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TheStreet Open House

MGP Ingredients, Inc. Reports Second Quarter 2012 Results

Stock quotes in this article: MGPI

Strong Demand for Beverage Alcohol Drives Distillery Segment Sales

Highlights

  • Q2 total net sales up 24% vs. year ago
  • Higher volume and pricing drive distillery sales increase of 34% vs. year ago
  • Q2 net loss per share of $0.05 vs. net loss of $0.61 in prior year
  • Improved material sourcing and selected price increases set stage for second half of year

ATCHISON, Kan., Aug. 9, 2012 (GLOBE NEWSWIRE) -- MGP Ingredients, Inc. (Nasdaq:MGPI) today reported results for the second quarter ended June 30, 2012. The net loss of $850,000, or $0.05 per diluted share, compared favorably with a net loss of $10.3 million, or $0.61 per diluted share, in the prior year.

Net sales for the second quarter increased 24 percent compared to the same quarter a year ago. The increase was primarily attributable to higher volume and improved pricing in high quality food grade alcohol. The recently acquired Lawrenceburg, Indiana distillery contributed to higher sales of beverage alcohol, along with sales of distillers feed and warehousing revenues. The ingredients segment reported lower sales for the period due to decreased volume partially offset by improved pricing.

Net income for the second quarter improved from a year ago, with a net loss of $850,000 compared with a net loss of $10.3 million. The net loss for the second quarter was driven by the continuing high costs of raw materials and the temporary effects of a planned 1-week shut-down of the Atchison, Kansas, plant for maintenance and capital upgrades. The company also experienced higher personnel costs related to the acquisition of the Lawrenceburg, Indiana distillery in late 2011. The loss during the prior-year period included significant unfavorable changes to cost of sales from open hedge contracts.

"We're making continued progress on growing the top-line," said Tim Newkirk, president and chief executive officer. "Our profitability, on the other hand, continues to lag behind our targets. High corn prices are certainly having an impact in terms of margin compression. However, this is mainly a function of some of our existing supply contracts, most of which are expected to roll off in the second half of the year. That's why we haven't yet been able to fully take advantage of our new sourcing agreements. Fortunately, our supply partner has an extensive global corn origination network and is not solely dependent on local origination for our facilities' corn supply. We also benefit from their much greater buying power. By the fourth quarter, we expect to be back to flat pricing for most of our grain needs, thereby reducing our corn basis risk and its negative impact on distillery margins.

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