MGP Ingredients Inc. reported higher sales but a loss for the third quarter and said it is exploring “strategic alternatives” related to its facility in Kansas City, Kan.
The Atchison-based company, which makes a range of products, including value-added ingredients for food products and food-grade alcohol, said that because of the loss of business from a significant pet treat maker, as well as an unfulfilled piece of anticipated business and other factors, it is assessing its pet-related business. That prompted a $4.9 million write-down in the quarter related to the Kansas City, Kan., plant and equipment associated with those products.
That plant was acquired in 2001. MGP then spent $4.5 million beginning in 2003 to expand the production of protein products at that facility, and $5.5 million in 2004, an expenditure that was focused on making and packaging natural pet chews.
But the 2006 acquisition by Mars Inc. of North Kansas City-based S&M NuTec LLC, which makes Greenies pet treats — and which sourced the production to MGP — took the bite out its pet treat business.
Now the company is contemplating its future in pet lines. Complicating the issues is that the plant is split in half by a wall, with its pet products operation on one side and other product lines on the other. Because of shifting manufacturing levels between the two product lines, the number of employees has always been between 40 and 44.
“The message to investors is that we’re taking a look at the situation and we’re absolutely committed to removing the earnings drag that has come since that business has changed for us,” said Tim Newkirk, president and chief executive officer of MGP.
So does MGP have a future in its once-booming pet treat business?
“That’s a really good question,” Newkirk said. “Ask me in 90 days and I’ll have a better answer.”
The company reported sales of $106.7 million, compared with $93.8 million for the same period last year. The net loss for the quarter ending March 31 was $6.3 million, or 39 cents a share, compared with a net gain of $2.1 million, or 13 cents a share, for the same period a year ago. The write-down on the Kansas City, Kan., facility equaled 29 cents a share.
The company also said rapidly rising commodity costs, including for wheat and corn, were having a negative impact on margins.
MGP’s stock closed at $7.42, up 34 cents.
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