Pacific Ethanol looking for better second half:
Pacific Ethanol (PEIX) reported its second quarter revenue on August 14, 2012. Due to a decline in ethanol prices as compared to last year, revenue was below year ago levels despite a significant increase in total gallons sold. Internal production was flat and third party sourced ethanol increased by 27%. We had expected an increase in gallons and flat pricing so results were below our expectations.
As a result of the minimal (or negative) spread between corn and ethanol prices the company is reducing the production of ethanol and, depending on market conditions and availability, will increase the third party sales. The conversion of the ethanol plants to separate the corn oil proceeds as expected and the first plant will be selling corn oil in the first quarter of 2013 and all the operating plants will have been converted by year-end 2013.
Pacific Ethanol expects the second half of 2012 to be better than the first half. We think that ethanol prices will increase as a shortage develops in the fall.
Corn supply in the west, the major supply area for the company, has not been as severely affected by the drought as has the mid west. However the price of corn is still at record levels.
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