Surging distillery profitability drives MGPI quarter earnings

by Josh Sosland
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ATCHISON, KAS. – Net income of MGP Ingredients, Inc. in the second quarter ended Dec. 31, 2006, was $6,960,000, equal to 42c per share on the common stock, up dramatically from $1,211,000, or 5c per share, in the second quarter of fiscal 2006. Net sales were $87,645,000, up 16% from $75,671,000.

In an echo of what took place in the first quarter, the distillery business enjoyed higher volume and higher selling prices, Ladd Seaberg, chairman and chief executive officer, said.

"The sales revenue growth in our distillery segment was strong due to higher alcohol pricing combined with increased unit sales versus a year ago," he said. "Drying this past quarter, we implemented measures to strengthen alcohol production efficiencies. These measures improved our capacity and permitted higher throughput, which contributed to distillery profits. The capacity improvements were part of a previously announced plan to incrementally expand our alcohol production."

Higher wheat prices and lower unit sales of specialty ingredients for non-food applications depressed ingredient segment sales. Wheat prices averaged 27% higher than a year ago for MGPI, weighing on profitability.

Sales of certain specialty food ingredients declined as well from the second quarter last year. "This decrease was largely due to a planned phase-out of low return products to achieve a more profitable product mix," the company said. "Combined with yield improvements and strengthened cost efficiencies, this strategy helped to partially offset the impact of reduced sales of specialty ingredients for non-food applications, particularly pet applications."

The ingredients business of MPGI sustained a pre-tax loss of $4,575,000 in the second quarter and an $8,137,000 loss year to date, versus losses of $2,174,000 and $2,393,000 in the comparable respective periods in fiscal 2006. Net sales were $15,963,000 in the three months ended Dec. 31 and $31,953,000 in the six months, down from $22,012,000 and $44,462,000, respectively.

The MGPI Distillery Products business earned pre-tax income of $15,978,000 in the second quarter and $31,220,000 in the first half, a dramatic improvement from $3,856,000 and $10,805,000, respectively, last year. Second quarter sales were $71,682,000, up 34% from $53,659,000 in the second quarter last year. Year-to-date, sales were $140,687,000, up 30% from $108,255,000.

In the six months ended Dec. 31, MGPI net income was $13,746,000, or 84c per share, up 186% from $4,807,000, or 28c per share, in the comparable period a year earlier. Sales were $172,640,000, up 13% from $152,717,000.

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