ATCHISON, KAS. — MGP Ingredients, Inc., in the third quarter ended March 31 sustained a loss of $6,248,000, versus a loss of $6,629,000 in the same period a year ago. Results during the quarter included costs of $2.2 million related mainly to projected settlements of natural gas contracts and the termination of rail car leases.
Sales were $54,562,000, down sharply from $106,694,000 in the same quarter a year ago. MGPI said sales from exited, unprofitable product lines were down $43.5 million, or 86%, from the same period a year ago.
"Our business transformation process has resulted in a much smaller, more efficient physical footprint," said Tim Newkirk, president and chief executive officer. "Our new lean operations align with our strategy to drive applied technology and commercialization of value-added solutions for the branded packaged goods industry. We have essentially exited the commodity wheat gluten business and have curtailed our commodity starch production. By closing protein and starch production at Pekin, Ill., we have reduced the volume of our ingredient solutions business by approximately 20% in terms of pounds while improving our profitability. Our manufacturing strategy is achieving better consistency and yields in our specialty product lines."
During the quarter, Mr. Newkirk said MGPI realized a noticeably improved starch recovery percentage at its Atchison facility. He also said the company’s recent exit from the fuel grade alcohol business has enabled MGPI to execute on its strategy to drive performance in its premium and food grade alcohol business.
Another area of progress was a reduction in inventories of approximately $45 million, a move that Mr. Newkirk said has contributed to a positive turnaround in third-quarter pre-tax profit performance in the ingredient solutions segment on both a sequential and year-over-year basis and a sequential improvement in the company’s distillery segment.
In its Ingredient Solutions segment, MGPI posted pre-tax income of $1,415,000 in the third quarter, which compared with a loss of $2,593,000 during the same period last year. Net sales were $16,266,000, down 37%.
MGPI said sales of specialty ingredients, consisting of specialty proteins and specialty starches, fell by $1,857,000, or 12%, during the quarter. Sales of vital wheat gluten decreased by $5,900,000, or 82%, primarily as a result of the company’s planned reduction in gluten sales. Sales for commodity starch, meanwhile, increased $147,000, or 17%, as a result of improved sales volume.
Distillery Products posted pre-tax income of $41,000 in the third quarter of fiscal 2009, which compared with pre-tax income of $5,474,000 in the same period a year ago. MGPI attributed the decline to negative margins from fuel grade alcohol sales during the first two-thirds of the quarter. Net sales were $37,263,000, down 53%.