MGPI earnings, sales slide in quarter

by Eric Schroeder
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ATCHISON, KANSAS, U.S. — Soft performance in the company’s Ingredient Solutions business bogged down earnings and sales at MGP Ingredients, Inc. Net income at the Atchison, Kansas-based supplier of specialty wheat proteins and starches in the second quarter ended June 30 totaled $6.308 million, equal to 37¢ per share on the common stock, down 20% from $7.871 million, or 44¢ per share, in the same period a year ago.

Net sales during the period also fell, decreasing 6% to $80.392 million from $85.354 million.

MGP Ingredients CEO Gus Griffin
Gus Griffin, president and chief executive officer of MGPI.

“While our second-quarter results were disappointing, we are pleased with our continued progress against our strategic plan, with our year-to-date operating income up 21% over the prior year,” said Gus Griffin, president and chief executive officer of MGPI. “Although a decrease in volumes in our lower-margin distillery product lines affected our second-quarter results in that segment, we continued to grow sales of higher-margin premium beverage alcohol products. Our Ingredient Solutions segment continued to experience a competitive global pricing environment and difficult export conditions.”

Gross profit in the company’s Ingredient Solutions segment decreased to $1.9 million from $3.9 million a year ago, while net sales for the segment fell nearly 17% to $13.7 million.

“Our Ingredient Solutions segment results reflect a challenging, competitive environment,” Griffin said. “We expect most product categories to return to historical low growth trends in the second half, as we continue to work to proactively position this segment to benefit from long-term consumer trends.”

For the first six months of fiscal 2016 ended June 30, net income totaled $13.329 million, or 77¢ per share, up from $12.941 million, or 72¢ per share, in the same period a year ago. Net sales were $157.227 million, which compared with $165.767 million.

MGPI said its 2016 net sales percentage growth projection has been revised downward to the low-single digits, reflecting the impact of the company’s first half sales decline. Meanwhile, 2016 gross margin gains are expected to be moderate following strong 2015 improvement, and operating income is expected to increase by a compound annual growth rate in the 10% to 15% range over the next three years.

“Despite market-driven pressure on overall net sales in the first half of 2016, MGP continues on the path of long-term growth,” Griffin said. “Our strategy of maximizing the value of our production is clearly buffering us from near-term volume declines in lower-margin products. We remain focused on implementing our long-term strategy in both operating segments.”  
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