MGPI vital wheat gluten sales surge

by Josh Sosland
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ATCHISON, KAS. — Sales in the Ingredient Solutions segment of MGP Ingredients Inc. surged 70% to $24,963,000 in the second quarter ended Dec. 30 versus the same period in 2006. Announcing second-quarter financial results, MGPI said vital wheat gluten sales were up $6.3 million in the quarter due to "significantly higher volumes as well as per-unit pricing compared with year-ago levels." Tighter supplies worldwide have bolstered demand for vital wheat gluten, and surging cash wheat premiums for high protein wheat could be contributing to demand as well. Net income of MGPI in the second quarter was $5,264,000, equal to 32c per share on the common stock, down 23% from $6,960,000, or 42c per share. Sales were $93,995,000, up 7%. Results in fiscal 2008 included a gain of $7,046,000 from the settlement of a 2005 patent infringement lawsuit. Absent the settlement, MGPI would have sustained a pre-tax loss of $2 million. The Ingredient Solutions business sustained an operating loss in the quarter of $124,000, versus a loss of $2,757,000 in the same period in fiscal 2007. Operating income in the Distillery Products segment plunged to $1,338,000, a 91% drop from $15,711,000 the year before. "We have been feeling the impact of lower ethanol pricing on distillery profits since the fourth quarter of last fiscal year," said Ladd Seaberg, chairman and chief executive officer. "This situation in the current year’s second quarter was further aggravated by near record corn prices, a major component of our cost of goods sold. We also fell short of achieving full planned distillery capacity due to some temporary fermentation issues which have since been resolved. Although corn prices have remained at or near this higher level and, based upon Chicago Board of Trade Futures, are expected to increase this summer, we are encouraged by the prospect of strengthened ethanol pricing for the balance of the fiscal year. The progress we are making with our ingredient solutions segment is more apparent on the top line than the bottom line. Granted, we did benefit from gluten sales, but we are also achieving better sales and margin improvements in our core specialty ingredients. As we continue to migrate to a higher mix of value-added products, the impact of rising wheat costs should lessen over time."

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