Jim Gray: Yes, Andrew, this is Jim Gray. I’ll take this. Obviously, there’s a couple of kind of more outliers, which would be what happens to energy prices here as we have some conflicts around the world. And we’re also looking at is there anything on kind of macroeconomic factors that impact demand in the last couple of months of the year? Largely October is done, but we still have November and December. And then maybe just FX, there’s a couple countries that have either elections or they have some kind of economic decisions in front of us that can always have an FX spike. But I think on the opportunity side, really is customer demand, I would say, as we built our forecast, really more of the trend, I think, month-by-month that Jim spoke to.
That trend has been a little bit stronger than necessarily as we’re looking at kind of how we lined up Q4. So we’ll see, but it’s October. Winter is upon us in the Northern Hemisphere. And usually, that’s something that can impact kind of demand pull for us. So we’re just — we’re cautious on looking at Q4.
Andrew Strelzik: Okay. Okay. Great. And then I guess as it relates to 2024, a clarification and a question. The clarification is just on the comments you made about the multiyear contract renewals that are going to support margin expansion. Are you talking about margins on a percent basis or a dollar-per-ton basis or both? And then in terms of — the question about 2024, I mean, you have that dynamic, you have volume recovering. At the same time, you talked about this being an outsized growth year in 2023, and I think you have some onetime stuff in the early part of the year that occurred as well. So I guess when you bring it all together, and I know you’re not obviously preparing to give 2024 guidance, but do you think that the operating income growth algorithm, kind of that level of growth is in play for next year?
What do you think are maybe the risks to achieving that? I’m just trying to, at a high level, put it together coming off what is a very, very strong year relative to the outcome.
James Zallie: So just on the multiyear contract question, the answer to your question about is it margins or is it gross profit dollars or both, the answer is, it’s both. So that’s one thing. And we also are looking at, honestly, the progress that we’ve made against our global operating model. Now — and just a reminder, we’re in our third year of globally moving to global operations. And having that team work through the significant challenges that the supply chain crisis brought about one to two years ago has made us, we believe, stronger and has enabled us to make investments in digital capabilities to better service our customers on our inventory positions, our warehousing. And again, that’s — one of the other things that we feel very good about is — when volumes are — have been soft like they were for the majority of this year across the industry, many companies are sitting on higher quantities of inventory than we think we are as we exit the year.
And so we think that will be helpful as we go into next year. The other thing — and it’s just noteworthy because South America’s performance this year has been down in comparison to really two to three very strong years. And the energy transition there, it’s just noteworthy to point out, we estimate that there is a $5 million to $8 million one-off cost of that transition to biomass, which, again, it’s going to — we’re doing that for a number of reasons, but — moving to biomass, which is lower cost of natural gas and will also provide less earnings volatility, we believe, going forward in comparison to natural gas. And again, it’s enabled us to reduce in Brazil 84% of our greenhouse gas emissions. All of those things, we think operationally are helpful as we head into 2024.
So that’s kind of why we’re feeling at this point in time. And again, we’re not through contracting. So we have to see how that’s going. But based on all the data points that we have thus far, we’re cautiously optimistic about 2024, I would say, Jim.
Jim Gray: Andrew, I’d answer the question maybe on a long-term basis. We’re consistently building capabilities. So across our go-to-market team as we seek really customer excellence, we’ve built in Pricing Centers of Excellence. Why does that matter? The last two years, so 2022 versus 2021, 2023 versus 2022, we’ve seen a pretty dramatic run-up in corn costs worldwide. Normally, we’re chasing that. So now we’re looking at 2024, corn costs might be down. And so now we’re using new capabilities around our Pricing Centers of Excellence and with our commercial teams to navigate what that means in terms of pass-through in terms of some of our raw material advantage or expected cost advantage next year, but while being paid and being rewarded for the gross profit dollars that we need to run our business.
As Jim just talked to, we’re also building that global operations team, and they’re building momentum. And I think that that works towards controlling inflation. And so we’re not — I don’t think we’re necessarily out of the woods yet on what the inflation of our manufacturing expense looks like for next year. And so we need the time to pull that together and my team to do the math and see how that works in. But we’re clearly aware of that as we’re setting prices and talking to customers next year about that. And so I just think that we have some capabilities that we’ve continually been building. And as we’re going through different impacts of our corn cycle, I think we’re going to really strive to be managing that gross profit dollar and that operating income dollar growth.
Andrew Strelzik: Great. I guess I’ll go ahead and leave it there. Thank you very much.
Jim Gray: Thanks, Andrew.
Operator: 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.
James Zallie: 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.
Operator: Thank you. Ladies and gentlemen, this does conclude today’s conference. Thank you all for participating. You may now disconnect. Have a great day.
