ATCHISON, KANSAS, U.S. — MGP Ingredients, Inc. suffered a loss of $850,000 in the second quarter ended June 30, which compared with a loss of $10,258,000 in the same period a year ago. MGP attributed the loss to continuing high costs for raw materials as well as the temporary effects of a planned one-week shutdown of its Atchison plant for maintenance and capital upgrades. The company also incurred higher personnel costs related to the acquisition of the Lawrenceburg, Indiana, U.S., distillery in late 2011.

Sales were $85,534,000, up 24% from $68,798,000.

Despite the quarterly loss, Tim Newkirk, president and chief executive officer, said MGPI continues to make progress on the top line, but profitability is lagging company targets.

“High corn prices are certainly having an impact in terms of margin compression,” Mr. Newkirk said. “However, this is mainly a function of some of our existing supply contracts, most of which are expected to roll off in the second half of the year. That’s why we haven’t yet been able to fully take advantage of our new sourcing agreements. Fortunately, our supply partner has an extensive global corn origination network and is not solely dependent on local origination for our facilities' corn supply. We also benefit from their much greater buying power. By the fourth quarter, we expect to be back to flat pricing for most of our grain needs, thereby reducing our corn basis risk and its negative impact on distillery margins.

“Performance at our Lawrenceburg, Indiana, U.S., distillery is coming up to speed now that the facility has been integrated with our SAP platform. Process changes at the plant are expected to result in increased quality and efficiency. We’re also seeing greater interest in a broader range of premium beverages as we spend more time with LDI’s customer base. Demand remains strong for premium aged bourbon and whiskeys.

 Therefore, we added to our MGP-owned barrel inventory in the second quarter at an investment of approximately $5 million.”

In its Ingredient Solutions segment, MGPI posted pre-tax income of $987,000, up from a loss of $136,000 in the second quarter of fiscal 2011. MGPI attributed the return to profitability to improved average selling prices, a higher value product mix and lower natural gas prices. Flour costs averaged about 8% lower per pound compared with the year-ago period, the company said.

Net sales in the Ingredient Solutions segment were $14 million, down about 10% from the same period a year ago.

Distillery Products posted pre-tax income of $3.7 million, which compared with a loss of $3.7 million in the same period a year ago. MGPI said pricing for distillery products out-paced the higher costs for corn, excluding the impact of accounting for open commodity contracts. The per-bushel cost of corn for the three months averaged 4.8% lower than the same period a year ago, the company said.

Net sales in the Distillery Products segment were $71.1 million, up 34% from a year ago. MGPI attributed the majority of the increase to a 37% increase in sales of high quality food grade alcohol, driven by approximately equal gains in pricing and unit volume. The Lawrenceburg facility has added significant new sales of beverage alcohol compared to the prior year, MPGI said.

For the six months ended June 30, overall net income was $1,026,000, equal to 6 cents per share on the common stock, which compared with a loss of $9,557,000 in the same period a year ago. Net sales were $171,878,000, up 29% from $132,986,000.