for all of the tariffs that went into place last year, and we managed through that very well. This year, as it relates to the direct impacts thus far that we've been able to project forward for the Middle East energy price situation, we're seeing a number in a similar range. So we think that's extremely manageable.

But to Jason's point, the bigger watch out, I think, for everyone, for the industry at large, is the longer the conflict lasts and the inflationary impacts are felt through increases that consumer products goods companies are putting through in packaging, plastic-related packaging, which is mid-single digits, high single digits and passing that on to the consumer as well as, obviously, gasoline prices that are going to impact lower to mid income consumers, that's where I think the watch out is for the second half of the year, which is very hard to predict even though in the first quarter, -- we saw minimal to no impact of this, but everyone is watching cautiously despite the fact that consumers seem to remain robust in the first quarter, at least in the United States.

Got it. That's very helpful. And just a follow-up question. Go in a different direction here. Your balance sheet, the cash balance is still very, very strong. And we know that you've been looking at a pretty robust M&A pipeline that, that valuations haven't quite been where they need to be to take action. As you're looking at a potentially tougher environment for the industry, how are you thinking about your M&A pipeline?

Is it getting more interesting? And are you prepared to pursue more inorganic growth?

Yes. I mean 1 of the things we're obviously fortunate to have is a strong balance sheet and strong cash flows, and that does provide us optionality to pursue value-accretive M&A. I think it's important to note that we have a track record for remaining disciplined in pursuit of M&A prospects. And when we do pursue a target and integrate that business, we've typically integrated and delivered on the business case. We have a robust M&A pipeline. We always do, and we're actively pursuing a number of businesses that could bring us obviously, sales and EBITDA and talent and technology. And anything that's going to, again, enhance our winning aspiration in the areas of texture solutions and helpful solutions, that's going to be our priority. But again, we'll remain disciplined in relationship to the value-accretive nature of of those and the executability and the synergies that we can deliver from those targets.

Our next question comes from Ben Theurer with Barclays.

I just wanted to follow up a little bit on the performance in Latin America and what's been driving this. You've called out the volume decline. But if we look at some of the underlying trends, be it at the Coke bottlers or even what we saw with large beer brewers in Brazil earlier this morning as well reporting surprisingly better results.

I was just wondering where the mismatch is in between what we saw operationally from the Coke bottlers, brewers in the region was actually flattish to maybe even slightly up volume versus you guys having about a 7% impact on volume. Just wanted to understand the mismatch here.

Yes, Ben, it's a really good question, and we saw those results as well that you referred to. So what we can say about 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 quarter 2. However, we're lapping soft volumes in quarter 3 of last year related to a particular customer contract management issue, and we think that the second half, the 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. I think GDP growth now is in the, say, 1% to 1.5% territory. And so overall, against a record Mexico performance last year, we're seeing softness in relationship to that. And then as Jason alluded to, we have the impact of the Mexican peso, which is a headwind for us as well. And we'll dig more into the numbers that you referred to, specifically in brewing and try to understand what may be happening in relationship to say no and low alcohol beers, which appears to be growing 25% in comparison to mainstay beers and understand how that then flows through to us and impacts us. But that's what we're seeing. That's what we can say to you in relationship to trying to reconcile it at this point in time.

Okay. And then just following up, the price mix, was it more price? Or was it more mix in terms of what drove the headwinds here? Just to understand if it's more like just price pass-through? Or if is it actual mix effect to lower priced items? .

In Latin America, you're asking?

Yes, correct. Yes, correct.

Jason, do you want to take that?

Yes. I would say that the -- all the impacts from the price were reflected in our guidance and even our original guidance. It's really at this point, it's kind of a mix issue. We're seeing differentiated customer mix and some product mix that is having a little bit of an impact there. But overall, results were in line with our expectations for the quarter. And we're not seeing a huge change in LatAm balance of year. Obviously, the bigger drivers in our guidance change are Argo, which is about half of it. And then the balance is really the Mexican peso and some of the Middle East impacts on energy costs. So the LATAM piece is really a smaller component of that.

Thank you. Our next question comes from Kristen Owen with Oppenheimer.

Just following up on this thread on LatAm. I wanted to ask if you could provide a little bit of background on the Cabo plant. Just what the decision factor was there and how we should think about that influencing margins? And also just a clarification on the model. Is the shutdown of that plant included in the updated outlook and then I have a follow-up. .

The answer to your last question is yes. And I'll give you some context and relationship to the decision that we announced today. We're always continuously evaluating the efficiency and optimization of our operations and network. And as part of a broader initiative to adjust our operating footprint in Brazil with the goal of strengthening operational efficiency, competitiveness, long-term business sustainability, we made the decision to cease operations at our Cabo plant. That plant is in the Northeast part of Brazil, economic growth in that part of Brazil. compared to when we made that decision to make that investment hasn't lived up to its potential. Brazil at the time of that plant going in Brazil itself was growing 7%. I remember when the investment was made.

And here we are 15-plus years later and the potential for that plant with its location and the economic growth in that territory just hasn't delivered. So while these decisions are never easy, the decision regarding Cabo does align with our long-term vision for Brazil, as we concentrate resources on higher value-generating businesses. And what I think is also noteworthy is the decision we took in Brazil as well in quarter 4 to close our Elconterra plant, the ingredient polyols business in Brazil is a strategic growth platform.

And we successfully have executed that, and we've expanded our polyols production at our flagship facility at Mogi Guacu, and that is delivering now on all elements. And so we're encouraged by that, and that will provide some strength for the Brazilian business in this year as well as the savings associated with the Cabo facility. So these were all necessary moves to strengthen our footprint and our network in Brazil, dealing with the realities of the marketplace.

Okay. Great. And then my follow-up question, just -- we've talked about some of the moving pieces in F&I North America. But I'm wondering if you can help us understand how to think about like co-product opportunities, just given where fed oil prices have moved, maybe some cross wins on the paper and packaging side, just how we should think about that influencing the balance of the year?

Do you want to take that, Jason?

Yes, I can take that. I think our co-products are always an important part of the business. And what we've been able to do over the past few years is mitigate some of the volatility related to the co-products. So as we've been able to hedge further forward on our corn during our contracting process, we're also hedging forward our co-products. So that does somewhat temper any volatility relative to our forecast, which is actually a good thing.

So we'll obviously see a little bit of benefit as products rise for the unhedged portion of our contracts, but it will be muted relative to what we may have seen 5 or 10 years ago.

Our next question comes from Heather Jones with Heather Jones Research.

Thanks for the question. I hopped on late, so I apologize if I -- my question is repetitive, but I was wondering on the guidance side, I guess I just wanted to ask about your confidence level. So as far as the Argo issue, you had the issues from last year's fire and now there was a recent fire, I think that was in the corn germ part of the plant. So I was wondering have the issues from last year have been fully resolved?

And does your guidance for the rest of the year assume that the corn germ piece is fully resolved relatively soon.

Yes. The answer to your last question is yes, in quarter 2 that issue, we believe, will be behind us. Let me -- because Argo was so significant in the quarter, I do want to take just maybe a little bit more time picking up on your question, if you don't mind, to try to put it in perspective. Because it's been a disappointment for us.

Early in the first quarter, we had a failure in our corn conveying at the plant, which led to incremental intra-plant logistics basically to have corn flow as it should, and that led to increased logistics and maintenance costs. Now this was repaired in the quarter, and that's now behind us. In addition, in our downstream refinery operations, we experienced operational reliability challenges in our syrup refining. And that led to product downgrades and unexpected rework costs.

And typically, we can overcome that pretty quickly. And in this case, the issue and getting to the root cause proved a little bit more elusive and it just took longer than we had anticipated. Now this issue unfortunately persisted through the quarter and was the single biggest unexpected negative impact to results. That's now resolved, and that's now behind us.

And so -- and that came about through really kind of a SWAT team approach to get that behind us. Now while these issues cumulatively had a significant impact, we're pleased to say with where we're at right now, the issues are behind us and refinery production is operating at normalized rates as we exited the quarter. But to the question you asked about the thermal event that we had on April 10, we suffered that thermal event in our corn germ processing unit, which took this unit offline for approximately 5 to 6 weeks, and that is scheduled to be back online within quarter 2.

And it was isolated, it was limited to just the germ processing area. Again, the front-end grind and refinery were not impacted. And what's important to highlight is that due to the nonrecurring nature and magnitude of this event, that impact will be excluded from our adjusted results. So what I leave you with related to the Argo plant is that we're seeing sequential improvement at Argo and our outlook assumes we will sustain the production and yield levels we're operating at today. So hopefully, that provides you some additional context as it relates to Fargo and the impact in the quarter.

It does. And I just want to clarify for my next question. So the issues from last year, where I think there was a dryer issue related to your gluten feed and gluten meal, that was fully resolved and was not a factor in Q1. It was more on the downstream refinery, but that's all been resolved. It's working well. The corn germ issue, is not resolved, but is expected to be, but regardless, it's excluded from your adjusted guidance. .

That is 100% -- that is correct.

Yes. And I can say -- the challenge you have when your germ processing goes down as you have more term, right? So we can store a good portion of it that we can process once everything is back online. But - some of that will go into the wet feed pile or and it will impact co-product values overall.

And because you have a larger portion of product that you need to dry, we won't be able to manage that through all of the dryers. But the issues of last year are resolved, but we do expect a little follow-on co-product headwinds as we get the corn germ processing back online.

Okay. And then I want to go through your segment guidance. So if I was reading the releases and Q4 is released correctly, I think you took down TNH a little bit. I think you've been guiding up low single digit. You're guiding up low single digit had been low single to mid-single. LatAm now down and U.S. can down low double digit. And U.S. can seems obvious because of Argo, I was wondering on the TNH side in the LatAm side, I heard your commentary regarding brewing demand has been weaker than expected to date, and there's obviously been some increases broad-based increases from a cost perspective.

Are those guidance changes related to the cost? Or has there also been disappointing demand beyond just brewing in those regions?

Jason, go ahead.

Yes. No, I would say that impact on TNHS really just reflects the higher costs that we're expecting from the higher energy costs, and the lag that it will take in some regions to pass those costs through. And again, there will be a net negative but small but manageable impact. for certain costs that we can't pass on to customers, warehouse to warehouse transfers, things like that.

So that's really the cause of the reduced outlook for TNHS. Beyond that, we're expecting volumes and sales to be roughly in line with our original guidance. Although as we said, it's hard to assess the potential impact on consumer demand that those higher cost pass-throughs may ultimately have. So that's something that we're watching carefully and would be included in the lower end of our range.

Okay. I appreciate it. .

Thank you, Heather.

Our next question comes from Ben Klieve with Benchmark StoneX.

Just 1 quick 1 for me. You alluded on the call in your prepared remarks earlier in the call, to optionality regarding growth investments. And I'm wondering a couple of things around this dynamic. First of all, have the issues that you've been forced to navigate here, be it Argo or the various macro dynamics, have those in any way, compromised your ability to really focus on growth initiatives so far year-to-date?

And then second of all, can you talk about how you were -- how you see these growth investments kind of evolving. Are you winning in now more into the kind of the protein side of the business that you highlighted, still focused quite a bit on the TNHS segment? Any context there would be great.

Yes. I think 1 of the things that we did is alongside of our enterprise productivity initiative, which we always need to have as a lever to drive continuous improvement in our business. As a management team, we got together early in the year looking at that initiative and what we wanted to achieve from that this year alongside of what our CapEx budget presented.

And we ring-fenced certain investments that we preserved for support of our texture solutions, for example, capability build. And we proceed it to make the people investments and the innovation investments. So right now, 1 of the bodies of work in enterprise productivity which you would think could be solely about cost reduction, but actually 1 of the biggest parts of our enterprise productivity is over, is enhancing our innovation operating model and how do we become even more efficient and effective from innovation with the investments that we have -- we can make in artificial intelligence to get the predictive formulation that's at the heart of our solutions capability as well as the measurement capabilities to do structure function predictability work for, again, texture solutions.

So we've ring-fenced those investments. We're continuing to make those investments. And the cash flows afford us the opportunity to invest both in a balanced way in growth capital as well as reliability capital and we're always assessing those needs. And I think we've got the balance right going forward. We spent a lot of time debating and discussing that.

Very good. I appreciate that context. I'll get back in queue. .

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

All right. Well, 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 Conference on May 13 in New York. And at this time, I want to thank everyone for your continued interest in Ingredion.

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

Everyone find their seats, please for our next presentation. Well, it's my pleasure to welcome Ingredion back to CAGNY, introduce President and CEO, Jim Zallie. Ingredion is a leader in global ingredient solutions, and Jim is building on more than 40 years in the food industry and 17 years with the company. Over his time with Ingredion, Jim has been instrumental in the company's growth through customer focus, productivity, people development, innovation and expansion into new markets. He's led the successful integration of strategic acquisitions that have broadened the portfolio in sugar reduction, clean label and texture solutions. In 2025, the company again posted record results, including $950 million in cash from operations, about half of which was returned to shareholders.

Here to tell us more is Jim. Welcome. Thank you. Take it away.

Thank you, Jonathan, and it is great to be back at CAGNY to provide everyone an update on Ingredion's activities and our progress this past year and the opportunities that we see before us. So I am going to open today's presentation discussing our strategic vision for growth, and I will be joined by Patrick Kalotis, our Executive Vice President for Texture and Healthful Solutions. I believe this is Patrick's first CAGNY presentation. Patrick joined Ingredion late last year with nearly 30 years of experience in the food industry working for some of our most important customers. So he brings a real voice of customer to Ingredion. Following Patrick will be Rob Ritchie, our Executive Vice President for Food and Industrial Ingredients businesses as well as Sugar reduction. And Rob has presented at CAGNY in the past, and he has really deep knowledge of the industry and more than 30 years of experience with Ingredion. Jim Gray, our Executive Vice President and Chief Financial Officer, will conclude the presentation with a financial overview and an update to our long-term outlook.

So please note that certain statements we may make today may contain forward-looking information, which is governed by, of course, our safe harbor provisions. Now let me share with you an update on Ingredion's recent progress and how we're strategically positioning ourselves for the future. For those of you that are not familiar with Ingredion, we are a global ingredient solutions provider, primarily to the food and beverage industry, where nearly 70% of our revenues come from. But we're also a preferred supplier to the papermaking and corrugated box industries as well as a specialty ingredient supplier to the pharma and home and personal care markets.

We have been in business for more than 100 years and an interesting fact, next year, we'll celebrate 125 years of listing on the New York Stock Exchange as the 12th longest listed company. And that legacy has us very well positioned with more than 16,000 global customers and local customers in 120 countries around the world, which we service through 30 Idea Labs that are strategically positioned in 22 countries around the world. Last year was another record year for Ingredion with record gross profit margins of over 25%, up 120 basis points on prior year. Record earnings per share, which was driven by our Texture and Healthful Solutions segment, where we returned $435 million to shareholders through dividends and share repurchases. We also exited the year once again with a very strong cash position.

Over the last 3 years, Ingredion has averaged the generation of $1 billion in cash, providing a very strong balance sheet today, which provides us financial flexibility and provides us also optionality going forward. Now more than 2 years ago, you might remember that we resegmented our business into 3 large global or multi-country regional segments based on the value propositions inherent in the respective segment portfolios as well as the way customers prefer to engage with us from an innovation and servicing standpoint. So this strategic resegmentation of our portfolio has provided more scale to leverage and increase our intimacy with customers, better enabling us to co-create and deliver consumer-preferred innovation. Our sugar reduction and protein fortification businesses are in the all other category, which we characterize as other growth bets.

Now I do want to say something about our Food and Industrial Ingredients businesses because they have performed extremely well in the recent few years. And that's due to the in-country and across-region customer relationships and the synergies that are inherent within our Food and Industrial Ingredients businesses, both in LATAM and in U.S./Canada. And we've demonstrated an ability to generate strong profit growth as well as cash generation over the last 3 years. Due to the strong leadership positions we have, for example, in Brazil, Colombia and Mexico, our LATAM businesses generate nearly $500 million of operating income with an OI margin of 21%. And our U.S./Canada business has delivered 15% compounded annual growth over the last 3 years in operating income, and it operates at an operating income margin of 16%. So very solid businesses that are strong cash generation businesses that help support the growth ambitions that we have going forward in the future.

Now providing growth opportunities to our Global Texture and Healthful Solutions segment are macro trends where we believe we are well positioned to capitalize on from our market -- from our product portfolio and the focus of our go-to-market teams. For example, our market leadership in natural high-intensity sweeteners position us strongly with customers that are reformulating for low and no sugar recipes. Our pea protein isolates are coming off a very strong year of growth and profit improvement, capitalizing on the increases in protein fortification for those pursuing an active lifestyle or for those that are on the anti-obesity medications. Also, given all of the reformulating that's taking place as branded goods and private label manufacturers look to innovate with cleaner labels, our portfolio of industry-leading clean label starches and specialty flours are driving overall solutions growth, which Patrick will talk about.

And here's an example of the clean label growth. It's one of those categories that is growing in both volume and in revenue. Consumers are checking labels more than ever, and they consider natural or clean label claims more important than ever, and they're willing to pay for it. Over the last 4 years, the clean label category has grown in revenue at a compounded annual growth rate of 6%. And across the demographic spectrum, buying trends are signaling that consumers have a very strong preference that's increasing in healthy eating. Two buying trends across 4 generations are for high protein and for high fiber. And you can also see common across all groups is the avoidance of any ingredient that comes across as artificial. For example, artificial colors, of course, and artificial flavors. So there is this trend towards positive nutrition or fortification and more authentic labeling.

These categories that are shown here are what we call consumer benefit areas are also large individually. As you see, in the case of clean label, $145 billion consumer benefit category itself or protein fortification at $28 billion. So these categories provide headroom for growth for us working with customers in these spaces. And all of these health-oriented claims driven by these -- by the tailwinds are growing high single digits with a forecast for fiber fortification this year and into the future to grow at similar rates due to the satiety benefits of fiber. According to FMI, the global dietary fiber market is entering a decade of accelerated growth with industry revenue anticipated to reach $13.6 billion in 2026 and projected to expand at a compounded annual growth rate of 10% between now and 2036.

So a little bit about our engine of innovation. Our approach starts with capabilities that we've invested in over the last number of years, specifically in consumer and market research, market insights that enable us to connect with customers toward unmet needs and co-create with our customers recipes that address those unmet needs. So with a common understanding of the consumer, we're connecting with customers in ways that we haven't in many years, and we're leveraging investments that we've made in texture and sensory science supported by predictive formulation to position ourselves to overcome texture deficiencies as products are being reformulated that are being positioned healthier, but also looking to help elevate the overall texture experience to develop new and interesting textures that can help drive innovation for both CPG branded goods manufacturers as well as private label manufacturers and have products that will be winning on the shelf.

So what I'd like to do is I'd like to conclude my section before turning it over to Patrick with a reference to our strategic pillars for growth. Our strategy to drive profitable growth is centered on understanding our customers better and to best position ourselves to support their innovation needs and also segmenting our customers smartly as we optimize our support across existing and new customer channels for growth. And again, you'll hear Patrick talk about how we're pivoting towards the growth that we're seeing in private label and foodservice and how we're organizing to increase our penetration in those channels. We're also focused on upgrading our mix across target markets for food and nonfood through innovation and solution selling.

So when it comes to innovation, we're strategically investing in differentiating capabilities in texture, measurement science to support our aspiration to make healthy formulations taste better through deeper understanding of the impact of texture on taste. And we're underpinning that with investments and again, predictive formulation to help scale those capabilities more quickly for customers. And just this year, we're transitioning out of our Cost Smart program, which outperformed its target over a 2-year period. With an undertaking around enterprise productivity, which is engaging the entire organization to help drive efficiency and effectiveness, leveraging obviously AI, but all the elements of continuous improvement, lean manufacturing and eliminating waste throughout the organization. And so we're very hopeful and believe that this program is going to contribute and provide another lever to us to drive long-term profit growth.

So with that, I would now like to turn it over to Patrick. Patrick?

Thank you, Jim. Good afternoon, everyone. It's great to be here at CAGNY. As Jim mentioned, this is my first time on the stage at CAGNY. I'm pleased to report that the hazing has been low to moderate so far. So I appreciate you all for that very warm welcome. As Jim mentioned, I've been with Ingredion here for just over 3 months, having joined at the back end of last year as our Executive Vice President for Global Textures and Healthful Solutions. And I bring with me nearly 30 years of CPG industry experience. Initially in Europe, globally, but then also in the last 10 to 11 years in North America. So A lot of the companies that I used to work for represent some of our key customers, and that's really an angle that I'm looking to bring to Ingredion as we turn our attention to be more customer-centric and really answer and be able to deliver against the requirements of our customers.

Before I get deeper into the presentation, I wanted to share a little bit about some context around the Textures and Healthful Solutions segment for those of you who aren't as familiar. So what you will see, we are -- we continue to drive above-market performance, not just the top line but critically expanding our gross margin which underscores the breadth of our product lines, our solution selling and also our robust innovation delivery. And we've got some really supported by some very strong industry-leading capabilities. So you'll see here over 1,000 ingredient solutions, Jim already mentioned 30 Ideas Labs. We typically position those in different parts around the world to make sure that we're understanding local textures and taste and culture. And making sure that our delivery and our innovation match against those consumer expectations across all of our regions.

Well, we're already the global leader in texture, as you can see from our #1 position here in each of the markets that we're present. So #1 in U.S., Canada, in Europe and in APAC. There's clearly a lot of headroom and a lot of addressable market for us to go and capture. And not least because in most cases, consumers are telling us the texture, in some cases, even more than flavor is driving their choices. And you'll see just a couple of statistics that I've pulled out here from our consumer base and our consumer work 85% of consumers are highly likely to recommend their favorite food based on texture. And 3 out of 4 would actually say that texture is in fact, more important than flavor as they make some of their choices.

And I would argue that in some cases, consumers will talk about taste, they're actually referencing texture when they do that. I'm sure you've been in many conversations yourself. I want something creamier. I like the crispy texture of it. It was nice because it was sparkling, right? A lot of those consumer descriptors relate much closer to texture than they do flavor, and we feel that represents a unique opportunity for us to really drive that market growth.

And there are a number of key trends that we are acutely aware of and that we're tracking and making sure that we deliver against as we look to drive that texture growth over the next 3 to 5 years. Jim already mentioned clean label and the importance of wellness, which I'll come back to shortly. But what I did want to do, I wanted to call out increasing importance of two of the other spaces here on the page. So for example, unique ethnic textures. And I think the example of mochi here really represents a perfect example of how important texture can be to consumers as they think about specific food delivery.

The other one that I just wanted to highlight real quick is convenience and delivery foods. It's another great example where the importance of texture is paramount. As an example, no one is looking forward to their next delivery of soggy fries. And that's something that we're solving for through our textures business. And as we do that, we're also being very intentional about the categories that we believe will create the most value for us and for our customers. And the ones shown here on the screen, represent about 90% of where we think that value is going to come from. It's notable that while a number of these categories are still delivering growth, the texture component within those, in some cases, is growing even faster than the category itself. And I direct it to things like dairy or beverage, and you'll see the numbers there, mid- to mid- to high single-digit growth in terms of the texture market within those categories. And that's what gives us confidence that we are on the right path here and looking to deliver sustainable growth going forward.

And a number of those factors driving texture growth also result in a lot of manufacturers now looking to reformulate. And we've coined the term texture deficiency. That is present in a number of product lines. Consumers are increasingly looking for simpler, cleaner labels. They want to avoid complex ingredients and in response, manufacturers and our customers are looking to do so, but they need our help in making sure that they maintain the texture without compromising affordability or functionality and as they continue to innovate in those particular spaces. And it's really one of those hard trade-offs between cost, quality and texture that manufacturers are looking to resolve and where we can step in and really help them achieve that. And of course, all of this is happening in the context of an environment where regulatory impacts continue to accelerate change.

So this is where I want to pause on this slide a little bit longer and talk about our ingredient solutions approach, which really comes into its own. A couple of things that I'll highlight in a slide or 2 about $1 billion of our sales are now going through -- in revenue are going through our solutions business. So this is pretty scale part of our business. It's growing at about 2x the rest of our Textures and Healthful Solutions. So in the last year, our solutions approach grew 7.5%. And even more excitingly, if you think about it from an Ingredion point of view, because we're selling a service here rather than an ingredient it's also margin accretive to us. So some 500 basis points of margin accretion as we grow our solutions business.

So as you think about how our solutions approach differs. Really, we start with consumer insights, and then we bring those closely to our customers. And customer intimacy is a key driver here. That allows us to co-create briefs and product briefs with our customers. And be with them on that journey of innovation from the get-go. That's huge in terms of ongoing partnership. And then when we do that, we've got an agreed brief. And that will allow us then to go into our customized blends on our formulations of which we have a library of thousands, which allows us to deliver very quick prototypes. We commit now through our solutions approach that we will have a viable prototype after we signed a brief with our customers within 15 days. We started the journey at 90 days, and that was considered pretty quick. As you can understand from a manufacturer and some of our customers' point of view, bringing that down to 15 is a game changer for them because that allows us to then move very quickly to the innovation cycle and then to develop -- to deliver from there.

And of course, with the changing environment, rapidly changing environment, we move even faster and they've got the pressure to do so. And when we work with our private label customers, the urgency of change can typically be even more dynamic than that. What that all means is that the end of the cycle, we're able to effectively guarantee a higher product success rate because of the intimacy with the customer upfront and the expertise that we have and then from a customer point of view, I mean, the most typical failure is innovation. So anything we can do to give them a higher guarantee of success is obviously a welcome partnership.

So as we do that, what we're doing is elevating that Texture Solution to make sure that we're going sort of from the beginning all the way through to the end of the process and give ourselves a higher chance of success. We'll bring in sensory science into it, and then we will use that to identify consumer ingredients, and we're very clear on some of the ingredient spaces that our consumers are looking for, put that through our texture science application. And interestingly, we're beginning to develop predictive formulation liking.

So we have now, like I said, a library of ingredients and solutions and what that allows us to do is keep generating. We're building an AI component to that. And we're pleased to say that at this point, we can pretty much predict that consumer liking with about an 80% to 90% accuracy. And that goes back to what I was saying earlier about our customers lowering that chance of failure for their innovation and really buying into that partnership with us. And we can only achieve that because of the scale that we've been able to create in terms of the database of, like I say, ingredients and solutions. So as of now, we've got some 1,800 active and granted patents, which really underpin some of those technologies that we have on both texture and formulation.

I mentioned some of the numbers on this page a few minutes ago. Our solutions business just crossed the $1 billion in net revenue, growing at a pretty strong clip at 7.5%. And I mentioned the 5 points of margin accretion versus our average T&HS gross margin. Underpinning that growth are really two key structural changes in demand that we are looking to double down on clean label and private label, and I'll spend a little bit of time unpacking each of these here in the next few minutes.

So starting with clean label. Our technology delivers natural indulgent texture while simplifying the label. And if I can put it simply, clean label means that when we're transforming raw materials, such as milling corn, we are doing so in a way that the alteration of the product is simple enough that it can be labeled essentially as its basic self. We can do this through starches, fibers, protein isolates, depending on the product or the solution we're looking to deliver for our customers. A recent example of that would be our innovation product. It's a great example because the raw material is effectively citrus rinds. And what we do is we grind, we boil and we dry that and then we extract the citrus fiber. So you can understand that, that's very attractive to consumers, very attractive to our customers by way of being able to execute that simplicity and that clean label denomination.

As we think about clean label specifically, we're already the #1 in that space. We're about 3x the size of our nearest competitor. We're essentially the only clean label producer in North America. And we've expanded our margin as we grew into that space about 200 basis points here in 2025. I mentioned the growth that I was talking about earlier at the overall solutions level and clean label is growing even faster within that. So over the last year, we've enjoyed 8% growth on our clean label. And that's driven mainly by the ASP. So our average modified starch sells for about $2,000. The ASP on our T&HS business, a little bit higher than that. And our clean label will be twice that in terms of the ASP that we're able to charge.

Now you'll see here, EMEA is significantly ahead of the other regions in terms of adoption of clean label. But even within EMEA, we're still below 10%. So the headroom for growth as the pressures come for cleaner label is huge across all of the regions. But of course, the work that we've already done in EMEA helps inform us as we think about catching up fast in APAC and the U.S. As I pivot to private label as a second vector of significant growth within solutions, what's on the page here will not come as a huge surprise to anyone, I don't think as our consumers continue to seek more value, prioritizing affordability often at the expense of brand loyalty. And that's leading to declines in some of the premium product purchases. And that's about more than 50% of our consumers are switching to cheaper brands to manage that sort of economic uncertainty and some of the affordability challenges that they're experiencing. And as a consequence of that, what we're seeing is foodservice and private label growth above other food and beverage channels.

So if I dive a little bit deeper into private label, these are 5 trends that we see within private label that are really driving the value. Of course, you'll see first and foremost, affordability and convenience. But clean label that I already mentioned, enhanced nutrition and functionality, and that's important because as things get removed from the ingredient panel, it's important to maintain that same structural integrity of the product. And inventive textures that allow us to still deliver against consumer expectations.

Sustainability is also an emerging trend, a little bit less so as we think about private label, but nonetheless present as we try and help our retailers reformulate. So within that, we have built in expertise within private label. We're present across the world. In EMEA, private label is over 40% penetrated across on average across most categories. And what's interesting from an Ingredion point of view, more than -- approximately 50% of our total revenue in EMEA actually ends up in private label food and beverage.

So this is a path that we've been working for a number of years in EMEA, 15 to 20 years ago, we started the journey with private label. And really helps inform some of the growth that we're seeing now in U.S. and APAC as private label catches up, but you can see immediately the headroom that, that creates in both of those regions. And of course, to underpin all of that with the demand that we're expecting to see in these spaces, we're investing very strategically to drive our capabilities and to support the growth. In the last year alone, about $200 million of CapEx has come to fruition across the regions that I'm highlighting here.

And just to give you a sense of what that looks like in Thailand, one of our plants, we've got a new spray dryer, in Hamburg we increased our fluid bed reactor capacity that allows us to deliver incremental capacity while also expanding our footprint and delivering customized formulations with allergen segregation as well. In Indianapolis, we've modernized our facility there for specialty manufacturing assets by optimizing our slurry-based processes, which also results in cost savings. And then in Bell camp, more recently, we have just opened a blending center of excellence which helps us expand our in-house blending capacity and again, enables allergen handling. So a lot of strategic investment going into a number of our facilities across the world to underpin a lot of the growth that I mentioned. I hope that gives you a good sense of why we feel so confident.

And with that, I'm going to hand over to my colleague, Rob Ritchie.

Thank you, Patrick. Good afternoon, everyone. It's great to be back here at CAGNY again to speak to you about Ingredion and our ongoing strategy. I'm going to talk to you today a little bit about our two Food and Industrial Ingredient segments in the LATAM region and in U.S./Canada and the significant contributions and growth opportunities that they've provided to Ingredion. In LATAM, we generate around $2.5 billion in revenue in net sales with a segment operating income of 21%. So very healthy margins in that market. We're a trusted partner for ingredients and solutions in the region for both local customers and global customers that are established in LATAM. And our strong local presence is supported by 9 plants, 3 innovation centers in the region, which positions us well relative to our peers who combined only have 6 plants.

In U.S./Canada region, we have achieved $2 billion in net sales in 2025 and a segment operating income margin of 16% which is very healthy for the mix of these products. It's also worth noting that we are the only corn wet-miller with assets located in Canada. And for all of these plants, more than 80% of the production from these plants and the segments are sold within a 100 to 200-mile radius of the plants. So we've got very strong supply chain. We can optimize shipments, don't have to deal with rail delays either. So very well positioned to our key customers to provide them with growth.

In LATAM, we have market leadership driving higher operating margins and delivering consistent growth. Our OI growth of 4% since 2022 has added $56 million of operating income to Ingredion. We've increased our OI margins from 17% in 2022 to 21% in 2025. We have over 90-plus years in the region of experience, and we have the #1 position throughout the LATAM market. So we're very experienced in the region. And as you see from the news headlines, it's a fairly volatile region. So we're very used to that volatility. In fact, it's a way of life in terms of how we operate in the LATAM region. We have strong customer intimacy that allows for consistent and reliable growth in the region, and we're positioned well to support CB growth in the region over the next several years as those favorable trends continue to emerge.

We've got a very strong right to win in LATAM. Patrick and Jim talked about our Idea Labs. So we have local idea labs in the region to customize towards local tastes and preferences. However, we leverage our global scale to bring those ideas to the market within LATAM as well. We have the lowest delivered cost producer in the region, as referenced by our plants, which we've located near our customers to ensure cost-efficient service and supply chain within them. We continue to trade up our mix based on customer needs, moving from perhaps bulk sweeteners and starches to value-added ingredients and solutions, and we have that playbook already established in our Global Texture and Healthful Solutions business. along with Pharma and Beauty and Home. We're able to do that by repurposing our grind to higher value-add ingredients and solutions. And the benefit in LATAM is we sell the full portfolio of products, so our teams there sell all of our food and industrial ingredients and also are part of the Texture and Health business in that region as we continue to grow as our consumer needs and preferences change in the region.

Some of the key trends here that are very favorable for long-term growth in LATAM. Affordability is a key issue, approximately 24% of the income spent in LATAM is spent on food unlike, say, in U.S. or Britain, we're at 6% to 7%. So the cost of these ingredients and finished products is very important. Private label growth that Patrick had mentioned as well, grew at 14.2% versus 2023. So we see an opportunity for affordability there. Also, younger population. So we've got a younger population of LATAM compared to more western markets, they're moving into the middle class. They're moving into their prime spending years, which should bode well for CPG growth over the next 5 to 10 years. We expect consumer packaged good growth to be at 3.9%. That's almost double of what it's in in some other regions in Western developed markets. And urbanization, the vast majority of the population is moving from farms into cities. Right now in LATAM, it's 82% and over the next several years, expected to reach 89%. As those consumers come to the cities, they tend to buy more packaged foods, which aligns very well with our strategy in LATAM.

Obviously, there's economics in government in the region. So GDP at approximately 2% inflation at 5%. As I've mentioned, we've been there for 90 years. So we're used to the volatility. So when new taxes come up or different governments are able to be elected, we have the ability to work with them to ensure that our strategy continues to grow in those particular markets. I'm going to pivot now here to our U.S/Canada business. Very strong financial performance over the past 4 years, showing an OI growth CAGR rate of 15%. And as Jim had mentioned, 16% of OI margins which, based on that product mix is, again, very stable and helps grow the business with cash generation. We've been growing our growth in industrial opportunities in packaging, in BioSolutions we're the leader in paper and corrugating in the U.S./Canada market, and we're pivoting towards sustainable and advanced packaging material opportunities as well.

We focus on margin stability, customer intimacy and optimize supply chain, as mentioned by the strategic location of our plants, and again, strong cash generation to support capital priorities across the enterprise. So what is our right to win in this market? So we have leading market positions in U.S., Canada and wide competitive moats built on over 100 years of experience. I'll just start on the right-hand side. We have thousands of farmers who grow our primary raw material corn, but also potato and other raw materials like that. Relatively few competitors in the marketplace and thousands of customers. So it's a very strong operating model. One of the things that we've done with this business over the last several years is put in some advanced hedging on our raw materials to reduce that raw material cost volatility. So we truly are buying that agricultural product and converting it into a value-added ingredient.

Relatively stable industry structure, very high barriers to entries. Corn wet-milling plant in U.S. Canada is a very expensive proposition. So very high barrier entry in that area. Pricing excellence, Quite a few years ago, we established pricing COEs that allow us to ensure that we're getting the right value and maximization of our prices for the ingredients in the marketplace. And finally, as mentioned, very strong cash generation supporting not only our continued reliability investments to deliver the return on invested capital for these plants but generating cash to invest in value-added ingredients within the Texture and Healthful Solutions, sugar reduction and protein as well.

So what are some of the challenges that we have and what we're doing to maybe address some of the gradual declines in high fructose that's driving mix shift and improving margins. I mentioned our industrial business is growing very well, 3% to 5% a year in terms of revenue, native starch and modified starch into packing and industrial solutions. The biosolutions, liquid dextrose is an excellent feedstock for fermentation for green chemistry and advanced biofermentation that's the wave of the future. We see that being a huge opportunity not only for Ingredion. But overall corn wet milling. In the sweetener market, we are trading up from some of our bulk sweeteners to dry dextrose and glucose, which are much more value added. We're the largest dextrose producer in the North American market, and that demand continues to grow.

And differentiated markets. We have polyols, which are used in sugar reduction. As Jim mentioned, we've got a very robust Beauty and Home, pharma and sugar reduction market as well. So as our consumers change and demand patterns changed, we shift the mix coming out our plants to make sure that our assets are assigned and aligned very carefully with those consumer trends.

So finally, just our market positions and differentiated capabilities across both segments provide competitive advantage. I mentioned our opportunities in LATAM positioned very well. I think that point around we serve all food and beverage categories with sweeteners, starches, texture and sugar reduction and protein. We're positioned very well and the external factors are set up very well for long-term success. And in U.S./Canada, a little more mature market, but again, positioned very well. and we'll continue to invest and pivot away from maybe some of the products from 30 years ago to drive growth and opportunity and keep our margins stable in that business.

With that, I'm going to turn it over to Jim Gray, our Executive Vice President and CFO.

Thanks, Rob. With just a few minutes left here. We'll focus on the math part, so I may go quick. Hopefully, this room can follow a math. So just a quick recap of 2025. So net sales were down. For those of you who may not know our company, generally, when the cost of the raw materials like corn goes down or up, we're passing it through our top line. So we very much, as a company, focus on gross profit and gross profit per ton. That's reflected in our adjusted EBITDA, which was up, and this is the third year in a row that, that was a record for us. Strong cash from operations with over $900 million generated, and we do focus on return on invested capital as one of our key metrics.

So let me turn now to our 3-year outlook, and we're going to extend that by a year. So in 2025, we put forth an outlook for '25, '26, '27 and I think in the second half of the year, what we really saw, at least in the U.S. was some real changes. I think we saw some changes from some tariffs that were impacting packaging costs for a number of our customers. That led to probably some midyear pricing and in a number of the categories in which we sell ingredient solutions into, they're elastic. And so we saw some volume demand headwinds in the second half of 2025.

The other piece that I would argue is that within -- looking forward into 2025, we knew that immigration might be an impact within the U.S. We didn't really know, I think, the debate between probably the labor rate and what that income might look like, but it actually turned out to be really people and stomachs. And so we've seen both voluntary and involuntary deportation to start to impact in the United States, and that affected some consumption of specific categories in which we sell into. So here, what we're doing in our outlook, you'll see that our net sales for the whole enterprise, we think are going to be probably between 1% and 3% through 2028. We still believe that we can hit that very solid mid-single digits operating income growth, and we see operating income expansive over that time period. We're going to do our best to control our corporate costs, and we're also going to manage our fiscal policy such that we think adjusted EPS can be in the range of 7% to 9%. You combine that with our dividend rate, and we really strive for greater than a 10% TSR.

We outlined here by segments and maybe the only one that I would highlight is that for our U.S./Canada segment, while we finished at about $315 million of op income for 2025, we'd really like to put out a target there where we think that the profit potential of this segment can solidly be in the $350 million range, and we would put that out there for 2028. And then below, you can see the kind of the target operating income margins for each of the segments that we do report in our 10-K.

Against this, there are risks out there. There's continued tariff and trade risks, potentially regulatory risk and kind of those all combined with kind of input cost inflation. And then separately, we're looking at a bit of a weaker dollar. So we'll have some FX impacts. We're watching population change. And then always, there's just kind of economic growth. But we are seeing some generally around the world, rates come down, which should be a boost, a tailwind to economic growth.

One pillar that Jim introduced, I just want to put a cap on it here in my final minute is enterprise productivity. We're really moving -- most companies are moving to a stage where they're thinking about how are they going to streamline processes, how are they going to really change the responsibilities of the professional and augment those with AI and get to just greater effectiveness of our people and greater efficiency within the organization. We've embarked on a multiyear program here on enterprise productivity. I shouldn't call it a program. It's actually a journey. It's a change in our mindset. And we think that's going to lead to over 1 point of op income growth by 2028.

We balance our capital priorities. We focused on growth first. We're very disciplined. I'll leave this to you to follow up in the presentation. We're very consistent in turning cash back to shareholders. Here, you can see both share repurchases as well as dividends. We've increased the dividend, the annual dividend rate 11x in the last 11 years. And we also think and take a very disciplined approach to M&A, and you can read through the details here. I would just say that we really target a 3-year, so 3 year post the acquisition. At least a return on invested capital of 10%.

So we give ourselves a couple of years to capture those synergies, get the cost out, get the capacity balanced, work on those revenue adjacencies and really drive that. And so with that, we'll finish. Our last theme was the investment thesis, but we'll leave it there on time. Thank you very much.

Thank you very much. Please join me in thanking the management team of Ingredion. And we'll take it over to the breakout.

Good day, and thank you for standing by. Welcome to the Fourth Quarter 2025 Ingredion Inc. Earnings Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded.

I would now like to hand the conference over to your speaker today, Noah Weiss. Please go ahead, sir.

Good morning, and welcome to Ingredion's Fourth Quarter and Full Year 2025 Earnings Call. I'm Noah Weiss, Vice President of Investor Relations. Joining me on today's call are Jim Zallie, our President and CEO; and Jim Gray, our Executive Vice President and CFO. The press release we issued today, as well as the presentation we will reference for our fourth quarter and full year 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 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 will 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 our press release and in today's presentation appendix.

With that, I will turn the call over to Jim Zallie.

Thank you, Noah, and good morning, everyone. Despite unforeseen challenges throughout the year, we are pleased to share that we delivered record full year operating income and earnings per share growth driven by continued strength in Texture and Healthful solutions and solid results from our Food and Industrial Ingredients LatAm business. Although the largest facility in our Food and Industrial Ingredients U.S./Canada segment faced operational difficulties, we have taken steps at the Argo facility to systematically address the issues. While we expect a gradual recovery, the actions we are taking should lead to steadily improving performance throughout 2026.

Turning to the next slide. Let's start with a summary of our net sales volume growth for the fourth quarter. Texture and Healthful Solutions posted its seventh straight quarter of volume growth, up 4%, led by clean label ingredients and solutions. Clean label ingredient volumes experienced significant growth in both the fourth quarter and throughout the year across Asia Pacific and U.S./Canada.

Clean label remains one of the food industry's fastest-growing areas, emphasizing its critical role in meeting consumers' preference for authentic ingredients and simple food labels. Ingredion continues to be a leader in the clean label texturizing space due to the breadth and strength of its portfolio, which is supported by proprietary technology, patents, consumer insights and years of formulating expertise. Furthermore, our solutions selling approach continues to deliver robust growth, outpacing the segment's overall net sales performance. This comprehensive way of engaging customers is driving greater intimacy at a time when food companies are pursuing more reinvention and reformulation. These higher margin sales are also expected to be margin accretive to the segment over time.

In our Food and Industrial Ingredients LatAm segment, we started to see brewing adjunct volume demand recover from our long-term contracted customers. However, the region continued to face challenges in the confectionery and paper and corrugating sectors, where demand remains soft. Partially offsetting this softness, food ingredient sales experienced modest growth.

Lastly, our Food and Industrial Ingredients U.S./Canada segment saw a 7% decrease in net sales volume in the most recent quarter, primarily driven by ongoing production challenges at Argo, which limited our ability to produce inventory available for sale. In addition to this operational issue, our business and the industry faced overall softness in beverage sweetener volumes, further contributing to lower sales.

As we move to segment updates, I want to highlight progress against key growth investments and strategic initiatives. Starting with Texture and Healthful Solutions. Our focus on the customer has never been stronger, delivering sales volume growth of 4% NOI growth of 16% versus prior year. In addition, strategic capital growth and cost savings investments were completed.

At our flagship Indianapolis facility, our starch modernization project completed in quarter 4 will reduce our modified starch production costs through more efficient product flows and debottlenecking, which will drive the release of new capacity. In addition, we completed the expansion of our blending center of expertise in Belcamp, Maryland, which increases customized solutions revenue potential by $30 million a year. The range of solutions capable to be produced from this facility support clean label, plant-based protein and fiber fortification, sugar reduction and affordable formulating.

Turning now to our Food and Industrial Ingredients LatAm segment. Against a backdrop of regional, economic and political volatility throughout the year, our team managed to deliver record operating income and margins of greater than 21% for the year, up 140 basis points. Mexico specifically demonstrated resilience to offset challenging unforeseen economic conditions, delivering another record year of operating income.

In pursuit of more profitable growth, Mexico repurposed a portion of its [ grid ] to strategically diversify its customer and product mix towards higher-margin ingredients that serve food and confectionery customers. We successfully completed a complex network optimization move in Brazil for long-term cost competitiveness. We closed our Alcantara facility and successfully expanded [ polyol ] production at Mogi Guacu, our largest facility in Brazil. This investment was supported by long-term customer volume commitments.

Now turning to our Food and Industrial Ingredients U.S./Canada segment. Operational issues at our Argo facility stubbornly persisted throughout the fourth quarter. Despite being encouraged by a strong September, we experienced intermittent grind shutdowns, which resulted in higher maintenance costs, lower yields and fixed cost absorption, which reduced both our salable finished product inventory and our co-product valorization. Furthermore, industry volume demand for sweeteners was down throughout the second half.

The 2025 full year operating income impact of Argo's operational challenges was approximately $40 million. With the majority of the first quarter still ahead of us, our team remains focused on executing an achievable recovery plan. Despite the unforeseen challenges and headwinds described, Food and Industrial Ingredients U.S./Canada delivered greater than 15.5% operating income margins for the year.

Let me now update you on progress against our 3 strategic pillars. Let me start with driving profitable growth. By continuing to prioritize solutions and clean label offerings, we have significantly enhanced the results of our Texture and Healthful segment. As mentioned previously, sales in both ingredient solutions and clean label categories have outpaced the overall segment's net sales growth during the second half of 2025, and we have a strong pipeline and growth momentum in both areas going forward.

Furthermore, we are excited to report that our protein fortification business delivered a record year, with net sales growth exceeding 40%. As you know, we have been working diligently to optimize this business for several years. In 2025, we doubled production and were able to increase the average selling price through new product innovation. We see this business representing a viable long-term growth opportunity for us, supported by strong and clear consumer pull.

Looking at our second strategic pillar, innovation. We have developed a new family of ingredient solutions that help customers readily replace ingredients that have been impacted by shortages and rapidly rising raw material costs. For example, our suite of solutions to replace cocoa and product reformulations have seen steady sales increases throughout 2025. Furthermore, we are advancing our proprietary sugar reduction taste modulation platform in collaboration with Oobli through a strategic commercial partnership.

Our sweet proteins and stevia blends improve the quality of natural sweetness while offering a cost-competitive clean taste solution. Regarding innovation, texture elevation represents the next level in value delivery that we are offering to select customers. This co-creation approach combines proprietary consumer insights, sensory science and rapid formulation expertise to help customers predict overall liking and deliver consumer-preferred textures faster and with higher success rates. Our 2025 customer engagements proved very effective and are leading to customer successes in the marketplace. We are extremely excited by this opportunity and what it represents to grow customized solution sales with the potential also to generate new service revenues.

Lastly, I'd like to comment on our operational excellence pillar. In 2025, we delivered $59 million of Cost2Compete run rate savings, exceeding our previously stated $50 million savings target. This achievement reflects our ability to optimize across manufacturing -- our manufacturing network, as well as deliver procurement and SG&A savings, leveraging our scale. Building off the success of Cost2Compete, we are transitioning our operational excellence strategic pillar toward long-term enterprise productivity. We look forward to updating you on our enterprise productivity progress in the future.

It is also worth highlighting that despite the volatile trade and tariff environment in 2025, Ingredion was minimally directly impacted. This was due to the fact that more than 80% of our production is locally made and locally sold.

Turning to the next slide. Our results this year demonstrate how Ingredion's diversified portfolio continues to drive stronger and more consistent profitability. While navigating volatile market conditions, we delivered record gross profit and expanded margins to over 25%, a clear testament to our agility and operational discipline. This performance also reflects the ability to leverage the strength of our global network, adapt quickly to shifting demand and our focus on higher-value solutions. As we continue to optimize our mix and execute against our strategy, we are building a foundation for sustained long-term growth. Overall, 2025 stands out as a year where disciplined actions and portfolio balance enabled us to perform well in a challenging environment.

Before I turn the call over to Jim to discuss our financial results, I do want to take a moment to comment on our CFO transition. Last week, we announced that Jim Gray will be retiring on March 31, 2026, and we have begun a comprehensive search to identify his successor. The Board, the executive leadership team and I are incredibly grateful for Jim's leadership during his more than 9 years as a CFO of Ingredion. He's been an invaluable partner to me and has made significant contributions to our success. I wish Jim all the best in retirement.

And with that, I'll turn the call over to Jim Gray for the financial review. Jim?

Thank you, Jim, and good morning, everyone. Moving to our income statement. Net sales for the fourth quarter were $1.8 billion, down 2% versus prior year. Gross profit dollars decreased by 4%, with gross margin slightly lower at 24.5%, as cost of goods sold was impacted by higher manufacturing expense in U.S./Canada Food and Ingredients. Reported and adjusted operating income were $220 million and $228 million, respectively.

Turning to our Q4 net sales bridge. The 2% decrease was driven by $40 million in lower volume, $39 million in lower price/mix, offset partially by $36 million of favorable foreign exchange. Moving to the next slide. We highlight net sales drivers for the fourth quarter. Texture and Healthful Solutions net sales were up 2%, driven by sales volume growth of 4% and foreign exchange favorability of 2%, partially offset by price/mix attributable to pass-through of declining tapioca input costs and greater volume mix of lower-value tapioca-based sweeteners sold locally in Thailand.

Food and Industrial Ingredients LatAm reported net sales up 1%, largely driven by favorable foreign exchange, partially offset by weaker volumes. Food and Industrial Ingredients U.S./Canada net sales declined 9%. Sales volume fell by 7%, primarily driven by less available inventory for sale as our Argo facility faced operating challenges, and we met customer demand by sourcing from other plants.

Turning to our earnings bridge. On the top half, you can see the reconciliation from reported to adjusted earnings per share. Operationally, we saw a decrease of $0.23 per share for the quarter, driven by a decrease in operating margin of minus $0.22 and volume of minus $0.10, partially offset by foreign exchange gain of plus $0.08 per share.

Moving to the change in nonoperational items, we had an increase of $0.13 per share. Shares outstanding had a favorable impact of $0.08 per share, and a lower tax rate equivalent was $0.06 per share favorable. Moving to our full year income statement. Net sales for the full year were $7.2 billion, down 3% versus prior year. Gross profit dollars increased by 2%, with gross margin increasing to 25.3%. Reported and adjusted operating income were $1.016 billion and $1.028 billion, respectively.

Turning to our full year net sales bridge. The 3% decrease was driven by $144 million in lower price/mix, $75 million in lower volume, offset partially by $8 million of favorable foreign exchange. Moving to the next slide, we highlight net sales drivers for the full year. Texture and Healthful Solutions net sales were up 1%, driven by 4% sales volume growth and foreign exchange favorability of 2%, partially offset by price/mix. Food and Industrial Ingredients LatAm reported net sales down 4%, driven by weaker volumes across [ brewing hedge ]. Food and Industrial Ingredients U.S./Canada net sales declined 7%. Sales volume fell 4%, primarily due to previously mentioned challenges at our Argo facility and weaker sweetener demand.

Now let's turn to a summary of results by segment. For full year 2025, Texture and Healthful Solutions net sales was up 1%, and operating income was up 16%, which translated into a higher operating income margin of 16.9%, up more than 200 basis points from the prior year. The increase for the full year was driven by lower raw material and input costs as well as improved margin volumes, partially offset by unfavorable price/mix.

In addition, one comment regarding Texture and Healthful Solutions' quarter 4 operating income. Last year's fourth quarter had onetime benefits from SG&A, which we were lapping. We anticipate that Texture and Healthful will continue to generate positive operating income growth. In Food and Industrial Ingredients LatAm, net sales were down 4% versus last year. However, operating income increased to $493 million, and op income margin reached a record 21.1%.

Moving to Food and Industrial Ingredients U.S./Canada, full year net sales were down 7%. Operating income was $315 million, down 16%, driven by production challenges at our Argo plant and lower-than-expected beverage and food volume demand. For the fourth quarter, we estimate that operating challenges have had a $16 million loss impact and that the total 2025 impact is approximately $40 million. For the all other group of businesses, the 2% increase in net sales was driven by growth both in our sugar reduction and protein fortification businesses. Operating loss improved by $20 million versus prior year, driven mainly by significant gains in protein fortification.

Turning to our full year earnings bridge, where we illustrate a 4.5% year-over-year increase in adjusted diluted earnings per share. Operationally, we saw an increase of $0.13 per share, driven by an increased operating margin equivalent of $0.39 and other income of $0.15, partially offset by volume of minus $0.47 per share.

Moving to the change in nonoperational items. We had an increase of $0.35 per share. Shares outstanding had a favorable impact of $0.23 per share, a lower tax rate equivalent of $0.09 per share and lower financing costs of $0.03 per share.

Moving to cash flow. Full year cash from operations was $944 million, which includes investment in working capital of $75 million for 2025. Full year CapEx investments, net of disposals, was $433 million. The company continues to invest in organic growth opportunities that provide a significantly higher return than our cost of capital. We repurchased $224 million of outstanding common shares, exceeding our $100 million share repurchase target announced at the beginning of the year. Furthermore, we paid out $211 million in dividends and increased the dividend per share to $0.82 during the third quarter, which represents our 11th consecutive annual dividend increase.

Now let me turn to our 2026 outlook. For the full year 2026, we anticipate net sales to be up low single digits to mid-single digits, reflecting greater volume demand. We anticipate the reported and adjusted operating income will be up low single digits for full year 2026. Our 2026 financing cost estimate is in the range of $40 million to $50 million and a reported and adjusted effective tax rate of 25.5% to 27%. Our full year adjusted EPS is expected to be in the range of $11 to $11.80, reflecting continued sales volume growth in Texture and Healthful Solutions and relatively slower operating income growth from our Food and Industrial ingredients segments as we face industry volume demand softness and higher manufacturing inflation not fully offset by pricing. This adjusted EPS range is based upon a share count of 64 million to 65 million shares.

We anticipate our 2026 cash from operations will be in the range of $820 million to $940 million, reflecting slightly more working capital investment as net sales are expected to grow. Capital expenditures for the full year are anticipated to be between $400 million to $440 million. Please note that our guidance reflects current tariff levels in effect at the end of January 2026. In addition, this guidance excludes any acquisition-related integration and restructuring costs as well as any potential impairment costs.

Turning to our full year outlook by segment. For T&H, we estimate net sales to be up low single digits to mid-single digits and for operating income growth to be up low single digits to mid-single digits, driven by sales volume growth. For F&I LatAm, net sales are estimated to be up low single digits to mid-single digits and operating profit to be flat to up low single digits, reflecting sales volume growth, partially offset by foreign currency transactional headwinds, specifically in Mexico. As a reminder, we are dollar functional in Mexico. Therefore, a stronger pace of inflates local manufacturing and costs and operating expenses.

For F&II U.S./Canada, our outlook for net sales is in the range that is generally flat year-over-year, and operating income is projected to be flat. While we have [ near-end ] confidence in Argo's recovery, we anticipate continued challenges through the first quarter, in line with the previous quarter. Furthermore, while contract pricing covered raw material cost changes, we were not fully able to cover anticipated manufacturing cost inflation. For all our all other businesses, we expect the combined net sales to be up high single digits and operating income to improve between $5 million to $10 million. Lastly, for the first quarter of 2026, we expect net sales to be down low single digits and operating income to be down mid-double digits, primarily due to the strength of first quarter 2025's 26% operating income growth.

With regards to my announced retirement, it has been a privilege to host 35 quarterly calls with you, our shareholders, analysts and employees. Ingredion has an amazing leadership team led by Jim Zallie and will continue to be supported by a very, very strong finance team. As a shareholder, I look forward to Ingredion's continued success as the company navigates any challenges with proven agility and seizes future growth opportunities to deliver solutions that make healthy taste better.

That concludes my comments, and I'll hand back to Jim.

Thank you, Jim. In closing, 2025 was another year where we displayed meaningful progress against our strategic pillars, led by the strong sales volume momentum we saw from our Texture and Healthful Solutions segment. We believe the clear customer focus that has resulted from the resegmentation completed 2 years ago, along with our advanced approach to solutions selling, positions us well for continued growth in this segment in 2026.

We are also encouraged by the continued benefits we expect to see from the nearly $60 million of Cost2Compete run rate savings we delivered by the end of last year. Our commitment to cost competitiveness will continue forward as we pursue enterprise productivity for long-term effectiveness and efficiency.

We anticipate Food and Industrial Ingredients in U.S./Canada to meaningfully overcome its operational setbacks as we remain laser-focused on stabilizing Argo, and we expect steady improvement from the facility throughout the year. Finally, our financial position remains a source of strength. We delivered nearly $950 million of cash from operations in 2025 and returned $435 million to shareholders. And as Jim explained, we expect cash flow from operations to continue at these levels, providing flexibility to pursue growth.

Now let's open the call for questions.

[Operator Instructions] Our first question is going to come from the line of Kristen Owen with Oppenheimer & Co.

And Jim Gray, best wishes. Thank you so much for the help over the last several years. So kicking off then with the outlook. You sprinkled some breadcrumbs throughout the prepared remarks about the Argo facility. Just help me understand how much in the fourth quarter was Argo versus the volume decline? And then how we should think about that playing out in 2026? Because I would have thought with the $40 million headwind from that facility that maybe the op income guide would be a bit higher in F&I North America. So maybe help me bridge all those pieces together that you left for us throughout the call?

Yes, sure. So obviously, in Q4, the primary issue was the operational challenges there. As we said [indiscernible], we felt that, that was about $16 million impact as we're kind of estimating between idle and yield loss and some incremental maintenance costs. That was the impact to the U.S./CAN F&I segment in Q4. So -- and then for -- in total for 2025, the impact to the U.S./CAN F&I segment was about $40 million.

As we roll forward and we look at kind of the 2026 guide for that segment, we also then -- we had some lapse when we go from -- let me back you up to 2024 versus 2025, right? So we're down about, let's call it, $58 million. So $40 million is Argo. We had a couple other earlier events in the year, kind of more manufacturing events related. We had a small train derailment in Cedar Rapids. And let's say that was about $10 million. And then from '24 to '25, we had probably about $8 million in terms of just volume softness.

So through 2025 and probably more June on, you saw some response by some of our customers to tariffs. We saw some pricing increases across some categories, soda beverages, beer and cans, et cetera, where we provide a lot of sweetener volume or adjunct volume into. And naturally, those categories are elastic. So you're going to see some volume softness in really in the second half. Maybe that started May, May-June, but throughout summer, and throughout fall.

So as we go into 2026, we'll still have some Argo costs, and those will be mostly impacted in Q1. But we will probably get back some of the Argo onetime impacts in the back half of 2026. So then what says to -- so that should say, hey, you should be up year-over-year at '26 versus '25 on your op income and maybe you should be up $15 million, $20 million. And what I think what we're really seeing is that when we looked at contract pricing, we absolutely were able to cover any change, anticipated change in the net cost of corn.

But we do have some manufacturing inflation. We have some higher nat gas and we have some higher labor rates. And so those are playing against our COGS rate of change in U.S./Canada. And that's in our guide. So our upside to our guide would be that our inflation is less. Maybe there's a stronger volume that shows up in the second half. And all of those would be pluses. But we felt it kind of prudent to guide kind of flat year-over-year.

And Jim, just to answer the question regarding the percentage or say, the apportionment of the decline in the quarter, Argo vis-a-vis sweetener volumes, we say 2/3 Argo, 1/3 sweetener volumes?

Yes, 2/3, 3/4.

And then in addition to that, the impact for the full year of $40 million for Argo. Of course, if you look at that as limited to 2025, and I would say January's been a little bit of a rough start to January. And so...

And pretty cold.

It's been pretty cold. It's been pretty cold in January. And as we sit here right now, the plant is running well. It actually ran well from a standpoint of through the very severe cold spell, but January was not as strong as we had anticipated. And I think that in addition to everything else that Jim just said, is the reason why we're putting forward, say a flat year-on-year projection for the full year.

Yes. And maybe, Kristen, I think it's helpful to then say, well, what do you anticipate U.S. CAN F&I's potential to be. I think once through Argo's recovery and we look at some of the investments that we've made and how we're positioned with customers, this segment can definitely still achieve a 16% to 17% op income margin.

Okay. That is super, super helpful. I'm going to ask one here also on Texture & Healthful Solutions. Because I think, Jim, you called out maybe some tapioca headwinds here, maybe some mix headwinds. One of the questions that we get about Ingredion is through this Texture & Healthful Solutions, really looking to see that ASP per ton move higher, help contribute to that OI income outgrowth. Maybe pencil out for us the onetime items there? And then the price/mix headwinds that you're expecting in 2026, just help us unpack those a little bit?

Yes. Look, I think if you looked at just the print on the op income margin for Texture & Health for fourth quarter, right, it will show op income down year-over-year by a slight percentage. That was all really driven by some op -- some benefit in op expense in Q4 of 2024. Onetimers, as you adjusted, there was some comp benefit, and we had to take that in the Q4 and accrue for that.

And so we really -- it's kind of just the year-over-year cleanup when you're getting to how you're looking at 1 year's finishing. So I really didn't see that because I want to highlight the gross margins for Texture & Healthful for Q4. Gross margin -- gross profit had grown and gross margins have expanded, right? So I think that's always a better measure of the health of the product mix in Texture & Healthful.

As we look forward to 2026 and we talk a little bit about what's the expectation for price/mix to finally move positive, right, and to finally show kind of year-over-year gains in ASPs, that's absolutely going to be reflected by some of the comments Jim made on solutions growth, on texture elevation. These are all very much positives that are driving much higher average selling prices per ton and I think are reflected in value to the customer.

I do want to remind everybody, though, that -- so we're in -- we just finished the second year of this resegmentation, and we're going into 2026. And we still have some little pockets of business that may not be at that higher average ASP. And so one of those businesses is in Thailand, and we still have a tapioca glucose syrup business. It is pretty big volume relative to our more higher value tapioca texture solutions. And so when it has a lot of demand, and it moves up, it's going to have an impact on price/mix, and/or we had a healthy tapioca crop and tapioca prices came down. And so again, we're going to reflect those changes in the raw materials, we pass those through. We'll always try and call that out. But I think we're pretty confident and pretty excited about the texture solutions growth and what it implies for ASP as we go forward year-over-year.

Yes. And it's noteworthy, I think, for the full year, Texture & Healthful operating income margins were up 210 basis points.

[Operator Instructions] Our next question comes from the line of Josh Spector with UBS.

You have James Cannon on for Josh. I wanted to ask on the LatAm business. You had some mix management from business rationalizations earlier in the year. And you talked in the quarter about underlying demand there being improving. I was just wondering if you could kind of break out some of the volume movements that you saw there, kind of like you did with U.S/CAN earlier?

Yes. Quarter 4 net sales were up 1%. For the segment, quarter 4 sales volume declined by 3%, but that was largely attributable to the brewing adjunct volume declines. More than 100% of the downside was attributed to brewing adjunct, whereas there was sales volume growth for food and beverage, and that was positive. And because the brewing adjunct business represents 18% of net sales and a larger percentage of our volume, we've been actively pursuing alternative paths to utilize the grind more profitably by trading up to support higher-margin products in food and confectionery. And this really represents an exciting incremental opportunity to diversify beyond brewing and valorize our grind much more profitably. Just for some additional color, Mexico food volumes were up 3%, and beverage volumes were up 1%.

For the quarter?

For the quarter. Yes. So we've started that -- James, we started that transition, right? So we still have -- Mexico still has, I would say, at least 1 to 2 years of ramp from the volume that is sort of released by kind of rightsizing and managing through the customer change, but it's starting well. So we're excited about that.

Okay. Great. And then I just wanted to poke one thing on THS as well. You talk about the solutions business being higher margin than the rest of the segment. Could you just give us some quantification of like how much of the mix is sold as solutions today, what that margin differential looks like?

Yes, sure. Go ahead.

Yes. So the solutions has been something where we've been working on establishing a baseline and really tightly defining that and really completed that work in 2024. And in 2025, we're able to -- Jim and Patrick Kalotis and [ Michael Reardon ] were able to kind of set some real objectives for the sales teams. So that business right now in '24 and '25 is just over $1 billion. And the gross margins are definitely higher than the segment average, and they're like 30%, 35%.

I'd say 5% higher than the segment's overall average, and it's about 40% of the revenue approximately of the segment.

Yes.

[Operator Instructions] Our next question comes from the line of Ben Theurer with Barclays.

Jim, I'll talk to you later on, but enjoy retirement. Two quick ones. So number one, just picking up on Texture & Healthful Solutions a little bit. Can you help us maybe understand within the framework of the guidance, where you stand in terms of like contracting pricing for 2026? Is there anything off cycle in terms of like the pricing mechanisms going out to? I guess, if I remember right, I think you said something like flat for the beginning -- at the beginning of '25 and then kind of like ended up somewhat negative mid-single digits. So just understanding a little bit the drivers and things you've already talked about tapioca and those factors. So how should we think about '26 nonetheless on your current expectations as it relates to T&H. That would be my first question.

Yes. So let me take that and then let Jim add some color commentary. I would say that contracting for TH&S in the U.S. was completed with pricing slightly down, and we anticipate that we covered any changes in the cost of corn and other raw materials. We are anticipating volume gains year-over-year. That said, some large customers were communicating that unit volumes might be lower given their pricing actions and the fact that U.S. consumers continue to struggle with affordability. We anticipate that we will not fully cover the expected manufacturing cost inflation, and that will hold our gross margins basically flat in general for that segment.

And Ben, just for Texture and Healthful, right, so slightly higher semi-variable and fixed costs in that business, right, as we use more production lines to create value. So manufacturing cost inflation, 2%, 2.5%. Some of that reflected in energy cost change year-over-year, some of that in labor costs. And as you go into your pricing, clearly, you're having a conversation with the customer about any change in the raw material. But you're always trying to price in enough to cover that manufacturing cost inflation.

And I think this year, we are looking at the outlook and saying, well, some of that manufacturing cost inflation is going to show up. And we'll see. Clearly, our operations team will always take up the mantle to work enterprise productivity, to lower that. Our procurement team is going to go and work against any rate changes year-over-year, but that would be upside to our guidance for Texture & Healthful.

Okay. Perfect. And then, Jim, for you, on the outlook. I mean, clearly, cash from operations, expected another strong year, close to $1 billion, with CapEx a little less than, call it, $0.5 billion. So that leaves me with like $0.5 billion free cash flow. You've spent a little over $200 million for repurchases and then there's a little over $200 million on dividends. How should we think for '26 in terms of repurchases of stock, and that maybe in context to M&A, what you might have in your pipeline or not? So what are the key preferences here between one or the other, given where the stock price is currently at?

Yes. I guess right now, the view that we have is, as we have done in previous years, we've established a share repurchase commitment of at least $100 million for 2026. The cash on the balance sheet does, as you indicated, remains strong by this year, generating nearly $950 million of cash from operations. And we think it's important to remain flexible and retain optionality for strategic M&A opportunities. And clearly, our balance sheet provides us that opportunity to do that.

So -- but that's the view for the buybacks. Just a reminder, I think, Jim, in '24, we also bought back more than $200 million of shares as well. So -- but for '26, we've established the same target we've had in previous years of at least $100 million.

Yes. And maybe just for everyone listening because when we think about capital allocation priorities. We're putting out there that CapEx will be between $400 million and $440 million, tongue-twister. But within that, it's still a healthy budget for growth, anticipating between like $80 million to $100 million in growth for 2026. Pretty excited about those projects. Jim highlighted a few projects that we've completed in 2025. We still see opportunities around the world that really support us having the capacity as well as the product lines to continue to drive growth, supporting solutions and supporting some of our other sectors where we see growth.

And then we also have about $40 million or so in kind of large cost savings and infrastructure improvement projects. And so those will finish up in '26. But for example, at our Indianapolis plant, we're working on a new cogeneration, and that project will finish in 2026. So we have some very discretionary discrete opportunities that we're pursuing in our CapEx budget that we think is a great deployment of capital to create returns for shareholders.

[Operator Instructions] Our next question is going to come from the line of Heather Jones with Heather Jones Research LLC.

Thanks for the question. And Jim, I'm really going to miss working with you. It's been a great pleasure. [indiscernible] enjoy retirement.

I guess my first question is on LatAm. Given this recent surge in currencies, I think you called out the peso and -- the Mexican peso. And then some of the tax regulatory changes that we've got going on this year in Mexico, just wondering what are the positives that will offset those potential risks and drive growth in that segment in '26?

Yes. Maybe let me take some upsides and downside maybe to what is currently in our forecast with regard to LatAm. So you're right. So as I mentioned in the remarks, so we're dollar functional in Mexico, which means that a strong peso increases our operating expense and increases some of our manufacturing expense. And so we're feeling that right now. And so that will be the transactional cost headwind as we go into 2026.

Now there are opportunities. We're going to watch the value of the peso versus the dollar. But if that peso gets stronger, that's kind of really the downside estimate. And so the opposite is we have upside if we saw moments where the peso was weaker versus the dollar, then that's something that we can go in and kind of secure for the balance of the year.

I think within LatAm, what we're really, I think it's encouraging to see at least is that there is some of like the food and maybe the beverage category volume at retail. So the -- [ more the ] Nielsen data was showing volume up in Q4. And so there's been a bit of noise economically around Mexico in terms of its GDP growth, where might inflation wind up. And so hopefully, what we'll see in 2026 is a slightly stronger consumer in Mexico once kind of wage impacts are felt. So that's a little bit of what we're watching probably mostly in LatAm is the volume pull that we see in Mexico.

Yes. And I think it's noteworthy also, we got asked about this on one of the prior calls, that the sugar tax on sweetened beverages went into effect on January 1. And essentially, the amount is approximately 7% to 8% on single-serve full-calorie sodas and a new tax of 3% to 4% on lighter diet beverages. And in the past, what we have seen this type of tax has an early negative impact on volumes in the first few months, and then after implementation, then those impacts subside. So we're going to watch that.

Now also, it's noteworthy to point out, and we've seen this repeatedly every 4 years, is this is a World Cup year. And so we are expecting incremental volume from the World Cup, which should benefit volumes in Q2 and Q3. And that goes for beverages as well as brewing as well.

Okay. That makes sense. And can you remind me, in Mexico specifically, what's the rough breakdown of your sales that are food versus bev so we could just -- because you're talking about like stronger volumes now in food, and just how -- as we think about the risk of that new tax? Just would help frame it in our minds if you could give us a rough breakdown of the food versus bev.

So I'm going to say -- I'm going to -- [indiscernible] Noah maybe will update this, but I'm going to guess that between kind of brewing adjunct and beverages that, that volume is about 40%. And that the food as well as industrial and confectionery and all other would be the remainder.

But also, Jim, the breakdown of soft drinks vis-a-vis in Mexico vis-a-vis brewing is much smaller.

Much smaller proportion.

Much smaller. And so we're not a big exporter into Mexico of HFCS because we produce locally. And so we've talked about that in years past on how we strategically diminish that exposure. So it's more weighted towards brewing and less so towards soft drinks exposure.

Okay. And then my follow-up, is -- and you mentioned that you expect to get some of the Argo effect back in the second half of this year. Just was wondering in like your base case for the U.S./CAN business, what is your assumptions of how much of that $40 million you'll get back in the back half?

I -- I mean, I think it would be fair to say, look, look, I think in Q1, we're probably going to have another anywhere between $10 million and $15 million of impact. And so that won't lap, and so you might see $20 million of Argo benefit come back in the second half.

Thank you so much.

There's a range around that assumption, right?

It's just worth reminding everybody in relationship to quarterly phasing. That quarter 1 operating income last year was up 26% and versus 2024. And in particular, Argo was running quite well in 2025 first quarter. And also in first quarter last year, LatAm had a record quarter 1. So that also is impacting the phasing for quarter 1.

[Operator Instructions] Our next question comes from the line of Benjamin Mayhew with BMO Capital Markets.

And Jim Gray, congratulations on retirement. We're going to miss you a lot. So my -- you're welcome. So my first question has to do with the long-term algo that you put out at the Investor Day for operating income growth. And I'm just wondering, given all that's been said on the call so far, when would it be possible to kind of get back to that algo level, to reach that algo level? Would it be in second half '26 where you're growing again at 5% to 7% operating income growth? Or -- how should we think about accelerating towards that run rate?

Yes. Ben, let me set the stage a little bit because I mean, I think 2025 in the first part of the year had some surprises for all of us within the U.S. marketplace. So our Investor Day in September was based upon 2024 full year actuals, and at that time, kind of our first half 2025 momentum. So 2025 introduced new challenges to the business environment, which had secondary effects on the rest of the world through tariffs had impacts on immigration in the U.S. and changing dietary guidelines within the U.S. And these changes impacted our customers, our customers' costs, our customers' pricing actions, our customers' volume demand.

And our long-term strategy and the direction of the 3-year outlook that we laid out at Investor Day kind of remains intact. But given these factors, we're going to sass whether and how best to update the current 3-year outlook. And we're getting our heads around how we completely finish '25, making sure that all of our contracting information is in, our forecasting tools for '26. And so we'll share our latest thinking with you at CAGNY.

I think the 1 perspective though, that I would share with you now with regard to Food and Industrial Ingredients U.S./Canada specifically, is that I would characterize our outlook as more kind of measured versus September. We will likely kind of reset to 2025 space results. And then I think that this segment can return to a 17% to 18% op income margin, probably more evident in 2027 and maybe 2028.

And again, our business targets are really delivering across cycles, right? So at any point in time, there may be like one time when you're kind of taking a little bit more of a flat year versus the chance and the opportunity where all of your growth bets are coming into place and you have at least favorable wins in terms of managing your cost inflation and pricing and customer and product mix is working in your favor. And so that very much allows this business to kind of hit those mid-single digits and high single digits types of year-over-year op income. I hope that characterizes a little bit.

Yes. No, that's great. My last question is more kind of broad-based here in terms of what we're seeing in the CPG industry in terms of like portfolio shift. And I'm just wondering, how do you guys view your positioning as we kind of absorb the secular shift in packaged food industry? Like how do you view your capabilities in the true opportunities that you might have to help your customers reshape their portfolios? And also, you mentioned earlier the advantage of both producing and selling locally, that stood out to me. So if you could just kind of tie that all into maybe your competitive advantage there moving forward as your customers look to really shift their offerings for the consumer?

Yes. Thank you for the question, Ben. I think one of the things that we feel very good about -- and it's been enhanced by the work that we did with the resegmentation is our work on customer segmentation and something that we call customer channels for growth and really understanding where the consumer is moving within those customer channels, along with who are the customers that are most well positioned to benefit from those channel shifts.

So what we are improving each and every day is the opportunity across what we call global key accounts, which we have a program and we have a leadership team that manages, multinational and multinational accounts regional leading accounts, companies that are in foodservice. And then most recently, we're doing an exhaustive amount of work to map the whole private label channel for growth. And the co-packing network, co-man network that produces for private label as well as reaching where the innovation starts for those companies, either the consultants, the advisers that are partnering with some or many of the large private label producers that have made significant investments to be not just producing themselves and vertically integrated, but to be thought leaders in this space.

Example, you saw Kroger most recently come out with data on the consumer that they're becoming a thought leader. So we're doing an awful lot of work to map that whole ecosystem. And we have hired specialists and resources to enable us to kind of skate to where the puck is going in relationship to the consumer across these categories. And we're looking at where the growth is coming. So for example, dairy category was one of the few categories that showed positive unit volume growth. And of course, that's always been a strong suit of ours. So that's how we're approaching this. And the solutions selling approach marries very well to that.

The other thing also that we're looking at is how do we sequentially continue to strengthen our partnerships and relationships with our distributors. Because typically, our distributor margins are very attractive, very attractive. In fact, higher than our average margins. And so we're looking to be really smart in how do we maximize those partnerships as well. So hopefully, that gives you a little bit of insight into customer channels for growth and customer segmentation that we think -- again, we've been doing this now for a number of years, but we've really intensified the focus across foodservice and private label just within the last 2 years and bolstered it with resources, and we're seeing the dividends paying off.

[Operator Instructions] Our next question comes from the line of Pooran Sharma with Stephens.

Congrats on the retirement, Jim. It's been good working with you. Just wanted to maybe start off and understand how broader industrial starch demand trends have been faring? I think on the last call, you mentioned you're starting to see momentum there. Just wondering if you could give an update on that? And then kind of on that, are you able to give us a little bit of clarity as to how much what kind of benefit you're going to expect here and maybe like a cadence or a pacing to that benefit for the Indianapolis starch modernization project?

Okay. Let me take a little bit of the industrial. And then it's distinct and different than the Indianapolis because the Indianapolis produces exclusively for food. But let me address your industrial starts demand question. First of all, it's a business that we don't really talk about a lot, but we probably should because it's done exceptionally well in recent years, not just from a standpoint of organic growth, but also in margin growth and overall operating income contribution.

I would say this past year in contracting, pricing was a little bit more intense than it had been in prior years. And typically, it's obviously an indicator of overall economic health for the industry, for the macro economy. And I would say that volumes in the second half were a little bit softer than we saw in the first half. But as you know, we announced, I think it was early last year, a $50 million investment in Cedar Rapids to expand capacity and modernize some of our drying capacity. And it's because the business has done exceptionally well, and we needed to solidify our position as a reliable supplier to customers. So when that is going to I think, complete in the second half of this year and position us well for 2027. So we feel very good about our position there.

The other thing that we're doing in industrial is working with customers capitalize on the trend and requirement for what we call advanced packaging materials. And these are materials that would have a value proposition around sustainability or biodegradability. And they could be corrugating adhesives, which we have a niche market that's growing nicely, or for binders for compostable bowls. And so this is different than just starch for potential strength or wet end strength or coding.

And so very well positioned, pursuing pockets of growth there, but the underlying base business is very solid, very strong customer relationships, exceptionally strong. I think, Jim, you may want to comment on the Indy modernization and the commissioning of that and where that's trending? And maybe you may want to make a comment on even our [ cogen ] investment there as well?

Yes. So what we did analysis that we had an opportunity to really kind of debottleneck, to take out some awkward product handoffs that were occurring across the plant really with just continuous flow of product, and then also kind of really upgraded a lot of our drum drying unit within Indy. And it's just when you come into this and these complicated investments in an older plant and you see once it's gone and the beauty of the engineering and the debottlenecking.

So first, it's a much safer and cleaner environment; two, it's lower costs; and three, it slightly expanded our capacity. And so glad to have that part of our modified starch, one of our modified starch units completed. And then separately, we have -- kind of because of the infrastructure investment tax opportunity, we jumped into becoming more sustainable, self-sustainable at Indy with regard to our [ cogen ] unit. And that is making very nice progress. And we will be commissioning that, I think, in the third quarter of this year, and it'll just allow us to then kind of really look at our own nat gas supply, allow us to hedge, allow us to reduce future profit volatility around energy costs and really drive some just continued savings with regard to energy at Indy and look forward to that really in Q4 of this year.

Great. Appreciate the color there. And then just -- my follow-up here would be around the -- you've given good commentary around contracting. You mentioned the pricing declines. You mentioned kind of the tariff impacts and then just consumer affordability/economics. Just wanted to get a sense if GLPs came up in your discussions with consumers? Does that growth in kind of GLP-1s or just interest in that, has that been sending people more to spot? Would just love to hear your commentary on GLP-1s.

Well, I mean, I think everybody is waiting to see what the -- trying to get some quantification around what they think the impact will be. It's no doubt, having some sort of an impact. But what I can tell you on a positive note is in relationship to our protein fortification business, which we haven't talked about in a number of quarters, but we decided to obviously emphasize the full year performance of the double-digit increase in sales that we saw with revenue growing 40%. And it's also noteworthy that for that business, the reduction in operating income loss was greater than $20 million in 2025. And we have active programs in place to increase the valorization of pea starch, pea fiber, along with the growth of pea protein isolate.

And so we're fully contracted for 2026, which again shows the strength we think on the back of the GLP-1 effect for protein fortification and anticipate another year of notable revenue growth and operating income improvement for protein fortification. So we're, like everyone else, monitoring GLP-1, but I can tell you it's having an impact for our protein fortification business.

Positive impact.

Yes.

Thank you. And I would now like to hand the conference back over to Jim Zallie for closing remarks.

Thank you, operator, and thank you all for joining us this morning. We look forward to seeing many of you at our upcoming investor events, with the next significant engagement being CAGNY on February 17. At this time, I want to thank everyone for your continued interest in Ingredion. Thanks very much.

This concludes today's conference call. Thank you for participating. You may now disconnect. Everyone, have a great day.

Good day, and welcome to the Ingredion Q3 2025 Earnings Call. [Operator Instructions] At this time, that today's conference is being recorded.

I would now like to hand the conference over to your speaker, Mr. Noah Weiss, Vice President of Investor Relations. Please go ahead.

Good morning, and welcome to Ingredion's Third Quarter 2025 Earnings Call. I'm Noah Weiss, Vice President of Investor Relations. Joining me on today's call are Jim Zallie, our President and CEO; and Jim Gray, our Executive Vice President and CFO.

The press release we issued today as well as the presentation we will reference for the third quarter results can be found on our website, ingredion.com, in the Investors section. As a reminder, our commitment -- 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 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 the 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 our press release and in today's presentation appendix.

With that, I will turn the call over to Jim Zallie.

Thank you, Noah, and good morning, everyone. The third quarter was more challenging than we expected, with net sales and adjusted operating income down more than our previous guidance. Despite Q3's results, we are, however, confident that Ingredion's diversified business portfolio will deliver another full year of operating income growth. As we discussed the performance in the quarter, we will highlight the progress we are making to improve upon recent and near-term operating challenges while navigating with agility, pockets of economic weakness and uncertainty by remaining focused on driving innovation and operating excellence to deliver profit growth.

Turning to the next slide. Let's start with a summary of our net sales volume growth for the quarter. Texture & Healthful Solutions delivered a solid performance with 4% sales volume growth across U.S., Canada and EMEA, including double-digit sales increases for clean-label ingredient solutions. Growth in foodservice channels globally as well as for convenient grab-and-go offerings at retail drove increased demand for our batter and breading ingredients in the quarter. Additionally, our solutions portfolio continues to grow, outpacing the segment's net sales growth, thanks to increased demand for specialty blends that help customers address affordability, eliminate artificial ingredients and simplify labels.

In Food & Industrial Ingredients, LatAm. The main driver of the sales volume decrease came from softer brewing industry volumes with customers attributing it to cooler, wetter weather for some of the seasonal decline. More broadly, weaker LatAm demand became increasingly evident as higher inflation and interest rates impacted consumer spending. Our Food & Industrial Ingredients U.S./Canada segment experienced a 5% decline in net sales volume, largely due to our inability to meet customer demand requirements from continued production challenges at our Chicago plant as well as overall softness in beverage and food volumes. In contrast, we saw increasing volume demand for industrial starches to our major corrugating and paper and packaging customers.

Moving to the next slide. I would like to take a moment to elaborate on the primary factor contributing to our Food & Industrial Ingredients U.S./Canada performance, and that is the ongoing operational challenges at our Argo facility outside of Chicago. For background, Argo is one of the largest plants in our network and accounts for more than 40% of the segment's net sales. Following a fire in our feed dryer at the end of quarter 2, which halted the entire plant's production we faced several challenges while plant operations recovered during the third quarter. This quickly and directly contributed to tighter inventories being available for incremental sales.

Given the size of the volumes that move through this plant on a daily basis, we estimate that the cumulative operating income impact to the segment was approximately $22 million across both the second and third quarters with $12 million of that operating income impact being felt in quarter 3. Production rates remained challenged in July and August before improving in September. In quarter 4, our team remains focused on stabilizing production and rebuilding inventories. Also in the quarter, we experienced the overall market demand for sweetener products weakening in July and August before bouncing back in September.

We believe many beverage and food customers were experiencing slowing demand as a result of price increases that were put into effect to offset anticipated rising packaging costs, particularly from aluminum and tin plate.

Turning to the next slide, our Food & Industrial Ingredients, LatAm segment saw a decrease in operating income this quarter, down 11% versus last year. The reduction is primarily attributable to the strategic realignment of our brewing customer mix as well as lower brewing industry volumes. We are making good progress strategically diversifying our customer and product mix in LatAm towards higher-margin sweeteners that serve food and confectionery customers. We will continue to repurpose our grind to improve the consistency of profit margins over time.

Beyond what we believe was a transitory impact from the brewing segment in the quarter. We are monitoring softer consumer demand in general across LatAm, which became increasingly evident in quarter 3 as higher inflation and rising interest rates weigh upon GDP growth and consumer spending.

Turning to the next slide. It is important to reinforce the fact that we have made considerable progress to expand the company's gross margins over the last 3 years through a combination of service differentiation, operational excellence and solutions selling. We are focused on not only sustaining the performance but steadily improving upon it by executing against our strategic pillars to drive mix improvement and enterprise productivity.

Let me now update you on progress against our 3 strategic pillars. To start I'd like to highlight our focus on driving profitable growth, particularly within Texture & Healthful Solutions segment where we continue to expand our leadership in clean label ingredients and solutions globally. North America and Asia Pac experienced double-digit clean label growth this quarter, reflecting a growing demand from customers and consumers for greater transparency and simplicity in ingredient labeling. This trend has become mainstream with both private label and CPG consumer -- customers reformulating products at an accelerated pace.

Additionally, demand for protein isolates remains robust as evidenced by our record sales for protein fortification during the quarter and the fact that we are already more than 50% contracted for isolates for 2026. Our high-value pea protein isolates offer notable functional advantages and benefits from labeling preferences compared to other protein sources across various food categories with our new product introductions being preferred for their taste and overall quality.

Moving now to our second pillar, innovation. Our focus on integrated solutions continues to favorably impact Texture & Healthful's results with solutions-based sales growing at a faster rate than the overall segment's net sales growth for the quarter. Furthermore, as food inflation -- food inflation pressures persist, affordability remains a key catalyst for recipe reformulation across our customer base. Brands are actively seeking our assistance with cost-effective ingredient solutions that allow them to maintain quality and shelf life while reducing input costs.

Our latest innovations in egg and cocoa replacement solutions delivered cost savings, improved functionality and enhanced flavor profiles. By enabling customers to reformulate recipes without compromising taste or texture, we're helping them differentiate their products and respond quickly to market trends. As consumer demand for natural sweeteners continues to increase, Ingredion is advancing development partnerships for sweet proteins and novel customized clean taste solutions containing stevia and sweet proteins. We believe this will further strengthen Ingredion's position as a leader in sugar reduction innovation.

Lastly, I'd like to comment on our operational excellence pillar. Our operational focus has translated into meaningful benefits at our Indianapolis facility, where we've taken steps to maximize asset utilization across our starch network. By modernizing the plant layout and reengineering slurry transfer systems, we've created flexibility to run specialty starch operations in a more integrated manner with downstream operations. This means fewer bottlenecks, better load balancing and improved throughput. These changes reduce inventory requirements, enhance service levels and deliver meaningful savings, all while better positioning the plant to support future growth for texture solutions.

Additionally, we feel confident we will surpass our $50 million run-rate Cost2Compete savings target, and we'll realize more than $55 million in run-rate savings by the end of 2025. This achievement reflects a relentless focus on operational efficiency and disciplined cost management across the organization. By optimizing processes, eliminating waste, leveraging technology and driving continuous improvement initiatives, we've been able to unlock significant savings.

Last month, we hosted our first ever Supplier Day, bringing together strategic partners from across our supply chain globally in the pursuit of shared value creation. This was a valuable forum for collaboration, knowledge sharing and strengthening of relationships. The event created increased awareness and understanding by our suppliers of our business and is already leading to new opportunities for value creation for us and them.

Lastly, in October, we held a Global AI Forum for our entire employee base to accelerate adoption for the responsible usage of AI. Our AI priorities for value creation are focused on enhancing the customer experience, driving supply chain and manufacturing efficiency and accelerating innovation.

Now I'm pleased to hand it off to Jim Gray for the financial review. Jim?

Thank you, Jim, and good morning, everyone. Moving to our income statement. Net sales for the third quarter were $1.8 billion, down 3% versus prior year. Gross profit dollars decreased by 5% and with gross margin slightly lower at 25.1% as volume headwinds are partially offset by lower input costs. Reported and adjusted operating income were $249 million and $254 million, respectively.

Turning to our Q3 net sales bridge. The 3% decrease was driven by $39 million in lower volume and $30 million in lower price mix, offset partially by $15 million of favorable foreign exchange.

Moving to the next slide. We highlight net sales drivers for the third quarter. Texture & Healthful Solutions net sales were up 1%, driven by sales volume growth of 4% and foreign exchange favorability of 2%, partially offset by price/mix.

Food & Industrial Ingredients LatAm reported a net sales decrease of minus 6%, largely attributed to a reduction in sales volumes, which was mainly influenced by weaker brewing demand as well as slower macroeconomic growth across the segment. Food & Industrial Ingredients U.S./CAN net sales declined 7%. The sales volume decline of 5% was impacted by the extended recovery time to normalize production at our Argo plant as well as softness in sweetener volume demand.

Now let's turn to a summary of results by segment. For the third quarter 2025, Texture & Healthful Solutions net sales was up 1% and operating income was up 9%, equating to a 17.4% operating income margin, significantly higher than prior year. This result has been driven by lower raw material costs, as well as favorable volume impact, partially offset by unfavorable price/mix.

In Food & Industrial Ingredients, LatAm, net sales were down 6% versus last year. Operating income declined to $116 million with an operating income margin at 19.8%, holding strong. Moving to Food & Industrial Ingredients, U.S./CAN, third quarter net sales were down 7%. Operating income was $81 million, down 18% or $18 million. driven by production challenges at our Argo plant and lower-than-expected beverage and food volume demand.

As we stated earlier, we estimate that this disruption has had a $12 million operating loss impact on the quarter's results. For the all other group of businesses, the 17% increase in net sales was driven by increases across the board. Operating income was flat versus the prior year as protein fortification gains were offset by lower profits from the Pakistan business.

Turning to our earnings bridge. On the top half, you can see the reconciliation from reported to adjusted earnings per share. Operationally, we saw a decrease of $0.31 per share for the quarter, driven by a decrease in operating margin of $0.22 and a volume of minus $0.12, partially offset by foreign exchange of $0.03 per share.

Moving to the change in nonoperational items. We had an increase of $0.01 per share. Shares outstanding had a favorable impact of $0.05 and a lower tax rate equivalent had a $0.02 per share impact, partially offset by higher financing costs of minus $0.06 per share.

Shifting to our year-to-date income statement highlights. Net sales for the first 9 months were approximately $5.5 billion, down 3% versus prior year. Gross profit dollars grew by 4% and gross margin has increased to 25.6%, up 180 basis points. Reported and adjusted operating income were $796 million and $800 million, an increase of 10% and 4%, respectively.

Turning to our year-to-date earnings bridge. The result is an increase of $0.58 per share. Operationally, we saw an increase of $0.36 per share for the 9 months. The increase was driven by an operating margin increase of $0.61 as well as favorable other income of $0.14 per share, primarily from our Argentina joint venture, and these were partially offset by volume of minus $0.38.

Moving to the change in nonoperational items. We had an increase of $0.22 per share, primarily driven by fewer shares outstanding of $0.15 as well as lower financing costs and tax rate of $0.03 per share each.

Moving to cash flow. Year-to-date cash from operations was $539 million which includes an investment in working capital in the current year. Year-to-date capital expenditures net of disposals were $298 million. The company expects to invest in organic growth initiatives that provide a significantly higher return than our cost of capital.

Lastly, we have repurchased $134 million of outstanding common shares, exceeding our share repurchase target of $100 million. We have paid out $157 million in dividends and increased the dividend per share to $0.82 for the quarter, which represents our 11th consecutive annual dividend increase.

Now let me turn to our updated outlook for the year. For the full year 2025, we anticipate net sales to be flat to down low single digits with our outlook reflecting lower price/mix due to pass-through of corn costs and an updated view of the effects of foreign exchange. We anticipate that adjusted operating income will be up low single digits to mid-single digits for the full year. Our 2025 financing cost estimate will now be in the range of $35 million to $40 million, reflecting year-to-date foreign exchange impact.

For the full year 2025, we expect a reported effective tax rate of 25.5% to 26.5%, and adjusted effective tax rate of 26% to 27%. We are narrowing our full year adjusted EPS range to be $11.10 to $11.30. Given the macroeconomic softness evident in the third quarter for Latin American economies and the incremental issues that we absorbed related to F&II U.S./CAN segment's Chicago plant outage. We anticipate our 2025 cash from operations will now be in the range of $800 million to $900 million.

Our guidance reflects current tariff levels in effect at the end of 2025. In addition, this guidance excludes any acquisition-related integration or restructuring costs as well as any potential impairment costs.

Turning to the full year outlook for each segment where we have made updates. For Texture & Healthful Solutions, our estimate for net sales is to be up low single digits. We have raised our operating income profit growth to now be up high double digits. For F&II LatAm, we have lowered our net sales outlook to be down mid-single digits and operating profit to be flat to up low single digits. For F&II U.S./Canada, we have now lowered our outlook for net sales to be down mid-single digits and operating income to be down low double digits based upon operating challenges.

That concludes my comments, and I'll turn it back over to Jim.

Thank you, Jim. As we conclude today's call, I want to emphasize the focus we have on our operational and strategic priorities. Clearly, we have a near-term focus on improving productivity at Argo and rebuilding inventories and driving sales recovery in our U.S. Food & Industrial Ingredients segment. Complementing this focus on operational excellence, the entire organization is committed to exceeding its Cost to Compete target, delivering $55 million of run rate savings by year-end. We will continue to deploy capital towards organic growth opportunities to expand and strengthen our Texture & Healthful Solutions portfolio.

Lastly, we remain committed to returning capital to shareholders through share repurchases. As of the end of September, we exceeded our full year target by purchasing $134 million worth of shares and have increased our 2025 share repurchase target to $200 million, underscoring our commitment to maximizing shareholder value and reflecting our confidence in the future, we are announcing that our Board has authorized a new share repurchase program of up to 8 million shares over the next 3 years.

Now let's open the call for questions.

[Operator Instructions] And our first question will come from the line of Andrew Strelzik with BMO Capital Markets.

I wanted to start on the demand environment, and I apologize if you covered some of this in the prepared remarks that I missed. But I guess I'm just curious that you're seeing that evolve. It certainly seems a bit softer than anticipated. And so I guess, are you seeing it continue sequentially to slow? Or are you seeing any signs of stabilization? In the release, you mentioned some customer mix management. I was hoping you could maybe elaborate on that as well.

Yes, Andrew I'm going...

Ladies and gentlemen, please remain on the line. Your conference will resume shortly. Once again, ladies and gentlemen, please remain on the line. Mr. Strelzik, I just want to make sure that you can hear me.

I can, yes.

Speakers?

Yes. We're back.

Okay. You're loud and clear, and we still have Andrew on the line for his question.

Okay. Andrew, I'm going to start back with the response related to what's happening in LatAm and with Mexico and Brazil, I think that's where the line got cut off. Is that correct?

Yes. I mean the question was broadly about the demand backdrop and if you're seeing any signs of stabilization, but then there was the comment. I think it was on LatAm about the mix management, customer mix management. I was hoping you could elaborate on.

Right, right. Yes. So in Brazil and in Mexico, we're seeing inflation, elevated prices that are impacting the consumer. Interest rates are relatively high versus history and we do believe that's impacting consumer spending and confidence. Mexico GDP is forecasted to only grow 0.5% and Brazil's GDP is forecasted to grow only 2% It's just noteworthy to remind everyone that food spending represents approximately 20% to 30% of disposable income for the LatAm consumer. And thus, when we see softness and thus, we're seeing the cumulative impacts related to softness in beverage and multiple food categories.

Moving to the United States, we saw demand for sweeteners in particular decrease in July and August. That's what the industry data showed. It was a pretty notable drop in July and August, but it did recover nicely in September. So -- but for the quarter, July and August was impacted. And of course, we, at the same time, in those months, had issues related to Argo depletion of inventories inability to sell, but things picked up in September. And again, as it relates to Texture & Healthful, we didn't see that kind of decline. In fact, the U.S. market contributed most to volume, net sales and operating income growth, but all 3 geographies grew operating income high single digits for Global and Texture & Healthful. Hopefully, that answers the question.

It does. And as a follow-up, I was hoping you could drill down a little bit more on the Texture & Healthful Solutions segment. The change in the outlook there. Is that -- what kind of is the biggest driver of that piece? Is it more what you saw in 3Q? Is it more what your expectation is for the 4Q? I was just looking for a little more color on the guidance change there.

Jim Gray, I'm going to let you take that .

Andrew, I mean, I think that as we look at Q4, we have from prior years, kind of a slightly easier lap. But I think more importantly, when we look across Texture & Healthful, it's really a diversity of customers. And so we have some of our largest customers that are in foodservice. We also have customers that are into private label as well as kind of branded CPG. So when affordability and value against either the U.S. or the European consumer, we're already benefiting a bit from what that sort of food service traffic and food service ticket looks like as well as whether it's store brands or private label brand. I think we're seeing a nice balance of our volume demand across all of our customers. And so we feel like that's a well diversified and very solid business right now that has some growth right in front of it.

And we're also benefiting from a focus with a well-defined definition for solutions selling, where we went through a complete retraining of our go-to-market sales and technical service force. And we're into the second full year of, I would say, more advanced solution selling than we've ever had in relationship to selling differentiating ingredients, customized blends and solutions all around consumer benefit platforms around affordability, health and wellness, which are really aligned to the trends. And that's why I think we're seeing the strength in our clean label solutions growth, which again grew double digits in the U.S. and Asia Pac.

One moment for our next question. That will come from the line of Kristen Owen with Oppenheimer.

Jim, I did want to follow up on the F&II businesses. You gave some helpful color on Argo in the prepared remarks. But can you just help us unpack how much of the volume was sort of this macro weakening that you addressed in the first question, how much of that was sort of these company-specific events like the Chicago plant or this transition in your brewery business in LatAm? And I'm just trying to think how much of those onetime items kind of roll off in the fourth quarter and what sticks with that? If we could start there and then I'll have a follow-up.

Kristen, can we just clarify which segment? So U.S./CAN F&II first.

Yes. Let's take -- why don't we take U.S./CANADA F&II first, Jim, and then maybe I'll take the LatAm F&II.

Yes. Okay. Is that okay, Kristen. Yes.

Yes, I was hoping to get both.

So I think with regard to U.S./CAN F&II, so first of all, as Jim mentioned on the prerecording that the feed dryer is very much at the end of the process. When that goes down, the entire plant has to shut down and so then as we looked at those, we just -- we wanted to bring up the full recovery of the plant. And so we had a couple of impacts in terms of you have some lower value from your coproducts that you got to clear out. You also had some periodic halting of the grind, which impacted a variety of the refinery processes. And so we didn't have as much volume available. We also had to absorb some fixed costs and then as we've got running to kind of normal production rates in September, you can really put a kind of cap on those costs, and that cap is around $12 million impact to Q3. Don't really anticipate that, that's going to repeat, right?

I mean, we want to work on reliability. We think about our planning as we go forward. And obviously, we plan to run at normal to full capacities in 2026. So I really don't think we're going to overlap this maintenance and the idle plant charges within U.S./CAN F&II.

So $12 million of the $18 million decline, we would attribute to the Argo issues. The remainder related to the market weakness that we saw, which was very curious with the drop off in July and August, but the good news is we saw industry recovery in September.

So let me pivot and I'll talk about LatAm. For the LatAm F&II segment, approximately 40% of the revenue decline year-on-year was attributable to soft brewing volumes. Now the largest contributing factor was related to the impact of the terms and timing of purchases associated with the rollover of significant customers multiyear agreement. That situation is now satisfactorily resolved and it should not repeat.

So for color, in the quarter, Mexico was down 10% with half of the net sales decline due to brewing related situations to that unique customer situation. And in Brazil, 90% of the decline was due to brewing demand, again, predominantly related to that customer situation. And because brewing adjunct represents 18% of net sales for F&II/LatAm and a larger percentage of our volume what we've been doing is we're actively pursuing alternative paths to utilize our grind more profitably by trading up to support higher-margin products in food and confectionery.

We believe this represents an exciting incremental opportunity to diversify beyond brewing and valorize our grind more profitably. So hopefully, that answers the question related to the -- what we believe is some transitory aspects in F&II with about half of the decline in LatAm was due to the brewing transitory nature, and Jim indicated about 2/3 of the decline in F&II US/Canada was related to the Argo situation. Hopefully, that's clear.

No, really, I appreciate all of that color. That is very helpful in helping us understand what goes the way in the fourth quarter. My follow-up question is actually as far as thinking about fourth quarter contracting season, I understand it's a little early on 2026. But just given some of these onetime items in '25 I'm wondering if you can give us a sense of how you're thinking about price cost dynamics into 2026. I mean we've had a lot of volatility on the input cost side. And then you've got some of these onetime items on the cost side. So just some of the big buckets that we should think about from a price cost perspective into 2026 would be very helpful.

Yes. I would say, just as it relates to contracting, obviously, we're early in the process. I would say that we're currently midway through firm price contracting in the U.S. and in Europe. So still a long way to go. And as it relates to inflationary pressures, which there are on input costs, along with U.S. cost of corn projected to be higher in '26 versus '25, we anticipate this is going to prolong customer commitments and that contracting will not be completed until late in the year. And obviously, we always do a, we think, a pretty good job of balancing all of the puts and takes, especially given the pricing centers of excellence that we have stood up over the last few years that have served us very well during the inflationary period, and now as we manage a more benign but yet still sticky inflationary period. We're cautiously optimistic that 2026 contracting will position us for another year of modest profit growth based on everything that's happening in the economies globally along with the backdrop of uncertainty.

One moment for our next question. And that will come from the line of Ben Theurer with Barclays.

I wanted to follow up on T&H, just the dynamics in the quarter and the outlook. So the first question really is related, if you could elaborate maybe with a few examples on what's been driving the negative price mix in Texture & Healthful Solutions, which at minus 5% look pretty high. So that's the first thing I would like to understand. And then I have a quick follow-up.

Let me have Jim make that comment, Jim?

So Ben, on the price mix, when you look quarter-over-quarter, right? So some of the pricing that we had coming into the beginning of 2025 from Europe. We had some higher energy costs that were evident in '24. And so as energy costs had come down, that was part of our pricing mix. That's been kind of true all year as well as some of the corn -- corn was about equal, but we've also seen some higher expected corn costs and like basis for some of our specialty grains. So that's literally -- in the prior year, that was there. And then as there's been more plentiful corn some of that basis has come down year-over-year. So it's really more of a pass-through, I think, of some of the -- either net corn costs or the inputs.

Okay. Perfect. And then my follow-up question is really coming back to some of the dynamics in Food & Industrial, Latin America and the outlook in particular. So as you're probably aware of, in Mexico, there is a proposal out which is about to be approved for a significant increase on taxation for soft drinks which would not only affect the ones with caloric content but also the ones with no sugar in it. So no caloric content at all. It's still being taxed.

And the bottler is down there [indiscernible] expectation that there's going to be a significant need to pass pricing because of these taxes and with an expectation of large volume declines. So I wanted to understand what is your provisioning? And how can you kind of like protect maybe volume? Or what are you doing in order -- on your contracting side, particularly in Mexico, as it relates to the sweeteners piece, but also the non-caloric sweeteners as alternatives, which both are going to be impacted by the taxation into 2026?

Jim, why don't you take first, and then I'll pick up on it.

So obviously, what Ben, you're discussing is this kind of sweetness tax that is across both caloric as well as non-caloric or light beverages that will impact in Mexico. I think that legislation is up for vote or maybe it's approved, but the effective date, I thought was January 1, 2026. So on the caloric side, clearly, the bottlers in Mexico have a choice between kind of liquefied sugar and HFCS, and we think that as you look at the cost competitiveness and the formulation for HFCS, it should lean a little bit more towards kind of the use of HFCS and then just -- and what we've also seen historically when we've seen kind of taxes go into place on beverages is that usually, there's an initial sort of sticker shock.

But then after that, I think consumers generally kind of sort of accept or work that in to their overall cost of their grocery basket or their cost of lunch on the go or dinner. And so there's always usually an initial impact for anywhere between a month to 3, 4, 5 months. And then it sort of -- it works through. I think the customers that we have also are very much thoughtful around their pack -- their price pack architecture, and we'll think about value in those trade-offs.

I think for non-caloric sweeteners, it's more of an interesting issue, right, which is there's a consumption tax going in will you see any separation for beverages that we sell like maybe a stevia solution into where you have where you have maybe a unique proposition on that beverage and that might be able to withstand that tax increase.

Yes. What I would also say, Ben, is that this proposed increase, which I think is $0.17 a liter on sugary drinks. And again, nonsugary drinks but sweetened with artificial sweeteners as well that will go into effect. It's coming now maybe 8 years later than first 6.8% tax that was put in place. And as Jim said, when that went into effect, there was a dampening for 6 months to 9 months on purchases. And then what was interesting, is consumer behavior was modified and the tax actually had unintended consequences and impacted purchases of other products outside even the food category, where people then went back to products that they liked, which were some of the caloric beverages, especially consumed by laborers and the construction workers, et cetera. And we actually observe that.

Now we'll see what's going to happen this time. But the other important point, Jim, that I think is important for us to highlight is we do not export a lot of, say, HFCS into Mexico. In fact, it's a very small quantity because we produce locally and we're not a large HFCS producer locally. We're much more of a glucose producer locally. So from a standpoint of how directly -- so I use the word directly going to be impacted, I don't foresee it will have a direct impact, how it impacts the industry and what indirect effects are kind of remains to be seen. But I do think it won't be a 1 for 1 that is prolonged, it will -- consumers will adjust as they did when that tax went into effect in 2016, '17 and we'll see then what happens from there.

One moment for our next question. And that will come from the line of Pooran Sharma with Stephens.

I just wanted to ask about U.S./Canada F&II . I think you mentioned it in the prepared comments and in the Q&A here. I think you called out $12 million weakness from Argo and $6 million from a softer market and just parsing into that further, you mentioned softness in July and August, but a recovery in September. Were you speaking on a volume basis? And are you able to kind of share if that recovery has held into October? Or what you're seeing thus far quarter-to-date?

Yes. I think you've summarized it accurately as it relates to U.S./Canada. And the comments that we made about July and August in U.S./Canada related to volume shipments in the industry of sweeteners, which is what we were specifically talking about and that recovery in September was also volume related and related to sweeteners. I would say it's early yet in the quarter for quarter 4, but we're not, I don't believe, going to see the July and August step-downs that we saw from an order of magnitude, and we do really believe that it was related to a subset of brand companies -- brand food companies in both beverages and packaged foods, taking price, promoting less and absorbing higher aluminum and tinplate packaging costs, passing those on. Because the 232 tariffs that went into effect actually were announced, I believe, in March. And by the time they started to be manifested at the retail level, we believe that, that onetime impact was experienced in those months.

And the manufacturers were optimizing their approach to how they were going to price and thus the impact was felt by consumers. The adjustments have occurred and again, September was evidence of that. That's how we have interpreted it. And again, we need more data points going forward to really be conclusive, but that's our best understanding of what took place and how we would explain the impact in the quarter.

Great. Great. I appreciate that detail there. And just maybe wanted to understand just Argo a little bit better. Maybe I was wrong in my thinking, but I think last time we had spoke or last earnings call, you were expecting to get some of the volumes back as we work through 3Q and 4Q. So I was just wondering what you are all facing from like a production challenge standpoint. And do you see these manufacturing issues abating by 2026? Or what kind of time line should we be thinking of here?

Yes. No, you are correct in what we had expected and what we thought was possible. The point we wanted to make and the point we'll make again is that Argo is a big complex facility factory. And when it runs well, we can make up for a lot of lost ground. And what we were expecting was that it was going to recover more quickly than it did. And unfortunately, the recovery lasted into the quarter. So not to be repetitive, but when a factory like that of that size goes down, the first challenge that we have because it impacted what we call the back end, which is the coproducts and the feed is we then lose the valorization premium on coproducts. And we have to get the plant up and running, and we have to dispose of the coproducts so it doesn't become a bottleneck and it takes time to normalize the quality of those coproducts to get the valorization.

In addition, you then have periodic halting of the grind that impacts the downstream refinery processes, and then that leads to product downgrades and then that leads to under-absorption of fixed costs and unplanned maintenance costs, and we incurred all of that. The -- again, the production impacts that we experienced separate from what we saw in the industry from a standpoint of volume for us was particularly acute in July and August, but September returned to normal production rates. So the team right now is very focused. We don't want to declare victory. They are -- we're seeing steady recovery, stabilization and we're hopeful that certainly quarter 4 is going to be better than quarter 3. And then as we go into the winter, assuming we don't hit -- we've lived through polar vortexes and those kind of things. Assuming we don't have anything like that, we should be on a steady road to recovery at Argo.

One moment for our next question and that will come from the line of Josh Spector from UBS.

So a follow-up on the U.S./Canada side. Just specific for our fourth quarter I mean it looks like on your guidance for the year, down low double digits, it maybe implies that your fourth quarter is around $70 million in EBIT. So you're still down around $10 million year-over-year I guess, is that right? And is that primarily just comments around weaker market buying and seasonality? Or are there any other effects there? And I guess I'll ask my follow-up in addition here that around -- does that carry into the first half of next year with some of the comments around weaker consumer buying or not?

Josh, this is Jim Gray. I think with regard to how we think about the momentum going into Q4, we don't really expect any kind of operational issues or onetime issues, whether -- if it's the U.S./CAN Chicago plant operations or kind of the LatAm brewing what we did want to come back and just say for U.S./CAN market for the demand for beverages and food, for kind of our sweetener serves. I think we do see some customers not just branded but also private label taking price in the market. They are overcoming package -- expected package cost inflation. And our markets are always -- consumer is always going to be a little elastic. And we've seen this before. It's not dramatic in terms of the overall cost inflation that we're seeing in the market.

But you are seeing some unit price increases show up in the kind of the scanner data. And I do anticipate that, that will carry into Q4 and so that's kind of what's shaped our guidance a little bit. But overall, it's not a shock. I think the U.S. consumer is in a good spot with regard to wages and affordability is always top of mind, but I think there is some necessary, if not modest pricing inflation on behalf of some beverage and food customers, and that's going to always slow the demand for sweeteners. But we're in a good spot if that sweetener demand does pick up in Q4, and that's kind of part of our guidance.

One moment for our next question. And that will come from the line of Heather Jones with Heather Jones Research.

And apologies if I repeat anything. I got on the call late. I was wondering you talk about LatAm and as you're thinking about '26 and the Mexico tax issue that you discussed and then just the broader inflation challenges for the consumer. Just wondering -- I know you're not giving '26 guidance yet, but just wondering now, how you're thinking about that setup for next year, particularly given it's had a couple of really good years. Just I was hoping you could give us some color on that. .

Yes. We -- let me just make a comment. We just actually celebrated our 100th year operating in Mexico. In fact, we had a Board meeting in Mexico, and we were able to meet with government officials, and we were able to hear from economists in relationship to the pulse on the economy. And definitely, the government's budget deficit in Mexico has presented a challenge along with the muted GDP growth. So we are seeing a softer Mexican economy and also some of the companies that we sell to there export to the U.S. and export to a Hispanic community in the U.S. from a standpoint of some of their products and brands.

So -- and we all have read from CPG companies in the U.S. about a weaker Hispanic consumer here in the U.S. So clearly, that manifested itself in the shipments that we make to these customers in the third quarter, not really prior to that. It's starting. And you're going to have an overhang as well in relationship to USMCA negotiations that will need to be resolved or postponed by July of '26. So there will be, we believe, some uncertainty that will hang over certainly the Mexican economy and that's kind of what we're anticipating as we exit the year and as we head into the year.

That all being said, the position that we hold in the Mexican market is a very solid position, very strong position. And the overall Mexican consumer has been resilient and affordability is going to be very, very important that plays to one of our strengths from a standpoint of how we work with customers on recipe development. And -- we also really know how to optimize our network down there. We've got 3 great plants, and the team is working very hard to optimize supply chains and look at cost management. So that's kind of the backdrop, and that's how we're approaching it right now. But it's early. It's really early to project too much forward what we've seen in Q3 into '26 at this point in time.

Okay. And then my next question is just on the share repo. This is a throwback to years ago, but I remember at one point, your shares weren't as liquid as far as how they trade and all. And so that sort of limited the optionality on the magnitude of share repurchases. So I was just wondering if you could update us as far as your thinking on that? Is there a limit to how many you want to repurchase ultimately and just update it. Thank you on that.

Yes. Well, first of all, I mean, why the new authorization from our Board on our share repurchase program. So our -- the program that we had in place was set to expire at the end of '25. I think overall, we're confident in the growth strategy for the company and believe that organic investment is going to continue to favorably impact cash flow growth. And so if you look at that going forward, then our capital allocation priorities are still around reliability capital, organic growth investment supporting the dividend. But after that, we have strategic cash to deploy, and we have a healthy cash balance today.

And so I think we look at our repurchase history for 2024 and now for 2025 with trying to exceed $200 million of share repurchases in 2025. So we're going to anticipate that we're going to have kind of more share repurchases in '26, '27, '28 and thus the need to come back and renew and reauthorize it at 8 million shares over that time period.

I'm showing no further questions in the queue at this time. I would now like to turn the call back over to Mr. Jim Zallie for any closing remarks. .

Thank you, operator, and I want to thank all of you for joining us this morning. We look forward to seeing many of you at our upcoming investor events in the next engagement being the Stephens Annual Investment Conference in mid-November. And at this time, I just want to thank everybody again for your continued interest in Ingredion.

This concludes today's program. Thank you all for participating. You may now disconnect.