The death of low-carb diets hasn't been kind to MGP Ingredients
When the Atkins craze subsided, demand for MGP's specialty wheat products plunged. Still, even though performance in the specialty ingredients segment remains mixed, solid fiscal first-quarter results show that MGP has other strengths on which it can rely.
The company indicated that revenue for the quarter rose almost 12% year over year to $77 million, while earnings increased to $3.7 million, thanks to improved gross margin. Net income per diluted share was $0.23, compared with $0.01 in Q1 of fiscal 2005.
The major hero in the quarter was MGP's distillery segment. Revenue in that area climbed 18.4% to $54.6 million, primarily as a result of sharply higher sales of food-grade alcohol and more modest rise in ethanol. Meanwhile, profitability improved as the result of lower prices for the unit's primary input, corn. It seems that the distillery business is on track to continue its growth; the company expects it to be the primary driver going forward.
There was far less to crow about in MGP's ingredient business. Sales fell slightly, and the unit's pre-tax loss widened. Still, the news wasn't entirely bad. The poor showing was primarily attributable to soft sales of the protein and starch-based resins used in high-end pet industry products. Sales of the company's Fibersym fiber-boosting starch rose year over year. Sales of wheat protein products, which were in demand during the low-carb craze, increased sequentially, although they were still down year over year.
Admittedly, MGP still faces an uphill climb in the wake of the carb craze. However, it's important to remember that the firm has the flexibility to adjust. Like egg producer Cal-Maine
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Fool contributor Brian Gorman is a freelance writer in Chicago. He does not own shares of any companies mentioned in this article.
