Good morning, and welcome to Ingredion’s third quarter 2023 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 issued today and the presentation we’ll reference for the third quarter results can both 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 Form 10-Q and 8-K. During the 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’s appendix. With that, I will turn the call over to Jim Zallie.

Thank you, Noah, and good morning, everyone. As we enter the last part of the year, I am pleased to report positive sales growth and strong profitability in the third quarter, driven by solid price mix, partially offset by volumes, which are recovering sequentially across all regions. Adjusted operating income was up 15% as we were able to mitigate the impact of cost increases through multiple levers, including pricing and mix improvements, operational excellence and productivity initiatives. Our business is stronger and more profitable today as a result of the continued execution against our strategic roadmap for growth. Let me update you now on the progress against each of our strategic pillars. Beginning with specialty ingredients, year-to-date net sales have grown 6%, along with continued gross margin expansion. Additionally, starch-based texturizers, pharma and personal care, and food systems all experienced double-digit growth year-to-date against strong performance in the prior year. Turning to commercial excellence, our sales teams secured multi-year contracts with some of our larger global customers. These contracts, which provide a sizable baseload of volume, should support margin expansion in 2024. Additionally, the work we completed to enhance our logistics systems and overall supply chain fulfillment capabilities has been rewarded with higher net promoter scores and positive customer feedback. Looking to quarter four, we are excited by the opportunity to further improve our warehouse operations and reduce customer pickup times and freight costs. An increasingly important part of the commercial excellence agenda we have with our customers is dedicated to shared value creation from sustainability initiatives. The regenerative agricultural projects we continue to collaborate on with our customers is generating incremental value across the supply chain for farmers, ourselves, and our customers. We are also engaging to develop a regenerative agricultural framework for the food and beverage industry as a proud founding member of SAI Platform’s program. In the area of cost competitiveness, we have done a very good job of balancing production against changing customer demand. Our supply chain team has worked closely all year with both the commercial organization and operations to ensure our customer demand is met while maintaining sufficient, yet not excessive, finished goods inventory. Our operations team continues to do a fantastic job managing production inputs to help offset inflation and absorb fixed costs. It is worth noting that year-to-date, our teams have faced more than $50 million of higher allocated fixed costs due to lower volumes and have largely offset these cost challenges through their productivity efforts. Additionally, I’d like to recognize the tremendous job of our operations team that they have done driving employee and contractor safety performance this year. Ingredion has historically operated at world-class levels of safety performance, but this year is particularly notable given a step change reduction in recordable and lost time case rates. Finally, acknowledging our purpose-driven and people-centric growth culture. For the ninth consecutive year, Ingredion Mexico received awards for ethics and values in the industry from the Mexican Confederation of Industrial Chambers. And in South America, we were pleased to be awarded great place to work certifications for the second year in a row in Brazil, Colombia, and Peru. Turning to volume trends in the quarter, we show here a volume index based upon our 2019 quarterly shipment averages excluding high fructose corn syrup and adjusting for changes in our portfolio since 2019. During our Q2 conference call, we introduced this graph to illustrate how exaggerated demand in 2021 and 2022 produced a build-up of inventory throughout the supply chain that required rebalancing. It appears customer destocking has decelerated as we experienced sequential improvement month on month throughout the third quarter. We believe this quarter’s performance also demonstrated the diversity of our product portfolio. Markets exposure and the strength of our business model. Both our core and specialties ingredients continue to be well-positioned to address large and growing end markets in the geographies where we operate. From a specialty ingredients perspective, we experienced growth in our largest specialty category, Texture Solutions. Our food systems platform has outperformed expectations as we worked closely with customers to reformulate recipes to drive affordability primarily in the European private label market. In sugar reduction, we also continue to experience strong volume growth and expanded pure circle margins. Our core ingredients also showed resilience with one of our largest markets, Mexico, delivering record third quarter operating profit driven by volume growth across a range of food and beverage categories where a robust economy is driving growing middle class demand. In the U.S., we were also pleased to see solid demand for glucose as our production facilities ran at full capacity in the quarter, partially in response to higher sugar prices. Lastly, our industrial ingredients which serve the paper making and corrugating industries saw a steady pickup in demand as shipment volumes recovered broadly across the U.S. As you can see, the diversity inherent in our business allows us to continue to deliver shareholder value even in challenging environments. As we have continued to invest in growth and improved risk management, our business has shown consistency as we deliver record setting results. Now, let me turn it over to Jim Gray for the financial review.

Thank you, Jim, and good morning to everyone. Moving to our income statement, net sales of approximately $2 billion were up 1% for the quarter versus prior year. Gross profit dollars grew 13% versus prior year with gross margins reaching greater than 20% again this quarter. Reported and adjusted operating income were $213 million and $219 million respectively. The increases were driven by favorable price mix, partially offset by higher input costs and lower volume. Our third quarter reported and adjusted earnings per share were $2.36 and $2.33 for the period, up 48% and 35% respectively from the prior year. The main driver for lower adjusted EPS is a $0.13 adjustment due to a tax provision in Mexico driven by the higher value of the Mexican peso against the U.S. dollar. Turning to our Q3 net sales bridge, we achieved strong price mix of $159 million, along with favorable foreign exchange impact of $10 million. This was partially offset by decreased sales volume of $159 million. Turning to the next slide, we highlight net sales drivers for the third quarter. Foreign exchange was a 1% tailwind this quarter as South America saw strengthening of the Brazilian real and Colombian peso, partially offsetting the FX-related impact in EMEA, primarily in Pakistan. Sales volume was down 8%, but up sequentially from the second quarter as customers continued to work through destocking of inventory. Contributing to net sales growth, price mix was up 8% due to customer and product mix optimization compared to the third quarter of 2022. Turning now to gross profit margins. On a year-over-year basis, we improved gross margins by 220 basis points to 20.7%, driven by price mix optimization. Inflationary input cost increases continued through the third quarter, but the rate of increase has started to moderate. Weaker industry volumes have led to higher fixed cost absorptions throughout 2023. Our operations team has done a great job to address higher costs and to manage production more evenly to demand. It is noteworthy to highlight that commercial and operational excellence efforts have enabled us to expand gross margins for five consecutive quarters. Let me turn to a recap of our Q3 regional performance. North American net sales were up 3% when compared to prior year. The increase was driven by strong price mix, as well as solid sales volumes across sweeteners and industrial ingredients. North America operating income was $171 million, up 36% versus last year, driven by favorable price mix, partially offset by higher input costs and lower volumes. In South America, comparable net sales were down 8% versus last year, and down 15% on a constant currency basis. South America’s operating income was down 33% to $32 million, driven primarily by lower volumes and higher energy costs associated with our transition to renewable biomass in Brazil. While we incurred upfront costs associated with this changeover, the long-term strategic supply of predictable energy and cost savings will be beneficial. Moving to Asia Pacific. Net sales were down 2% for the quarter, and were flat on a constant currency basis. Asia Pacific operating income was $33 million, up 22% versus prior year, with favorable price mix partially offset by lower volumes. In EMEA, net sales increased 1% for the quarter. Absent foreign exchange impacts, net sales were up 5%. EMEA operating income was $32 million in the quarter, up 7% compared to the prior year, driven by favorable price mix, partially offset by lower volumes, higher raw material costs and foreign exchange impacts. Turning to our earnings bridge. On the left side of the page, you can see the reconciliation from reported to adjusted earnings per share. On the right side, operationally, we saw an increase of $0.29 per share for the quarter. The increase was driven primarily by an operating margin increase of $0.66, partially offset by unfavorable volume of minus $0.36 per share. It is noteworthy that operating performance alone drove a 17% increase in adjusted EPS. Moving to our non-operational items. We had an increase of $0.31 per share in the quarter, which was primarily driven by a lower tax rate of $0.36 per share from a recently issued IRS notice, which increased our ability to claim certain foreign tax credits against U.S. taxes. Year-to-date, net sales of $6.2 billion were up 5% versus prior year. Gross profit margin was 21.6%, up 240 basis points. Year-to-date, reported operating income was $755 million, and adjusted operating income was $766 million. Reported operating income was lower than adjusted operating income, primarily due to equity method investment impairments and costs related to a work stoppage at our Cedar Rapids facility in the first quarter. Our year-to-date reported earnings per share was $7.63, and adjusted earnings per share was $7.45. Reported EPS was higher than adjusted EPS, primarily due to the tax benefits from the valuation of the Mexican peso against the U.S. dollar in the period. Turning to our year-to-date earnings bridge. On the left side of the page, you can see the reconciliation from reported to adjusted. On the right side, operationally, we saw an increase of $1.56 per share. The increase was driven by margin improvement of $2.84, offset primarily by lower volumes of $0.94 and foreign exchange impacts of minus $0.19 per share. Moving to cash flow. Year-to-date, cash from operations was $647 million, up significantly from $80 million in the same period last year. Through the end of Q3, our net working capital investment was $118 million, and we expect this to remain relatively flat for the balance of the year. Net capital expenditures were $231 million, in line with our full year expectations. During the first three quarters of the year, we paid $143 million in dividends to shareholders and repurchased $101 million of outstanding common shares. As cash from operations remains strong, we’ll continue to be flexible and strategic with respect to our capital allocation priorities. Next, I’d like to address our updated 2023 outlook. We now expect net sales to be up mid-single digits, reflecting softer but recovering sales volumes. We lowered our adjusted effective tax rate to 25% to 26%, reflecting recent tax provision guidance. We have also raised our full year 2023 adjusted EPS guidance and now expect it to be in the range of $9.05 to $9.45. We have decreased slightly the diluted weighted average shares outstanding to be between 66.5 million shares and 67.5 million shares. Lastly, cash from operations for the full year 2023 is now expected to be in the range of $650 million to $750 million. In terms of our full year regional outlook, North America net sales are expected to be up 5% to 10%, driven by favorable price mix. Operating income is expected to be up 20% to 25%, with price mix continuing to outpace lower volumes and cost increases. For South America, we expect net sales to be flat to down 5% due to lower volumes. South America operating income is expected to be down mid to high teens, driven by lower volume and higher energy and input costs. In Asia Pacific, we anticipate net sales to be flat versus the prior year, and we expect operating income to be up high double digits, driven by favorable price/mix and PureCircle growth, partially offset by higher input costs. For EMEA, we now expect net sales to be up 5% to 10% and operating income to be up 40% to 45% due to favorable price/mix. Corporate costs are expected to be up high single digits. That concludes my comments, and I’ll hand it back to Jim.

Thanks, Jim. I would like to share just a few final thoughts on how we see the business outlook for the remainder of the year. As we finished the third quarter, we anticipate that volume weakness related to inventory corrections is largely behind us, and we anticipate that the sequential improvements in shipments should continue. While the operating environment continues to be uncertain, our business remains resilient, and our teams are operating with agility, as evidenced by our strong profit growth and year-over-year gross margin expansion. We are well positioned to deliver a record year in 2023, which we believe is a testament to the strength of our diverse portfolio and our customer relationships. We are delivering results that will exceed our four-year growth outlook while continuing to return value to shareholders through increased dividends and opportunistic share repurchases. We remain focused on finishing the year strong and carrying momentum into 2024. Before opening the call for Q&A, I would also like to mention our announcement today of our intention in the first quarter of 2024 to reorganize our business operations to better serve customers with a global focus on texture and healthful solutions. We expect the reorganization of our business will result in a change to our financial reporting segments in the first quarter, which will provide the company’s financial stakeholders with greater insight into our product capabilities and market opportunities and better reflect the strategic value drivers for the company. Now let’s open the call for questions.

Thank you. Our first question comes from the line of Kristen Owen of Oppenheimer. Your line is open.

Hey thank you. Good morning and thank you for taking my question. Jim, I actually wanted to follow up on the last comment that you made here about the realignment of the segments. And if you could just help us understand internally the effect of that realignment? And maybe if there are any synergies in terms of innovation cycle times or just what that implies internally for the organization. And I’ll start there. Thank you.

Thank you, Kristen. We are very excited about the opportunity that lies before us with our intention to reorganize our business operations to align with the value propositions in texture and healthful solutions. We see that our broad position in specialty starches offers a significant potential for growth by providing unique textural solutions for various applications. This has already been demonstrated through our collaboration with PureCircle on sugar reduction. Additionally, we believe that there are long-term opportunities in protein and fiber fortification, where we can address challenges in a more holistic manner. Engaging with global customers and operating on a worldwide scale will generate numerous operational and go-to-market synergies, enabling us to better serve our customers in two large, growing categories. We are very excited about this, and the organization shares this enthusiasm. An internal announcement was made today alongside the external update. We look forward to discussing in detail the various segments involved in this reorganization, as we believe it will more accurately represent the strategic value drivers for the company and provide greater insight into our product capabilities and market opportunities.

That’s really helpful. And then I realize it’s a little bit early for 2024. But just given some of the trends that you discussed on the destocking, strength in price mix, just help us understand puts and takes for next year, how we should think about sort of the momentum on the margin side moving into 2024? Thank you so much.

What I want to convey is that it is still early in the contracting cycle, and we usually update on contracting during our Q4 call. Nonetheless, I want to highlight a few important points. We have renewed several multiyear contracts with major customers that will provide a solid foundation of volume and should enhance our margins in 2024. Additionally, about 50% of our revenue in North America comes from fee contracts that adjust monthly based on corn costs from our customers. We expect to see some relief from lower corn costs in 2024 if market conditions remain consistent. Given the current market environment, the renewal of these contracts should also support margin growth next year. As we enter this contracting phase, our Pricing Centers of Excellence, which have effectively managed inflation for the past couple of years, are ready for a different contracting landscape compared to the last two years. Our experienced commercial team will continue to carefully manage pricing and volume trade-offs in response to market competition. On the volume front, we are pleased to report that there has been month-on-month improvement in volumes throughout the third quarter. Based on our Q3 results and early insights for Q4, we expect this upward trend in volume shipments to continue. However, that's about the extent of what I can share regarding contracting as we prepare for 2024.

Thank you.

Thank you. One moment, please. Our next question comes from the line of Ben Theurer of Barclays. Your line is open.

Hi, good morning Jim, congratulations on the positive results. I have two quick questions. First, you've mentioned some market dynamics, specifically noting that overall volume was weak, but there were some bright spots, especially in Mexico. Additionally, South America seemed to perform a bit better in terms of volumes. Can you explain what has been driving these volumes among your customers? What categories are contributing to this, such as specialties or sugar reduction? I would like to get a clearer picture of the quality of that volume. That’s my first question.

Yes, I'll address this and then Jim can add more. We have conducted extensive customer feedback analysis alongside our ongoing monitoring of volume trends throughout the year to gauge where our customers stand with inventory adjustments and destocking. We believe this phase is primarily behind us. Our Texture Solutions business continues to perform well, and the bulk volumes for sweeteners have remained stable throughout the year. In Brazil, although volumes were down during the first half, we experienced a significant increase in Q3, with September demand reaching levels seen in 2022. It's important to note that we were also comparing against some preparation activities for the World Cup, which is common in Brazil during the fourth quarter of 2022. Overall, I believe we have moved past the lowest point and are now experiencing growth across all the regions and segments we track on a monthly basis.

Yes, Ben, we’ve previously informed shareholders that the customer inventory cycle for syrups and some industrial starches is typically much shorter. As a result, we haven't seen significant inventory build-up or the same decline in sales volumes that we experienced earlier this year or in the third quarter. However, we observed more inventory build-up with our food ingredients that support texture. We highlighted in our presentation that due to longer supply chain times and the importance of certain food texturizing starches in recipes, there was indeed a build-up in 2021 and 2022. When we discuss destocking, we notice that excess inventory has largely been cleared from the food supply chain. Consequently, we are optimistic as we move into the third and fourth quarters, believing that some of the higher-value food texturizing starches are being used up. The only concern is that we're uncertain how higher inventory values will impact December for some of our multinational brand companies. Additionally, it's worth mentioning that in your region, Ben, sugar prices are significantly higher due to constraints among major sugar producers globally. Whenever there's a considerable gap between the value of our syrup and the premium on sugar, there's always likely to be an increase in demand for our syrups in various recipes.

We’re definitely seeing that where higher sugar prices globally and in the U.S. are supportive of higher corn-based sweetener demand.

Okay, that makes sense. My second question is about capital allocation. You've slightly increased your cash from operations guidance for the year and raised CapEx by about $10 million compared to your previous guidance. This indicates that more excess cash is being generated, and you mentioned potential share buybacks and an increased dividend. However, how do you view the current asset base? How much do you anticipate needing to invest in CapEx for operations, maintenance, and keeping plants running? Additionally, how much will be allocated for buybacks? It appears that you have lowered your guidance for shares outstanding, so I'm looking to understand your perspective on the buyback opportunity.

We are carefully considering our strategic cash available for deployment, which is calculated as cash from operations minus our capital expenditures and dividends. In the third quarter, we invested $101 million in share repurchases because I believe the stock was valued attractively and it’s important to return value to shareholders. We will continue to explore this opportunity. Looking ahead, we have experienced some volume slowdown, which provides us with extra capacity to delay some of our growth capital expenditures to future years. However, we are still progressing with investments in our health-oriented solutions platforms. For instance, we are finalizing an expansion at our PureCircle facility in Kuala Lumpur, which will enhance our bioconverted Stevia solutions that are in high demand due to global concerns regarding obesity, diabetes, and the trend towards sugar reduction. While we will be strategic regarding our organic capital investments, we see a significant demand for opportunities globally that exceeds the funds we can allocate from our capital resources.

Okay, perfect. Thanks Jim.

Thank you. One moment please. Our next question comes from the line of Ben Bienvenu of Stephens. Your line is open.

Hey thanks, good morning guys. I want to ask about the 4Q guidance and in particular, kind of the implied operating profit for North America, which I recognize there is inherent seasonality in the business from 3Q to 4Q. But I would think with core base is coming down, still strong pricing, volume getting better sequentially, that we might see operating profit better than flat to slightly up in the fourth quarter? So help me think about the range of outcomes that are possible there, what the variables are affecting it and why you centered in on that guidance that you did?

Thank you, Ben. I’ll address this. This year has shown some impact on sales volumes and a slower progression in demand signals, leading to what I consider a nice normalization of our texture sales, especially in North America. As we approach Q4, it's typically a slower quarter for sweetener volume demand. Therefore, we are being somewhat cautious with our volume expectations, which will influence our Q4 outlook. With corn values decreasing from one year to the next, we have seen higher corn prices in 2023 but expect them to be lower in 2024. This leads to discussions with customers about corn value and its effect on pricing. Customers might anticipate flat to declining prices in 2024, which could lead them to hold off on ordering at the end of December. While we may see an increase in orders in January or February, it’s a matter I must consider as we finish the year. I also want to remind everyone that for CFOs monitoring year-over-year changes in working capital and seeking to manage operating cash flow, reducing inventories is a key strategy, especially with current high short-term rates. So, as I take a cautious stance on this, I’m mindful of any potential surprises we could encounter in December.

Okay. Very good. Understood. My second question is around currency and in South America, in particular, is your expectation that you could continue to price for any currency headwinds that you incur as we move forward? And would that be true across the other regions that you’re operating as well? How do you expect to be able to navigate that?

Yes, we generally do consider the value of corn in our pricing discussions with customers. In some markets, if corn's value is aligned with U.S. dollars, that conversation becomes essential. It’s interesting to note that if the real strengthens, one might assume the value of corn would decrease; however, it tends to rise more in Brazil because of exports. Brazil's market operates very efficiently in this regard. Overall, we are confident in our ability to adapt to changes in foreign exchange rates over time.

Yes. And we’ve demonstrated that over the last number of years. And specifically, our Pricing Centers of Excellence originated in South America and developed those muscles, and that’s been carried out around the world. So I think we feel pretty comfortable and confident that the team is very experienced in knowing how to do that.

Great. Congratulations, best of luck.

Thank you. Thanks Ben.

Thank you. One moment please for our next question. Our next question comes from the line of Josh Spector of UBS. Your line is open.

Hi, good morning. This is Lucas filling in for Josh. So just sort of want to get back to the volume. So I mean, you’ve given quite a bit of context there on sort of how it’s improving sequentially through the third quarter into the fourth quarter. So just wondering if you could give us your updated view on where you sort of see the gap currently between customer purchases and the sales volume trends? So what is the difference sort of now between kind of the seller and the sellout? And do you expect that to reconnect in the fourth quarter? Or is that maybe in the first quarter? Thanks.

Lucas, could you clarify your question a bit more? I think you may be referring to the timing related to customer volumes for branded companies compared to our ingredient sales. Is that correct?

Exactly. So where your sales are going downstream. So I mean, obviously, with the destocking, there’s been a gap there over the last sort of nine months or so. And presumably, that’s narrowing as we sort of get towards the end. Do you have any visibility into sort of where that gap is and how you see it closing other than just that your volumes are improving sequentially?

Yes. I’ll comment and Jim can add as well. We analyze our business where a significant portion of our ingredients is used in food and beverage, mainly by packaged food companies. This includes both branded and private label products, where we have observed some volume growth. Specifically, we are catching up more with branded consumer packaged goods companies. In the United States and Canada, approximately 20% to 25% of our volume is directed to foodservice, such as restaurants. There, we have noticed more fluctuations in 2020 and a recovery in 2021. Foodservice traffic has been relatively stable and has provided a solid support for some of our ingredients. Additionally, we recognize that distributors serve medium and small customers, which include innovative packaged food companies and foodservice suppliers. It appears that we are seeing a gap within distributors as they navigate their excess inventory while these medium and small customers are working to regain shelf space and push for their innovations. This demand recovery is likely where we are seeing improvements.

Yes. I would say that we're observing early signs in the fourth quarter that the sequential improvement in volumes is continuing, including with distributors. However, we're also trying to realistically assess how customer buying behavior may be influenced by Jim's comments regarding year-end developments in December, particularly related to declining corn costs. We're considering all of these factors as we develop our forecast for the fourth quarter. I believe this suggests a positive outlook for volume momentum to persist into 2024.

Great. And then just on the higher sugar prices. So you sort of mentioned you’re starting to see some demand substitution coming through there. Just thinking about the pricing side. So how should we think about your ability to kind of price within syrups and Stevia, relative to the move-up in sugar there? Is that going to assist with sort of value capture heading into next year?

Yes. Go ahead, Jim.

I mean, Lucas, I know it’s a little bit newer to the business, but I’ll just give you one example. So when we look at Mexico and you look at beverage bottling business, they use a blend of sugar and high fructose corn syrup. Most of that HFCS is imported from the United States. And there is a value gap that actually liquefying sugar and using it at the current domestic price of sugar in Mexico is much more expensive than using HFCS imported from the U.S. And so to the extent that you’ll see beverage bottlers will still move that mix. They’ll move that mix to 55% or 60% HFCS. And while that’s a small percentage move in the recipe, it’s actually quite a bit of demand. And so there’s not many customers that have that ability, but that is a pretty clear example where you can see that benefits the demand pull for HFCS for the industry out of the U.S. And that’s an example where you can see that happening.

Thank you.

Thank you. One moment for our next question. Our next question comes from Adam Samuelson of Goldman Sachs. Your line is open.

Yes, thank you. Good morning everyone. I would like to start with a question about Mexico. Can you provide any insights on whether Mexico played a significant role in the strong expansion of profits and margins in North America? Specifically, how did local production and U.S. shipments to Mexico contribute to this, or do you believe the profit growth was more broad across the entire American platform?

Yes. I would say it was proportional across all of North America. However, Mexico has consistently performed well for us. We did emphasize that it achieved a record operating income this quarter, driven by strong demand across all product categories we supply. It's important to note that production in Mexico is primarily for local consumption, but there are also exports, particularly in brewing, where products are shipped from Mexico to the U.S. Regarding its overall contribution to North America, I would say it was proportional for the quarter.

Yes, it was proportional. In the U.S. and Canada, we observed decent demand for sweeteners and an increase in industrial starches. Jim can provide more details, but we have seen better interest in packaging for some of our industrial starch offerings. The one area that has been soft throughout the year has been our texturizers, as we've definitely noticed the effects of destocking on those products.

Yes, which go into center of the store, which has been talked about being a little bit softer and impacted by the destocking.

That’s helpful. Regarding specialties, you mentioned a 6% growth year-to-date and provided some performance details in key areas like starch-based texturizers, pharma, personal care, and Food Systems. These categories are growing significantly better than the overall specialties. Can you clarify what is contributing to the growth that falls below the 6% within your specialty range? Is it primarily related to the protein sector, or can you specify what is not performing above the specialty average?

Yes. I would say that plant-based proteins is definitely compared to what our expectations were for the year has been soft, and the market continues to be soft. The two categories that we talked about last quarter in Q2 but now for Q3, the IRI data for plant-based milk and alternative meat sales volumes were down 10% and 18%, again, respectively, which is the same as Q2. So that segment, compared to our expectations, remains soft. And then I would say the only other category is in the area of, say, clean and simple ingredients, which have higher price points. I would say that would be one other category, but it’s proportionately compared to, say, starch-based texturizers overall, not as large, but that has been a little soft. But we’ve got a great franchise there. So we anticipate that that’s a long-term trend toward clean formulating and natural labeling will continue to bode well long term. Yes.

Okay. To clarify, in relation to the reorganization that will take effect early next year, can you share what the external reporting will look like? Will it focus on a specialties versus core dynamic, or will you be presenting starch-based products along with some key specialty categories as you have listed? How should we expect to see this evolve moving forward?

Yes. Adam, not really finalized yet. And we have some clear ideas internally of where we’re headed, but we’re not ready yet to communicate the specific segments. The narrative from a standpoint of core and specialties will likely change as we move to, again, a global operating segment and/or segments or different segments. But I think Cagney in February and the earnings call in February is when we’ll be in a better position to sharply clarify how we’ll be defining all of those reporting segments.

Okay. All right. That’s helpful. I appreciate it. Thanks.

Thank you Adam.

Thank you. One moment please. Our next question comes from the line of Andrew Strelzik of BMO Capital Markets. Your line is open.

Great. Thanks for taking the questions. Good morning. So for my first one, I just wanted to revisit the 4Q guidance and the implied guidance. And you already talked about some of the assumptions around volume in North America. But just curious, any other swing factors relative to the high and low end, it is a bit of a wide range that we should keep in mind about the fourth quarter in your assumptions?

Yes, Andrew, this is Jim Gray. I’ll address that. There are a few factors to consider, particularly regarding energy prices due to global conflicts. We're also examining macroeconomic influences that could affect demand during the last couple of months of the year. October is nearly complete, but we still need to focus on November and December. Additionally, foreign exchange rates could be impacted by upcoming elections or economic decisions in certain countries, which may lead to fluctuations. On the positive side, customer demand appears to be stronger than expected as we developed our forecast. This trend has been encouraging month by month, which Jim mentioned earlier. As we approach Q4, we need to remain cautious, especially with winter approaching in the Northern Hemisphere, as that typically influences demand for our products.

Okay, great. Regarding 2024, I have a clarification and a question. The clarification pertains to your comments about the multiyear contract renewals that will aid in margin expansion. Are you referring to margins in percentage terms, dollar-per-ton, or both? As for my question about 2024, you mentioned a recovering volume alongside the fact that 2023 is expected to be a year of significant growth, with some one-time events occurring early in the year. So when considering everything together, and understanding that you're not ready to provide guidance for 2024, do you believe the level of operating income growth seen this year is feasible for next year? What do you perceive as the risks to achieving that? I'm trying to piece it together following such a strong year relative to the results.

Regarding the multiyear contract question, the answer is that it involves both margins and gross profit dollars. We are also evaluating the progress we’ve made with our global operating model as we are in the third year of transitioning to global operations. The team has navigated significant challenges from the supply chain crisis experienced one to two years ago, which we believe has strengthened us and allowed us to invest in digital capabilities to enhance customer service concerning our inventory and warehousing. Importantly, while industry volumes have been soft for most of this year, we believe that many companies are holding higher inventory levels than we are as we close the year, which should benefit us moving into next year. Additionally, it's significant to note that South America's performance this year has been down compared to the past two to three strong years. In light of the energy transition there, we estimate a one-time cost of $5 million to $8 million associated with our shift to biomass. This shift is for various reasons, including lower costs compared to natural gas and reduced earnings volatility. Furthermore, we have achieved an 84% reduction in our greenhouse gas emissions in Brazil. All these factors contribute positively as we approach 2024. While we are still in the contracting phase and need to see how that develops, we remain cautiously optimistic about 2024 based on the data points we have available.

Andrew, I’d like to address the question from a long-term perspective. We are continuously enhancing our capabilities. In our go-to-market team, we are focused on achieving customer excellence by establishing Pricing Centers of Excellence. This is significant because over the last two years, we have experienced a considerable increase in corn costs globally. Typically, we would be reacting to that. As we look ahead to 2024, corn costs may decrease. We are now leveraging new capabilities from our Pricing Centers of Excellence and our commercial teams to understand what that means in terms of pass-through and the advantages we expect from raw material costs next year, all while ensuring we are compensated for the gross profit required to sustain our business. As Jim mentioned, we are also developing our global operations team, which is gaining momentum, helping us control inflation. That said, I don’t believe we have fully addressed the potential inflation in our manufacturing expenses for next year. We need to take the time to work this out and for my team to analyze the implications. We are definitely considering this as we set prices and engage with customers about the upcoming year. I believe we are building valuable capabilities, and as we adapt to the fluctuations in the corn cycle, we will strive to effectively manage our gross profit and operating income growth.

Great. I guess I’ll go ahead and leave it there. Thank you very much.

Thanks, Andrew.

Thank you. I’m showing no further questions at this time. I’d like to turn the call back over to Jim Zallie for any closing remarks.

Okay. Thank you, operator. And I wanted to thank all of you for joining us this morning. We look forward to seeing many of you at our upcoming investor events, and I want to thank everyone for your continued interest in Ingredion.

Thank you. Ladies and gentlemen, this does conclude today’s conference. Thank you all for participating. You may now disconnect. Have a great day.