Pacific Ethanol focuses on high-quality alcohol, coproducts

By Erin Voegele | August 12, 2020

Mike Kandris, co-CEO of Pacific Ethanol Inc., announced on Aug. 12 that the company does not expect to reopen its idle fuel ethanol plants until it can better secure positive forward operating margins for the idle facilities.

Kandris made the comments during a second quarter earnings call, held Aug. 12.

Pacific Ethanol on March 27 announced that it would idle more than 60 percent of its ethanol capacity by the end of the month in response to falling demand and economic factors caused by the COVID-19 pandemic. Neil Koheler, president and CEO of Pacific Ethanol, said in mid-May that the company was then operating at approximately 50 percent capacity.

During the Aug. 12 earnings call, Kandris said ethanol production crush margins currently remain variable without long-term forward predictability. Given those conditions, he said the company does not expect to resume operations at its idle fuel ethanol facilities until it can better secure positive forward operating margins.

Reopening of those facilities, Kandris said, would be achieved through either repurposing or restarting with high-value complimentary or differentiated products. “Further, we continue to consider all options for maximizing or monetizing the value of these plants, and we are in discussions with various parties in this regard,” he added.

While economics for fuel ethanol were difficult during the second quarter, Pacific Ethanol reported strong results for its high-quality alcohol, high-protein meal, and dried yeast products.

Kandris said demand for the company’s products that can be used in sanitizers increased significantly during the second quarter due to the COVID-19 pandemic. To meet that demand, Pacific Ethanol focused on debottlenecking production and other process improvements to generate additional production capacity of 25 MMgy of high-quality alcohol at its campus in Pekin, Illinois. The company also announced it is modifying and refurbishing existing equipment to increase production capacity of USP-grade alcohol by an additional 30 million gallons by the end of 2020. By 2021, Kandris said the Pekin campus will have the capacity to produce 140 MMgy of high-quality alcohol, the majority of which will meet or exceed USP specifications.

Kandris also noted that Pacific Ethanol continues to experience high demand for its high-protein meal and dried yeast products. Despite the slowdown in fuel ethanol production during the pandemic, he said the company has been able to consistently maintain production of its high-protein meal and dried yeast coproducts at its Pekin campus, resulting in strong coproduct returns.

Pacific Ethanol reported net sales of $212.1 million for the second quarter, down from $346.3 million during the same period of last year. Gross profit was $31.2 million, up from $4 million. Operating income was $22.6 million, compared to a loss of $2.7 million. Income available to common stockholders was $14.6 million, or 27 cents per share, compared to a loss of $8 million, or 17 cents per share, reported for the second quarter of 2019. Adjusted EBITDA was $28.8 million, compared to $7.2 million.