MGP Ingredients returns to profitability in quarter
by Eric Schroeder
ATCHISON, KAS. — With the premium side of its business gaining momentum, MGP Ingredients, Inc. rebounded from a loss sustained in the same year-ago period. Net income in the second quarter ended June 30 was $280,000, equal to 2c per share on the common stock, which compared with a loss of $850,000 in the same period a year ago. The year-over-year gain came despite a reduced volume of industrial alcohol, higher commodity prices and some temporary operational interruptions.
Sales were $79,395,000, down 7% from $85,534,000.
Tim Newkirk, president and chief executive officer, said operating results would have looked similar to the first quarter, when MGPI posted net income of $1,477,000 on sales of $86,404,000, if not for a temporary production shortfall at the company’s Atchison plant during the second quarter.
“That doesn’t mean we are satisfied,” he said. “Not by a long shot. We’re doing everything we can to cost optimize our bulk industrial alcohol business while supplies of U.S. corn are scarce. After back-to-back years of drought, and the resulting decline in physical corn stocks, industry experts are anticipating improvements by the end of this year’s planting season.
“With greater liquidity in the corn markets, MGP will be better able to match our costs and contract pricing. That’s the key for achieving acceptable gross margins in our industrial grades. In the meantime, we continue to shift our portfolio to higher profit products while driving our per-gallon costs lower.”
In its Food Ingredients segment, MGPI posted pre-tax income of $875,000, down from $987,000 in the second quarter of fiscal 2012. MGPI said gross profit margins decreased mainly due to higher raw material costs. The most notable was for flour, which average about 23.5% higher per pound over the prior year.
Net sales in the Food Ingredients segment were $15.4 million, up 10% from $14 million from the same period a year ago. MGPI said sales benefited from both higher average pricing and unit volumes, with specialty starches showing the sharpest net sales gains.
“Higher ingredient sales in the second quarter were led by strong demand for specialty starches and wheat proteins used in a variety of food applications in the U.S. and internationally,” the company said. “The company’s latest innovation is a lightly hydrolyzed wheat protein named Optein, which targets a number of applications such as nutritional drinks, smoothies, meal replacement bars and sports beverages.”
For the six months ended June 30, overall net income was $1,757,000, or 10c per share, up 71% from $1,026,000, or 6c per share, in the same period a year ago. Net sales were $165,799,000, down 4% from $171,878,000.