Ceres nets an $8.4m third-quarter loss

July 16, 2012 |

In California, Ceres has reported a net loss of $8.4m for their third quarter, which ended in May.

Responded President & CEO Richard Hamilton, these numbers are not indicative of end-of-year performance; “Under some very challenging agricultural conditions, we outperformed commercial competitors and, at locations where adequate rainfall was available, we demonstrated the economic potential of our products as a season-opening feedstock for biofuel and biopower.”

Quarterly highlights

“The highlight of the quarterly release was the long-awaited yield data, coming against the backdrop of a 40-70% reduction in rainfall amid drought,” wrote Raymond James analyst Pavel Molchanov. “Ethanol mills indicated that Ceres’ two sweet sorghum hybrids provided better yields than competitors’ offerings…Next year, the company plans to introduce six new hybrids…Alongside sweet sorghum’s intrinsic advantages, the Brazilian government is supporting its adoption via financing opportunities for mills.

“Acreage expansion next planting season (November) will vary by mill group,” adds Piper Jaffray analyst Michael Cox, ” but at this point we remain comfortable with our estimate of 25k hectares of Ceres sweet sorghum.”

Analyst ratings

Michael Cox, Piper Jaffray: Overweight

“We reiterate our Overweight rating and adjust our price target to $20 from $24 due to the effect of unfavorable exchange rates on our out-year estimates. Despite this change, we are incrementally more positive on the stock following favorable field trial data from the recent Brazilian sweet sorghum harvest and insight into additional hybrids in the company’s FY3Q release. Despite another difficult drought year in Brazil, Ceres announced that its sweet sorghum out-yielded the competition and management expects increased planted acreage in the next planting season later this year. Ceres plans to introduce six new hybrid sweet sorghum seeds, providing additional catalysts for sales and profits.”

Pavel Molchanov, Raymond James: Outperform

“Within the context of our broadly favorable view on the development of next-generation (Gen2) biofuels, Ceres represents a derivative play on non-food biofuels. Ceres’ diverse range of energy crops helps address “food vs. fuel” concerns and price volatility surrounding sugarcane and corn. The company’s position in the upstream of the biofuel value chain provides leverage to many process technologies and end markets. We reiterate our Outperform rating, which balances the unique IP platform and wide set of market opportunities with the adoption curve’s limited visibility and a distant outlook for profitability.”

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