Processing Magazine

MGP Ingredients to end ethanol production

February 4, 2009
MGP Ingredients Inc. has announced plans to leave the ethanol business, according to the Associated Press. The company will also temporarily shut down distillery operations in Illinois, requiring the temporary layoffs of 79 workers. It also warned in a securities filing that it was in default of its credit facility and seeking additional financing "to continue as a going concern." The Atchison, Kan.-based company said the Pekin, Ill., distillery operations will be shut down for 90 days, affecting production of both fuel-grade and food-grade alcohol. Fourteen employees were already temporarily laid off last month and this announcement will affect another 65. The company said its current inventory of food-grade alcohol means the shutdown shouldn''t affect customers. In a statement, Chief Executive Officer Tim Newkirk said getting out of the ethanol business was part of the company''s plan to return to profitability. "Factors such as extreme and sporadic swings in ethanol demand, volatility in raw material prices for corn, and the impact of volatile oil and gasoline prices have made it increasingly apparent that the fuel grade alcohol market is not one in which we currently can create value for the company and our stockholders on a sustainable or predictable basis," he said. Ethanol makers across the country have pulled back on producing the fuel additive, with many either closing their doors or declaring bankruptcy. Last fall, MGP closed down wheat protein and starch manufacturing operations at the Pekin plant and closed its flourmill in Atchison, forcing the layoffs of 52 workers and early retirement for another 31. MGP said in the securities filing that its December earnings before taxes, depreciation and other factors didn''t meet requirements set by the company''s lenders and that it is in default. It said the lenders are willing to continue issuing credit to the company, but that could change at any time and the current credit facility expires later this month