MGPI profit nears $4 million in first quarter

by Eric Schroeder
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ATCHISON, KAS. — Improved sales mix of value-added products, reductions in grain and energy costs and lower payroll costs helped spur a turnaround in earnings at MGP Ingredients, Inc., in the first quarter ended Sept. 30. Net income in the first quarter was $3,738,000, equal to 22c per share on the common stock, up from a loss of $17,243,000 in the first quarter of fiscal 2009.

Sales were $47,084,000, down 52% from $99,020,000 in the same period a year ago.

"The turnaround represented by our first-quarter profit performance is a great and exciting way to start the new fiscal year," said Tim Newkirk, president and chief executive officer. "Our profit momentum has carried over from our fourth quarter, again reflecting the stark difference in our product mix and cost structure as compared to one year ago.

"We completed a significant transformation in fiscal 2009 in order to strengthen our position as a producer of value-added ingredients sold into a wide range of branded packaged goods. We have significantly reduced our presence in the commodity-type product markets, particularly fuel grade alcohol and vital wheat gluten. While I’m encouraged to see our pre-tax income approaching $4 million, I know that we are only beginning to realize our long-term potential."

John Speirs, chairman of the company’s board of directors, added that the first quarter of fiscal 2010 marks the first quarter in nearly a year that MGPI did not report a one-time or other unusual items related to the company’s restructuring plan.

In its Ingredient Solutions segment, MGPI posted pre-tax income of $2,297,000 in the first quarter, which compared with a loss of $5,389,000 during the same period last year. Net sales were $15,059,000, down 42% from $25,897,000.

MGPI said the majority of the sales decline was due to a planned reduction in sales of commodity and other low or negative margin ingredients. MGPI said the company’s profitability benefited from reduced flour costs — down 27.9% per lb from a year ago — resulting from lower wheat prices compared with a year ago.

Mr. Newkirk said MGPI particularly has been pleased by its enhanced marketing efforts for the company’s Fibersym RW resistant wheat starch.

"In bread applications our ingredients can increase the dietary fiber by a factor of five times, with a lower calorie count, compared to the standard bread formulation," he said. "In the bakery world alone, there is huge potential to improve the nutritional benefits of processed foods with our patented technology. We believe that MGPI has the best dietary fiber for flour-based foods. We’re aggressively taking that message to our outstanding list of core customers."

Distillery Products posted pre-tax income of $6,629,000, which compared with a loss of $12,926,000 in the same period a year ago. Net sales in the Distillery Products segment were $31,373,000 in the first quarter, down 56% from $71,362,000. Revenues from fuel grade alcohol declined by 94%, while sales of food grade alcohol fell 28%. Distillers feed sales fell 60%.

MGPI said a decrease in volume in the Distillery Products segment reflected the closing of the Pekin, Ill., facility in January.

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