MGPI - Earnings call transcript Q3 2018

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Operator

Good morning, and welcome to the MGP Ingredients, Inc.

Third Quarter Results Conference Call and Webcast. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Mr. Mike Houston, Investor Relations. ahead. go Please

Mike Houston

I the Good the Debbie. discuss and you firm. quarter thank company's IR, with Thank Investor MGP's Ingredients morning, conference joining Relations XXXX. third the MGP results joining to Mike call for Houston financial Lambert me you, And for everyone, am and the webcast Officer; prepared Chief their Vice President Pigott, and of members Gus Financial are the to Tom We'll team, including call management's Griffin, questions. Finance and and call President then open today management and remarks Officer. begin Chief with Executive up of

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

Gus Griffin

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

the to results. turning Now

for sales consolidated about and improvement top almost the operating we XX% expected, by quarter income net results line the exhibit third increasing quarter Our with up XX%.

of against some short-term progress production While did we with parts remain strategic very that we impacted plan, facility our all our our challenges Lawrenceburg at our margins. pleased experience

that We poised issues strategic improved reaffirming the growth continued business our resolved Based our and in again further quarter. fourth momentum the are year. and for solid the growth execution we income on of confident are are been plan, the our have operating guidance for the we of

beverage at provided We prior with increased of Products profit X.X%, Looking alcohol quarter segment X.X% sales alcohol our year up segment, gross each industry. finished premium the the food Distillery period, both while up for grade by from sales alcohol our long-term on focused Net within X.X%. individually. the opportunities distilled the quarter. spirits positioning and In unique industrial net remain decreased the

track. quarter, plan positive results our pricing. our Distillery on sustainable premium dried due impact believe on or note, growth We segment grains, of the this a for improved XX.X%, of had in bourbon alcohol for new We We've to our inventory in quarter. experience this increased continue distillate nicely demand and attracting whiskeys, both supported to the and been successful additional last customers, sales existing and rye our new grew quarter put distillers quarter. in Products DDG, remains to and away primarily we third Also beverage customers sales the new strong growing business very

the environment unchanged quarter, versus each maintain in macro we our we short-term segment, this this challenges the pricing seen our production due that led to are beginning lower to sustainable at not Lawrenceburg in quarter improved XXXX. Products year, we line these Despite of view that first slightly prior the top While quarter. results in facility strong experienced Distillery a trend year quarter have pricing our results

systems our of part investment As our facility, this updated continued quarter. this control we technology in

As margin sometimes market be gross primarily there for as as to profits The have and to the quite quarter installation segment full but also to in very for delays Distillery facility the our did been prior declined only competitive. XXX alcohol on The returning higher negative. away this issues negatively Products profits as ability affected basis industrial price gross points operational outlook the production oversupplied alcohol. Lawrenceburg and Gross from happens, its segment go as and margins smoothly industrial our continues put facility year at to additional delay by were the remains the on period, capabilities. resolved, The barrels. well due cost planned, not impacted this not lower but

very Our industrial on we as segment. the result, Distillery additional and alcohol pressure Products challenging, a is anticipate business margin

our last to $XX.X investment barreled quarter, increasing inventories in and slightly inventory inventory. at turning After whiskey barreled significantly our stands quarter, million cost. whiskey declined this Now at now

last the back have quarter, higher production increase The that quarter. short-term the mentioned anticipated grow that sales previously this level inhibited we anticipated in also I issues of half our As of to to support mentioned second inventory using ability year. some quarter

our whiskey be customers attract to and our brands. We distillate new support for to leverage the provide and ages this with barreled retain continues of build very inventory and and these products potential growth strategy customers mash own Discussions of whiskey. existing to a of our to offerings. market bills to of prospective Our enable believe to aged the to about unstructured this and structure will for product ongoing are library inventory us

while specialty wheat of increased the sales due for Ingredient gross profits quarter points commodity wheat gross grew million on proteins to segment. to XX.X% marking profit basis business growth consecutive XX.X%, proteins. higher this Turning the eighth Net Gross XXX and and starches for by Solutions. margins $X.X increased revenue quarter, to

either be as up as sold valued Our proteins wheat be protein proteins. wheat can further wheat specialty base or commodity sold to

commodity of by strong pleased customers. proteins continue we new the initiatives also see for wheat customer are to a demand in offerings, and demand wheat specialty result our TruTex proteins are strong our our While we interest as for with seeing clean-label

segment's ingredients, this fueling on sales are high-protein, focused growth. strong proteins with high-fiber, and growth are the consistently this continued We trends are consumer leveraging and of non-GMO, plant-based pleased clean-label

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

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

Tom Pigott

Thanks, Gus.

selling, For result a Solutions the in in Ingredient $XX million, the reflecting Gross Distillery to sales to Solutions partially XX.X% $XX.X our basis net $X.X expenses Distillery segment. personnel Products year the increased Products growth XXX consolidated quarter, points investments margin in profit professional offset were sales. fees a decreased declined Ingredient versus Corporate versus general prior for growth the and decrease prior partially both Lower administrative net X.X% and year platform. increased a Gross X% to profit to quarter million by XX.X% segments. decline were brands costs as the quarter. and of of segment, gross by and support million the in offset the

investing $X.X as quarter. effectively costs while still million for to results grow. reduction prior the third was compared during quarter the managing in as on the to during focused income are The profit increased these XX.X% the increase SG&A. well year We increased due to quarter million Operating to $XX gross

Act. favorable the in the impact quarter corporate tax Jobs XX.X% was the year Cut to compared and prior reflecting quarter, of Our rate the Tax XX.X% effective for

partially strong from for to operating MGP's quarter allowing our successful to full earnings from additional year to warehouse such our recorded decreased down We've sale due to XXXX the share Illinois and long-term capital long-term invest $X are quarter inventory expansion us million increases million on year now per decrease based sheet or These remains per are from strategy. fund $XX.X targets by of decreased with M&A opportunities, prior guidance effective of our in offset whiskey rate method $X.XX in primarily to that sale our the third to shareholder value. in Corn tax and Net per continue in share efforts, prior access revising quarter. third our the tax latest share rate declines the increase balance We and gain possible the our growth results year income $X.XX investment XX% on an Processing, great in from growth consistent drive were equity the in barreled to as income. of to the forecast.

and XXXX net shift high gross premium following versus September in growth be the to outstanding $XXX to consistent XX% continue as XXXX; of approximately beverage to aged in XX% board income of some the continues available for million million are view and the of to share authorized whiskey to XX, is be amount XX% a quarter of expected is to as industrial projected becomes year company under more is be subject The success to XXXX way sales $XXX factor; as revolving XX% single-digit in shares growth Recently, the company sales with income to shareholders. guidance significant the XX.X dividends operating year-end. expected line. to for continues the are is the the fiscal forecasted the rate is the remained range effective with XXXX from important third XXXX, an to tax volatility conservative As credit of beyond: to XXXX XXXX; at between XXXX in alcohol; grow expected XX% margins sales operating million estimate board company's the $X.XX XXXX, per and MGP offering fiscal share.

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

Gus Griffin

Tom. Thanks,

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

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

potential Tom our continue capital present long-term warehouse significant on believe to growth opportunities category, flow As strong us and capabilities mentioned, in as program. to enable capitalize we key investments in themselves. barrel and our American We cash growth balance generation whiskey they the the of sheet make additional

of on be approximately $XX.X continues to completed in anticipated investment track XXXX. million Our

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

this As of approximately XXXX, total incurred September had of investment. million XX, $XX we

distilled will in mentioned brand I've the core always other spirits. Products focus be As owners Distillery in premium supplying segment our with previous calls,

owners. We are were of company's of strategic all implementation become alcohol the beverage supplier since realizing sales quarter the the for choice this efforts brand Net highest of the premium benefits to plan. of the our

to strengthen our We initiatives the also positioning craft to in continue implement segment.

be own continue are positive we experiencing We pleased the momentum our with initiative. brands to in

of at Whiskey. and further of the validates released this November The consumer brands our our our be XX. for the highest-quality received Reserve year premium strong have the awards release limited high for will magazine the Bourbon gold medal at a position Straight challenge the them trusted double Rye Straight the Our source accolades top San this the Remus Crafted as an for a Festival ratings and points Diego's offering Whiskey; Whiskey; on next Repeal their demand Table Series double X Master XX awarding the for including spirits. Bourbon gold Straight impressive and Cup for Washington Rossville brands Remus George Spirits for Union Tasting continue quality, to Spirits garner

the I've be As continued markets. year existing mentioned our throughout on of in velocity distribution in call sales focus increasing will the our last and the balance quarter,

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

Operator

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

Bill Chappell

implies the Gus, that single-digit a for growth in you expect the talking the big about quarter. -- full ramp Thanks, high side, good still just on pretty year? if And each do so, fourth morning.

understand, capable quarter? that so or when Just capacity have orders is towards hit company truncated the to are fourth trying it the does to the

Gus Griffin

digit premium Yes, and for single we've upper capability. high the think total we and believe have provided beverage. was the revenue. feel the I capacity don't we one I But company both yes, the --

several just the to and, strong, it's continues us very is overall the beverage American category specifically, for one, -- whether we've strong. whiskey, category, growth the about the think I continues talking to there, premiumization premium whiskey in Bill, both I going think, very alcohol be be the things and

add to continue We customers.

recruit and suppliers. about the You've choice premium efforts out beverage speak supplier repeatedly us be to all to customers to heard new our go of

going the faster actual We're number of adding before. customers, that's than we very, did at than was so disclose And a very customers. we faster We last clip but did well. year, we don't are year clip the them a which adding

paid So the really there dividends. have that implementing initiatives are we

And that. We're we're right with seeing horses. that also so pleased we're very backing

They're awards. winning rates. Our customers, growth brands their are showing impressive

well. So there, efforts marketing very very, our are going

So on that longer-term very all good. a sense looks

that's this. Now They've be very whatever days, confidence why just the looking management, we very those to that XX we on done been to at numbers. detailed by next have have and we'll approach reviewed the disciplined forecasting able do customers, the

Bill Chappell

sales sticking delays how from put on weren't quarter. sales terms in said but that had you terms, inventory, what that anyway of production about what Is able I was impact to the you the as And on there actual know standpoint? that, of -- just Okay. there to much away any delay in in the

Tom Pigott

No, Tom, is Bill. this

all from So to top able fulfill we inventory to sales. line standpoint, a utilize were existing

So that, related weren't increase as to kind there as you of to would've was no sales balance But we much able that impact. liked. inventory as we

Bill Chappell

then And go -- Okay. ahead.

Gus Griffin

Just that. a on build

away the said would the with we pool of second we -- the As had over we back -- increase putting down sort that of quarter the quarter, inventory last we thought half. were we in big some that

to our further more hurt inventory had and this during put ability inventory and, So we the it that our gross we we grow anticipated. as capacity Certainly, profit have we had it inhibited quarter. and to -- away certainly, barrels the firepower. But

Bill Chappell

that the of Thanks. inventories next the of you're to your outlook just coming with change just of you're think going give us I've year. you on kind then of got the And unaged. due on this. aged class versus path players larger with obviously, the aged, some update? And down further Can how 'XX place then conversations what is to inventory to any value

Gus Griffin

those continue the Yes, said as I two we've to last, quarters, think, we have discussions.

more We that the we're we're remember, XXXX caution for will pricing the inventory. in partners, place now. you, January going it have increasingly they anything old on years this to all feeling doesn't that use the are both it. will are need people their spread out when the inventory and But confident for prospective putting that four demand the plans turn you X, share so be concrete don't ready with year. through in who will Our I that to inventory

of your to view our of So question, value we would change seen the haven't second anything that inventory. that

Operator

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

Alex Fuhrman

and nice really has strong of remarks, other in Is of commodity to think terms Great. are even all are accelerating and Gus, the in to people marketing the I'm fair your as including past products just business, gravitating well business, towards the really those quarter. the Ingredient I we're is assume attributes how see for some consistently it portfolio, quarter. questions it that up the sense, a as familiar starting And think, I looks my but mean, this? for of Are Thanks taking I are non-GMO? like the there there next of over been guys side Ingredients, a products, well? more towards then, commodity over growth growing of side to on pick really clean of of move how wanted about health more the you the congratulations Solutions couple portfolio years ask us much companies business the Can wondering mentioned with be if label. trend attributes is, that couple you give sustainable you last to years. very as commodity prepared you I continuing that clean-label the the specialty your just

Gus Griffin

Yes.

high-protein, segment, so high-fiber, and -- I'll long-term -- business trend, take this of order. proteins the let's the trends, non-GMO, this sort those of the We So clean-label of growth consumer as because sustainable a really, products. plant-based an the see

in on. consumer the interest anyways, see So that we those going trends,

All products are made of our wheat. from

are non-GMO. verified they so And all

trying label labels, up non-GMO. new-news they the consumers want whether across the all to people So food are want their And specialty there. category, verified products. labels, commodity, clean or probably even they'd simpler they cleaner The clean be is -- are certainly,

and the some offerings And our is proteins, demand different -- some that a products, of ways different sort we've proteins we've for treated introduced new we so commodity commodity have. of basket

pricing demand been some from because introduced of turned has demand. the products basically customers. of past a address desire to that we've that it the better -- and that's So stronger to new better there because our be And out in than

Alex Fuhrman

-- decline business. some Then a The came of spirits, where that the the helpful. from. to of I'll follow-up a just interpret quarter. due trying side put trying the aged was just better sounds but beverage of was like to comments it that small on really That's the it lot of sense like in production Great. second get a take Obviously, in distilled of prepared products to the sold, the in the that of I'm $X million issues, sounds you your away remarks, that, you was some

product it aged in quarter X, So the things just was sure the sold X you of months probably that the you old, that want that quarter? big to X, to assume correctly make just the in second that is understand and I majority third fair distilled

Gus Griffin

as and to in because our inventory last the new Yes, we we foreshadowed we in we back said, half. strong going look, distillate ramped our be up the really second we had quarter were sales the quarter, capacity available knew

second is, third away so it and that's quarter anticipating happened the what we put that in quarter. exactly needing the for And fourth

that that offset those further we issues the growing do as that. issues And really is to Lawrenceburg we anticipated, from thing able So putting kept away to are going And thing certainly need being think in the we're us then kept from one inventory solved. production second that was because, it.

not So to continuing and an issue with build our we're we back to That's inventory. running that well. anymore, strategy, anticipate consistent

Operator

Mr. question-and-answer to for conference I the closing the Griffin turn remarks. like concludes Gus would This over to session. back any

Gus Griffin

for in for third joining our interest call. and quarter's you our company for Thank us today

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

Operator

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

disconnect. now may You

MGP Ingredients (MGPI) 3 Nov 182018 Q3 Earnings call transcript