You miss the call to sell at $24?
I just explained how I saw the cash going out rather than stay in the company!
Look at the final balance sheet, ALL of the cash generated went out the door.
! ALL of cash LEFT ( after capex) on the books are from issued common shares.
Funny, debt restructured was lowered by HALF A PERCENT... my guess from 13.5% to 13% AND kept longer!!! SO when I see any debt at 13% Interest, it is 2X Debt at 6%, and 3X debt at 4%.
My new sentiment is based on Aventine risk in a market where extra cheap corn will keep everyone running and Industry Inventory is already high. Unlike last year, everyone can step up production in peak summer season. So running down this inventory might close the door on Aventine stepping up production at a profit. By the way, Cash flow from flow or DRAW from Aventine will hit PEIX kitty. So what looks like sufficient now for PEIX might become thin ice for a larger company.This is iffy until summer
Yeap, I made that call since they were using ALL the cash generated to buyback 'debt' and issuing diluted shares in the process!!! Had they held the cash back for 6 months, they could have walked to a bank for a commercial loan or come to market with Low interest bonds. But only then did I realize 100% of their cash flow was limited to 'plant owners', and not to the shareholders !
Holding at $23 still?
Water under the bridge
o 2015 is a new year. Aventine is the new load to bear!
o PEIX common shares and not cash from "plant owners" at play
4Q is last of EXCELLENT operating quarters. Pluses and Minuses
+ Volume production with plant running above 100% and yield of 2.8 gallons per bushel
- Basis at $1.35 higher than 3Q due to high train traffic during harvest time. Why was old-corn not in store for 4Q?
- WDG price was low
What is ahead for 1Q15?
+ Basis is now around $1/bushel (35c less than 4Q). So call it less cost of 10-12c per gallon
- But average ETHANOLwest cost price is $160-1.70 per gallon ( range so far). This 50-40C LESS than 4Q $2.15(avg). So corn basis does not make up for ethanol price drop
+ / - By-product price (WDG) higher than 4Q but less in 1Q15 than 1Q14
- extra Corn oil has not yet kicked in for 1Q15
-- SGA Plus Interest cost about $5M or 21c/gallon @45m gallon production ;
BIG hurdle to Generate Cash above COGS
- Production at 90% generate lower margins to cover fixed cost. Margin is in WDG. Low run rate genrates less cash.
- Negative earnings -- say -10c/share
What is ahead for later in 2015?
+ extra corn oil
+ Tax rate of 35-40% kicks-in
+ Cash position Good !!!
Why is Aventine above a "-" (mInus)
- Overpaid above market price per gallon, when considering Stock and Debt.
- With West coast ethanol premium at 20c ( and not 30-40c), arbitrage will be limited
- Aventine will be a flex Export engine, but not lower cost ( due to high interest debt)
- Dliuted common shares will come to market - Aventine owners cashing out.
There is Conv debt on their books to be replaced by newly issued shares. When GPRE say that they will be 'debt free', they have always said that the debt will be paid with shares.
Big plant out, ' Significant mechanical faliure'.
Impacts fuel and animal feed.
Full impact starting this week,partial hit last week..
Feb 9 (Reuters) - Cargill Inc on Monday said it was suspending shipments and deliveries at its corn wet mill in Fort Dodge, Iowa, due to a "significant mechanical failure" on Friday.
"The local team is in the process of assessing the damage to the equipment. As a result, we will be immediately suspending inbound and outbound deliveries," the company said in a note on its website.
The company purchased the mill from Tate & Lyle PLC in 2011 and the plant can consume 150,000 bushels of corn daily, churning out ethanol, dextrose and animal feed.
A company spokesman did not immediately respond to a request for comment.
Yes, this is a good number after the dip in October.
VLO Net profit margin is 46cents after 37cents operating cost which includes 4cents depreciation.
;Assuming VLO gross 87c /gallon and 47c cost ( inlc 14c depreciation ) for PEIX, then they would net 40c per gallon .
times 50m gallons = $20M; Minus $4m corporate = $16M.
$16M over 25m shares = 64cents
Multiple by a 'round factor of 4' to see that there is a margin to export to Brazil.
Brazilian ethanol prices out of plant doors.
Weekly Average Price in cash* - FUEL ETHANOL
Date Anhydrous US$/liter Hydrous US$/liter
01/23/2015 0.5618 0.5223
01/16/2015 0.5517 0.4862
01/09/2015 0.5304 0.4775
01/02/2015 0.5351 0.4771
12/26/2014 0.5360 0.4770
R&D is one step, Licensing is a second step, Building a new plant or extension to an existing plant is a 3rd step, Volume Contract is a fourth step.
Dollar investments varies depending on what the step is.
Old cash burn rate as stated in Jan 20th suggest that they used $8-8.75M out of the $14M (3Q). SO there is $6M in the kitty If there was No $ Income from any 4Q contract/special sales...
o Production rate 979K barrels per day, up 1K from last week. Cumulative rate for 4week at 977Kbpd which 9.7% year-to-year
o Refiner Demand 837K up 15Kbpd from last week. This leaves 142Kbpd or 934K Refiner demand. Now see below.
o Total Inventory at 20.4m up 200K from 20.2M last week. Since Only 200K went into Inventory, EXPORT
must have take 734,000 Barrels in one week ( 934K extra production minus 200K = 734K; Times 42= 30.8Million Gallons)
Inventory Status Comments:
Gasoline Refiner Total demand UP 6% ( economy is humming) while Ethanol Mix is 4.17%!!!
East PAD added 400K ... 2014 was a meager storage level due to drought; 2015 still below 2013 level by 400K. So given the high level of gasoline refiner needs and Winter, East Pad OK.
Midwest added 200K at 7.1M and is 600K above 2013 level. Midwest getting ready for more export?
Gulf down down 200K at 3.8M sill up from 2013 level 3.2M
West coast at 2.3M way below 2.9M level of 2013. West coast is still tight.
I just read the Jan 20th Status UPDATE. So wanted to check back here on 4Q expectations.
1. In prior statement, GEVO stated that they reached plant level EBIT in Nov, with 50K iso production.
2. Now they stated that December ended with rate of 75,000-100,000.
3. Have enough in the tank to keep shipping to existing customers but MAY SWITCH to 4 fermenters running ethanol.
4. CREATED a path fromethanol to hydrocarbons. this could lead an ethanol producer to buy
out GEVO ( get a plant and all the technology!!!)
They cut R&D headcount (as Predicted) by $3m/quarter,
but in the process also gave cash burn rate of $1.50 -$1.75M/month....
Given 4Q numbers, this might take them to June.
So a Licensing Contract is needed to shore up cash. Or a take-over offer from an ethanol producer.
This is a monthly running rate; metering a process flow that they are optimizing.
News like a 'super bug' ( generate more sugar, faster) ,
or a second vat (my word) to brew the stuff...
The question becomes how close are they to100K/monthvs 50K per month. Remember, their goal is 200k-300K/month in 2015.
Two Notes on Inventory:
1. The Bump in Inventory is mostly explainedby the Regional coastal PADs being cautious
about possible Transport snafus. Load up the tanks while the trains are running.
East took on an extra 500K, Gulf an extra 300K, West an Extra 200K.
Tanl Levels are still below 2013 ( when corn was plenty) but above 2014 levels(when corn harvest was from a drought summer).
Midwest PADwas flat week-to-week but enough to meet EXPORT demand for January.
2. Will Export come thru?
Yes, once a refiner swich mixture, they will not shut down the refinery to reconfigure.
They will pay less.
But also on the Export horizon:
Brazil had usually placed a cap on gasoline and ethanol is a fixed percentage of the gasoline price.
Over the last month, with all the currency variations, the priceof ethanol in Brazil has been in the $US .53c range perliter or $2.10'ish per Gallon!
Brazilneedsto keep inflation down. So importing fuel at a cheaper cost is part of the equation.
Gasoline import is certainly cheaper, but depending on far out is Petrobas order book and hedge book is at, gasoline prices stayed up in the last 30-60 days.
Brazil uses Flex Fuel vehicles, so they can easily go up the ethanol mixture, just by adjusting prices. US cheap ethanol can fiil-er up!
In December, Brazil ethanol disappearance was 2.2b liters. At that rate ( about 12+%).
I copy :"Of the ethanol volumes sold in December 2014, 2.09 billion liters went toward supplying Brazil’s domestic market, and 158.26 million liters were destined for export."
Brazil can take the liquid while China loads up on DDG
Key 4Q milestones:
1 EBIT at plant level. ( Nov)
2 Key Production rate for future quarters (50-100K/month)
3 Volume shipment to NEW customers ( see PR)
4 Opportunistic hydrocarbon fuel sales ( Airforce, Marines)
What is not talked about but the real opeating profit for SBS (in upcoming quarters):
o what cut in R&D costs was done in 4Q and possibly 1Q15
o when does licensing income flows into the coffers
One word about November statement made in last PR, DDG ( byproducts, IDG) wasat its lowest in November. Recovered by some +60-70% in December after China resumed buying. This DDG is counter-balanced with ethanol prices adjusting down in January.
The estimated price was based on the NUMBER of shares X avg sahre price at time of signing of the deal. Not on a fix amount. It can up and and down in value..
Thanks for the 'dumb down' on the Dec 17 post.
It is now news, DDG prices up as much as $79 since 1st week od December.
The cows,hogs and pultries have to eat!
"China Buyers Seeking U.S. DDG"
Had the same concern. But since no information was released, how to assess run rate/payback at Aventine.
In the merger PR , PEIX said that their debt level was $135M.
Last Sec Q document in 2012, gives a $279M devet level...
So they must have extracted not just revenue, but profits from their installed capacity...
Second, they stated that they had a;ready converted some boilers from coal to natgas...
So this is behind them.
A third tidbit: back in the days they were buiding the twi 110M plants, they were identical.
Valoero picked up on plant last year and were able to fire it up... no 'extra' cost was menetioned... So the second plant kept by Aventine must be OK as well( picked-up by PEIX).
The two plants, just by themseleves were $450Mish. So PEIX pick-up 100% of Aventine for 17.7M shares ( today below $10/shr) is a good deal.
Fourth: Corn in the mid-west is cheapppppp. WIth train cost getting lower ( with less oil movement reuiring less cars), I could see windows where it might be cheaper for PEIX to slowdown the West coast Plants and keep the mid-west plants going...
Just buying more corn locally and selling the ethanol outwest.
On a stock for stock swap, the equation of 11(PEIX) for 14(AVRW) is explained by the value of NOL. One has to assume that AVW also has 17.75m shares +warrants issued.
In any case $190M ( shares) + $135M in debt =$325M or $1/gallon.
Peix needs to pull in 10c per gallon net per year to earn 10% on the deal.
By addressing the issue of MIR62, China has resumed buying DDG. By-product prices up considerably..+60-70% so far. still below last year record-breaking level BUT considerably better when one cosiders cost of corn also is down from 6's to 4's ( say by one third).
Corn is the cost basisused for both iisobutanol and ethanol.
Beakeven for isobutanol got better.