ATCHISON, KAN. – MGP Ingredients’ Ingredients Solutions segment achieved record gross profits in the first quarter ended March 31 on the back of strong demand and an improved product mix, David Colo, president and chief executive officer, said at a May 5 conference call. Gross profit more than doubled to $8.1 million from $4 million in the first quarter a year earlier. Sales increased by 46%, from $19.1 million to $28 million.
“The product lines we have in this business are high protein, high quality vegetable starches, great fiber,” he said. “They are in high demand in our customers’ products.”
In the first quarter of the prior year, MGPI experienced temporary weakness in Ingredient Solutions primarily due to a natural gas curtailment which impacted approximately two weeks of production, reducing gross margin by approximately 400 basis points. base, Mr. Colo said.
“The increase in sales (in the first quarter of this year) was mainly due to higher volumes and higher average selling prices of specialty wheat starches and proteins as well as basic wheat starches”, Mr. Colo said.
Company-wide MGPI recorded net income of $37.3 million, or $1.69 per share on common stock, an increase of 142% from $15.4 million. dollars, or 90¢ per share, in the first quarter of the previous year. Sales increased 80% from $108.3 million to $195.2 million.
In the distillation solutions segment, gross profit increased by 38%, from $28.2 million to $38.9 million. Sales increased 26% from $88.6 million to $111.5 million, reflecting a 38% increase in premium liquor sales.
In the branded spirits segment, gross profit reached $24.8 million while sales reached $55.8 million, compared to $570,000 in the first quarter of the previous year, mainly due to the acquisition of Luxco on April 1, 2021.
MGPI has faced higher prices for corn, wheat flour and natural gas in recent quarters, said Brandon M. Gall, chief financial officer.
“As we shared in February, we entered fiscal 2022 with the majority of product purchased against contracted volumes,” he said. “We employ an extensive risk management program that includes purchasing the corresponding grain at the same time as we contract the volume and price of our products.
“Our goal, as always, is to price through as much raw material input inflation as possible. However, for various reasons, we do not contract 100% of our sales. For example, some customers of our products whites and our industrial alcohols choose not to contract in advance.In addition, customers of our fuel-grade alcohol, distiller feeds and related co-products have also purchased on the spot market.As a result, we cannot guarantee that we will always be able to fix prices through increases in commodity costs for our customers in the open market.”
Supply chain disruptions have had minimal impact on MGPI in recent quarters, but company executives continue to monitor to mitigate potential impacts, Gall said.