MGPI - Earnings call transcript Q2 2018

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Operator

Good morning. Welcome to the MPG Ingredients, Inc Second Quarter Results Conference Call. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Mike Houston, Investor Relations. Please go ahead.

Mike Houston

Debbie. you, Thank and conference everyone financial for the joining for Good and thank webcast Ingredients XXXX. call second company’s to MGP the morning, quarter you discuss results the MGP’s am Investor I with Houston Lambert, Relations Mike firm. Edwards, And Officer. team, Gus management Officer Tom Griffin, of Finance President, Executive including Pigott, Chief joining Vice today and and me members and their are President Chief Financial

call with begin prepared remarks the the open call management’s up will questions. We then to and

you a and inform this of from including the call, number could turn company Exchange filed MGP’s this reports Gus the anyone can quarterly company’s and as the statements it’s as by the company’s have statements does website, The my involve made before the forward-looking risk call release well plans call differ However, begin factors certain not objectives any to a may call. The with described obligation At any during we actual most If today’s press made projections responsibility materially already issued Securities at like statements and in time, to Gus? the recent of Griffin. update of President capital forward-looking annual copy to to the as results to of and I that forward-looking statements, such you it the company’s revenue, on factors, business. earnings over due today and structure www.mgpingredients.com. Chief would Officer, company’s MGP Commission. access assumes the today, no Executive

Gus Griffin

provide strategy and On financial an updates us. a for for on metrics questions. of will our key take then and overview we progress discussion the Thank thank results you, will your Mike all call, quarter, joining we you of performance against our this

income net remain and XX%. quarter, invest up with net second we are very the X%, about growth. our progress for to year increasing consolidated with driving parts over showed We of the business results, segments continuing of plan both for to strategic turning the against all sales growth over our prior Now quarter for pleased our

overall delayed having the some be customers orders meet While the temporary a or due existing whiskey American continues we purchased first robust, their reduced experienced half adequate few inventory to softness to needs. previously as near-term to in category

continue with We expect existing that attracting are result for strong new well the in and we our to guidance stronger partnerships of our will as in growth on customers reaffirming focus revenue second our year. as half year the the customers

the individually, gross sales in up products industrial finished X.X%. alcohol by both X.X%, down net were within slightly, and of focused Net premium industry. quarter Looking decrease resulting distillery at our positioning year quarter. grade long-term remain alcohol our prior segment, X.X% beverage the in spirits segment food in opportunities alcohol the a provided while from each distilled the profit on We increased sales

dried distillers XX.X% continue due balance to for our quarter, DDG, remains note, year. impact on sales and for positive our grains, pricing. of alcohol We growth a plan or premium the Also second our Products of track the on beverage and segment sustainable bourbon for rye whiskeys results experience to the in of growing in demand Distillery improved had strong

pricing as on industrial DDG The by alcohol lower provided XXXX. gross that segment partially of macro sustainable first to this to results the to we for view quarter trend margin environment lower we a results improved these competitive. led be was oversupplied continues not beginning extremely While as to sales that the due in welcome DDG margins market sales and quarter margin the quarter, unchanged price do offset the benefit

inventory is whiskey. alcohol to build aged our The strategy, long-term of our continue we soft. industrial the be inventory to to this continue with of expect We to market strategic Consistent intent whiskey of the were We our second attract able of brands own significantly to to aged our retain increase the support for inventory new customers growth products. distillate during and and quarter. our

A in assessing the of sales reflects second American very whiskey. we increase anticipated for QX of Our investment to stronger million sizable best has aged premium reached in whiskey structure unstructured of $XX the year. term, our in at whiskey portion now the Longer approach cost. products market half to the aged are provide

experienced potential positive have of year, first half about to plan. this in strategic and line lower for the continue with growth alcohol We premium existing Despite growth sustainable for projections customers the remain with our our we prospective in the product. in beverage discussions the

X.X%, by input for million higher costs points Turning to the to grew sales net year Solutions, compared profit declined $X.X margins quarter. basis Gross declined to as due the prior while gross quarter. Ingredient X.X% to XXX

The for second seventh quarter consecutive of marks Ingredient revenue our segment. the quarter growth Solutions

clean leveraging are on focus this plant-based We and with sales of pleased key and label high growth. fueling is continued non-GMO ingredients the our this proteins fiber, trends high protein, growth consumer

strongly This the to these trends concludes in We my continue provide. remarks. believe initial potential

to Let me numbers. the over metrics things now turn and key Pigott of review for a Tom? Tom

Tom Pigott

Gus. Thanks,

the savings fees. prior quarter offset $X.X the compared costs year the profit from increased consolidated profit increase administrative sales increased in Ingredient remained Products as growth in million general Ingredient Products $XX.X prior were a partially gross the costs year. as flat Distillery quarter-over-quarter. to $XX.X segments. and The the For million the in income personnel X.X% and flat versus SG&A. we net to sales Distillery to X.X% decline reflects selling, for growth quarter the net at a by Solutions during as XX% X.X% segment. of during the the profit in Solutions and Increases in to primarily $XX.X in Gross both support expenses leverage and million $XX.X Corporate million Operating were on to the margin quarter, quarter. segment quarter growth Gross offset platform brands professional personnel second result the of remained well achieved million, increased by reflecting gross other

for quarter to tax quarter. XX.X% the the was year XX.X% effective compared prior rate corporate Our for

year the quarter. We XX.X% consistent were with $X.XX loss prior which ICP, well per rate earnings per and a year of improved from $X.X to year quarter’s our XX.X% of driven by tax income from rate method to increased million quarterly lower share half our divested share operations, July second the during from from results to in as rate. guidance. performance effective quarter equity full of increased for expect These Net second this the decline XXXX as the absence an tax the was

allowing to and invest sheet lapping successful drive shareholder the the value. As for to from a of quarter. remains ICP us long-term be continuing growth strong we sale next gain reminder, MGP’s will balance

flows cash increase even the have capability during our business, We we discussed net us positive million which the which aging quarter. aging of second our $X.X cost, the incurred addition generating $X.X of strong million, inventory inventory whiskey. provide in was the includes invest to at to as of our operating $X.X Year-to-date, flow fundamental allows this cash cash million

mentioned earlier half anticipated in sales year. inventory increase in Gus second products sizable the American of call, the the of whiskey As the our our in reflects stronger

great like our to have to opportunities lever expansion additional growth continue warehouse program. capital access for to We

per quarter $X.X of of to as continues remained million and balance the success the with available share. in As XX, Recently, $X.XX on The the dividends line to was June a dividend of cash revolving $XXX.X under the share the board sheet. view $XXX million important an amount of board second credit million the authorized company way shareholders.

range between growth As alcohol. XX% at approximately grow subject end. significant as to the single-digit some XXXX grow estimate the shift grow to company income sales The gross modestly XXXX XXXX and income million of and are XXXX. XX% expected of in stated, following XXXX year premium to are fiscal is to Operating to be as for operating from expected is more versus shares and net factor. to in aged to be projected is outstanding Gus to MGP in beyond. XXXX expected year margins volatility high versus beverage XXXX. effective conservative is XX% tax XX.X to XX% a previously become reaffirming is the The sales fiscal industrial guidance for rate forecasted continues XXXX XX% sales whiskey company’s

for things Gus Now, back remarks. concluding to turn let me over his

Gus Griffin

Thanks, Tom.

touch like plan. some on long-term would additional initiatives to strategic that support our I Now

continue Distillery invest our segment. grow to Products We in to

to mentioned, our Tom As on key themselves. flow us opportunities generation capitalize balance growth as strong they present enable capabilities sheet and cash

for trends we our that barrel We premium to capital to consumer demand whiskeys, continue invest the investments to full of and advantage our key pleased American we now significant strong program. continued in warehouse based additional making are on take are announce

$XX.X Our in approximately been million from this to expenditures, up has $XX.X increased in projected approximately program investment million. capital

our triple capacity. more original capacity. more than plan next Our will initial doubled warehouse than phase This our warehouse expansion

our We own needs increased long-term expect new and distillate meet aging our customers will investment to both this the storage whiskey us enable inventory. of

we incurred of year XX, had approximately the June the this million XXXX. As end of $XX completion total anticipate by investment. We calendar project of XXXX, of

providing As initiatives to the even be premium and reach that to lowering and will we I accessibility spirits. craft easier at become segment. an to of we brand implement segment craft all always segment. owners key be to our set stronger focus this the brand in Products have more our previous in distilled to options, it supplying will in mash customers. choice X,XXX lowered Previously to barrels, partner more for positioning our of mentioned Distillery strive custom bills. for owners believe By core continue in announced strengthen minimum have we were calls, barrels we with other Recently, custom the We XXX supplier growth be we

our whiskeys. pleased We are continue recently we initiative Rossville on momentum positive and launched the Union our be in brands Rye also particular, with to experiencing

Our earning being brands across prestigious Reserve ratings this source the the spirits. gold Craft Best Repeal The the our Competition. premium including medals quality, top and for each of them of Whiskey and recently as received board year position our and Show for have continue Competition accolades validates highest North awards the the strong American at and at win demand further quality trusted their for consumer the named brands International to Remus outstanding Bourbon

the sales our be of on and velocity the markets. existing increasing will For distribution remainder our year, in focus

strategies the begin will on our key commitment We to Operator, remarks. strategies by are we yield now prepared question-and-answer remained shareholder the superior we and in to focused our of the returns. and focus these continued portion are the well-positioned over That demonstrated that confident call. long-term remain concludes ready As market accomplishments, long-term. these

Operator

first The [Operator SunTrust. Bill Please Instructions] Chappell comes question with ahead. from go

Bill Chappell

Thanks. Good morning.

Gus Griffin

morning, Bill. Good

Bill Chappell

to just obviously is I more come bit roaring little of of guess, focal I it second Gus, the quarter, it’s beverage this but it’s lingered. weakness questions lingered premium the several surprise be long. straight in quarter. this a into the, a you that the the second back I kind And and to point guess didn’t seems know expect that

So, back I in that a or this guess quarter-to-date many confidence what would implying big in And capacity you half? you that? issue that seeing commitments orders you mean, of will? second half. business Are gives it kind orders you that had of I firm or is have of you give the the some there coming you terms confidence are much then in any this pretty

Gus Griffin

had would Yes. the call second happen we want Day, of half. the it rebound the recovery signaled that bulk At the or the we whatever the thought you or growth in Analyst to

that surprise the long-term. thought they really wasn’t it So focus on are. a We we of much

most come you the half. And thought happen are never in, they so going to sure but it in we second orders, when are of exactly would

are So, strongly that. on deliver track still that we we on our to guidance feel against very

In whiskey put the and what more year, what in in terms be capacity put we so the ahead excess as be to projected in to demand. second of of away project we more utilize in we so capacity as the I quarter we that excess robust would basically noted, half we to meet away go meet had be to with the second position growth that position capacity to the

Bill Chappell

the own won’t right customer way half, in away that? will your to much on the read is be probably as focused that back orders, So it it of put you

Gus Griffin

Yes, exactly.

Bill Chappell

of looking a of kind instead orders of year on year? away back some is then these if of And sense orders any I XX-month, maybe there in was some am there kind pull-forward that some at of of in terms annual from – of the rolling kind calendar half took of that were the there first of a in lot orders a half just last of this ‘XX rate, in

Gus Griffin

No.

how think orders release, don’t that’s people and of out temporary. their what individual have we versus who for model As we strongly breather believe we on We our the business, and temporary. to doing comment their of pulled was couple just lose temporary. strongly had we year them. reassess to needs them their projections We and it’s believe we our that the but their for and just a It those business reduced of was so were else. back also called brands forth their in choice customers, the we think them either did some we specific reassessing And still existing press not customers inventory and are a supplier are and reassessing, taking sort who somebody did we

Bill Chappell

this selling And third any on your just your thoughts on it is half sales towards of it I And quarter? half, guidance is the un-aged If second quarter one. half? the on subject of inventory this second then or please am I doesn’t back on last aged for include on weighted your fourth assuming kind any versus basically look more the

Gus Griffin

probably now. quarters it’s I about think been five

said purposes. lightly some aged new product product. and strategic attract customers we do It’s for for and distillate continue we have to that. our do to retain It’s sell We will

would our believe strong we able giving we guidance quarterly terms and guidance. the of be that’s going in, against and to good, quarters, how we be In towards would deliver we that I are away weighted fall have shied but will have to from where a second half this

Bill Chappell

Okay. then ingredients the me, one just side, choppiness? the kind just of for quarter-to-quarter commentary on And the last more

Gus Griffin

that? Yes, you handle to want

Tom Pigott

Yes.

margins is quarter. we So referring costs. I wheat being higher think this we to seeing are are down the What

of ahead priced it. had we Now,

in now those margins but some and contract, growing as in maintaining growing overall, the we its that of expanded absorbing are are QX. margins we So, And confident margins. we and costs, business

Gus Griffin

Yes.

we there there of about I around margin long-term think and very that our input quarter have revenue of a was in consecutive how turnaround. difficulties this pleased growth ingredients sustained costs, pleased and some because business. that very, in we had that the really are growth And while seventh is are turned we with is has the

Bill Chappell

Got it. Thanks.

Operator

next Fuhrman Craig-Hallum. with The comes from question ahead. Alex go Please

Alex Fuhrman

needs for years you much targets expansion, last announced clearly have my are first to very investing taking program, the couple Wanted of in you over since expansion mean your much taken terms warehousing in Thank you you the to customers question. has category ask the particularly hear the your I of about of how of large months a up increase like ago? changed today would that what thoughts of seems couple either thinking your of and that you and versus times. your This a sort on love maybe how or X the were X and

Gus Griffin

Yes.

that it a the I we referred bit you by did a program. have the in plan program. now a we think better worked in times, forth, small sort to of as goes incremental get so long-term or you out increase and those we as and go little thought projections increases and so the of And our make I ahead time substantial was and market little go you time get smarter, as to couple of further a have out view

ultimately think you number is. together view plan there. exactly you and to put that the obviously one we that what take sort think want ahead and need, put what master incrementalizing warehouse as to care that’s it’s plan get you to make is big of investment to to your ahead and you to go master that When and way and a we a this going clear So, vast a as a our opposed so this you – it have will in think We to go have plan needs. you of together we be investment

Alex Fuhrman

current or to That’s sense to of you you this are it’s warehouses a real-time And as Do XXXX? in that capacity full are? and position how be your anticipate a now available give us to going Gus. in you needing between you can Thanks, helpful. extra becoming use

Gus Griffin

if and we consistent but in we become on to floor available. be doing utilizing in be going before test to where Hopefully, a we quite this where roll be not dry basis the we in, Yes. the yes, as were them position these we are see past, is barrels the they definitely, will – will we the it’s

Alex Fuhrman

it Gus, some some you on an wins update and more to in sounds lastly like reviews of you give when a those financially? And us obviously having ratings brands big contribution can your new start Terrific. of would products, terms on a bit little expect of

Gus Griffin

Yes.

is company go I supply to long-term As initiative. the as past, where in a have we said We know growth, long-term this a it’s but initiative. is to long-term need this very a

pleased seen. with have are we very We everything

distributors. the with getting pleased are support we are our from We

sales with and pleased of team. We the our marketing are performance

we We velocity it are just time are with velocity, consumers. distribution pleased takes but to the that build getting and with

So, focus now are will the on build from sales at to we going retail that that’s in there. to is building in, where then continuing we to we distribution continue on are markets the focus continuing expand to velocity and

So we to very I but everybody want very long-term is make a understands, are with I sure it, pleased initiative. this guess

a stick is impacting don’t will I significantly going So, think hockey financials. soon where start we see this to our anytime

Alex Fuhrman

you, Gus. Thank

Operator

question-and-answer concludes President turn to for This Griffin, session. closing our over remarks. and will Gus conference I now back CEO any the

Gus Griffin

company and Thank call. for you our for us interest second for in today quarter joining your our

our the third and look are the sustained in with forward of the strength We certainly which pleased again with categories quarter. you progress to we We talking compete. after

Operator

Thank The today’s conference you for presentation. has concluded. attending now

You may disconnect. now

MGP Ingredients (MGPI) 6 Aug 182018 Q2 Earnings call transcript