ATCHISON, KAN. — Continued strength in the company’s Ingredient Solutions business, boosted in part by a shift toward plant-based diets, propped up earnings and sales at MGP Ingredients in the first quarter. Despite income that was down double digits from a year ago, executives at MGP Ingredients said first-quarter results represented the second-best quarter in company history, second only to the first quarter of fiscal 2022.
Net income at MGP Ingredients, Inc. decreased 17% in the first quarter ended March 31, falling to $31.07 million, equal to $1.40 per share on the common stock, from $37.44 million, or $1.69 per share, in the same period a year ago. Net sales increased 3% to $201.01 million from $195.24 million.
Gross profit in the Ingredient Solutions segment increased to $12.2 million in the first quarter of fiscal 2023 from $8.1 million a year ago, while sales increased 10% to $30.9 million.
“Our year is off to another strong start, and we remain encouraged by our continued momentum this quarter,” David J. Colo, president and chief executive officer, said during a May 4 conference call with analysts. “During the first quarter, we achieved our second best quarterly gross profit and adjusted EBITDA performance in company history. The results this quarter were second only to the first quarter of 2022, which represented a record for the company. The continued strength and value of our business model and long-term growth strategy underpinned our success this quarter.”
Mr. Colo said MGPI has maintained a high level of execution and continues to optimize product mix to benefit from broader consumer trends, including the shift toward plant-based diets.
“The increase in (Ingredient Solutions) sales was primarily driven by higher sales of specialty wheat proteins as well as commodity protein and commodity wheat starches as rising consumer demand for plant-based proteins and food products with lower net carbohydrates continue to gain popularity,” he said. “Gross profit this quarter also benefited from cycling through lower cost inventory at the start of the year, driving the segment’s gross margin higher. The momentum we continue to realize across our specialty ingredients products is driven by ongoing consumer demand for foods containing plant-based proteins and high fiber content. As we continue to align with these trends, construction of the textured protein extrusion facility that we previously announced remains on schedule with an expected start date during the fourth quarter of 2023.”
Brandon M. Gall, vice president of finance and chief financial officer, noted during the call that commodity expenses continued to climb during the quarter, with input costs for corn up 15% from the same year-ago quarter, wheat flour up 8%, rye up 61% and natural gas up 16%.
“Despite these elevated input costs, our risk management process and our focus on products that are premium and more specialty in nature, have enabled us to mitigate the impact of inflation over the past several quarters in most of our product lines,” he said.
Looking ahead to the full year of fiscal 2023, Mr. Colo maintained MGPI’s forecast for sales to be in the range of $815 million to $835 million while adjusted EBITDA is expected to be in the range of $178 million to $183 million.