MGPI trims loss in third quarter
May 11, 2010
by Eric Schroeder
ATCHISON, KAS. — MGP Ingredients, Inc. narrowed its loss in the third quarter ended March 31, trimming its loss to $2,254,000 from $6,248,000 in the same period a year ago. Results during the quarter included $1,541,000 in joint venture costs, including start-up costs and low initial production volumes associated with the company’s previously announced Illinois Corn Processing, L.L.C. joint venture.
Sales were $46,716,000, down 14% from $54,562,000 in the same quarter a year ago. MGPI said the sales decline reflected the company’s planned reduction in sales of fuel grade alcohol and resulting lower sales of distillers feed, the principal co-product of the alcohol production process.
“As we move forward in the final quarter of this fiscal year, we anticipate a return to profitability and our business performance to be more closely reflective of our new focus on value-added specialty ingredients and high-quality food grade alcohol,” said Tim Newkirk, president and chief executive officer. “We’ve made significant progress during the year, starting with sales growth in our value-added specialty ingredients. Following lengthy product development cycles, our fiber and textured protein platforms are finding their way into new formulations of prepared packaged foods, including frozen, refrigerated and microwavable items. A big contributing factor to our success has been the added sales and application support for these key areas. MGPI is poised to expand its market share and its reputation as a leading resource of dietary fiber with our unique and highly effective Fibersym resistant wheat starch. At the same time, the new sales mix has produced a dramatically improved profit profile from a year ago.
“Our strategic restructuring plan included a significant decrease in sales of commodity products and a company-wide reduction in operating costs. The early evidence of our strategy can be seen in our gross margins, where to date we are ahead of our stated annual target.”
Mr. Newkirk noted MGPI sustained extra costs for bringing its Pekin, Ill., joint venture on-line during the quarter, but he added the facility is now up and running and is expected to make increasing contributions to the company’s sales and operating profits.
“The next milestone for the facility will be to achieve full production rates and optimized cost efficiencies,” he said. “All things being equal, this will greatly reduce our loss below the operating line and enhance our net income.”
In its Ingredient Solutions segment, MGPI posted pre-tax income of $2.2 million, which compared with $1.4 million in the third quarter last year. Net sales were $14.1 million, down 13% from $16.3 million.
MGPI said combined sales of commodity ingredients, primarily vital wheat gluten and commodity starch, fell $1.5 million, or 65%, during the quarter, while revenues for specialty starches fell by $500,000, or 12%, due to lower unit sales and decreased unit pricing. Sales for specialty proteins rose by approximately $200,000, or 4%, behind higher unit sales, MGPI said.
Distillery Products posted pre-tax income of $1.9 million, which was a sharp rise from $41,000 in the third quarter of fiscal 2009. MGPI attributed the increase to the company’s strategic focus on the production and sales of high-quality food grade alcohol. Net sales were $31.9 million, down 14% from $37.3 million.
Pre-tax profit in the Other segment was virtually breakeven, which compared with a loss of $162,000 in the same period a year ago. Net sales for the segment fell 42% to $602,000, primarily reflecting lower sales of pet products, which the company discontinued in August 2009. Sales of plant-based biopolymers rose approximately 99% and now comprise the majority of the Other segment’s revenues, MGPI said.