GPRE expects to return to profitability by Q4 2012

By Erin Voegele | July 27, 2012

Green Plains Renewable Energy Inc. has announced its financial results for the second quarter of 2012, which ended June 30. While the company posted a net loss of $7.6 million during the three-month period, information presented during a call to discuss the results reveals that GPRE expects to be profitable by the end of the year.

“We have positioned Green Plains with a strong balance sheet to provide sustainability through cyclical downturns such as the one we are currently experiencing,” said Todd Becker, GPRE president and CEO. “While the tight margin environment has continued, our strategy to pursue growth opportunities that continue to de-risk the ethanol segment remains intact. Our non-ethanol businesses continue to diversify our cash flows, allowing us to meet our debt service obligations largely from operations. During the quarter, we repaid over $60 million in term and revolving debt, while maintaining a strong liquidity position with $137 million in total cash and equivalents at quarter-end.”

Becker stressed that GPRE’s focus has been, and remains on, maintaining economically sustainable operations. “Over the last three years we have acquired technologies, built and acquired businesses, and expanded segments that have added revenue and income, which has reduced our dependence on our ethanol production segment,” he said. “At the same time we have repaid debt, and built our liquidity.”

Due to its diversified operations, Becker said GPRE management believes the company is in a good position to weather the difficult margin environment the ethanol industry continues to experience. “While we are not happy with the overall results, we are pleased with the performance of our non-ethanol operating segments,” he continued. “We believe that as we navigate through a challenging third quarter, we should be profitable in the fourth quarter.”

During the quarter, GPRE improved ethanol production yields to a level of 2.85 gallons per bushel of corn. “On an ongoing basis we have worked to refine the ethanol production process and get more out of the corn we grind, “Becker said. “Whether it has been though our new enzymes, or improving process flows, as a company and an industry we continue to seek improvement in yield.”

According to Becker, GPRE is working with a new technology he called “fine-grind technology,” which targets the last 7 percent of starch for enzyme conversion into sugar by breaking the larger starch particles into smaller ones, and breaking starch away from the fiber, protein or fats in the corn kernel. “We believe this technology could improve our ethanol yields 2 to 3 percent, and could also increase corn oil recovery yields 10 to 15 percent, both having positive contributions to the bottom line over the long term,” Becker said.

Becker also noted that GPRE evaluates its operations daily, and considers a number of factors as to whether to slow down or idle each of its plants. The improvements that have been made to debottleneck production, implement corn oil extraction and evaluate find-grind technology have so far allowed all of GPRE’s plants to remain operational.

A big part of maintaining operations comes from the company’s non-ethanol operating income, which measured $14.6 million during the second quarter. This includes income from corn oil production, agri-business operations, and the marketing and distribution segments.

“We have locked in the approximately 40 percent of our ethanol margins for the fourth quarter at profitable levels,” Becker said. “This, combined with positive results from our non-ethanol operating income segments, gives us the confidence to say that we believe we will return to profitability in the fourth quarter.”