Earnings season is upon us — time to go, as they say, to the scoreboard for an update on some of the sector’s perennial favorites.
GPRE earning, DSM acquiring, AMRS shipping — some welcome pars, even a birdie or two, from the front-lines.
Now, the ethanol sector has been going through one of its periodic rough patches in recent months — in this case, courtesy of the dire US drought last year which has forced up corn prices and tightened inventories. A number of ethanol plants have tumbled into the red, or shut down production entirely until corn and ethanol prices become better aligned.
First up to bat: Green Plains Renewable Energy
So, it was surprising news when Green Plains came out with positive earnings for the 4th quarter and the year as a whole.
Net income attributable to Green Plains for the full year of 2012 was $11.8M, compared to net income of $38.4M in 2011. Revenues were $3.5B for 2012 compared to $3.6B in 2011. For Q4, net income was $33.0M, compared to $13.3M in 2011. Revenues were $883.7M for Q4 compared to $922.8M for Q4 2011.
“All of our business segments reported positive operating income during both the fourth quarter and the last half of 2012,” said CEO Todd Becker. “We ended 2012 with $280 million in cash and the lowest ethanol plant debt in our history. This positions us for the future to take advantage of growth and diversification opportunities and to continue to withstand the cyclicality of our business.”
The strong earnings earned high marks from investors. Overall, shares jumped from a closing low of $7.59 on January 30, to $9.90 at the closing bell on Valentine’s Day before settling back to $9.88 at yesterday’s close. A very impressive 30% leap — and an upgrade from TheStreet Ratings (from sell to hold).
Looking at the company’s longer range future, news continues to be positive in GPRE’s BioProcess Algae venture. The start-up initiated and completed construction of Phase III Grower HarvesterTM reactors in Shenandoah, Iowa. Construction of Phase IV, involving an additional 4.25 acres of reactors and a new downstream processing facility, has begun with completion expected in September 2013.
The upside there is to convert the low-value CO2 byproduct at the conpany’s Shenandoah plant to a feedstock for a high-value algae venture in producing feed, nutraceuticals and fuels. A Bioseutica deal for Omega-3 oils is a first step in monetizing that project.
It’s proof positive, GPRE’s results that is, that lean times in corn do not necessarily have to translate into disaster at the earnings call. Investors who bought in during the company’s long run at the $10-$12 range may not have received satisfaction — both those who took the plunge when the company’s shares were trading at $3.57 back just 6 months ago are pocketing large gains.
Over to Amyris
Next on the docket — Amyris reported in yesterday with its Q4 and year-end results.
Overall, aggregate revenues for the quarter ended December 31, 2012 were $5.9 million versus $41.5 million in the fourth quarter of 2011. The decline in revenue was due to the Company’s planned transition out of the ethanol and ethanol-blended gasoline business, which was completed in the third quarter of 2012.
Of the $5.9 million in aggregate revenues during the quarter ended December 31, 2012, $3.0 million related to renewable product sales compared to $0.7 million for the same period in the prior year.
On a non-GAAP basis net loss attributable to common stockholders was $29.7 million compared to $52.8 million ($1.15 per share) in 2011.
For the year as a whole, 2012 revenues were $73.7 million versus $147.0 million for 2011. On a non-GAAP basis, the net loss for 2012 was $131.8 million ($2.32 per share) compared to $153.4 million ($3.42 per share) in the prior year.
“In the final quarter of 2012, we completed commissioning and began commercial production of our industrial-scale farnesene production plant in Brazil. Also, we secured additional capital from some of our largest shareholders,” said John Melo, President & CEO of Amyris. “Amyris is focused on continued execution of our business strategy with the goal of achieving positive cash flow in 2014, underpinned by a reduced operating expense profile, strong product and collaboration revenues, and ongoing support from our investors,” Melo concluded.
Over at Cowen & Company, Rob Stone wrote: The Q4:12 cash loss was 20% wider than St. on lower revenue, weak mix, and higher expenses. Product and collaboration revenue both fell short of our estimates. Squalane and niche diesel are still the only products shipping; others should follow in H2:13. Despite the recent financing, only about 50% of expected 2013 collaboration funding is firm. Maintain Neutral (2).
Over at Piper Jaffray, Mike Ritzenthaler wrote:
“We maintain our Neutral rating and $3 target on shares of AMRS following their 4Q GAAP print of ($0.72) in loss per share, below our estimate of ($0.55). Gross margins on farnesene again appeared to be above zero, and $3 million in product sales were about half of the total 4Q revenues. Management’s focus continues to be on reducing costs, but with ~$30 million of burn in 4Q, cash availability remains a central tenet of the Amyris story. The Paraiso startup and new potential volumes are promising steps in the right direction, but with $30 million in cash on hand and ~$85 million in burn on tap for 2013, we remain on the sidelines.”
The stock is on a run in recent weeks — running up over $4.00 per share briefly, prompting a technical downgrade from Raymond James after shares shot up 60% in a month and overshot the RJ’s price targets. Since then, the buyer jets have cooled somewhat and the stock has settled back to $3.13 this morning after taking an 8% hit following the earnings announcement.
But, by any measure, miles better than the $1.57 low that AMRS shares reached after a steep slide last spring when the company’s ramp-up targets were abandoned due to technical problems in scale-up.
Over to DSM
This morning, DSM reported €243 million in EBITDA for Q4, with the company noting that this result came despite a €100 million lower contribution from its caprolactam activities compared to Q4 2011. For the full year EBITDA amounted to €1,109 million, 14% lower compared to 2011. Profit growth in all clusters was more than offset by approximately €300 million lower results from DSM’s caprolactam activities in Polymer Intermediates and Performance Materials.
Nutrition results in Q4 increased by 6% versus Q4 2011 and full year results increased by 8%, as a result of contributions from acquisitions and continued organic growth.
Pharma results in Q4 as well as for the full year 2012 were slightly above the level of the comparative periods of 2011.
Performance Materials recorded 21% higher EBITDA in Q4 compared to Q4 2011 due to higher volumes, improved margins and lower costs. Full year EBITDA was 4% lower due to lower margins in the polyamide-6 value chain (caprolactam effect) and lower volumes at DSM Dyneema.
In early trading, NYSE-traded shares in Royal DSM were up to $15.78, nestled quite close to an 18-month high (the stock briefly touched $16.00 in late January). DSM has not hit the $18 mark in the past five years — is the company poised to make a strong run in 2013, after dipping to as low as $10.83 in mid-summer. Certainly, the company has been active in M&A, most recently acquiring enzyme-related businesses from Cargill.
The Bottom Line
For all three reporting stocks — the companies have recovered strongly from share price jitters in the past year. Intrepid investors have been making large returns in all three stocks over the past few months. Each of the three issued relatively bullish outlooks for their development efforts — more cautious on the short-term economics and earnings.
But a whale of a lot batter than seven months ago — when scale-up concerns, drought concerns and capital-finding woes had tumbled shares associated with advanced bioenergy and renewable chemicals into the tank.
Category: The Business Case