MGP Ingredients, Inc. Announces Profitable Fiscal 2010 First Quarter Results
MGPI's first quarter results reflect the benefit of a more focused product mix for both the ingredient solutions and distillery products segments. In essence, we have created a clear path for executing our growth plans.
6 Nov 2009 --- MGP Ingredients, Inc. reported net income of $3,738,000, or $0.22 in diluted earnings per share, for the first quarter of fiscal 2010, which ended September 30, 2009. This compares with a net loss of $17,243,000, or $1.04 in diluted loss per share, for the first quarter of fiscal 2009. The increase in earnings was primarily the result of an improved sales mix of value-added products, reductions in grain and energy costs, and lower payroll costs as a result of restructuring completed in fiscal year 2009. Total sales in the first quarter of fiscal 2010 were $47,084,000, a 52.5 percent decrease from sales of $99,020,000 for the same period a year ago. The sales decline was principally due to the company's significant reductions in sales of fuel grade alcohol and commodity ingredients.
"The turnaround represented by our first quarter profit performance is a great and exciting way to start the new fiscal year," said Tim Newkirk, president and chief executive officer. "Our profit momentum has carried over from our fourth quarter, again reflecting the stark difference in our product mix and cost structure as compared to one year ago. We completed a significant transformation in fiscal 2009 in order to strengthen our position as a producer of value-added ingredients sold into a wide range of branded packaged goods. We have significantly reduced our presence in the commodity-type product markets, particularly fuel grade alcohol and vital wheat gluten. While I'm encouraged to see our pre-tax income approaching $4 million, I know that we are only beginning to realize our long-term potential."
Reflecting on the company's progress, John Speirs, chairman of MGPI's board of directors, commented that "Management has accomplished a lot of heavy lifting to get results back on a profitable track." He further noted that the first quarter of fiscal 2010 "is the first quarter in nearly a year that we have not reported one-time or other unusual items related to the company's restructuring plan. MGPI's first quarter results reflect the benefit of a more focused product mix for both the ingredient solutions and distillery products segments. In essence, we have created a clear path for executing our growth plans. We see opportunities to drive sales growth in both of these key segments. Regarding ingredients, we are starting to make significant headway in putting more science behind our products that promote health and wellness. This includes our resistant starches, specialty proteins, and textured proteins. Our packaged goods customers are focused on developing foods that deliver higher fiber along with lower fat, fewer calories and lower cholesterol."
Newkirk stated that MGPI's marketing efforts "have been greatly enhanced" by recent clinical studies pointing to the nutritional benefits of the company's Fibersym RW resistant wheat starch. "For example," he said, "in bread applications our ingredients can increase the dietary fiber by a factor of five times, with a lower calorie count, compared to the standard bread formulation. In the bakery world alone, there is huge potential to improve the nutritional benefits of processed foods with our patented technology. We believe that MGPI has the best dietary fiber for flour-based foods. We're aggressively taking that message to our longstanding list of core customers." In an effort to expand the scope of the MGPI's products and services, Newkirk also noted that the company also recently aligned with a key distributor to the bakery industry.
"Along with sales growth we are focused on producing and sustaining higher profit margins," Newkirk explained. "Our first quarter gross margins exceeded 20 percent. However, we realize that this may not be sustainable, as it resulted from a number of factors which are not likely to be repeated over a prolonged period such as the effects of a special product mix and/or specific input costs. We have gone on record recently with a targeted gross margin in the range of 15 percent. Our actual results could differ from this forward-looking statement, as there are many factors that impact gross margin, including product mix, raw material costs, energy costs, etc. and, as such, actual margins will differ from our target. Nonetheless, this represents quite a change from the widely variable margins that the company has historically experienced."
Newkirk went on to note that, "While the recent improvements in our margins have resulted in part from a higher-value sales mix, we see significant opportunity for further improvement as we increase our manufacturing productivity. Specifically, we are targeting higher starch recoveries. Our ability to produce and sell more starch per pound of flour processed should flow directly to our bottom line. In addition to generating a higher profit per pound, we have the ability to increase unit volumes by a significant factor without the need for much in the way of incremental capital."
