ATCHISON, KANSAS, US — The Ingredients Solutions segment of MGP Ingredients achieved record gross profits in the first quarter ended March 31 thanks to strong demand and improved product mix, said David Colo, president and chief executive officer, in a May 5 earnings call. Gross profit more than doubled to $8.1 million from $4 million in the previous year’s first quarter. Sales increased 46% to $28 million from $19.1 million.
“The product lines that we have in this business, they’re plant-based high-protein, high-quality starches, excellent fibers,” he said. “They’re in strong demand in our customers’ products.”
In the previous year’s first quarter, MGPI experienced temporary softness in Ingredient Solutions primarily because of a natural gas curtailment that impacted about two weeks of production, reducing gross margin by about 400 basis points, Colo said.
“The increase in sales (in this year’s first quarter) was primarily driven by increased volumes and higher average selling prices of specialty wheat starches and proteins as well as commodity wheat starches,” Colo said.
MGPI companywide had net income of $37.3 million, or $1.69 per share on the common stock, which marked a 142% increase from $15.4 million, or 90¢ per share, in the previous year’s first quarter. Sales increased 80% to $195.2 million from $108.3 million
In the Distilling Solutions segment, Gross profit increased 38% to $38.9 million from $28.2 million. Sales rose 26% to $111.5 million from $88.6 million, reflecting a 38% increase in sales of premium alcohol.
In the Branded Spirits segment, gross profit rose to $24.8 million while sales reached $55.8 million, up from $570,000 in the previous year’s first quarter, primarily due to the April 1, 2021, acquisition of Luxco.
MGPI has dealt with higher prices for corn, wheat flour and natural gas over the last several quarters, said Brandon M. Gall, chief financial officer.
“As we shared in February, we entered the 2022 fiscal year with the majority of commodities purchased against contracted volumes,” he said. “We employ an extensive risk management program that includes purchasing the corresponding grain at the same time we contract volume and pricing for our products.
“Our objective, as always, is to price through as much commodity input inflation as possible. However, for various reasons, we do not contract 100% of our sales. For example, there are certain customers for our white goods and industrial alcohol products that choose not to contract in advance. Additionally, customers for our fuel-grade alcohol, distillers feed and related coproducts also purchased in the spot market. As a result, we cannot provide assurance that we will always be able to price through increases in commodity costs to our customers in the open market.”
Supply chain disruptions have had a minimal impact on MGPI over the last several quarters, but company executives continue to monitor to mitigate potential impacts, Gall said.