Pacific Ethanol tumbles into loss despite 47% revenue jump, but beats Wall Street consensus
In Oregon, Pacific Ethanol reported Q4 revenues of $376.8 million for the fourth quarter of 2015, an increase of 47% when compared to $256.2 million for tQ4 2014, and operating income for the Q4 2015 of $0.5 million, compared to $13.6 million forQ4 2014. Net loss for Q4 was $1.1 million compared to $11.9 million for Q4 2014. Cash and cash equivalents were $52.7 million at December 31, 2015, compared to $62.1 million at December 31, 2014. For 2015 as a whole, the company reported a net loss of $20.1M compared to $19.4M for 2014.
Reaction from Fortress PEIX
Neil Koehler, president and CEO, stated: “In 2015, we made significant progress in positioning the company for long-term growth. We completed our acquisition of Aventine in July, more than doubling our production capacity. Our expanded footprint is demonstrating operating benefits. The diversification of geography, technology, feedstocks and products strengthens our performance across margin cycles and provides a strong platform for growth.
“Looking ahead, we remain focused on improving our performance through further lowering production costs, expanding sales of higher value ethanol and co-products and reducing the carbon intensity of our ethanol.
“In the first quarter of 2016, we are moderating production levels to match supply and demand. While the demand for ethanol continues to grow, current industry ethanol inventories remain high. We are confident that the fundamentals of ethanol as a valuable source of octane and carbon reductions will support continued growth in demand and improved production margins.”
Market reaction
Over at Cowen & Company, Jeffrey Osborne wrote:
Pacific Ethanol reported revenue below estimates but beat on earnings The company is focusing on cutting costs and synergies from the merger as well as reducing capacity while it waits for either growth on the demand side or consolidation on the supply side to resolve these issues. The oversupply theme of 2015 continues to remain the biggest concern going forward. While management is hopeful that the end is near due to growing demand, they are planning for the trend to continue in the near to mid term by reducing capacity. The company was very constructive on the integration so far with last year’s acquisition of Aventine, estimating that they have already achieved 3/4 of the expected $1 mn per month. Given recent M&A of $1.00-$1.50/gallon, assuming the low end of $1.00/gallon and looking at PEIX’s 550 mgy of capacity, adjusted for debt, our implied equity value reflects a price target of $10.00 per share
Category: Fuels
