US ingredients company MGP Ingredients suffered a net loss for the current year's first quarter as higher grain prices and reduced sales in distillery products took their toll - but speciality ingredients witnessed strong growth.
A net income of $6.79 million (€6.73m), or 84 cents per common share, for the first quarter of fiscal 2003, compared to $2.45 million for the year before, was due to recognition of expected insurance proceeds from a distillery explosion and consequently largely disguised the actual loss of $1.1 million for the first quarter.
The company also experienced a decrease in ingredient sales due to a planned reduction in sales of commodity ingredients, which consist of vital wheat gluten and commodity wheat starch. Meanwhile, sales of the company's speciality ingredients, primarily speciality wheat proteins and starches, grew by 10 per cent over the prior year's first quarter level.
"Growth in the speciality ingredients area is our primary focus as we concentrate our marketing efforts on serving manufacturers of food, personal care and pet products," said Ladd Seaberg, president and chief operating officer of MGP Ingredients. He went on to add that over the next two years, the company's goal is to increase sales of speciality ingredients by over 30 per cent compared to the $37.4 million that was realised in fiscal 2002.
The US Department of Agriculture's programme to support value-added wheat protein and wheat starch development, and which contributed $621,000 to first quarter income, was implemented in June, 2001. Administered by the USDA's Commodity Credit Corporation, it was granted in lieu of an extended quota on imports of foreign wheat gluten. Over the life of the programme, which is scheduled to end on 31 May 2003, MGP Ingredients is eligible for approximately $25.6 million of the programme total of $40 million.
The funds must be used for capital, research, marketing and promotional costs related to value-added wheat protein and starch products.
Seaberg emphasised that MGP Ingredients' financial condition "is very solid," noting that the company has cash and cash equivalents of $28 million, working capital of approximately $42 million and equity of approximately $110 million. He announced that considering "the increase in grain costs combined with challenges posed by the Atchison distillery shutdown, the company's fiscal 2003 target for operating income, which excludes insurance gains, is to break even."
He also added: "I expect us to emerge from our current situation as a stronger company and hope to have improved operating income, resulting in earnings per share in the range of 40 cents to 50 cents in fiscal 2004."