Pacific Ethanol EBITDA quadruples for Q3: “best production margins of the year,” says CEO

November 6, 2016 |

In California, Pacific Ethanol reported Q3 EBITDA of $9.3M, up from $2.4M in Q3 2015, as sales jumped 10% to $417.8 million and CEO Neil Kophler hailed near “the best production margins of the year from strong ethanol demand and low corn input costs aided by a record corn crop.”

Koehler added: “During the third quarter, we sold a record 243.7 million gallons of ethanol, reflecting increased output from our eight production facilities as well as a 16% increase in third party sales over the comparable period in 2015. As a result, net sales grew 10% compared to the third quarter of last year. This also demonstrates our success in integrating and optimizing our Midwest assets.

“Net loss of $3.8 million for the third quarter of 2016 was impacted by over $11 million of extraordinary expenses, including higher beginning inventory valuation, lower margins in the Company’s ethanol trading business resulting from the intra-quarter drop in ethanol prices, significant repair expenses and non-cash mark-to-market adjustments related to open hedge positions.

Cash and cash equivalents were $40.6 million at September 30, 2016, compared to $52.7 million at December 31, 2015. The lower year-over-year cash and cash equivalents balance reflects debt and interest payments of over $27.0 million and capital expenditures of $14.0 million. On a sequential basis, cash and cash equivalents improved from $31.7 million at June 30, 2016.

Jeffrey Osborne at Cowen & Company noted: “Extraordinary Expenses appear to be one time on the price release. We continue to believe the company will benefit from improved crush margins in an environment with low corn prices and strong demand for ethanol. We look for more commentary on the extraordinary charges, and the outlook for 4Q and 2017.

Pacific Ethanol reported revenue of $417.8mn, above our estimate of $398.7mn and consensus of $392.4mn, but missed our and consensus gross margins and EPS estimates due to extraordinary charges related to inventory valuation, lower margins in the company’s ethanol trading business due to intra-quarter drop in ethanol prices, and non-cash mark-to-market adjustments related to open hedge positions. We continue to believe that the setup for 4Q16 and 2017 will reflect low corn input costs and strong demand for ethanol as the company continues to improve its efficiency at its production plants and expand its marketing business.”

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