Sales for speciality ingredients set first quarter results soaring for US company MGP Ingredients, offsetting a downturn in figures for commodity ingredients and in the face of higher energy and raw material costs.
Sales for the first quarter of fiscal 2004 rose 33 per cent to hit $57 million, up from $42 million for the same period a year ago, ushering in a net income of $6.7 million or 84 cents per share, although earnings for the period gained from a considerable $13 million in non-operating income from insurance proceeds.
First quarter sales for the company's speciality ingredients - primarily wheat proteins and wheat starches - counteracted a decline in sales of commodity ingredients, principally vital wheat gluten and commodity wheat starch. As a result, total sales in the company's ingredients segment rose by 62 per cent from the same period a year ago.
"Our growth strategy is focused on building our specialty products by concentrating our manufacturing, research and development, and marketing activities on this area," said Ladd Seaberg, CEO of MGP Ingredients. "Since adopting this strategy in recent years, our efforts have resulted in steady progress which has now begun to move at a more accelerated and profitable pace."
According to Mike Trautschold, executive vice president of marketing and sales, "the increased demand for our speciality ingredients is being met by recent expansion projects". Last year the company expanded its Atchison plant for the production of speciality wheat proteins for bakery, pasta and noodle, and related food markets. "It has enabled us to satisfy increased interest in our speciality wheat protein isolates and concentrates for use in multiple food formulations, particularly low-carbohydrate, high- protein formulations, as well as in refrigerated, frozen and par-baked dough systems," added Trautschold.
Higher energy and raw material costs knocked results with the company reporting a 65 per cent jump in the average per unit price of natural gas compared to the prior year's first quarter. The average price for wheat on a per bushel basis rose 4 per cent, while the price for corn was 'practically even with the average experienced during the same period last year.'
"All-in-all, even in the face of these higher costs, we took a large step during the first quarter toward achieving, at minimum, our fiscal 2004 budget goal of earning pre-tax operating income of approximately $4.5 to $5 million, which, assuming a tax rate of 39.5 percent, translates to earnings per share in the range of 35 to 40 cents," said Seaberg. "The most gratifying and encouraging aspect of this is the increased momentum at which our speciality ingredients sales have progressed," he concluded.