Net profit soared 168% in the quarter, to $1.9m from $700,000 in the prior year period, while net sales increased to $86.3m from $64.1m. Net income for the period also included a $4m gain related to the sale of the company’s 20% share in its Illinois Corn Processing joint venture.
MGPI’s president and CEO Tim Newkirk said that while the company was pleased with its progress in moving toward a higher value sales mix, it was not satisfied with its ability to generate consistently higher profit margins. The company has previously been hit by high corn costs, and now it is taking steps to mitigate the effect of volatile raw commodity prices.
“During the quarter, we entered a grain supply contract for the Indiana distillery and amended the grain supply agreement for our Atchison facility that now permits us to secure corn for delivery up to 12 months in the future at fixed prices,” Newkirk said. “This marks a significant change from past purchase and hedging practices for corn, our most important largest ingredient. We implemented strategic sourcing for wheat flour several years ago. By partnering with world-class corn suppliers, we have taken a major step toward better managing our corn volatility. This will be especially important as we grow our businesses in an environment of stubbornly high commodity prices.”
The per-bushel cost of corn for the three months averaged 6 percent higher than the same period a year ago, the company said.
MGPI’s distillery products sales were up 44% in the quarter to $72.4m, driven by higher sales of food grade alcohol. Sales in the company’s ingredient segment were approximately flat at $13.5m, with higher pricing more than offsetting lower sales volume, and increased sales of commodity starches.