MGP is also a top producer of high quality industrial alcohol for use in both food and non-food applications. The Company's distillery products are derived from corn and other grains (including rye, barley, wheat, barley malt, and milo), and their ingredient products are derived from wheat flour. The majority of their sales are made directly to, or through distributors, manufacturers and processors of finished packaged goods or to bakeries.
The Company is headquartered in Atchison, Kansas, where distilled alcohol products and food ingredients are produced at the Company's production facility ("Atchison facility"). Premium spirits are also distilled and matured at the Company’s facility in Lawrenceburg and Greendale, Indiana ("Lawrenceburg facility").
The name MGP doesn't seem to be an acronym for anything currently (that I can find) but it may have once stood for Midwest Grain Products.
MGP Ingredients, Inc. produces and supplies distilled spirits, and specialty wheat proteins and starch food ingredients. The company operates through two segments, Distillery Products and Ingredient Solutions. The Distillery Products segment provides food grade alcohol for beverage applications that include bourbon and rye whiskeys, as well as grain neutral spirits, including vodka and gin; and food grade industrial alcohol, which is used as an ingredient in foods, personal care products, cleaning solutions, pharmaceuticals, and various other products, as well as for various industrial processors. This segment also provides distillery co-products, such as distillers feed, fuel grade alcohol, and corn oil; and warehouse services, including barrel put away, barrel storage, and barrel retrieval services. The Ingredient Solutions segment provides specialty wheat starches for food applications under the trademarks Fibersym Resistant Starch series, FiberRite RW Resistant Starch, Pregel Instant Starch series, and Midsol Cook-up Starch series; and specialty wheat proteins, commodity wheat starch, and commodity wheat proteins. It sells its products directly or through distributors to the manufacturers and processors of finished packaged goods or to bakeries primarily in the United States, Japan, Thailand, and Canada. MGP Ingredients, Inc. was founded in 1941 and is headquartered in Atchison, Kansas.
(Summary) (Company) (Chart)
11 April 2017
1yr Target $60.67
Payout Ratio 8.79%
1yr Cap Gain 14.40%
1yr Tot Return 14.70%
EPS (ttm) $1.82
EPS next yr $2.00
Forward P/E 26.51
EPS next 5yr 15.00%
1yr Price Support $30.00
Market Cap $921.13 Mil
Revenues $318.30 Mil
Earnings $30.20 Mil
Profit Margin 9.48%
Quick Ratio 0.90
Current Ratio 3.00
1yr RevGR -2.86%
3yr RevGR -0.52%
5yr RevGR ---
1yr EarnGR 22.97%
3yr EarnGR ---
5yr EarnGR ---
1yr DivGR 100.00%
3yr DivGR 33.49%
5yr DivGR ---
As of December 31, 2015, the Company has two reportable segments: distillery products and ingredient solutions.
Distillery Products Segment - The Company processes corn and other grains into food grade alcohol and distillery co-products, such as distillers feed (commonly called dried distillers grain in the industry), fuel grade alcohol, and corn oil. They also provide warehouse services, including barrel put away, barrel storage, and barrel retrieval services. The Company has certain contracts with customers to supply distilled products as well as certain contracts with customers to provide barreling and warehousing services. Contracts with customers may be monthly, annual, and multi-year with periodic review of pricing. Sales of fuel grade alcohol are made on the spot market. During 2015, the five largest distillery products customers, combined, accounted for about 23.3 percent of consolidated net sales.
Food Grade Alcohol - The majority of the Company's distillery capacities are dedicated to the production of high quality, high purity food grade alcohol for beverage and industrial applications.
Food grade alcohol sold for beverage applications consists primarily of premium bourbon and rye whiskeys, and grain neutral spirits, including vodka and gin. The Company's premium bourbon is created by distilling grains, primarily corn. Their whiskey is made from fermented grain mash, including rye and corn. Whiskeys are primarily sold as unaged new distillate, which are then aged by customers from two to four years and are sold at various proof concentrations. Grain neutral spirits are sold in bulk quantities at various proof concentrations. Gin is created by redistilling grain neutral spirits together with proprietary customer formulations of botanicals or botanical oils.
In July 2015, MGP Ingredients announced their first retail-distributed brand which was made available for retail sale in September 2015. The brand, Metze's Select, is a limited edition Indiana Straight Bourbon Whiskey.
Food-grade industrial alcohol is used as an ingredient in foods (e.g., vinegar and food flavorings), personal care products (e.g., hair sprays and hand sanitizers), cleaning solutions, pharmaceuticals, and a variety of other products. The Company sells food-grade industrial alcohol in tank truck or rail car quantities direct to a number of industrial processors.
Distillers Feed and related Co-Products - The bulk alcohol co-products sales include distillers feed, fuel grade alcohol, and corn oil. Distillers feed is principally derived from the mash from alcohol processing operations. The mash is dried and sold primarily to processors of animal feeds as a high protein additive. The Company produces fuel grade alcohol as a co-product of our food grade alcohol business at their distillery in Atchison. They produce corn oil as a value-added co-product through a corn oil extraction process.
Fuel grade alcohol is sold primarily for blending with gasoline to increase the octane and oxygen levels of the gasoline. As an octane enhancer, fuel grade alcohol can serve as a substitute for lead and petroleum-based octane enhancers. As an oxygenate, fuel grade alcohol has been used in gasoline to meet certain environmental regulations and laws relating to air quality by reducing carbon monoxide, hydrocarbon particulates and other toxic emissions generated from the burning of gasoline.
Warehouse revenue - Customers who purchase unaged barreled whiskey distillate may, and in most cases do, also enter into separate warehouse service agreements with MGP for the storage of product for aging that includes services for barrel put away, barrel storage and barrel retrieval. Revenue from warehousing services is recognized upon providing the service and/or over the passage of time, as in the case of storage fees.
Ingredient Solutions Segment - The Company's ingredient solutions segment consists primarily of specialty wheat starches, specialty wheat proteins, commodity wheat starch and commodity wheat protein. Contracts with ingredients customers are generally price, volume, and term agreements which are fixed for three or six month periods, with very few agreements of 12 months duration or more. During 2015, their five largest ingredient solutions customers, combined, accounted for about 11.2 percent of our consolidated net sales.
Specialty Wheat Starches - Wheat starch constitutes the carbohydrate-bearing portion of wheat flour. MGP produces a premium wheat starch powder by extracting the starch from the starch slurry, substantially free of all impurities and fibers, and then dry the starch in spray, flash or drum dryers. A substantial portion of their premium wheat starch is altered during processing to produce certain unique specialty wheat starches designed for special applications. They sell their specialty starches on a global basis, primarily to food processors and distributors.
MGP markets their specialty wheat starches under the trademarks Fibersym Resistant Starch series, FiberRite RW Resistant Starch, Pregel Instant Starch series, and Midsol Cook-up Starch series. They are used primarily for food applications as an ingredient in a variety of food products to affect their nutritional profile, appearance, texture, tenderness, taste, palatability, cooking temperature, stability, viscosity, binding and freeze-thaw characteristics. Important physical properties contributed by wheat starch include whiteness, clean flavor, viscosity and texture. For example, the starches are used to improve the taste and texture of cream puffs, éclairs, puddings, pie fillings, breading and batters; to improve the size, symmetry and taste of angel food cakes; to alter the viscosity of soups, sauces and gravies; to improve the freeze-thaw stability and shelf life of fruit pies and other frozen foods; to improve moisture retention in microwavable foods; and to add stability and to improve spreadability in frostings, mixes, glazes and sugar coatings.
The Company's wheat starches, as a whole, generally compete primarily with corn starch, which dominates the United States starch market. However, the unique characteristics of the Company's specialty wheat starches provide a number of advantages over corn and other starches for certain baking and other end uses.
Specialty Wheat Proteins - MGP has developed a number of specialty wheat proteins for food applications. Specialty wheat proteins are derived from vital wheat gluten through a variety of proprietary processes which change its molecular structure. Specialty wheat proteins for food applications include products in the Arise , Optein, and Trutex. The specialty wheat proteins generally compete with other ingredients and modified proteins having similar characteristics, primarily soy proteins and other wheat proteins, with differentiation being based on factors such as functionality, price and, in the case of food applications, flavor.
Commodity Wheat Starch - As is the case with value-added wheat starches, the Company's commodity wheat starch has both food and non-food applications, but such applications are more limited than those of value-added wheat starches and typically sell for a lower price in the marketplace. Commodity wheat starch competes primarily with corn starches, which dominate the marketplace and prices generally track the fluctuations in the corn starch market.
Commodity Wheat Proteins - Commodity wheat protein, or vital wheat gluten, is a free-flowing light tan powder which contains approximately 70 to 80 percent protein. When MGP processes wheat flour to derive starch, they also derive vital wheat gluten. Vital wheat gluten is added by bakeries and food processors to baked goods, such as breads, and to pet foods, cereals, processed meats, and fish and poultry to improve the nutritional content, texture, strength, shape and volume of the product. The neutral flavor and color of vital wheat gluten also enhances the flavor and color of certain foods. The cohesiveness and elasticity of the gluten enables the dough in wheat and other high protein breads to rise and to support added ingredients, such as whole cracked grains, raisins and fibers. This allows bakers to make an array of different breads by varying the gluten content of the dough. Vital wheat gluten is also added to white breads, hot dog buns, and hamburger buns to improve the strength and cohesiveness of the product.
My Strategy Going Forward
I'm always interested in "Behind the Scenes" companies that seem to sell their products to other companies rather than into the highly competitive retail market. Retail customers are rarely as loyal to companies as other companies are that depend on a constant supply of ingredients for their manufacturing process. And MGP Ingredients is one of these companies.
For the most part I like this company but the fundamentals are not growing like I'd like them to grow. Earnings are beginning to grow but revenues aren't growing at all. And that bothers me. In addition, the stock chart has moved extremely higher in a rather quick manner without the normally associated increase in fundamentals. So at this point my interest in the company will place it on my watch list but the extended price will keep me from buying it at this time. If, in the future, the fundamentals begin to increase in relation to the stock price I will consider starting a position in this company. But at this time, it'll have to stay on my watch list.