MGPI continues turnaround, posts Q2 profit

by Eric Schroeder
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ATCHISON, KAS. — MGP Ingredients, Inc. continued to make progress in its turnaround, posting net income of $4,778,000, equal to 29c per share on the common stock, in the second quarter ended Dec. 31, 2009. This compared with a loss of $42,716,000 in the same period a year ago.

Sales were $44,672,000, down 39% from $73,242,000 in the same period a year ago.

“In the first quarter of this fiscal year, we essentially completed our business transformation process, followed in the second quarter by the strengthening of our balance sheet,” said Tim Newkirk, president and chief executive officer. “The solid profitability we continued to produce in the second quarter is indicative of the tremendous strides we have made and the potential that lies before us. I am very excited and pleased that 1) we have made such remarkable progress in such a relatively short period of time, and 2) we have a sound structure in place, strategically and organizationally, to grow our business in a more consistently profitable manner.”

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 profit of $2,700,000 in the second quarter, which compared with a loss of $4,200,000 during the same period last year. Net sales were $15,100,000, down 33% from the same period a year ago.

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 revenues from vital wheat gluten and commodity starch declined by $4,800,000 and $600,000, respectively, in the second quarter, while revenues for specialty starches decreased $1,500,000 behind lower unit sales. In addition, the per-pound cost of flour for the second quarter fell by 20% compared with the same period a year ago.

Mr. Newkirk did note a number of active projects in development within the Ingredient Solutions segment are performing well. As an example, he said second-quarter sales of the company’s nutritional fiber derived from wheat remained approximately even with the first-quarter level, but were up 10% compared with last year's second quarter.

“With improvements in our sales mix and cost structure, we are highly encouraged by our early successes in the value-added portion of this segment of our business,” he said.

Distillery Products posted pre-tax income of $4,200,000, which compared with a loss of $15,400,000 in the same period a year ago. Net sales in the Distillery Products segment were $29,000,000 in the second quarter, down 42% from a year ago. Revenues from fuel grade alcohol declined by 93%, while sales of food grade alcohol fell 9%. Distillers feed sales fell 49%.

Overall, for the six months ended Dec. 31, 2009, net income totaled $8,516,000, or 51c per share, up from a loss of $59,959,000 in the same period of fiscal 2009. Net sales for the period totaled $91,756,000, down 47% from $172,262,000 in the first six months of fiscal 2009.

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