MGP Ingredients Swings to Profit in Q4
The sales improvement was principally due to higher sales of high quality food grade alcohol that resulted from increased output from the company's previously announced joint venture, Illinois Corn Processing (ICP), LLC.
Aug 25 2010 --- MGP Ingredients, Inc. has reported net income of $2,476,000, or $0.14 in diluted earnings per share, for the fourth quarter of fiscal 2010, which ended June 30, 2010. This compares with a net loss of $2,916,000, or $0.18 in diluted loss per share, for the fourth quarter of fiscal 2009. Total sales in the fourth quarter of fiscal 2010 were $54,359,000, a 4 percent increase above sales of $52,233,000 for the same period one year ago. The sales improvement was principally due to higher sales of high quality food grade alcohol that resulted from increased output from the company's previously announced joint venture, Illinois Corn Processing (ICP), LLC.
Historically, the company has reported its sales net of customer-paid freight costs. The fourth quarter and annual sales presented in this report, as well as previous quarterly and yearly amounts, are now stated gross, and all freight costs are now included in cost of sales.
For the 12 months of fiscal 2010, the company had net income of $8,738,000, or $0.51 in diluted earnings per share, on sales of $201,971,000. That compares to a net loss of $69,123,000, or $4.17 in diluted loss per share, on sales of $291,812,000 for fiscal 2009.
"This past fiscal year represents a significant and remarkably quick return to profitability," said Tim Newkirk, president and chief executive officer. "We ended the year on a strong note paced by higher sales of food grade alcohol and an improved sales mix of higher value specialty ingredients. At our ICP joint venture, we moved closer to full capacity volumes in the fourth quarter. The reduction in costs associated with the start-up of operations there, along with volume gains, produced a substantial upturn from the immediately preceding third quarter. In the fourth quarter, we also saw continued progress in sales of our specialty resistant wheat starch, which provides the nutritional benefits of fiber while also possessing a desirable flavor profile. With a growing focus on health and wellness, food companies are searching for new ways to make their products more nutritious and more convenient without sacrificing taste. MGPI's fiber platform is especially well-suited for a wide variety of prepared packaged foods. Our newly configured sales and customer service teams are having a positive impact as measured by a growing development pipeline and, more importantly, an increasing number of customer products being formulated with our specialty ingredients."
Board Chairman John Speirs added, "We made much headway in the fourth quarter to conclude the year on a very positive and exciting note. The progress we made exemplifies the benefits we realized over the past year from our restructuring plans, including higher gross margins, reduced exposure to commodity volatility, improved working capital management, and a reduction in our net debt to $2.8 million from $30.6 million at the start of fiscal 2010 and from a high of $54.5 million that was experienced during the second quarter of the prior fiscal year."
Total sales revenue in the ingredient solutions segment for the fourth quarter was $14.6 million, a decrease of approximately 8 percent compared to the prior year's fourth quarter. This decrease was mainly attributable to lower unit volume resulting from the planned reduction in sales of certain lower margin starches. The decrease in unit sales was partially offset by higher average selling prices for both specialty starches and specialty proteins. Additionally, sales of specialty starches and proteins in total accounted for 85 percent of all sales in the ingredient solutions segment during the fourth quarter. Commodity starches and commodity vital wheat gluten combined accounted for the remaining 15 percent.
Ingredient solutions pre-tax profits improved to $2.5 million compared with pre-tax profits of $1.4 million in the prior year's fourth quarter. Profit margins improved compared to a year ago due to the reduction in sales of unprofitable product lines and the resulting improved sales mix of value-added ingredients. Lower flour costs were also a contributing factor, with the per-pound cost of flour declining by 18 percent compared to the year ago quarter.
Revenues in this segment for the entire fiscal year for Ingredient solutions declined to $59.7 million from $82.1 million for the previous year. The decline was mainly due to strategic decreases in the production and commercialization of commodity starches and wheat gluten. Decreases in certain specialty starch sales and, to a much lesser extent, specialty protein sales were also factors contributing to this decline. Sales of MGPI's fiber-enhancing resistant wheat starch and the company's unique textured wheat proteins showed year-over-year increases, helping drive a solid improvement in the ingredient segment's profit performance. Pre-tax income in this segment for all of fiscal 2010 was $9.7 million compared with a pre-tax loss of $6.7 million in fiscal 2009.
