ATCHISON, KAS. — MGP Ingredients, Inc., whose board of directors earlier this week concluded a review of the company’s strategic alternatives determining that the best approach to enhance long-term shareholder value is to continue execution of the company’s strategic plan to reposition the business for profitable growth, sustained a loss of $6,436,000 in the third quarter ended Sept. 30. The loss compared with income of $1,244,000, equal to 2c per share on the common stock, in the same period a year ago. Last year’s results included a $1.8 million unrealized hedging gain on open commodity derivatives.
Net sales for the company increased 5% to $80,171,000 from $76,107,000 in the third quarter of fiscal 2012. MGPI said beverage alcohol sales benefited from higher unit volume and pricing, while sales of industrial alcohol saw lower unit sales but increased pricing compared with the same period a year ago. Ingredient Solutions sales were flat.
“With the market fundamentals in certain grades of industrial alcohol now showing signs of improvement, we believe that we’ve reached a major turning point for achieving higher profits in our bulk white goods, which still comprise the vast majority of our distillery volume,” said Tim Newkirk, president and chief executive officer. “MGP’s profitability has been pressured from the combination of tight U.S. corn supplies coupled with very competitive pricing. Today, however, we’re on the receiving end of one of the largest corn harvests in recent history. With greater liquidity returning to the corn markets, we expect a two-fold benefit: lower corn costs going forward and the ability to fully hedge our customer contract pricing. Sustained lower corn costs are the key to achieving the company’s long-term targets of double-digit gross margins in industrial alcohol. Regardless of improving fundamentals, we will not stop looking for ways to lower our per-gallon manufacturing costs.”
Income from continuing operations in the company’s Food Ingredients segment totaled $1.2 million in the third quarter, unchanged from the same period a year ago. Flour costs averaged 13.9% higher than the prior-year period, which was offset by improved sales mix. Food Ingredients sales for the quarter were $14.1 million, down less than 1% from a year ago.
Mr. Newkirk identified specialty food ingredients as a driver of future profit growth, noting the company “continues to add technical and sales resources.”For the nine months ended Sept. 30, MGPI sustained a loss of $4,969,000, which compared with net income of $2,455,000, or 8c per share, in the same period a year ago. Net sales were $245,970,000, down from $247,985,000.