ATCHISON, KAN. — Net income at MGP Ingredients, Inc. increased 1.2% in the first quarter ended March 31, rising to $9.78 million, equal to 57¢ per share on the common stock, up from $9.65 million, or 57¢ per share, in the same period a year ago. Net sales also increased, rising 11% to $99.08 million from $89.1 million.
“These results reflect strong customer demand in both business segments, and improved effectiveness in our tactical execution,” Augustus C. Griffin, president and chief executive officer, said during an April 30 conference call with analysts. “Our results for this quarter reflect growth in premium beverage brown goods sales, as well as significant year-over-year increases in sales of our specialty wheat starches and proteins.”
Gross profit in the Ingredient Solutions segment increased to $5 million in the first quarter of fiscal 2020, up sharply from $1.4 million in the first quarter of fiscal 2019, while sales increased 31% to $19.1 million.
“Our Ingredient Solutions posted its fourteenth consecutive quarter of year-over-year sales growth,” Mr. Griffin said. “We have been very pleased with the continued strength and momentum of our Ingredients business over the past several years, and we are encouraged by the robust gross margins we were able to achieve this quarter. The majority of this increase is due to our ability to optimize sales in production toward our highest margin products. We also benefited from decreased input cost in the absence of flood-related cost.
“Specialty wheat starch sales grew 48.4% this quarter, while our specialty wheat protein sales grew 43.3%, both driven by increased volume and favorable average selling prices. We believe our specialty starch portfolio, particularly our line of fiber products and our recently rebranded ProTerra line of textured proteins, continue to be aligned with strong consumer trends.”
David J. Colo, president and chief operating officer, said during the call that MGPI has continued to see good growth in its Ingredients business despite the coronavirus (COVID-19) pandemic, primarily driven by MGPI’s well-positioned portfolio both on the wheat protein and the wheat starch side.
“I think what you’re seeing is kind of a continuation of strong consumer demand as consumers continue to migrate to a healthier diet,” he said. “And with our plant-based protein in the Ingredient sector, we really didn’t see any anomalies, if you will, in Q1 in that business. I think we’re just seeing good strong underlying consumer trends with a well-positioned portfolio to support those trends.”
Despite the strong start to fiscal 2020, Mr. Colo said MGPI remains cautious in regards to its outlook for the remainder of the year. He said the company has ample access to capital and is seeing encouraging customer demand, but even so, the uncertainty of COVID-19 makes it impossible to predict what may transpire in the months ahead.
“Our balance sheet and access to capital continue to be strong, while we seek to optimize cash management during this pandemic,” he said. “Although our long-term capital allocation strategy may experience little change, we seek to maintain a conservative cash position. … By renewing our credit facility and expanding our borrowing capacity earlier this year, we have enhanced our access to capital with attractive pricing and terms. As we navigate the effects of this pandemic, we will remain focused on prudent capital management, which is why we have elected to curtail stock repurchases while maintaining our quarterly dividend. The management team, in close collaboration with the board, has the ability to initiate the buyback program or adjust quarterly dividends as circumstances warrant.”