MGP Ingredients(US:MGPI)2019-02-27 18:35Financial Data and Key Metrics Changes - Consolidated net sales for 2018 increased by 8.2% to $376.1 million, with gross profit rising by 10% to $83.6 million and operating income growing by 16.9% to $50.1 million [6][17][18] - For Q4 2018, consolidated net sales increased by 18.9% to $104.9 million, and gross profit increased by 31.2% to $25.6 million, resulting in a gross margin increase of 230 basis points to 24.4% [15][16][18] Business Segment Data and Key Metrics Changes - In the Distillery Products segment, full-year net sales grew by 7.9%, driven by a 5.9% increase in premium beverage alcohol, particularly an 11% increase in net sales of brown goods [6][9] - Ingredient Solutions segment net sales grew by 9.9%, with gross profit improving by 28.3% to $11.8 million, and gross margins expanded by 270 basis points [13][17] Market Data and Key Metrics Changes - The company reported that its full-year net sales growth in premium beverage alcohol outpaced the overall U.S. spirits industry, with brown goods growth outpacing the American Whiskey category [9][10] - The company experienced pricing pressure in the white goods and industrial alcohol market, which impacted gross margins [10][22] Company Strategy and Development Direction - The company continues to invest in its inventory of aged whiskey to attract and retain customers and support brand development, with a focus on expanding its premium beverage alcohol offerings [11][24] - A significant warehouse expansion program is underway, with approximately $44 million invested and expected completion in 2020 [25][26] - The company plans to increase sales of aged whiskey in 2019 while continuing to grow its inventory balance [27][28] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the growth potential of the American Whiskey category and the company's ability to leverage this growth [24][28] - The company anticipates mid-single-digit net sales growth for 2019, with expected modest increases in gross margins [22][38] Other Important Information - The company authorized a quarterly dividend of $0.10 per share and a $25 million share repurchase program, reflecting strong financial performance [21] - The effective tax rate for 2019 is forecasted to be approximately 21% [22] Q&A Session Summary Question: When should the company start to see more meaningful deployment of aged whiskey? - Management confirmed that 2019 marks the next phase of aged whiskey deployment, with sales already contracted and visibility to aged sales needed to meet guidance [36][37] Question: Is the beverage segment expected to align with mid-single-digit growth? - Management noted that while they do not provide segment-specific guidance, headwinds in industrial alcohol and strong comparisons in ingredient solutions are factored into overall revenue guidance [38] Question: Will the company continue to achieve strong pricing for aged inventory? - Management affirmed that despite competitive aged whiskey in the market, the consistency and quality of their offerings will allow them to maintain strong pricing [40][41] Question: How does the company plan to manage aged inventory sales? - Management indicated that they will judiciously manage aged inventory sales to maximize value rather than focusing on emptying the warehouse [42][43] Question: What is the outlook for the protein side of the business after losing a large customer? - Management expressed confidence in long-term growth for the protein business, citing strong consumer interest and a robust project funnel [47]