MGP Ingredients earnings, sales climb in fiscal 2012
ATCHISON, KAS. — Despite year-over-year gains in income and sales, fiscal 2012 “was not a satisfactory year” for MGP Ingredients, Inc., said Tim Newkirk, president and chief executive officer. Net income in the year ended Dec. 31, 2012, was $1,624,000, equal to 9c per share on the common stock, up 51% from $1,078,000, or 6c per share, in fiscal 2011. Net sales rose 20% to $334,335,000 from $279,463,000.
Income in the fourth quarter ended Dec. 31 was down sharply from the previously year, falling to $180,000, or 1c per share, from $16,144,000, or 89c per share. Last year’s fourth-quarter results included a $13 million asset acquisition gain related to the acquisition of the company’s Indiana distillery.
Net sales in the fourth quarter rose 23% to $86,350,000 from $70,339,000. Sales in part were boosted by strong gains for MGPI’s Fibersym resistant starch, which the company said increases dietary fiber levels while reducing the caloric content of bakery and prepared foods.
“The corn drought and consequent grain price volatility in 2012 prevented us from making any progress on our bottom line,” Mr. Newkirk said. “Our strategy for navigating this tough marketplace is to put more emphasis on our premium products. On that front we did achieve solid sales growth driven by our bourbon and rye whiskeys, custom distillery blends and our food ingredients targeting nutritional health.
“The improvement in our gross margins over the past few quarters is a key step as we work toward generating consistent operating profits and cash flow. We continue to experience lower volumes and margin compression in bulk alcohol sales due to higher input costs and increased market supply. However, our actions to reshape both our product mix and our asset base are beginning to bear fruit, even in the face of these ongoing industry challenges.”
Mr. Newkirk said MGPI reached a milestone in fiscal 2012 as the company marked its first full year of ownership of its Indiana distillery. The facility has helped MGP’s reestablish its presence in the premium segment of distilled spirits.
“With the help of new management and capital investments at the Indiana facility, we’re on track to see even stronger sales of premium spirits and custom blends in the coming year,” he said. “We have positioned MGP to serve not only the major players in our industry, but also the growing base of independent craft distillers. Meanwhile, aged brown goods remain in short supply, and we will continue to pursue opportunistic purchases to add to our aged barrel inventory.”
In its Ingredient Solutions segment, MGPI posted pre-tax income of $5,217,000, up from $1,008,000 in fiscal 2011. Net sales in the Ingredient Solutions segment were $56,488,000, down slightly from $56,774,000 in fiscal 2011. Specialty starches accounted for $26,393,000 of total sales in fiscal 2012, while specialty proteins accounted for $19,947,000, commodity wheat starch accounted for $9,027,000, and vital wheat gluten accounted for $1,121,000.
Distillery Products posted pre-tax income of $14,874,000, up sharply from $2,997,000 in fiscal 2011. Net sales in the Distillery Products segment were $276,690,000, up 25% from $221,730,000.
On Feb. 8, MGPI completed the sale of its bioplastics manufacturing facility in Onaga, Kas., and certain assets at the company’s extruder bio-resin laboratory located in Atchison. The purchase price was $2.8 million, and MGPI said it expects to record a $1.4 million gain on sale in the first quarter of fiscal 2013.
“The coming year will keep us focused on sales of premium products,” Mr. Newkirk said. “We face continued competitive pricing in our bulk white goods, namely industrial and beverage alcohol. To counter this, we must lower the cost-per-gallon at both of our distilleries with more efficient energy usage, equipment upgrades and process improvements.
“MGP has gone to great lengths over the past two years to reduce the impact of commodity volatility on our business. This transformation is reflected today in a higher value sales mix, a more effective supply chain, and a more productive base of assets. We won’t be satisfied, however, until we achieve the level of profits and cash flow returns that we believe are within our reach. The proof will be in the results. To that end, we anticipate progress on our bottom line in 2013 as our efforts start to take hold.”