Ladies and gentlemen, thank you for standing by and welcome to the Ingredion Fourth Quarter 2015 Earnings Call. [Operator Instructions] As a reminder, today’s call is being recorded. And I will turn the conference over to Ms. Heather Kos. Please go ahead.

Good morning and welcome to Ingredion’s fourth quarter 2015 earnings call. Joining me on the call this morning are Ilene Gordon, our Chairman, President and CEO and Jack Fortnum, our Executive Vice President and Chief Financial Officer. Our results were issued this morning in a press release that can be found on our website, ingredion.com. The slides accompanying this presentation can also be found in the website and were posted a few hours ago for your convenience. As a reminder, our comments within this presentation may contain forward-looking statements. These statements are subject to various risks and uncertainties. Actual results could differ materially from those predicted in the forward-looking statements and Ingredion is under 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 an 8-K. Now, I am pleased to turn the call over to Ilene.

Thanks, Heather and let me add my welcome to everyone joining us today. We appreciate your time and interest. I will give more details on the fourth quarter in a moment, but first, I would like to look back on 2015. Ingredion ended the year with record operating income and earnings per share or generating strong operating cash flow of $686 million. Volumes grew 7% overall driven by our acquisitions as well as organic volume growth in core and specialty ingredients. Our higher value specialty ingredient sales mix grew 1 percentage point to account for 25% of our total sales. We remained focused on continuous improvement efforts in optimizing our footprint, selling our Port Colborne plant in Canada, and announcing plans to further reduce our cost structure in South America by consolidating several plants in Brazil, and pass-through pricing partially mitigated foreign exchange headwinds. Overall, I am pleased our business model and strategic plan continue to deliver shareholder value. As a result, North America and Asia-Pacific had record high operating income. EMEA was down slightly due to foreign exchange headwinds and South America was down due to macroeconomic and foreign exchange headwinds in the region. For our company overall, our cash flow from operations and strong balance sheet enabled us to deploy cash to advance our strategic blueprint. Acquisitions of Penford and Kerr Concentrates have broadened our Ingredion portfolio and have hit our expectations on earnings per share accretion and exceeded our expectations on cost synergies. During the year, we increased our quarterly dividend by 7% and repurchased 435,000 shares. Overall, I am pleased our return on capital employed for the year was 11.5%, exceeding our stated long-term objective of 10%. Now, let’s spend a moment on each region’s performance in the quarter. Operating income in North America was $117…

Thank you, Ilene. Good morning, everyone. Let me start by covering the highlights of the income statement. Net sales were up $37 million for the quarter. The majority of the increase is attributable to volume growth in our core and specialty ingredients and the addition of acquisition-related ingredients as well as favorable price mix in South and North America. This was partially offset by unfavorable foreign exchange. Gross profit was higher by $41 million as a result of higher core and specialty volumes, the addition of acquisition-related volumes and a higher specialty mix and margin expansion in North America. Reported operating income was $55 million higher versus last year while adjusted operating income was $24 million higher than last year. The increase in gross profit was partially offset by higher operating expenses driven by the inclusion of Penford as well as lapping other income from 2014. Reported operating income was lower than adjusted operating income by $3 million. Of this, $7 million is related to the settlement of the Western Sugar lawsuit, $4 million of restructuring cost associated with the Port Colborne sale and Penford acquisition, $2 million is for acquisition-related costs for Kerr, and $10 million is a gain on the sale of the Port Colborne plant transaction. Our earnings per share, both reported and adjusted were $1.42. For the quarter, our adjusted earnings per share, was $0.12 higher than last year’s adjusted EPS. Moving to the net sales bridge, our sales of $1.4 billion are higher than last year by $37 million. Volume growth contributed a $131 million with price mix contributing $40 million. These positives were partially offset by the $135 million of foreign exchange headwinds. As we look more closely by region, you can see unfavorable foreign exchange affected us across all four regions. Volume growth…

From a strategic perspective, I am pleased to report that our acquisitions and deployment of cash in shareholder-friendly ways demonstrate that our business model and blueprint for growth are working. Our underlying business is solid and performing well. And Ingredion has evolved into a leading global ingredient solutions provider with the portfolio and R&D capability to help customers develop products in line with growing consumer trends. Additionally, we continue to take actions to optimize our cost structure for the future. Regionally, North America is expected to continue its positive trajectory. Asia-Pacific and EMEA are projecting modest growth and South America is expected to be in line with last year given the macroeconomic headwinds. With our strong balance sheet, we expect to continue to pulling our capital for growth, network optimization, acquisitions and other shareholder-friendly actions. And now, we are glad to take your questions. Thank you.

[Operator Instructions] And first from the line of Akshay Jagdale, if you could state your name and company followed by your question.

Thanks. This is Akshay Jagdale from Jefferies. Thanks for the questions. Good morning.

Good morning.

Good morning.

Congratulations on a solid quarter.

Thank you.

So, first just on North America we have heard that the contracting season has gone better than even last year. And corn cost seemed to be relatively benign. And then you are guiding to Penford delivering $20 million at least in synergies. And specialty, the commentary continues to be solid. Same thing on Mexico. So, why should we expect a year that’s similar to this year, where you saw throwing round numbers there, 30%ish growth in operating income if you exclude Penford maybe around 25%? So, why shouldn’t we see continued sort of very solid double-digit operating income growth in North America?

Akshay, I think we did comment that we would have growth in North America as well. I think to the couple of things that, if you look at this year’s percentages that don’t just necessarily translate into next year, one was don’t forget we are overlapping the 2014 polar vortex issue, where we had about a $0.20 impact to our earnings, which was negative that year, which made the percentages higher, it was low. As well as even in the fourth quarter last year, we had some issues as they are doing currency spell late in the quarter, which impacted our feed pricing. And I think we commented that at the end of 2014 as well. So, the base was a little lower this year. But even excluding those items, we had a very strong year in North America. I do think that there is a number of different variables. I think we are very satisfied with the way pricing and the contracting actually materialized for the year, but as you know, a variety of different impacts on that. And some of the things – well ethanol represents only 1% of our – less than 1% of our revenues. That pricing is down. And so you always have to look at a number of different factors from that perspective. Ilene, do you want to add something?

Yes. I guess the other thing I would say is I agree with what Jack was saying. And on the other hand, we are excited about the opportunities in Mexico and we have continued to deliver double-digit specialty growth in Mexico. Their GDP is expected to be close to 3%. So again, we are excited for the overall opportunity, but there is a balance there.

And just two more from me. So, one on South America, obviously, the devaluation causing a lot of noise here. So, first, on South America, can you give us some sense like what we should expect first half versus second half? And your interest expense is up a lot because of the devaluation. Can you be more specific on financing costs for next year? And the second question on specialty, can you just put into perspective, I mean, you have made some long-term capital investments in that business. You mentioned 25% of sales this year. Can you give us some sense as to what you are seeing underlying growth wise in that business for you and for the category? Thanks.

Let me start and then if Ilene has anything to add, she can add it particularly on the specialty growth side. Let me address South America first of all. I think that our guidance we have obviously looked at a number of different issues. And we don’t traditionally breakout by quarter or anything in our guidance. But we are seeing, particularly in Argentina we are looking at a relatively flat situation for the full year there. What we are seeing is there is a little bit – a little bit down in the first half of the year as prices adjust. We are actually, in Argentina as well we have had the export tax come of corn. And so I am waiting for the prices. And it’s fundamentally a core ingredient market. And I mentioned the business down there is HFCS which relates to sugar. So we want to see those prices adjust up to world sugar prices. And then we will start to see the return on profitability with the second half. The one thing that was good about the devaluation is we didn’t get our cost back in check in terms of the world cost, from that viewpoint. In terms of Brazil, we are looking at Brazil, starting out a little slow and we are not – we are kind of looking at Brazil has been down overall for the full year, just because of the macro headwinds that they are facing, primarily with respect to the slow economy there. But the Andean region is a positive note. We still consider volume growth there and margin growth. So that’s why we are ending up fundamentally flat year-over-year in South America. I am going to switch over to financing costs and alluded to one of the charges in the…

Yes. The specialty growth we are very excited about our portfolio. And if you recall a little over a year ago, we stated that our goal was to get our specialty portfolio to 30% of our total in over the 5-year period. And we are pleased that it’s been increasing. And in fact, we always said that we expected the specialty portfolio to grow at the high single-digit growth, probably 2x to 3x the core. So again, it depends on the relative growth rate there. But we continue to be a leader in the texture space and use our R&D to work with companies to develop these new solutions that are very much focused on the customer trends. And the consumer trends continue to be very important and be very robust. Now, we have also said that we have as you mentioned, implemented some capital to support this specialty growth. And so that continues to be implemented last year, 2016 we will continue and we will continue to look at those opportunities, as we mentioned even in some of the Mexico investment. So that will provide us the capacity and features and capability to deliver that type of growth to get the portfolio to 30% of the total.

Perfect. Thank you. I will pass it on.

And next we will go to line of Ken Zaslow. You can state your name and company followed by your question.

Ken Zaslow, Bank of Montreal. Good morning everyone.

Good morning.

Good morning Ken.

Just a couple of questions, what is the – your cash flow from operations is increasing $14 million or so, but your net income is going to be higher than that, what’s the disconnect, is it just echo items or some of these I could just – I am just curious on what the differential is?

Ken, one – there is two items really that we would try to factor in and we try to neutralize the impact of the margin accounts. It’s always challenging because it’s the year end number where you are marking your corn futures to actual. And that kind of – even if you look at our current results, it is $30 million plus, $30 million negative on one year and it does close through during the year. But we are never too sure where that is and that’s why we just kind of target that $700 million as an average. And then of course, we continue to focus on our working capital as well. However, there is incremental pressure in terms of investing in our working capital as we move more into a specialty portfolio. Sometimes the inventories, etcetera are a little bit larger than our core ingredients, as we continue to make sure that we have the right ingredients at the right place is at the right times, because they are smaller lots.

So they should not correlate as tightly as we translate?

Yes. I would say that the specialties just require a little bit more investment in inventories to service their customer appropriately. As our portfolio increases to 25% plus, moving forward the inventory is impacting us by a little bit in terms of our cash flows.

Then on your North American volume just to make sure, how much is the divestiture – how much of a penalty is that this year?

Well, this year basically it’s a very a little bit – you mean in the fourth quarter of this year, the transaction was just completed in December.

For 2016, because you said North American volumes are going to be down due to the port closure – the Colborne closure, so I am trying to figure out how much of help it gives, if I think about North American sales and volume, I would have thought sales would have been up rather strongly with the pricing environment. So I am assuming that the closure is a 500 basis points to 700 basis point decrease, is that the right number, it just seems – I was surprised that your net sales are going to be down in North America?

Well, we don’t give the specific numbers. And of course, what we said that we sold the facility and we are trying to support our customers, so we have moved some volume around. But we don’t have – we have not given the specific number of how much we are not supplying that particular market. Some of the other plants were able to – are able to absorb some of the volume.

But I do think Ken, one of the things that you have to appreciate is that, we did have an over the fence arrangement at that Port Colborne facility, which was a fairly low margin type of product for us. It was a fundamentally liquid dextrose with high moisture levels in it. And so that has a significant impact in terms of actual volume waiting. And you will see some drag on the North American volumes in total because of that. But really if you think about, it’s more of a trade up strategy from my perspective. And I think, that’s how you should be thinking about it. We are shedding some of the low end volume and so you will see a margin improvement affected by that volume drop-off actually. And so think about it not as necessarily, I know the numbers are worked out that is a small volume drag. But you will see there is an offsetting improvement in our margin from that. As well as the fact, just by doing this network optimization, we have commented in the past, that we do have significant savings about $8 million in terms of return on this on an annualized basis in terms of our network optimization. So that will improve our margins as well. So I think you will see a little bit of shortfall in the volumes. But I think the margins will more than offset any shortfall you will see in that volume.

I was trying to get is what base volume or base sales are growing at North America. I just was surprised by net-net it was down, I wasn’t actually looking for this – I know you don’t want to give too much detail I was just looking for like what the base is looking to grow in North America. But the other question I had was – my last question is on South America, again your commentary is look, we have net sales are going to be flat, obviously FX headwinds and slow economic growth, so you are going to price over both of those, is that how you get to neutral?

Yes. That as well as really focused on the cost down there, Ken. If we can’t get the prices up, obviously have to drive costs down. I think the equation there is just as you expressed. We do always have a little bit of lag on our price increases through the devaluation. And we are a little – and you might have picked up on fourth quarter there, where corn costs moved up a little bit higher than we anticipated in Brazil because of the export of some of the corn outside the country. Probably my assumption is because the reais had devalued with bank source of U.S. dollars. But in general, I think that you have got the formula correct. We are going to continue to chase devaluations if there is one. We do see the U.S. dollar as well. We don’t see quite the devaluations that we experienced this year. I think we are very successful in passing on the devaluations this year. I was actually very pleased with the way we performed from our pass-through of the devaluations. But I don’t think we are going to see the same rate of devaluation this year that we have seen last year. And that’s why we have curtailed our guidance down to the $0.30 to $0.40 range versus the $0.65 range that we have seen this year. And if there is further devaluations, it just means that we have to accelerate the pricing through the devaluations. And so that’s how we are looking at that situation now.

Great. Appreciate it. Thank you.

You are welcome.

And next from the line of Farha Aslam if you can state your name and company followed by your question.

Farha Aslam, Stephens Inc. Good morning.

Good morning.

Good morning.

Question around your specialty business, Ilene, you had highlighted that it’s strong in the international markets and you noted texture. But could you share with us how that specialty business is growing despite kind of the economic weakness we are seeing in some of those outside U.S. markets?

Yes, of course. Even when I look around the world and when you say outside the U.S., I include Mexico in that. We think about Asia, even Europe. And what you seem to have in a place like Mexico, while there is what I call the higher end and we have solutions that are tailored towards texture and convenience. At the same time, we have specialty solutions that are focused, we call it save money. We were able to substitute starch for higher priced oil and tailored to the local consumers. So that would be one of the particular trends in Mexico. If I go to some place like Asia, even targeting the Chinese market, we are able to come up with solutions let’s say for the dairy market that are specialty-oriented and again are tailored towards the healthy texture side. The clean label would be another example in Europe. Again, where there is a set of consumers that are willing to pay more for those solutions, because they get a product that could be an indulgence, it could be something that is very healthy and they are consuming that as part of the focus on their awareness of the requirements to publish a clean label as a ready meal as an example in Europe. People, our solutions are used in gravy and in salad dressing to make the meal very palatable and very healthy. So, the different consumers, I’d say that the both segments, what I call the high-end segment as well as the save money segment is really alive and well in a lot of places outside the U.S.

Great, that’s helpful. And just my follow-up, Jack, if the guidance range is quite wide, understandable because of what’s going on globally. But could you give us sort of a read of what you factored in on the lower end and what you factored in on the higher end, so we can kind of gauge where you would fall in as we see things develop during the year?

Yes, I think first, Farha, I think the guidance range, I think the thing is reasonable. I actually think that the real one that’s some of the major impacts is just how quickly we passed through pricing through the devaluation. It impacts both the higher and lower end of that range. Because if there is exchange differences that we don’t really move, it kind of hit us on the lower side. If we can move the exchange through on the pricing, it will help us on the upper end of the equation. The other one on the – I will start with the lower end of the guidance as well. I think the one that we are still looking at is, is how slow will the volumes in business be in Brazil as well with the slowdown in the economy there. I think that, that could have – if that economy does deteriorate rapidly, it will take us to the lower end of our range. And then Argentina I hate to put out all the onus on South America, but there is a little bit more volatility in those numbers because of the fact that we have seen the, what we believe, is very positive changes in the Argentine environment from a macroeconomic perspective. However, they haven’t felt it through the economy at this point in time. And so it will take a while to move those through. I think in the higher end of the range though, I think we still – I hate to put a lot of onus on to North America, but their volumes could continue to improve and we can see some specialty growth coming out of North America and some good margin improvements there because of that on a mix basis. And I would…

Great. That’s helpful. Thank you.

You are welcome.

Our next question is from the line of Rob Moskow if you could please state your name and company followed by your question.

Hi, thanks. From Credit Suisse. Jack, I remember talking about Argentina with you a couple of years ago and I know you have hit on it already a couple of times. But just so I am completely clear, as farmers are feeling more comfortable commercializing their corn, I think a lot went to the export markets, but are you starting to see better pricing on that – on those inputs? Number one. And then also how – what has to happen first in order for your pricing to go up? Do you need to see sugar prices rise, I thought I heard that locally or do you just need to see your customers feel more comfortable raising price domestically?

Let me address the three categories. You summarized it fairly well Rob and I will just kind of elaborate on the three different pieces. First of all, corn is actually moving very well through the system both domestically and on an export basis now, because I think people believe that the peso is fairly valued. And so there is no reason to hold on to their corn or anything like that. I would highlight though that the export tax on corn has been removed. And so therefore, it does put a little bit incremental cost to us because of the domestic market. It was kind of a balance there in terms of if you export the corn you were penalized with the export tax. So, that had a little bit of an impact on the input costs negatively, but in general, it’s nice because of the fact that everybody is comfortable selling their corn at this point in time. From a pricing perspective, it really is not so much in terms of passing the prices through. There is still pricing restrictions at the consumer level, which they have continued till May of this year. We do think it will kind of – that’s why we are saying the first half maybe a little choppier in terms of getting our prices up. But the real issue there is just getting the domestic sugar price up. And I highlighted the sugar prices before, because it’s really the domestic prices as people start to export sugar into the world market, we can compete with the world price of sugar, but the sugar prices happen to increase to the same degree as we would expect of the low world sugar prices today after the devaluation. So, how long will that take? It might take…

Very good. Thank you.

You’re welcome.

And we will go to the line of Brett Hundley. State your name and company followed by your question.

Hi, good morning. Brett Hundley, BB&T.

Good morning.

Good morning.

Jack, I had two quick questions for you and then one for you, Ilene. Just I am sure I am thinking about North America correctly, a lot is always made of contracting each year, but with where you are taking your business in recent years, the math that I am kind of backing into now is that while North American contracting is likely a benefit or a tailwind for you in 2016, I am actually getting a much bigger positive impact just from your specialty business in Mexico and the reason I ask that is just given the CapEx that you are putting into there, if that can be continuous in years ahead, I just want to use that to think about my forward model, so does that make sense from a bought standpoint?

Yes and no. But I just want to clarify a couple of things in terms of the investment in Mexico. What we are seeing in Mexico is solid growth both in the core and the specialty. And we are seeing the double-digit growth in the specialty, but we are also seeing good solid growth in the core as well. And the margins there are acceptable down the Mexico to continue to invest in the core. So that investment I would say is kind of supports both growth avenues. And so therefore, it’s really to grow with Mexico. I think we are seeing some positives in terms of the double-digits in terms of the specialty growth and obviously, core is not going to grow at double-digits down there, it’s more of the GDP, which is still a very strong solid number on the core side. And so I don’t want to overemphasize the specialty in terms of the mix down in Mexico.

Okay, that’s very clear. And then in Brazil, I am sorry if I missed this, but we just the overall environment in South America, particularly in H1, is there any potential for you guys to pull forward some of your plant consolidation that you highlighted in 2015, I think most of it was going to be a benefit for ’17, but is there any potential to pull that forward a little bit?

We continue to look in terms of how we can pull things forward and actually get our network optimization in place in Brazil. I think – at this point in time, one other things we are doing is we are consolidating some of the capacity that we are shutting down in Brazil into other facilities, which requires relocating certain equipment and that also requires certain customer approvals once we start to run that equipment as well. And so our timeline is pretty tight in terms of what we have seen so far. So we are going to hold to that timeline. And that’s how we have got it structured in our guidance as well as at this point.

Okay, great. And then Ilene, I had a question for you and Jack is more strategically on specialty, I don’t know if Jim is on the line as well, but I was looking – the genesis for the question, I was looking at a presentation by Kate [ph] recently and they were talking about their specialty business and a focus that they want to take on North America, and of course, they were talking about certain levels of specialty with that they want to reach and they talked about investment in product innovation and then plant expansion. You guys have done all that as well. You have been expanding through M&A, Kerr is an example. But besides Kate, we see it more generally, we see this big focus on specialty both in North America and Europe and it feels like it’s getting crowded. And so I wanted to ask you about competitive advantages that Ingredion brings to the table, you obviously have this wide swap of ingredients from basic textures all the way up to multi-functional branded ingredients and so maybe it’s a case where there is just such sizable demand out there right now, that everyone gets a piece of the action and for the next 5 plus years, the marketplace is such that you will continue to grow at a very healthy rate. If that’s not the case, does it just come down to pricing in the marketplace or is this more about first mover advantage in protecting science with patents and things like that or is it knowhow or just becoming large and building scale, just curious if you can talk a little bit to the competitive advantages that Ingredion has in order to keep growing in the specialty space?

No, absolutely. We really demonstrated a track record now with customers that we are able to work with them and develop new solutions that are very much on trend. And as you know, many of the customers are very much focused on the perimeter of the store. They have their fresh business unit. And we are the company that they come to, to really help design the ingredients for those solutions. And so I think one of our competitive advantages is that we have demonstrated this track record to work with these customers and get ready to help them bring to the market several different solutions. And so we don’t just work on one product area with a customer, we may be working with three or four. And they may come to our Bridgewater, New Jersey facility, work with us and then we can help tailor that solution to different parts of the world. So I think that it’s a combination of our people. And as you know, many of the larger companies are focused on their costs side and have eliminated some of their R&D people. And therefore, it makes our R&D people even more important to them to be involved. So I think we have the track record, the relationships and the know-how to really develop those solutions with – and as the texture leader, we are the go to guys, as texture becomes kind of what I call the new taste. And the customers really want to delight the consumers with these solutions. Now the other part of that is on the M&A side and I think that we have demonstrated with our strong balance sheet. And I spend a lot of my time on the pipeline of M&A, to continue to look for these opportunities where…

Thanks for that Ilene.

You’re welcome.

Our next question is from the line of David Driscoll. Please state your name and company followed by your question.

Hi. This is Joseph [ph] on for David from Citigroup. Thanks for the question.

Hi, good morning.

Good morning.

Good morning. On North American capacity, what’s your estimate on how tight U.S. wet corn milling capacity is. And are there any capacity expansion projects on the board across an issue that you are aware of and if there aren’t any, what would it take to see this type of announcement?

That’s kind of a three-part question. Let me first say I have not heard of any real capacity expansion projects on the board at this point in time. People are more interested in taking their finishing capacities and expanding those. And so you get a little bit finishing to grind ratio improvement. And I know that’s as you know we have a kind of two-step process in the industry, where one is the grind portion, the second is the finishing channels. And you can fill out more finishing channels. I don’t expect significant announcements on grind expansion. I do think the industry is working at fairly high levels of utilization. We have some capacity that come out of the marketplace over the last couple of years. And I think put it from a grind perspective into the high 80s taper range. And on some of the sweeteners, it maybe even in the 90% ranges in terms of finishing channels. But I don’t think that you are seeing a significant expansion at least we haven’t heard anything in terms of press releases on it or anything like that from anyone. I am not aware of any expansion from that perspective.

Got it. Thank you. And the flat year-over-year comment on Argentina is that for sales and profits? And if it’s for profits, over the next few years, do you think you could get back to the $75 million level?

Yes, I would say that it is for profits that we are talking about like the EBIT line that’s relatively flat. And over the next few years, we are very encouraged by Argentina in terms of some of the policies that are being adopted putting it back into a much more competitive position from a world perspective. And so we expect it to come back. When it’s obviously not 2016 issue, it’s more moving into 2017 and beyond. And so once it gets rationalized, but it was $75 million or $65 million, I can’t give you the exact number into the future, but we expect that we would be earning our cost of capital down there plus down in Argentina in the future.

Understood. Thank you very much.

You are welcome.

Very good.

And next from the line of Adam Samuelson, if you could state your name and company followed by your question.

Yes, thanks. It’s Adam Samuelson from Goldman Sachs. Maybe first, Jack following up on the prior kind of comment you said about no expansion in really industry grind capacity in North America for people expanding their finishing channels. And maybe if you could elaborate a little bit on that and give some examples or if you are seeing any areas of the core outside of HFCS really that you are starting to see a little bit more competitive intensity of some competitors who might have been more focused on the beverage market maybe look to switch that grind and move it into different parts of the food channel?

It’s interesting, Adam. I think that the one area that – and we don’t – we compete in certain categories on it. But the bio-solutions still continues to be strong even with oil prices where they are. We are seeing more and more people moving some of the liquid dextrose into bio-solutions which is expanding the demand there. And that’s really the one area that seems to be expanding obviously the expansion into more specialties across the board, because the different needs and things like that, but that’s kind of a zero some gain, because you are just taking the current capacity. And so that’s kind of where I am at with it, but maybe Ilene has a certain comment?

But the only thing I would add to that is the beer industry is announced expansion to Mexico and they do use starch for producing their product. And I think Mexico has become an attractive place to produce and then some of them export. So, I would say that, that’s an important area that our industry be prepared to supply.

Okay, that’s helpful. And then maybe switching gears a little bit on margins and this is more of a holistic 2015 or ‘14, I know the trends have been strong all year, but your gross margins in 2015 were up 240 basis points or so. I was hoping you can maybe break that down a little bit into some of the different components and whether that was maybe obviously absence of some of the negatives in ‘14 helped, but corn cost productivity actions, network optimization, price mix, specialty. Any way to put a finer point on the drivers of the corporate margin expansion this year as we try to think about, clearly, the company is operating a level it’s never operated before?

Yes. I think if you think about one of the things we have said in our earnings algorithm that we kind of said to people is we should have a 2% expansion in our margins over a longer period of time assuming corn and exchange being equal. You have seen over the last couple of years, whereas corn prices have come down, the denominator went down a little bit as well, because that’s what caused our sales to being stable as well. And even with during the devaluations, we kind of priced through the devaluation, but it’s to price back the margin component of that devaluation. And so that just gives you a little bit of an uplift in terms of the distortion on the numbers. But the actual improvement comes from, if you think about it, it’s really trade-up strategy from my vantage point. 1% may not sound like a lot in total, but as I have been quoted in the past, 1% is a big number when you are looking at your entire business. And we moved our specialties from 24% to 25% and we have commented that they have doubled the margins of our core business. And so effectively that margin enhancement there as well as continuing to drive down our cost in terms of the efficiencies really is what’s driving that our target of that 2% margin improvement. And I think we are tracking very well along all the programs. And it is a combination of trading up our product portfolio and driving down our cost. And I would like to emphasize the second part as well, because that’s what’s in our control and the trade-up strategy is working very nicely for us. And even components like our Port Colborne facility is illustrating how we are driving our trade up strategy.

Okay. And then maybe just finally I want to be clear on Penford, I know you alluded to some ethanol weakness previously, in Penford, I mean, ethanol, I recall correctly, there is about 25% ethanol of their output and certainly 2014 when you bought it, a meaningful proportion of EBIT. Is Penford EBIT including synergies actually growing in 2016 or expected to grow given ethanol industry fundamentals where they are?

Yes, absolutely. In fact, the basis for the – one of the driving goals for buying Penford was the potato starch, which is gluten-free, non-GMO, a great way to broaden our portfolio. So, we are pleased with how Penford is coming together both in the base business even with the minor ethanol headwinds from our portfolio point of view. But more so the synergies that we alluded to that we are on track, they are going well and we continue to enjoy having that product line as part of our expanded portfolio.

Alright, great. That’s very helpful. Thank you.

You are welcome.

And we will go to the line of Sandy Klugman, if you could state your name and company followed by your question.

Good morning. Sandy Klugman, Vertical Research Partners. Most of my questions have been asked, but perhaps a couple of follow-ups. One, the company has very effectively offered some of the macro and FX headwinds that we are seeing through productivity initiatives. A question is how much further scope do you have to cut cost if the environment remains challenging?

Sandy, that’s always an interesting question. And you are probably asking somebody that’s been in the company for 30 years. So, I am always amazed that the way we continue to drive cost out of our systems. I mean, right now, we have a program, which is our customer experience program, which is really focused on delivering excellent services to our customers right from our core to our specialty ingredients. And then it really looks at some of the distribution networks we have and really looking at how we can continue to drive costs. So, there is always new areas to look at. I think it’s unique from the perspective that you can provide new technologies. You can share ideas across regions. And I still think we have ways to go in that category.

Okay, thank you. That’s helpful. And then another follow-up. Things are obviously trending well with Penford and Kerr. Could you comment on what types of M&A opportunities you are seeing given the current macro backdrop? And where do you see opportunities either expand your product offerings or fill in geographical gaps in your portfolio?

Well, I think globally the opportunities are really spread out. And certainly, with the exchange rates, some have better value proposition than others. We look geographically. And so there are some opportunities, we talk about Asia. I still look at Asia with some potential opportunities both geographically and then broadening the portfolio. I think North America continues to provide opportunities as evidenced in 2015 in terms with closing on Penford and getting the Kerr acquisition done. I think the focus really is on broadening the portfolio though, because again when I look at the features. And so I talk a lot about texture, so anything we can do to make sure that we continue to be the leader in texture will certainly be a high priority. I have talked before about, not just starch, but non-starch hydrocolloids, another way of looking at texture are important. And even our nutrition side of the business, when you think about the consumer very focused on health and wellness, we look at solutions to deliver both texture and other types of sweetness as an example, those are areas that would be very attractive to us and we think that we could create a lot of value.

That’s very helpful. Thank you very much.

You are welcome.

And we have no further questions in queue.

Okay, good. So, just before – quickly before we sign off, I will reiterate our confidence in our business model, strategy and long-term outlook. We remain keenly focused on value creation and we are committed to delivering shareholder value. That brings our fourth quarter 2015 earnings call to a close. Thanks again for your time today.

Ladies and gentlemen, that does conclude your conference. Thank you for your participation. You may now disconnect.