ATCHISON, KANSAS, U.S. — MGP Ingredients, Inc. reported on March 12 that net income for 2012 was $1.62 million, or 9¢ per diluted share, compared with net income of $1 million, or 6¢ per diluted share in the previous year.
Net sales for the full year increased by 19% to $334.3 million. Higher sales from the Indiana distillery accounted for the majority of the year-over-year increase.
"This was not a satisfactory year for MGP," said Tim Newkirk, president and chief executive officer. "The corn drought and consequent grain price volatility in 2012 prevented us from making any progress on our bottom line. Our strategy for navigating this tough marketplace is to put more emphasis on our premium products. On that front we did achieve solid sales growth driven by our bourbon and rye whiskeys, custom distillery blends and our food ingredients targeting nutritional health."
Net income for the fourth quarter was $180,000, or 1¢ per diluted share, compared with net income of $16.1 million, or 89¢ per diluted share, in the prior year. Net Income in the prior-year period includes a $13 million, or 77¢ per diluted share, asset acquisition gain (net of tax effect), associated with the acquisition of the company's Indiana distillery.
Net sales for the fourth quarter increased by 22% over the year ago period. Significantly higher beverage alcohol sales more than offset a reduction in sales of alcohol for industrial applications.
"The improvement in our gross margins over the past few quarters is a key step as we work toward generating consistent operating profits and cash flow. We continue to experience lower volumes and margin compression in bulk alcohol sales due to higher input costs and increased market supply,” Newkirk said. “However, our actions to reshape both our product mix and our asset base are beginning to bear fruit, even in the face of these ongoing industry challenges."
Premium Spirits and Industrial Alcohol
Ingredient segment sales for the fourth quarter were $14.6 million, an increase of 20% from the prior year's quarter. Sales benefited from both higher average pricing and unit volumes.
The ingredients segment reported fourth quarter pre-tax operating income of $1.2 million compared with a loss of $548,000 for the same quarter a year ago. Profitability improved significantly from the prior year due to higher average selling prices and lower costs for natural gas and raw materials, principally flour.
Ingredients segment sales for the twelve months of 2012 were $56.4 million, approximately even with the prior year period. Pre-tax segment operating income for the twelve months improved significantly to $5.2 million compared with $1.0 million over the same period a year ago.
"The coming year will keep us focused on sales of premium products. We face continued competitive pricing in our bulk white goods, namely industrial and beverage alcohol,”
Newkirk said. “To counter this, we must lower the cost-per-gallon at both of our distilleries with more efficient energy usage, equipment upgrades and process improvements.
"MGP has gone to great lengths over the past two years to reduce the impact of commodity volatility on our business. This transformation is reflected today in a higher value sales mix, a more effective supply chain, and a more productive base of assets. We won't be satisfied, however, until we achieve the level of profits and cash flow returns that we believe are within our reach. The proof will be in the results. To that end, we anticipate progress on our bottom line in 2013 as our efforts start to take hold."