MGPI’s restructuring pays off in Q1
Its positive Q1 results represent a significant turnaround for the Kansas-based producer of grain-derived starches, proteins and food-grade alcohols, after it posted a huge $69.1m loss for fiscal 2009. It blamed charges related to restructuring for the increased losses – up from $11.7m in 2008 – as it moved away from commodity-based ingredients toward value-added products such as dietary fiber, protein isolates and concentrates, and textured proteins.
MGP Ingredients president and CEO Tim Newkirk said: “The turnaround represented by our first quarter profit performance is a great and exciting way to start the new fiscal year… We completed a significant transformation in fiscal 2009 in order to strengthen our position as a producer of value-added ingredients sold into a wide range of branded packaged goods.”
2009’s big changes
MGP Ingredients has undergone extreme and rapid change over the past year, as the company has divested its fuel grade alcohol business, stopped flour production at its Atchison mill and outsourced its flour supply, secured $25m in credit, sold its Kansas City plant, and cut its staff by 55 percent.
Its net income of $3,738,000 compares especially favorably to Q1 2009, when the company reported a net loss of around $24m, although the shift from commodity-type products, such as fuel grade alcohol and vital wheat gluten has considerably reduced sales, which were $47,084,000, 52.5 percent down from sales of $99,020,000 for the same period last year.
“While I’m encouraged to see our pre-tax income approaching $4 million, I know that we are only beginning to realize our long-term potential,” Newkirk said.
Health and wellness
He added that the company has benefited from the ongoing industry trend toward ingredients for health and wellness, particularly with its Fibersym wheat starch ingredient for increasing the fiber content of bakery products.
Newkirk said: “In the bakery world alone, there is huge potential to improve the nutritional benefits of processed foods with our patented technology. We believe that MGPI has the best dietary fiber for flour-based foods. We’re aggressively taking that message to our longstanding list of core customers.”
MGPI chairman John Speirs told shareholders last month that fiscal 2009 had been “the most difficult period in the 68-year history of MGPI”.
Commenting on the company’s Q1 results, he said: “MGPI’s first quarter results reflect the benefit of a more focused product mix for both the ingredient solutions and distillery products segments…We see opportunities to drive sales growth in both of these key segments.”
He added that the company has started to make headway in putting more scientific research behind the health claims of its ingredients for foods with higher fiber, lower fat, fewer calories and lower cholesterol.