MGP Ingredients Announces FY 2008 Fourth Quarter and Year-End Results
Total sales in the fourth quarter of fiscal 2008 were $104,227,000, an increase of 3 percent above fourth quarter sales a year ago of $101,547,000.
27/08/08 MGP Ingredients, Inc., reported a net loss of $9,989,000, or $0.60 in diluted earnings per share, for the fourth quarter of fiscal 2008, which ended June 30, 2008. The loss for the quarter included $1.0 million net of tax, or $0.06 per share, related to the write-off of fixed assets. This compares with net income of $1,668,000, or $0.10 in diluted earnings per share, for the fourth quarter of fiscal 2007. Total sales in the fourth quarter of fiscal 2008 were $104,227,000, an increase of 3 percent above fourth quarter sales a year ago of $101,547,000. For all of fiscal 2008, the company reported a loss of $0.70 per diluted share compared with income of $1.04 per diluted share for the prior fiscal year.
"There was no price relief in our key input costs in the fourth quarter," said Tim Newkirk, president and chief executive officer. "In fact, just the opposite occurred with July corn futures reaching all-time highs of over $7.50 per bushel in late June, and May wheat futures reaching nearly $9.00 per bushel. This directly impacted our reported results for the fourth quarter and even to a greater extent than we witnessed in the third quarter."
According to the United States Department of Agriculture (USDA), domestic corn production from this year's upcoming harvest is forecast at 12.3 billion bushels. While this figure is down 6 percent from last year's harvest, it represents a 17 percent increase above corn production in 2006. Based on the USDA's world agricultural supply and demand estimates, this year's global wheat production is projected at 670.8 million tons, an increase of 60.2 million tons compared to the previous year. This anticipated increase in global wheat production and the forecasted size of the U.S. corn crop has recently led grain analysts to expect some downward pressure on wheat and corn prices later this fall.
In addition to the higher grain costs, the company also experienced higher energy costs due to increased natural gas prices in the fourth quarter compared to both the same period a year ago and the third quarter of fiscal 2008. "Fortunately, natural gas prices have retreated to around $8.00 per million BTUs from a recent high of nearly $13.00 per million BTUs," Newkirk said. "While we expect to benefit from these lower energy costs in coming quarters, we are continuing to pursue plans for the installation of a coal boiler cogeneration facility at our Pekin, IL, plant, which has the potential to generate significant energy savings starting in 2011 if all goes as anticipated.
"The major impact on our results for all of fiscal 2008 was from commodity inflation, namely the record high prices for corn and wheat combined with the hike in natural gas prices. Corn and wheat prices for the year averaged 37.6 percent and 63.3 percent higher, respectively, above our fiscal 2007 levels, while the price of natural gas averaged 14.8 percent higher than the average price of natural gas during the prior year. The substantial rise in natural gas prices occurred as oil prices exceeded over $140 per barrel for a time during the latter part of fiscal 2008. Recently, oil prices have declined to a range of approximately $115 to $120 per barrel and, as a result, natural gas prices have also trended down."
Newkirk added that the company made several strategic moves during fiscal 2008 that are expected to impact future periods. "As we previously stated, we are transforming MGPI into a leading U.S. producer of specialty proteins and starches, as well as high quality food grade alcohol. This has been no small feat as we completely reconfigured our ingredient technology platforms around our customers. We narrowed our product lines to drive to a higher-value mix. We also took the opportunity to rationalize our manufacturing footprint, which as previously reported, involved the write-down of plant and equipment associated with the manufacturing of pet-related products and certain of our Wheatex textured wheat proteins that, in the future, we plan to produce through third parties. These actions in total are geared to improving our long-term profits and cash flows. At the same time, the structural and business process changes have created a strong foundation for enabling new growth opportunities in our respective business segments."
