Profits at MPG Ingredients Surge on Switch to Higher Margin Products but Sales Fall
06 May 2016 --- MPG Ingredients has reported a near 40 percent jump in net income in the first quarter, as it benefited from its switch to focus on higher margin products but sales fell.
Net income was up 39.2 percent to $7.1 million in the period at the Kansas-based company but sales were down 4.4 percent to $76.8 million, as MPG Ingredients was hurt by a fall in sales of lower margin products.
The fall in sales has forced MPG to revise downwards its sales guidance for the year, which is now expected to grow in the mid-single digits, compared to higher single digits previously expected.
“We are very pleased with the results for the quarter and our continued progress in implementing our long term strategic plan,” said Gus Griffin, president and CEO of MPG.
“The increase in our operating income is evidence of that progress. While net sales declined due to softness in some of our lowest margin products, our focus on our highest margin products drove a significant increase in gross profit.”
Across its Distillery Products division sales were down 3.1 percent to $63.8 million but profits rose to $14.9 million from$11.5 million, as MPG benefited from the move to higher margin spirits, higher selling prices and lower input costs.
Griffin added: “We continue to enjoy very strong demand for our bourbon and rye whiskeys, reflecting the projected long term growth of that category.”
“Net sales for our Distillery Products segment were down, primarily driven by a decline in our industrial alcohol business, the result of a very competitive market and a mild flu season."
“Despite that, our strong focus on our higher margin beverage alcohol products pushed segment gross profit up substantially."
“While we expect some volatility in our product mix, we believe the large shift this quarter is temporary and we remain pleased with the long term trend.”
Across its Ingredients Solutions division, profits increased from $1.9 million to £2.2 million but sales were down 10.7 percent to $13 million.
Griffin said: “While net sales for our Ingredients Solutions segment were down, with exports hindered by the strong US dollar, strong growth in our specialty protein products supported improved segment gross profit. We continued to be encouraged by our progress in positioning this segment to benefit from long term consumer trends.”
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