MGP Ingredients attributes Q4 loss to ‘extreme corn price volatility’
For the prior year period, MGP Ingredients reported net income of $2.48m. Sales were up 27% during the quarter ended June 30, from $54.36m last year to $68.8m in Q4 2011, principally due to higher sales of food grade alcohol.
“This year's fourth quarter results reflected an unfavorable mark-to-market valuation of approximately $5.5 million due to extreme corn price volatility,” the company said.
US corn prices have risen about 70% since last August, with markets for all major grain commodities hit by flooding in the Midwest, poor weather in Argentina and Russia, and higher fuel costs.
MGPI’s president and CEO Tim Newkirk said in a statement: “There was a lag in the adjustment of our alcohol selling prices with higher corn costs, pressuring our gross margins. To address margin issues, we have adjusted pricing to be more aligned with current input costs.”
He added that the company expects improved results in the first quarter of fiscal 2012, as its new pricing comes into effect.
For the full 2011 fiscal year, the company reported a net loss of $1.31m, compared with net income of $8.74m during the prior year, which included a $2.3 million loss on the formation of the company's distillery joint venture, Illinois Corn Processing, and a $4.8 million tax refund benefit.
Total sales for fiscal 2011 were up 23% year-on-year, from $201.97m to $247.92m.
"We are making real progress in improving the execution of our day-to-day operations," Newkirk said. "…We are seeing growing successes with our ingredient solutions being formulated into key customers' new or enhanced consumer packaged products. As a result, and also due to our strategic focus on high quality food grade alcohol, we are continuing to grow a higher value sales mix of products."
