Pacific Ethanol reports Q1 2015 loss of $4.7M as ethanol begins rebound

In California, Pacific Ethanol reported a net loss for Q1 2015 of $4.7 million, compared to $11.1 million for the first quarter of 2014. Net sales were $206.2 million forQ1  2015, a decrease of 19% when compared to $254.5 million for Q1 2014.

The decline in net sales was attributable to a decrease in the company’s average sales price per gallon of ethanol, partially offset by an increase in production gallons sold reflecting the restart of production at the company’s Madera facility in the second quarter of 2014. Adjusted EBITDA declined to a loss of $2.7 million for Q1 2015, compared to Adjusted EBITDA of $35.4 million for Q12014.

Bryon McGregor, the company’s CFO, stated, “Cash and cash equivalents were $42.3 million at March 31, 2015, compared to $62.1 million at December 31, 2014.”

Neil Koehler, the company’s president and CEO, stated: “During the first quarter of 2015, the ethanol industry was negatively impacted by lower production margins resulting from high ethanol inventory levels and volatile energy markets. As a result, we reported a first quarter 2015 net loss of $4.7 million. We have seen a solid improvement in margins so far in the second quarter, as US ethanol production has moderated while the demand for transportation fuels is strengthening. Looking forward in 2015, we are optimistic about the financial performance of the company and the industry. We began producing corn oil at our Madera facility and are close to initiating corn oil production at our Columbia plant, which will further diversify our revenues and contribute to overall margins.

“2015 is expected to be a transformational year for Pacific Ethanol as we extend our market reach through our planned merger with Aventine Renewable Energy and amplify our destination market strategy with key facilities in origin markets. In addition, as the fifth largest producer and marketer of ethanol in the United States post-merger, I am confident we will have the resources and strategy in place to drive profitable growth for years to come,” concluded Koehler.

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Jeffrey Osborne of Cowen & Company observed: “As expected by management, Q1’s bottom line was particularly weak on a negative corn/ethanol spread. The magnitude of margin compression comes as somewhat of a surprise, with the ethanol-to-delivered cost of corn spread nearing ($0.10) per produced and sold gallon. The primary cause of the crush depression was not only the overall expected weak margins for the industry in Q1, but rather the decrease in Pacific Ethanol’s premium per gallon typically exhibited. Compared to an average CBOT ethanol price of $1.50/gal., Pacific Ethanol received a $1.65/gal. price, only reflecting a $0.15 per gallon advantage, vs. the typical 30+ cent range.

Production was steady at 44.6 mn gallons, or ~90% of capacity, while Kinergy marketing reached a high of 91 mn gallons, from 73 mn in 1Q14.

From an industry-wide perspective, the ethanol/corn spread seems to have troughed given national inventory levels steadily below 21 mn barrels, strong exports held with February reflecting a 27% increase in exports y/y, corn cost remaining low, and the revival of the distiller grain market now that China removed the ban on importing certain strains of U.S. corn products.