Pacific Ethanol reports progress with plant improvements

By Erin Voegele | May 05, 2016

Pacific Ethanol Inc. has released first quarter financial results, reporting increased net sales, gross profit and adjusted EBITDA. The company also reported progress with improvements it is making to its ethanol plants.

“For the first quarter of 2016, we reported net sales of $342.4 million, gross profit of $1.1 million and a positive Adjusted EBITDA of $1.6 million, all of which represent significant growth over the same period last year,” said Neil Koehler, president and CEO of Pacific Ethanol. “We also paid off $17 million of our term debt in the first quarter resulting in our four Western ethanol plants becoming completely debt free. While seasonal patterns in supply and demand created a challenging market environment, we continued to execute well on our strategy to leverage our diverse base of production and marketing assets to expand our share of the renewable fuel and co-product markets. Current ethanol production margins have improved over the first quarter levels as both production and inventory have moderated in the face of growing ethanol demand.”

During an investor call, Koehler explained the first quarter of 2015 was the weakest margin quarter of last year, and Pacific Ethanol expects that pattern to be repeated this year. Recent reductions in production coupled with very strong ethanol demand are resulting in significant margin improvements during the front end of the second quarter, he said.

Although distillers grains prices declined during the first quarter and the company has been impacted by reduced demand from China, Koehler noted that Pacific Ethanol’s diverse portfolio of coproducts, including corn gluten meal and feed, corn germ, dry distillers yeast, carbon dioxide, and corn oil, have provided strong returns for the company and have helped mitigate negative ethanol crush margins experienced during the first quarter.

Koehler also briefly addressed the California Low Carbon Fuel standard and Oregon Clean Fuels Program, noting both programs have translated into meaningful financial results for Pacific Ethanol. He also noted that the California Air Resources Board recently updated carbon scores for ethanol facilities participating in the LCFS.

Regarding plant improvement initiatives, Koehler noted an industrial-scale membrane system that separates water from ethanol in the dehydration process being installed at the Madera, California, plant is expected to be in commercial operation during the third quarter.

During the first quarter and continuing into the current quarter, Pacific Ethanol has been conducting trials of Enogen corn at its Aurora, Nebraska, and Madera facilities. If trials are successful, Koehler said the company expects to move to commercial operations in parallel with a new corn crop later this year.

The Stockton, California, plant began producing cellulosic ethanol in late 2015 using a technology to process corn fiber. The technology is expected to increase the production capacity of the plant by 1 MMgy. According to Koehler, the company is still waiting final approval from the EPA to qualify the ethanol produced at the plant as cellulosic ethanol to produce D3 cellulosic renewable identification numbers (RINs).

Koehler also said the company remains on track for the installation of cogeneration technology at the Stockton plant that will convert waste was and natural gas into electricity and steam. Commercial operations are expected by the end of the third quarter.

Net sales reached $342.2 million during the quarter, up from $206.2 million during the same quarter of the prior year. Gross profit was $1.1 million, compared to a gross loss of $1 million during the first quarter of 2015. Operating loss for the quarter was $7.2 million, compared to $5.9 million during the same three-month period of last year. Net loss available to common stockholders was $13.5 million, or 32 cents per share, compared to $4.7 million, or 19 cents per share, during the first quarter of 2015. Adjusted net loss was $13.6 million, compared to adjusted net loss of $4.5 million during the same quarter of the previous year. Adjusted EBITDA was positive $1.6 million, compared to negative $2.7 million for the first quarter of 2015.