MGPI - MGP Ingredients announces closure of distillery in Kansas

2023-07-13 12:32:55 ET

MGP Ingredients ( NASDAQ: MGPI ) announced on Thursday the planned closure of its distillery in Atchison, Kansas, with the anticipated closure date estimated to be January of 2024. The distillery is responsible for producing grain neutral spirits and industrial alcohol products, as well as their related co-products.

The company said the decision to close the Kansas distillery is consistent with the  plan to address profitability headwinds associated with its grain neutral spirits and industrial alcohol products within its Distilling Solutions segment. Looking ahead, MGPI will continue to operate and invest in its Ingredient Solutions business located in Atchison, Kansas, including the previously announced $16.7 million-dollar texturized protein facility that is scheduled to be completed by the end of the year. MGPI will also continue to operate and invest in its Lawrenceburg, Indiana distillery operations.

"After careful deliberation, we have concluded that the closure of our Atchison distillery is a necessary step to further align the product categories we participate in and their supporting operations, consistent with our long-term strategic objectives," noted CEO David Colo. "The additional supply of grain neutral spirits and industrial alcohol that has entered the market during the past few years has had a meaningful and structural impact on the market," he added. However, combining those market factors with the increase in local corn basis costs during this same time frame has resulted in these product lines no longer being economically viable.

Weighing in on the development, Cowen analyst Vivian Azer said  the move is consistent with MGPI's strategy to minimize profitability headwinds associated with sales of white goods/industrial alcohol, which have had negative gross margins in recent quarters. The closure is also expected to allow for more operational focus on fast-growing Brown Goods. Cowen kept an Outperform rating on MGPI.

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