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MGP ‘disappointed’ with sales forecast
Spirits producer MGP Ingredients has lowered its earning expectations for the full year and also anticipates a 24% sales drop in its third quarter results.
The Kansas-headquartered company is set to announce its third quarter earnings on 31 October.
MGP Ingredients presides over Luxco’s portfolio, having completed the acquisition of the company in April 2021 in a deal valued at US$475 million. Its products include George Remus, Yellowstone Kentucky and Penelope Bourbons, as well as Rossville Union rye and El Mayor Tequila.
It also makes the neutral spirits used in the production of Pernod Ricard-owned Seagram gin and vodka.
MGP Ingredients made the decision to close its distillery in Atchison, Kansas, last July because of headwinds facing its grain-neutral spirits.
Excluding the impact of the closure, based on ‘preliminary results’ MGP expects a decline of 14% in the third quarter ending 30 September 2024. Factoring in the closure, sales are expected to decline much more, by 24% compared with the same quarter a year ago to US$161.5 million.
For its distilling solutions business, sales are expected to drop by 36%, including a 22% decline in the sales of brown goods. Meanwhile, for branded spirits – which has become a focus for the company – these are forecast to drop by 6%, but premium-plus brands look to be up by 1%.
Disappointing forecast
Sharing disappointment in the updated outlook, David Bratcher, CEO and president of MGP Ingredients, said soft alcohol spirits category trends and elevated industry-wide whiskey inventories were are putting “greater than expected pressure” on the company’s brown goods business, with a “larger impact” on the smaller, craft customer base.
“We are disappointed with our third quarter results and fourth quarter outlook,” he said.
Bratcher said the American whiskey category has “successfully navigated periods of temporary supply-demand imbalance over the years”, and on the positive side, the company’s pivot towards being a branded spirits company “continues to gain strength”. He added he “remains confident about our attractive long-term growth outlook”.
In its revised financial view, MGP now expects results to be below what was forecast on 1 August.
It expects full-year 2024 sales to be in the range of US$695m to US$705m, adjusted EBITDA (earnings before interest, taxes, depreciation and amortisation) to be in the range of US$196m to US$200m, and adjusted basis EPS (earnings per share) to be in the range of US$5.55 to US$5.65.
In its August reading, full-year sales were expected to be in the US$742m to US$756 million range.
Bratcher added: “We expect these industry headwinds to persist at least through the rest of the year and will share details about our 2025 outlook with our fourth quarter 2024 earnings release.”
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