MGP Ingredients generates positive operating results in quarter
May 6, 2013
by Eric Schroeder
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ATCHISON, KAS. — Improvements in plant performance and sourcing contributed to an operating income gain at MGP Ingredients, Inc. in the first quarter of fiscal 2013. Income from operations in the period ended March 31 totaled $1,296,000, which compared with a loss of $2,243,000 in the same period a year ago.
Net income in the first quarter was $1,477,000, equal to 8c per share on the common stock, down 22% from $1,876,000, or 10c per share, in the same period a year ago. The most recent quarterly results included a previously announced $1.4 million gain on the sale of discontinued operations, while last year’s first-quarter results included a gain of $4 million related to the sale of a 20% interest in the Illinois Corn Processing join venture.
Sales were flat in the period, totaling $86,404,000, which compared with $86,344,000 in the same period a year ago.
Tim Newkirk, president and chief executive officer, said business remains challenging in bulk white goods, which represent the majority of MGPI’s alcohol sales. However, the company has benefited from an ability to generate positive operating results.
“Despite corn and flour prices that remain elevated, MGP has benefited in terms of availability and pricing from our grain sourcing agreements,” he said. “Our new approach has also lowered working capital requirements and reduced inventory volatility related to commodity price swings. This is a complete departure from the past. MGP’s inventory today reflects our premium focus, with much lower volumes yet higher per-unit values. We’ve gone from barge loads to barrels. Another area where we’ve reduced our fixed costs and increased flexibility is transportation, resulting in greater efficiency and better customer service.
“We’ve made real progress over the past few quarters. I credit our employees, including key personnel we added in the areas of supply chain, plant operations and finance. The addition of whiskeys and bourbons to our revenue mix has certainly helped our profitability, and that holds even greater potential in the coming years.”
In its Food Ingredients segment, MGPI posted pre-tax income of $1.5 million, down from $1.6 million in the first quarter of fiscal 2012. MGPI said profits were approximately even with the prior year due to higher average selling prices offset by increases in the average cost of flour and natural gas.
Net sales in the Food Ingredients segment were $15.4 million, up 13% from a year ago. MGPI said sales benefitted from higher average pricing and unit volumes.
Distillery Products posted pre-tax income of $4.3 million, up from $2.6 million in the same period a year ago. The per-bushel cost of corn for the three months averaged nearly 20% higher than the same period a year ago, while natural gas increased by almost 4% over the same period, the company said.
Net sales in the Distillery Products segment were $70.8 million, down 2% from a year ago. MGPI said increases in sales of premium spirits, whiskeys, bourbons and distillers feed were offset by declines in lower-grade alcohol products.
MGPI said it suffered an operating loss of $90,000 in its Bioplastics segment, which compared with a loss of $96,000 in the same period a year ago. Net sales in the segment were $198,000, down from $281,000 a year ago.
“MGP is running more efficiently, and it’s helping to counter the effects of weak markets for bulk white goods and high input prices,” Mr. Newkirk said. “We continue to reshape our product mix and our balance sheet to support growth opportunities in our premium markets. Our strategic business partners continue to play a key role in MGP’s future, especially as we take these relationships to the next level. With the addition of our new distillery, we’re exploring system-wide opportunities for optimizing storage and transportation, as well as protecting our margin on materials.
“We’ve come through a volatile and protracted grain cycle in very good shape. More importantly, our future success will not be dependent on input prices as it was in years past. We think that the acquisition of the Indiana distillery was a seminal event for MGP. It gave us critical scale in the important premium spirits industry, but it also created new momentum across the company. We’ve accomplished a great deal in the past year, including the creation of a strong new business pipeline.”