MGP net income improves in first quarter

by World Grain Staff
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ATCHISON, KANSAS, U.S. — MGP Ingredients, Inc. on May 8 reported net income for the first quarter of $4.7 million or 26¢ per diluted share, up from income of $1.4 million or 8¢ per diluted share in the same quarter a year ago. 

Results from the prior year quarter included a profit of $1.4 million, net of tax, from discontinued operations and zero earnings per share from continuing operations.

Net sales for the first quarter declined by approximately 9% from the year-ago quarter. Beverage alcohol sales improved significantly on higher shipments from the Indiana distillery. Sales of industrial alcohol and by-products both declined compared to the same period a year ago. Ingredient segment sales in the first quarter declined from a year ago.

The company's gross profit during the first quarter was $6.8 million, or 8.6% of net sales, compared to $7.2 million, or 8.3% of net sales in the prior year period.

The distillery products segment reported first quarter pre-tax operating income of $5.4 million, or 8.4% of distillery products sales, compared to pre-tax operating income of $4.3 million, or 6.1% of distillery products sales, during the same quarter a year ago. 

Lower corn costs were mainly responsible for the improvement in return on sales over the prior year. The average per-bushel cost of corn decreased 39.5% from first quarter 2013, while the per-million cubic foot cost of natural gas increased 8%. Distillery products sales for the first quarter were $64.9 million, a decrease of 8.3% compared to the prior year quarter. Prices were lower in both distillers feed and lower-grade industrial alcohol products. Sales of fuel-grade alcohol more than doubled from the prior year period as production increased to take advantage of historically high margins.

The ingredients segment reported first quarter pre-tax operating income of $200,000, or approximately 2.1% of sales, compared to income of $1.5 million, or approximately 10.2% of sales, for the same quarter a year ago. Segment profitability in the first quarter was driven primarily by a lower margin mix of products sold. Ingredient segment sales for the first quarter declined by 8.7% to $14 million from the prior year's quarter following a decline in flour prices of 10.9% compared to the previous year.

Regarding the outlook, the company expects strong profitability in white goods again in the second quarter, but is cautiously planning for more normalized pricing in the second half of 2014. 

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