Ladd Seaberg, president and chief executive officer of Midwest Grain Products, Inc. (Nasdaq: MWGP), today reported that the company’s earnings for the fourth quarter of fiscal 2000 represented “a significant positive turnaround” compared to the same period the prior year. The company’s net income for the quarter, which ended June 30, was $969,000, or 11 cents per share, versus a net loss of $1,058,000 that was incurred in the final quarter of fiscal 1999. Fourth quarter sales in fiscal 2000 increased to $59,287,000 from $53,288,000 the preceding year.
For all 12 months of fiscal 2000, the company had net income of $4,890,000, or 54 cents per share, on sales of $231,880,000. Those results were much improved over the net income of $1,270,000, or 13 cents per share, that Midwest Grain posted on sales of $216,101,000 for all of fiscal 1999. The company’s earnings before interest, taxes, depreciation and amortization in fiscal 2000 were $23,066,000 compared to $17,660,000 in fiscal 1999.
The fourth quarter earnings improvement resulted principally from heightened demand for the company’s vital wheat gluten, specialty wheat proteins and fuel grade alcohol. Raw material costs for grain were up slightly in the quarter compared to a year ago, but have since come down due to favorable growing conditions which have thus far been experienced in major harvesting regions of the country. “Earlier fears about the possibility of widespread drought conditions this summer have proven to be unwarranted,” Seaberg said.
Sales of the company’s vital wheat gluten remain on an even track “due largely to measures regulating the flow of excess, artificially-priced gluten from the European Union (E.U.) into the U.S. market,” Seaberg said. As previously announced, President Clinton’s decision to allocate imports of foreign wheat gluten on a quarterly rather than an annual basis became effective June 1 with the start of the third year of a three-year-long gluten quota. The President additionally added Poland to the list of countries which are subject to the quota after determining that dramatically increased gluten imports from that nation “have impaired the effectiveness” of the quota. In the 12-month period prior to June 1, 1998, when the quota was implemented, less than 500,000 pounds of wheat gluten entered the U.S. from Poland. In the second year of the quota, that amount rose to 13.1 million pounds, or nearly 8 percent of all imports.
“Conditions currently indicate that President Clinton’s recent actions have brought greater stability to the domestic gluten market, as opposed to this time a year ago,” Seaberg said. In the spring and summer of 1999, the U.S. was suddenly and rapidly flooded with gluten imports, due mainly to the E.U.’s entire allocation entering the market within just two weeks after the second year of the quota opened, he explained.
In a related matter, a dispute panel of the World Trade Organization (WTO) has recently challenged the U.S. safeguards decision under which the quota was implemented. The WTO challenge will be appealed by the U.S. Trade Representative in a process that could extend through December, 2000. In the meantime, the ruling has no impact on the quota, Seaberg noted.
Seaberg also reported that conditions continue to “look very promising” for the company’s value-added wheat-based ingredients, which are produced and marketed for use in a variety of food and non-food applications, including dough conditioners, meat extenders and replacers, hair care and skin care systems, and bio-plastics.
“Consisting of specialty and modified wheat proteins and starches, these exciting products experienced steady growth in fiscal 2000,” he said. “As I stated in my last report, they continue to prove their ability to satisfy evolving needs in the marketplace such as helping customers meet growing demand for products that offer greater consumer convenience, selection and quality. Going forward, we expect sales in this area to gain increasing momentum, adding substantially to our bottom line.”
While sales of the company’s food grade alcohol for beverage and industrial applications have remained squeezed by tight conditions in those markets, sales of fuel grade alcohol, which increased in the fourth quarter, continue to show strength. This has resulted partially from the Environmental Protection Agency’s (EPA) recent proposal to phase out MTBE, a synthetically-derived fuel oxygenate, as the result of health-related environmental concerns. Furthermore, the EPA recently proposed new rules to make it easier for oil firms to use grain-based fuel alcohol, or ethanol as it is commonly known, to produce cleaner burning reformulated gasoline for the Midwest U.S. market. “While it is unclear at this time as to when any action might be taken, the proposal is an encouraging sign that ethanol is receiving greater consideration as the most rational choice for a safe and effective fuel additive,” Seaberg said.
This news release contains forward-looking statements as well as historical information. Forward-looking statements are identified by or are associated with such words as “intend,” “believe,” “estimate,” “expect,” “anticipate,” “hopeful,””should,” “may” and similar expressions. They reflect management’s current beliefs and estimates of future economic circumstances, industry conditions, company performance and financial results and are not guarantees of future performance. The forward-looking statements are based on many assumptions and factors, including those relating to grain prices, gasoline prices, energy costs, product pricing, competitive environment and related marketing conditions, operating efficiencies, access to capital and actions of governments. Any changes in the assumptions or factors could produce materially different results than those predicted and could impact stock values.